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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 T. Rowe Price is $116 per share, which implies a price/earnings multiple of 11.4 and 11.1 times our estimates for adjusted earnings in 2026 and 2027, respectively. For some perspective, during the past five (10) years, the company's shares have traded at an average of 12.8 (14.4) times trailing earnings on an adjusted basis, with the highest (lowest) multiple during the past decade being 20.5 (9.2) times. We assume a 21% US statutory corporate tax rate and a 10.3% (10.2%) cost of equity (weighted average cost of capital) in our valuation.

T. Rowe Price ended the second quarter of 2026 with a record $1.893 trillion in managed assets, up 12.9% year over year. Net outflows of $6.5 billion (including money market flows) during the second quarter were much better than the quarterly run rate of $15.6 billion in average outflows we've seen at the firm since the Fed started raising rates in 2022. The firm, however, noted that it had quarter-to-date outflows of $16.1 billion during the past two months, and is likely to close out the third quarter with more than $20 billion in outflows. While the company ended August 2026 with preliminary AUM of $1.897 trillion, we expect the firm's managed assets to decline to $1.810 trillion at the end of the third quarter.

While we expect positive flows to continue to be difficult to come by in the near term, we see them eventually abating over the long run, especially as fewer baby boomers reach retirement age. Our current projections have T. Rowe Price generating average annual organic AUM growth in a range of negative 3% to positive 1% during 2026-30, with flows starting to improve after 2028 when fewer baby boomers are expected to retire, and millennials start reaching their peak earnings years. This, of course, assumes T. Rowe Price gets its investment performance back in line with its historical track record prior to 2022.

As a result, our five-year forecast has total and average AUM increasing at a low- to mid-single-digit rate on average (a period that includes a meaningful equity market correction). With management fees continuing to be pressured industrywide, we see T. Rowe Price generating a 1.3% CAGR for revenue during 2026-30. With asset management firms continuing to not only pare back fees but spending more to produce better investment results and enhance distribution, we expect to see adjusted operating margins for T. Rowe in a range of 34%-38% over our five-year projection period, compared with 37.2% last year and 39.7% on average annually during 2021-25.

We project a bull-case fair value estimate of $180 per share and a bear-case valuation of $70 per share. The key factors affecting our scenario analysis include the firm's ability to gather and retain assets, as well as the expected change in its overall realization rate as a result of its ongoing growth and changes in product mix driven by market conditions, investor sentiment, and overall fund performance.

Our upside case implies P/E multiples of 14.0 and 13.7 times our adjusted earnings estimate for 2026 and 2027, respectively. This scenario assumes T. Rowe Price overcomes much of the pressure on growth equities, with top-line growth buoyed by less fee compression than in our base case. The net result is a 6.8% CAGR for revenue over our five-year forecast, with adjusted operating margins approaching 40% by the end of 2030.

Our downside case implies P/E multiples of 9.3 and 9.1 times our adjusted earnings estimate for 2026 and 2027, respectively. This scenario assumes T. Rowe Price struggles to generate better than low-single-digit top-line growth in most years, faced not only with a disdain for growth equities but also a prolonged bout of equity market malaise, with the net result being a negative 7.2% CAGR for revenue, with operating margins dropping closer to 30%, during our five-year forecast.

We believe the asset management business can be conducive to the development of economic moats, with switching costs and intangible assets being the most durable sources of competitive advantage. Although the switching costs might not be explicitly large, 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 have tended to keep investors in place. As a result, money that flows into asset managers tends to stay there.

For the overall industry, the average narrow retention rate, exclusive of exchange redemptions, was 75% or greater annually during the past 5-, 10-, 15-, 20-, 25-, and 30-year periods. Including exchange redemptions, the retention rate was greater than 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.

Because T. Rowe Price does not break out its net flows (which are gross sales less investor redemptions), we assume, based on its historical record of organic AUM growth, that the company's average annual retention rate has been somewhere between the industry's annual rate and estimated rates of 90% or more in the retirement channel. That said, redemptions have outpaced flows into 401(k) plans since the baby boomer retirement phase started in 2011, affecting the company's organic AUM growth.

During the past five (10) calendar years, T. Rowe Price's organic growth rate for its long-term AUM averaged negative 3.9% (negative 1.6%) annually with a standard deviation of 1.7% (2.7%). This meant that in most years, the firm was not fully compensating for investor redemptions with new flows. We expect T. Rowe Price to generate negative 1.1% (positive 0.3%) average annual organic growth for its long-term AUM during 2026-30 (2026-35), with a standard deviation of 1.6% (2.0%).

We believe the firm will continue to have a slightly better-than-average switching cost profile relative to its active asset manager peers, despite currently experiencing elevated redemption rates as the baby boomer retirement cycle continues, facing additional pressure from the growth of passively managed target-date funds, and struggling with uncharacteristically poor investment performance.

We think more traditional asset managers like T. Rowe Price can maintain their switching costs advantage by leveraging their product variety, distribution networks, and global presence, along with their strong brand names and record of generating above-average investment performance relative to peers.

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

That said, we do not think a 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 flows can be stiff and has traditionally centered on investment performance. Although institutional investors and retail gatekeepers are exerting pressure on pricing, price-based competition 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 asset managers, supplier power has been manageable, as many firms have reduced their reliance on star managers and 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 across different market cycles have tended to produce more stable 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, it has been firms with solid product sets across asset classes (built on repeatable investment processes), charging reasonable fees, and with singular corporate cultures dedicated to a common purpose that have done a better job.

We assign T. Rowe Price a Narrow Morningstar Economic Moat Rating. The biggest differentiators for the firm have historically been the size and scale of its operations, the strength of its brand, its track record of active fund outperformance, and its reasonable fees. The company has also had a stickier set of clients than peers, with close to two-thirds of its AUM derived from retirement-based accounts.

That said, the switching costs and intangibles attached to the firm have not been strong enough to withstand the pressures of the baby boomer retirement cycle, with the firm facing increased competition from passively managed target-date funds (spearheaded by Vanguard) in the retirement channel. This has challenged not only pricing but sales and renewals of the company's actively managed target-date funds, only adding to the outflow headwinds the firm has been facing in the retirement channel from the baby boomer retirement cycle.

With few of T. Rowe Price's asset class strategies outperforming enough to land in the upper quartile on a three- and five-year basis, and outflows expected to continue in the near to medium term, it will take some time before things improve meaningfully for the firm. In the meantime, the company is operating with higher levels of operating leverage than it had five years ago, with adjusted operating margins being some 500 basis points below historical norms.

With $1.897 trillion in AUM at the end of August 2026, T. Rowe Price is one of the larger US-based asset managers. Retirement accounts and variable-annuity portfolios, which tend to be stickier than retail assets, account for close to two-thirds of managed assets.

T. Rowe Price has capacity to expand its international fund offerings, allowing its organic AUM growth to be bolstered once markets and performance recover.

While most of T. Rowe Price's AUM generate fees based on daily AUM levels rather than monthly or quarterly averages, revenue will rebound faster during favorable markets.

The firm's equity performance remains weak, with just 25% and 26% of US fund AUM beating passive peer medians on a three- and five-year basis, respectively, at the end of June 2026.

Bond fund performance has also stumbled, with just 63% and 83% of bond fund AUM beating passive peer medians on a three- and five-year basis, respectively, at the end of the second quarter.

Additionally, just 50% and 24% of T. Rowe Price's multiasset fund AUM, which has historically outperformed, were beating passive peer medians on a three- and five-year basis, respectively, at the end of June 2026.