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With the US equity markets up just 2.3% in the third quarter, the 2.2% average stock gain recorded by the traditional US asset managers kept year-to-date average total returns for the group above the market's return (as represented by the S&P 500 TR index) at the end of September.

Why it matters: Because most of the traditional asset managers we cover are heavily leveraged to US stocks, strong equity market returns will generally give them a boost, helping offset the impact of persistent active stock fund outflows on growth in assets under management. The US-based traditional asset managers were up 14.5% on average on a total return basis for the first nine months of 2026, compared with a 12.7% gain for the S&P 500 TR index. This 180-basis-point outperformance compares with 90 basis points of outperformance for all of last year. But since the start of the fourth quarter, the traditional US-based asset managers have stalled, with the group's underperformance relative to the market leaving them beating the S&P 500 TR index by less than 75 basis points since the start of the year.

The bottom line: At the end of September, most of the traditional asset managers we cover were trading at discounts to our fair value estimates, although the average discount was just 7% for the group. Wide-moat BlackRock remains our top pick for long-term investors, given its higher concentration in passive products and increased penetration of the alternative markets. Currently trading at a 16% discount to our fair value estimate, the shares are attractively priced right now. Narrow-moat Cohen & Steers is another top pick, although with a smaller market capitalization ($3.7 billion) relative to BlackRock ($162.9 billion). The shares are not quite as attractive as BlackRock's right now and remain a leveraged bet on a recovery in the real estate/REIT markets.

During the past decade, the US-based traditional asset managers we cover have outperformed the S&P 500 TR index on a total return basis during 2025, 2021, 2020, and 2017, but fell short of the market return (in most cases by a wide margin) during 2024, 2023, 2022, 2019, 2018, and 2016. Despite an average beta of 1.2 times for the group, the shares of the US-based traditional asset managers seem to go up less during market rallies and go down harder and longer during market downturns.

With most of the managers we cover being more dependent on equity market returns than organic growth to grow their managed asset levels, the bull-market rally in the US stock market over the past 15 quarters has helped lift their AUM levels back to where they were (and in some cases higher than they were) before the Federal Reserve started raising short-term rates in March 2022. BlackRock, in particular, saw its total assets under management increase more than 90% from $7.961 trillion at the start of the fourth quarter of 2022 to $15.345 trillion at the end of June 2026.

Only no-moat Invesco came close, increasing its AUM by just over 85% to $2.470 trillion at the end of the second quarter from $1.323 trillion at the end of September 2022. A fair amount of that growth, though, came from the market performance of the Nasdaq 100, which spurred inflows and market gains, lifting the firm's core product group—the Invesco QQQ Trust ETF and the Invesco NASDAQ 100 ETF—from $151.9 billion in AUM at the start of the fourth quarter of 2022 to $591.4 billion at the end of June 2026.

BlackRock tended to be the more consistent generator of organic AUM growth in the group. During the past four years, BlackRock has generated a 4.4% rate of annualized organic AUM growth each quarter on average, with a standard deviation of 2.5%. This compares favorably with the group, which generated a negative 0.4% rate of annualized organic AUM growth each quarter on average, with a standard deviation of 2.4%. Only Invesco, which produced a 3.6% rate of annualized organic AUM growth each quarter on average, with a standard deviation of 3.5%, during the past four years has come close.

This outperformance allowed BlackRock's shares to record a 20.2% and 6.7% annualized return on a total return basis, respectively, during the three- and five-year periods ended Sept. 30, 2026. This was only slightly above the group averages of 19.3% and 5.7%, respectively, which is not what we've come to expect from a firm with so many advantages. That said, the company's 10-year return on an annualized basis of 13.0% at the end of the third quarter was meaningfully above the group average of 8.1%. While Invesco had better three- and five-year stock performance of 31.0% and 7.2%, it underperformed over the past 10 years, generating an annualized return of just 2.3%.

Looking at the group outperformance year to date at the end of September, much of it was due to outperformance from AMG (up 26.8%), which has seen better flows from its private markets and liquid alternatives offerings, and diminished outflows from its equity operations, allowing the firm to generate positive organic AUM growth again, Franklin Templeton (up 38.6%), which has moved past the Western Asset Management scandal from a massive outflow perspective (even if it still is facing a potential class-action lawsuit over Ken Leech's misdeeds at Wamco), and Invesco (up 17.2%), which has not only posted solid organic AUM growth for 13 straight quarters but finally moved from a situation where it was earning next to nothing in fees on its Nasdaq 100 ETF product to generating 4 basis points after converting the Invesco QQQ Trust to an open-end fund ETF in late December 2025.

With BlackRock's shares more deeply discounted than the rest of the group right now, trading at a 16% discount to our fair value estimate, we reiterate our preference for the wide-moat firm over its peers. At its core, BlackRock is a passive investor, sourcing close to two-thirds of its $15.345 trillion in managed assets at the end of June 2026, and just over half its revenue, from passive products through its ETF platform (41% of AUM and 45% of base fee revenue) and institutional index fund offerings (28% and 7%), providing it with a tailwind that most of its peers do not enjoy as investors migrate to lower-cost passive products over actively managed funds. The company's organic AUM growth rate has averaged 4.6% during the past five years, with only Invesco coming close to matching that level. BlackRock has also generated adjusted operating margins of 41%-47% during the past five years, compared with the group average at 35%.

We also expect the market to continue to discern between asset management firms with above-average levels of organic AUM growth and operating profitability and those that are likely to struggle to generate either of these attributes, with the former garnering higher trading multiples of 15-25 times forward earnings and the latter seeing lower P/E multiples of 5-15 times.

This also explains our preference for Cohen & Steers, which we expect to generate a 6.5% rate of annual organic AUM growth (including distributions) during 2026-30, with adjusted operating margins in a 34%-42% range during our five-year forecast period. This is second only to BlackRock in the group of traditional asset managers we cover, with the industry giant expected to produce a 5.2% rate of annual organic AUM growth during 2026-30, with adjusted operating margins in a 44%-50% range during our five-year forecast period. Meanwhile, we see the rest of the group continuing to struggle to generate positive organic AUM growth on a consistent basis, with most firms posting adjusted operating margins below 35% (and several coming in below 30%).

While Cohen & Steers has struggled with flows during the past several years, as higher short-term rates have made risk-free assets and other fixed-income products more attractive than REITs, we expect to see a recovery in organic AUM growth, with investors continuing to put capital to work in their funds in anticipation of a lower-rate environment down the road. That said, flow headwinds will persist as long as yields on less risky short-term bonds and money market funds are at or above 4%, although we are seeing some signs that fund flows and performance have improved during periods when investors, particularly institutional investors, are anticipating rate cuts from the Fed and see the potential for more positive gains for Cohen & Steers.

For more insight into the trends and other issues affecting the traditional US-based asset managers we cover, please see our latest Industry Pulse, "US Traditional Asset Managers: 2026 Q3," which was published on Sept. 18, 2026. We also have a broader industry primer available for the US-based asset managers in our annually updated Industry Landscape, "US Asset Managers," which was last published on Dec. 18, 2025.

Our fair value estimate for Invesco is $30 per share, which implies a price/earnings multiple of 10.7 and 9.3 times our 2026 and 2027 adjusted earnings estimates, respectively. For some perspective, during the past five (10) years the shares have traded at an average of 10.2 (10.1) times trailing earnings on an adjusted basis, with the highest (lowest) multiple during the past decade being 14.9 (3.6) times. We use a 21% US statutory corporate tax rate and an 11.2% (8.0%) cost of equity (weighted average cost of capital) in our valuation.

Invesco exited the second quarter with $2.470 trillion in AUM, up 23.4% year over year. Long-term AUM (which excludes money market funds and non-management-fee-earning AUM) was $2.213 trillion. Net inflows for long-term AUM were $45.1 billion ($66.9 billion) during the second quarter (first half), reflective of a 9.4% (6.9%) annualized rate of organic AUM growth. This continued the firm's trend of solidly positive organic AUM growth for its long-term AUM that started in the back half of 2023, and was well above the 4.0% average annual rate of organic AUM growth seen for these types of assets during 2021-25. Invesco closed August 2026 with $2.562 trillion in AUM and reported quarter-to-date net flows for its long-term AUM of $36.2 billion.

We continue to expect the firm to produce average annual organic long-term AUM growth of 0%-5% during 2026-30, which should contribute to mid- to high-single-digit average annual growth in both total and average AUM. While Invesco is not immune from the fee compression affecting US-based traditional asset managers, it did see a bump in its fee rate this year following the conversion of Invesco QQQ Trust to an open-end ETF in December 2025, leaving it with a slightly higher starting point for a future that will continue to be affected by fee reductions.

With that in mind, we see the company generating a 7.6% CAGR for revenue during 2026-30. Profit margin expansion will continue to be pressured, though, as asset managers like Invesco spend more to maintain investment performance and enhance distribution. We forecast adjusted operating margins in a 35%-39% range during 2026-30, compared with 33.8% on average annually during 2021-25 and 33.4% during fiscal 2025.

We project a bull-case fair value estimate of $46 per share and a bear-case valuation of $18 per share. The key factors affecting our scenario analysis include the ability to keep gathering and retaining assets, as well as expectations about the overall realization rate as a result of ongoing product growth and changes in product mix driven by market conditions, investor sentiment, and overall fund performance.

Our upside case implies a P/E multiple of 13.1 and 11.4 times our 2026 and 2027 adjusted earnings estimates, respectively. In this scenario, we assume Invesco posts stronger organic growth and market gains than in our base case, which allows it to generate mid- to high-single-digit top-line growth during most years of our projection period. The net result is an 8.0% CAGR for revenue during 2026-30. This scenario also assumes adjusted operating margins approach 40% of revenue over the course of our projection period.

Our downside scenario implies a P/E multiple of 8.5 and 7.4 times our 2026 and 2027 adjusted earnings estimates, respectively. This scenario assumes revenue growth is muted, with Invesco struggling to maintain AUM levels in the face of increased market volatility, poorer market returns, unfavorable currency exchange, and weaker fund flows. The net result is a 7.2% CAGR for revenue during 2026-30. Our downside scenario also assumes adjusted operating margins drop below 34% for an extended period.

We believe the asset management business can be conducive to establishing economic moats, with switching costs and intangible assets being the most durable sources of competitive advantage. Although the switching costs might not be explicitly high, inertia, the uncertainty of achieving better results by moving from one manager to another, and the potential tax consequences of selling a fund with significant gains tend to keep investors in place.

For the industry overall, the average narrow retention rate, which does not include exchange redemptions, has been 75% or higher annually during much of the past three decades. Including exchange redemptions, the rate has been just over 70%. Firms offering niche products with significantly higher switching costs—like retirement accounts, funds with lockup periods, and tax-managed strategies—have tended to hold on to assets longer. Invesco's average annual retention rate has been 71% over the past five and 10 calendar years, slightly worse than the industry average.

During 2021-25 (2016-25), Invesco's organic AUM growth rate when including flows for non-management fee-generating products averaged 3.4% (1.0%) annually with a standard deviation of 2.8% (3.8%). When looking at just long-term AUM (which excludes flows for non-fee-generating products), the organic AUM growth rate was 4.0% (1.2%) with a standard deviation of 3.4% (4.3%). What this tells us is that Invesco has been able to overcome its slightly worse-than-average retention rate to generate positive flows. Our current five- (10-) year forecast for the firm has Invesco generating organic long-term AUM growth at a 2.7% (2.7%) CAGR with a standard deviation of 1.9% (2.1%).

We believe that the traditional asset managers can improve on the switching cost advantage inherent in their business with organizational attributes (such as product mix, distribution channel, and geographic reach) and intangible assets (such as strong and respected brands and manager reputations from a record of generating above-average investment performance relative to peers).

While the barriers to entry are not significant for the industry, the barriers to success are extremely high, as it takes time and skill to put together a long enough record of investment performance to start gathering assets and build the scale necessary to be competitive. This has meant the larger, more established asset managers in the industry have tended to have an advantage over smaller players, especially when it comes to gaining cost-effective access to distribution platforms.

That said, we do not think the cost advantage moat source applies to the traditional asset managers—except in the case of index fund and ETF providers—as scale does not always confer better-than-average operating profitability, and the industry tends to behave as an oligopoly when it comes to pricing.

Competition for investor capital can be stiff and has traditionally centered on investment performance. Although institutional investors and retail gatekeepers are exerting pressure on pricing, competition based on price has been rare, aside from what we've seen in the US market for exchange-traded funds. While compensation remains the single-largest expense for most traditional asset managers, supplier power has been manageable as many firms have reduced their reliance on star managers and have tied manager and analyst pay to both portfolio and overall firm performance.

Asset managers that have demonstrated an ability to gather and retain investor assets during different market cycles have tended to produce more stable levels of profitability, with returns exceeding their cost of capital for longer periods. While the more broadly diversified asset managers are structurally set up to hold on to assets regardless of market conditions, firms with solid product sets across asset classes (built on repeatable investment processes), reasonable fees, and singular corporate cultures dedicated to a common purpose have done a better job of gathering and retaining assets.

Invesco, in our view, does not have an economic moat. While the firm has some moatworthy characteristics—like well-known brands, well-forged distribution ties, repeatable investment strategies, and an ability to generate organic AUM growth—these attributes and other intangible assets have diminished over the past decade. Invesco's five main asset classes are skewed more heavily toward equities (62% of managed assets), with fixed-income (19%), balanced (3%), money market (11%), and alternatives/other strategies (5%) accounting for the remainder.

While Invesco gets some credit for having a meaningful amount of passive exposure, accounting for close to half of its managed assets of $2.562 trillion at the end of August 2026, its distribution is more heavily weighted toward the retail channel (72% of total AUM). This leaves it more exposed to fee compression at the hands of the gatekeepers of the broker/dealer and retail-advised networks.

While Invesco's ETF operations, with $1.206 trillion in AUM globally at the end of August 2026, are smaller than the operations run by industry giants like BlackRock/iShares (with $6.463 trillion in ETF AUM globally) and Vanguard ($5.082 trillion), its business accounted for 6% of both the US and global markets, with the firm having traditionally been focused on niche products, which have been less susceptible to the intense pricing pressure seen in the core/index-based ETF market.

That said, we don't really see enough differentiated products or services at Invesco that would allow the firm to improve retention rates and/or organic AUM growth, let alone get better pricing than peers, blunt ongoing industry price compression, or improve adjusted operating margins. We also believe the firm will struggle to consistently outearn our estimate of its cost of capital over the next decade—one of the key considerations for a Narrow Morningstar Economic Moat Rating.

With $2.562 trillion in AUM at the end of August 2026, Invesco is in the second-largest tier of US-based asset managers, which includes firms like Pimco, Capital Group, J.P. Morgan Asset Management, and Franklin Resources.

Invesco's multi-asset fund operations had 82% and 83% of its managed assets outperforming peers on a three- and five-year basis, respectively, at the end of June.

The firm's fixed-income funds have also held up relatively well, with 64% and 58% of AUM outperforming peers on a three- and five-year basis, respectively, at the end of the second quarter.

Invesco's overall investment performance is still not quite in the top quartile, with just 69% of AUM outperforming peers on a three- and five-year basis at the end of June 2026.

The firm's active equity platform continues to be its Achilles' heel, with just 43% and 50% of AUM outperforming peers on a three- and five-year basis, respectively, at the end of the second quarter.

Poor investment performance tends to lead to outflows, with Invesco posting negative organic AUM growth in its active equity operations, offsetting the other positive flows it is generating.