Uncertainty is all around us. The housing market in most U.S. states is declining; the stock market is down 500 points one week then up 350 points the next, and elevated commodities prices have investors wondering if they've peaked or are poised for further gains.

This uncertainty equals business for asset management firms like BlackRock (NYSE:BLK) that offer institutions and individuals a wide range of investment options and advisory services. Investors building a portfolio of companies who are strong in providing asset management services should not overlook the following.

Merrill Won't Sell
BlackRock has nearly $1.4 trillion in assets under management (AUM). For the first three months of the year revenue increased 29% to $1.3 billion over the same period a year ago. On a GAAP basis, BlackRock's operating margin was up 3% to 30%. These numbers help explain Merrill Lynch's (NYSE:MER) decision not to sell off its 49% stake in the investment advisory firm. Merrill recently sold off its Bloomberg business to help mitigate its exposure to credit related write downs.

Alternative Investments Growing
Notably, BlackRock's alternative investments business doubled in size to $73 billion from the previous year, making it the fastest growing segment of the firm. Part of the growth was attributable to BlackRock's acquisition of Quellos Group, a hedge fund of funds, last year. While alternative investments still represent less than 6% of BlackRock's total AUM, this business segment is likely to continue growing as more institutional investors are seeking out this non-correlated asset class. Having a diverse basket of investment options like alternative investments is key for BlackRock's future growth. (To learn about FoF investments, check out Fund Of Funds - High Society For The Little Guy.)

Asset Manager to Consider
BlackRock's stock recently recovered from a 20% decline in value. Investors looking for an asset manager at a better bargain price should consider Legg Mason (NYSE:LM). Trading near $40 per share, Legg Mason is below its current book value suggesting a discount to its fair market value.

Although Legg Mason's AUM fell less than 2% to $950 billion at the end of its fiscal year in March, revenue rose almost 7% to $4.6 billion. Legg Mason was able to increase revenues by generating additional fees from its fixed income business line Western Asset Management, its mutual fund provider Royce & Associates, and its funds of hedge funds management firm Permal Group. For investors with a low risk tolerance, be advised that Legg Mason has lost nearly 50% of its value since the beginning of 2008.

Final Thoughts
When the markets are on the rise, everyone offering advice appears to have the golden touch. It's the firms with the widest range of product offerings and services who will win earn the most fees and survive the present storm.
For more tips on navigating down markets, read Adapt To A Bear Market and Surviving Bear Country.

Related Articles
  1. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  2. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  3. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  4. Fundamental Analysis

    HF Performance Report: Did Hedge Funds Earn Their Fee in 2015?

    Find out whether hedge funds, which have come under tremendous pressure to improve their performance, managed to earn their fee in 2015.
  5. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  6. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  7. Investing Basics

    Bill Ackman's 2 Best Investments (GGP, CP)

    Learn about the two best investments Ackman ever made. Ackman has demonstrated a consistent track record of success in all types of market environments.
  8. Investing

    George Soros: 3 Best Investments Ever

    Learn about some of the most successful trades famed investor George Soros has made during his career, including a billion dollar profit against the pound.
  9. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  10. Saving and Spending

    Where Does Bill Ackman Keep His Money?

    Learn about where prominent hedge fund manager Bill Ackman keeps his money. See how his short position in Herbalife has not been successful so far.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  4. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  5. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  6. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center