The U.S. economy is recovering at a gradual pace, but the global growth concerns still persist. Factors like slowdown in China and other developed economies, uncertainty over the timing of the Federal Reserve’s next rate hike and volatility in oil prices have had a significant adverse impact on the confidence of the Americans.

Among the sectors, Finance seems to be losing its attractiveness to investors due to its lackluster earnings performances in the recent past. Further, the experience of the sector’s role in 2008 financial crisis is keeping investors away. Though investment management (a part of the broader Finance sector) has been performing decently over the last couple of years, the trends seems to be reversing of late.

Notably, while retail consumer confidence is gradually on the rise, confidence in the Finance sector has failed to match up with the steps taken by regulators to regain the same. This has hit the investment management sector as well.

Though institutional investors continue to park funds with investment managers, retail investors are shying away. Despite an all-out attempt – including introducing new products to cater to ever changing customer needs and lowering transaction fees – to lure them, the industry as a whole has been witnessing net outflows.

Another factor leading to outflows is that Americans have started spending more (and saving less) as the economy is showing signs of recovery. So, the investment management industry is getting lesser funds from retail investors.

As a result, assets under management for many investment managers are either stable or declining. This led analysts to become bearish on the prospects of investment management stocks. A number of investment management stocks have seen significant downward estimate revisions in the recent past.

Stocks to Avoid

We would advise investors to stay away from investment management stocks that show weakness.

We have shortlisted stocks that have Zacks Rank #4 (Sell) or #5 (Strong Sell). We further narrowed down the list by focusing on those that have been witnessing downward estimate revisions over the past 4 weeks. Further, we applied our newest methodology, the VGM score, where V stands for Value, G for Growth and M for Momentum. The stocks we finalized don’t have a VGM score of “A” or “B.”

Here are the 5 investment management stocks that you should avoid:
 

Oaktree Capital Group, LLC (OAK -Snapshot Report), based in Los Angeles, CA, operates as a global investment management firm with primary focus on alternative markets. The company manages investments in a number of strategies within six asset classes through closed-end, open-end, and evergreen funds.

Zacks Rank #5
VGM Score: ‘F’
Market Cap: $7.5 billion
Change in F1 Estimate (4 weeks): -9.83%

Och-Ziff Capital Management Group LLC (OZM - Snapshot Report), based in New York, is a global institutional alternative asset management firm. The company’s diversified, multi-strategy approach is based on global investment strategies, including merger arbitrage, convertible arbitrage, equity restructuring, credit and distressed investments, private investments and real estate.

Zacks Rank #5
VGM Score: ‘C’
Market Cap: $800.8 million
Change in F1 Estimate (4 weeks): -18.35%

Ares Management, L.P. (ARES - Snapshot Report), based in Los Angeles, CA, is a global alternative asset manager. The company manages four investment groups that invest in the tradable credit, direct lending, and private equity and real estate markets.

Zacks Rank #4
VGM Score: ‘D’
Market Cap: $1.12 billion
Change in F1 Estimate (4 weeks): -4.68%

Eaton Vance Corp. (EV - Snapshot Report), headquartered in Boston, MA, creates, markets and manages investment funds. Also, the company provides investment management and counseling services to institutions and individuals.

Zacks Rank #4
VGM Score: ‘C’
Market Cap: $3.73 billion
Change in F1 Estimate (4 weeks): -11.42%

Northstar Asset Management Group Inc. (NSAM - Snapshot Report), headquartered in New York, offers a wide range of investment advisory services including asset management, retirement planning, administrative services and 401(k) management.

Zacks Rank #4
VGM Score: ‘C’
Market Cap: $2.2 billion
Change in F1 Estimate (4 weeks): -1.89%