Asset managers' stocks tumbled this year, and 2019 doesn't look much better due to "intensifying headwinds", a new report from Morgan Stanley said.
A group of 11 traditional asset managers' share prices fell 20% through November 30. Hamilton Lane was the only manager out of its peers to show positive performance, with its stock up 7%. Fund managers Invesco and WisdomTree Investments took the biggest hit, with stock down 44% this year for both companies.
While BlackRock's stock was down this year, Morgan Stanley is still bullish on the world's largest asset manager, writing that the firm is "best positioned among peers for long-term growth."
The report also said T. Rowe Price Investment Management is "priced for growth."
With markets poised for more volatility, 2019 will see many of the traditional asset managers' pressures "persist and perhaps intensify." The firms rely on market-sensitive revenue — the management fees they earn on assets under management — which is threatened by poor returns and a lack of net new capital.
Fee rates are also under pressure, with capital flowing out of active funds in favor of lower-fee, passive products. Morgan Stanley cautioned that there are no signs "that passive threats are slowing."
Read more: Investors are fleeing active funds in the worst month for managers in nearly 2 years
"Market uncertainty and volatility should continue to dampen net flows, and operating margin pressure will further weigh on valuation multiples," the firm wrote.
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