10 Investors' Stocks Beating the Market
The positive outlook from investors has also renewed confidence in asset management firms, which are benefiting from higher trading volume and money inflows to their funds this year, even as they battle to stanch the run-off of the past few years to inexpensive, passively managed index funds or exchange traded funds after several years of funds' underperformance.
As a result, the leading asset management companies' stocks are posting double-digit gains in 2012.
Shares of companies in the asset management company category, as tracked by Morningstar, are up an average of 19% this year, versus the benchmark S&P 500's 12% gain. Two of the biggest fund management firms, Vanguard Group and Fidelity Investments, aren't publicly traded.
On Friday, S&P Capital IQ upgraded the asset management and custody banks sector to "positive" from "neutral" because "so far this year, fund flows have done a turnaround with new investments coming into long-term funds.
"We observe a shift in investor sentiment toward the positive as many 2011 fears have been put to rest or at least tempered."
The Investment Company Institute reported investor inflows to bond and equity funds of $35.6 billion in January, the first positive month of inflows after outflows over the last seven months of 2011.
That trend picked up speed in the following six-week period with inflows of $59.6 billion through the first week of March.
But bond funds are the biggest beneficiaries. For example, investors pulled $126 million out of mutual funds that buy domestic and foreign stocks during the the first week of March, while $10.7 billion flowed into mutual funds that invest in bonds, ICI reported.
But, in the long term, the outlook for the industry should be bright as baby boomers continue to add to their retirement nest eggs. S&P says that "over the next 10 years, there should be a significant increase in retirement investments."
Most big, national banks also provide money management and advisory services, but many sold off their mutual fund units after the financial crisis. Only a few, such as Bank of America (BAC) and its Merrill Lynch money management unit, and investment bank JPMorgan Chase (JPM) , still rely on asset management as growth drivers, especially JPMorgan.
Bank of America's global wealth management unit brought in more than $15 billion in net new assets in 2011 and generated net income of $1.6 billion. Bank of America shares have rocketed 66% this year.
JPMorgan, now one of the 10 largest U.S. stock and bond fund managers, saw huge growth last year of almost $50 billion in assets under management. Its shares are up 35% this year.