We recently published a list of 10 Cheap Asset Management Stocks to Buy Now. In this article, we are going to take a look at where State Street Corp. (NYSE:STT) stands against other cheap asset management stocks to buy now.
The asset management industry plays a crucial role in global financial markets by managing investments for individuals, institutions, and corporations. Asset managers strategically allocate capital across equities, fixed income, real estate, and alternative investments, seeking to optimize returns while managing risk. The industry encompasses various segments, including mutual funds, hedge funds, private equity firms, and wealth management companies, each catering to different investor needs.
Recent research highlights the industry’s robust growth trajectory. According to PwC’s November 2024 Asset & Wealth Management Report, global assets under management (AUM) are expected to reach $171 trillion by 2028, reflecting a 5.9% compound annual growth rate (CAGR). Alternative assets, including private equity, hedge funds, and real estate, are projected to expand at an even faster 6.7% CAGR, reaching $27.6 trillion over the same period. As asset managers seek new growth avenues, tokenization is emerging as a transformative trend. PwC anticipates tokenized products will surge from $40 billion to over $317 billion by 2028, a 51% CAGR, as asset managers—particularly in private equity (53%), equity (46%), and hedge funds (44%)—embrace this innovation to democratize finance and lower investment barriers.
Amid these structural shifts, Deloitte’s 2025 Investment Management Outlook underscores the challenges firms face despite rising AUM in 2023. Revenue growth and profit margins remain under pressure, pushing firms to refine their product diversification strategies and distribution models. Key growth drivers include alternative investments like private credit and hybrid fund structures, as well as AI-driven sales and distribution technologies. Deloitte emphasizes that firms effectively implementing these initiatives will likely outperform competitors, while those failing to adapt may struggle to maintain their market position.
Another notable industry trend, according to Deloitte’s report, is the continued rise of exchange-traded funds (ETFs). Over the past five years, ETFs have attracted over $3 trillion in net inflows in the U.S., reflecting investors’ preference for low-cost, transparent investment vehicles. The majority of AUM in mutual funds and ETFs is concentrated in funds with lower expense ratios, contributing to ETFs’ growing market share at the expense of mutual funds. In 2023, active equity and bond ETFs maintained lower average expense ratios than their actively managed mutual fund counterparts, solidifying their appeal as cost-effective investment options.
In summary, the asset management industry is undergoing a period of transformation, driven by technological advancements, evolving investor preferences, and a shift toward alternative investments. While rising AUM signals strong long-term growth prospects, firms must adapt to shifting market dynamics by embracing diversified product strategies, AI integration, and tokenization.
Our Methodology
To determine the 10 cheap asset management stocks to buy now, we first compiled a list of asset management companies using online screeners and financial media reports. We then narrowed down the selection to stocks trading at a forward price-to-earnings (P/E) ratio below 15 and offering at least 10% upside potential. From this refined list, we further narrowed down 10 top stocks with the highest hedge fund ownership, utilizing data from Insider Monkey’s Q4 2024 hedge fund database. Finally, we ranked the selected stocks in ascending order of their forward P/E ratios, placing those with the lowest valuations at the top.
Note: All pricing data is as of market close on March 19.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is State Street Corp. (STT) the Cheap Asset Management Stock to Buy Now?
An executive in a suit and tie at a meeting discussing asset management strategies.
State Street Corp. (NYSE:STT) ranks among the world’s largest custodian banks and asset servicing firms, offering investment management, fund administration, and risk analytics solutions. Through its investment arm, State Street Global Advisors (SSGA), the company oversees an extensive portfolio of index funds and ETFs, including the SPDR series.
In 2024, State Street Corp. (NYSE:STT) was one of the largest asset management firms globally, with US$4.7 trillion in assets under management and US$46.6 trillion in assets under custody and administration. Alongside BlackRock and Vanguard, State Street is considered one of the Big Three index fund managers dominating retail investing.
On March 6, Morgan Stanley analyst Betsy Graseck reaffirmed her Overweight rating on State Street Corp. (NYSE:STT) but reduced the price target from $142 to $139 due to revised EPS estimates for 2025 and 2026, driven by lower fees and higher preferred dividends. Just days earlier, the analyst had raised the price target to $142 following the company’s announcement of its acquisition of Mizuho’s global custody and related businesses outside Japan.
The analyst had expressed optimism about the acquisition, anticipating that it would bolster State Street Corp. (NYSE:STT)’s position in the consolidating custody industry by increasing its scale. The acquisition aligns with the firm’s broader strategy to expand its international reach and effectively deploy excess capital. Although relatively small in scope, the deal underscores the potential for further cross-border transactions, strengthening the company’s competitive stance in the evolving global custody market.
Overall, STT ranks 4th on our list of cheap asset management stocks to buy now. While we acknowledge the potential of STT to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than STT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
