UBS: Maintain selectivity in US brokers and asset managers, favoring beneficiaries of low retail exposure and strategic M&A

Overview

This is a UBS research report on the US brokers and asset management industry published on July 8, 2026, covering alternative asset management, traditional asset management, wealth brokers, boutique investment banking, and BDCs. The report's central message is that performance is highly differentiated across the sector, and investors should reduce high-risk exposure to retail wealth channels, redemption pressure, and weak software M&A, shifting toward names with higher institutional capital exposure, lower valuations, or greater benefits from large strategic M&A.

Core views

Key views include: First, alternative asset managers remain in a short-term "catalyst desert," with redemptions, negative net flows, and limited exit visibility weighing on sentiment, although APO, ARES, and other platforms with greater institutional capital and private credit exposure are more defensive. Second, BX and OWL have relatively high dependence on private wealth and non-traded BDC channels, making management-fee growth more vulnerable to retail sentiment and redemption volatility. Third, among boutique investment banks, large strategic M&A is stronger than sponsor activity. EVR, PJT, JEF, and LAZ benefit in different ways, while MC was downgraded because its relatively high sponsor and software M&A exposure and valuation do not adequately reflect the risks. Fourth, cash sweep pressure at wealth brokers is not nonexistent, but small average balances, limited client benefits, insufficient advisor incentives, and platform restrictions mean the risk is exaggerated by the market.

Analysis framework

The report evaluates investment opportunities through cross-subsector comparisons, valuation multiples, earnings forecasts, AUM composition, management-fee sensitivity, M&A fee pools, and transaction-size mix. For alternative asset managers, it focuses on private wealth AUM, BDC exposure, FRE growth, and SBC treatment; for boutique investment banks, it analyzes strategic M&A, sponsor M&A, cross-border transactions, ECM, and IPO fee pools; for wealth brokers, it breaks down cash sweep balances, client incentives, advisor behavior, and platform access.

Methodology notes

• Valuation methodsP/E multiple on 2027E EPS

  Target-price framework for brokers, wealth managers, and traditional asset managers

  UBS primarily uses P/E multiples on 2027E EPS to determine target prices for wealth management brokers, independent investment banks, and traditional asset managers.

• Valuation methods50%/50% P/E and SOTP blended framework

  Target-price framework for alternative asset managers

  For alternative asset managers, the report uses a 50%/50% blended framework combining a 2027E EPS P/E multiple and sum-of-the-parts valuation.

• Risk scenariosBull/Bear scenario analysis

  OWL bull/bear scenario analysis

  The report discusses bull and bear scenarios for OWL based on BDC growth, FRE growth, credit quality, retail-channel resilience, and SBC treatment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• APO / ARES

  Alternative asset management and private credit

  Strengths

  Higher institutional capital exposure, longer capital duration, and more stable fees; may benefit from reduced competition and better terms as private wealth growth slows.

  Weaknesses

  Still exposed to the private credit cycle, the exit environment, and expectations for FRE growth.

  Comparison

  Compared with BX and OWL, the report believes APO and ARES have more defensive channel structures.

  Risks

  If the credit cycle deteriorates, non-accruals increase, or fundraising slows, valuations and earnings forecasts could still come under pressure.

• BX / OWL

  Alternative asset managers with high exposure to private wealth and BDC channels

  Strengths

  Large platform scale and the ability to benefit from the long-term expansion of private markets.

  Weaknesses

  More sensitive to private wealth, non-traded BDCs, and retail sentiment, with less resilient management-fee growth.

  Comparison

  The report identifies BX and OWL as the companies with the largest private wealth AUM and greater need for caution, ranking them below APO and ARES, which have more institutionally oriented channels.

  Risks

  Redemptions, pro rata redemption news, slowing BDC growth, SBC pressure, and below-expectation FRE growth could lead to valuation compression.

• MC

  Boutique investment banking

  Strengths

  The pipeline has improved since the beginning of the year; the report states that MC's fee pipeline has grown by approximately 48%.

  Weaknesses

  It has the highest sponsor transaction exposure, with approximately 64% of transaction flow coming from sponsors, as well as significant technology and software M&A exposure.

  Comparison

  Compared with peers that benefit more from large strategic M&A, MC is more sensitive to the currently weakest sponsor and software transaction environment.

  Risks

  UBS believes 2027E revenue and EPS are 10% and 22% below consensus, respectively, and that a software M&A stress scenario could create approximately 10% downside risk to 2027 consensus EPS.

• LPLA / SCHW / RJF / SF

  Wealth brokers

  Strengths

  Cash sweep risk is considered overstated; average client sweep balances are small, and advisors have limited incentives to promote alternative cash solutions.

  Weaknesses

  Cash sweep spreads may still face pricing pressure from AI or smart cash solutions.

  Comparison

  The report believes concerns about sweeps are more pronounced for SCHW and LPLA but does not expect a structural reset in sweep economics.

  Risks

  If client demand, advisor behavior, or platform access changes faster than expected, cash spreads and valuations could remain under pressure.

• EVR / PJT / JEF / LAZ / HLI

  Boutique investment banks

  Strengths

  Large strategic M&A, cross-border transactions, follow-on ECM offerings, and an IPO recovery provide revenue support; some companies benefit from a higher share of large transactions.

  Weaknesses

  Overall M&A activity remains below historical levels, while sponsor and smaller transactions remain weak.

  Comparison

  EVR and PJT are more influenced by large strategic transactions; JEF is supported by improving ECM and IPO fee pools; LAZ and JEF benefit from resilient cross-border activity; HLI stands out for upward consensus revisions in 2Q26.

  Risks

  If strategic M&A slows, sponsor recovery is delayed, or capital markets windows close, both revenue and valuations could be revised downward.

Key data

• Average upside to target price for alternative asset managers28%The sample includes APO, ARES, BX, OWL, BAM, CG, HLNE, KKR, STEP, and TPG.
• Average total return for alternative asset managers32.2%The table includes target-price upside and dividend yield.
• Private credit share of alternative asset management AUMapproximately 48%The report states that private credit accounts for approximately 48% of alternative asset management AUM, with a range of approximately 30%–80%.
• Software exposure as a share of alternative asset management AUMapproximately 6%The report states that software exposure is approximately 6% of total alternative asset management AUM and that software represents no more than 9% of private credit AUM.
• Share of large strategic M&A fees43% from transactions > $5BThis is above the historical level of approximately 28%, benefiting investment banks with greater exposure to large strategic transactions.
• Global M&A as a percentage of market capitalization5.2% vs historical 7.9%The US stands at 3.6% vs historical 7.5%, indicating that overall activity remains below historical levels.
• Year-over-year change in sponsor fees-19%Sponsor activity remains weak, with smaller transactions under the greatest pressure.
• MC target price$60UBS downgraded MC to Sell with a target price of $60.

Impact & implications

The investment implication is that the sector should not be approached using a uniform beta framework; allocations should be differentiated by funding source, transaction type, valuation, and earnings visibility. Alternative asset managers with high institutional capital exposure, more stable private credit fees, lower valuations, or significant prior selling pressure are relatively more attractive, while companies dependent on retail wealth channels, redemptions, and BDC growth face greater volatility. Within boutique investment banking, investors should favor companies benefiting from large strategic transactions and an ECM recovery, while avoiding names with excessive sponsor and software M&A exposure and overly elevated expectations. For wealth brokers, concerns about cash sweep products may create short-term valuation pressure, but if actual client migration remains limited, the risk may be overstated by the market.

Risks

• An economic slowdown leads to higher-than-expected credit losses.
• Capital markets activity slows materially, particularly M&A, IPO, and ECM activity.
• Redemptions and negative net flows through private wealth channels persist longer than expected.
• BDC credit quality deteriorates, non-accruals increase, or PIK income continues to rise.
• Software M&A remains depressed because of AI-related uncertainty.
• Revenue pressure from regulatory reform is more severe than expected.
• Rising SBC weakens actual shareholder returns and valuation comparability for alternative asset managers.

What to watch

• Whether non-traded BDC redemption requests in 3Q26 moderate from 2Q26 levels and whether redemptions remain subject to the 5% NAV threshold.
• OWL's non-accrual trends, underlying portfolio health, and retail and institutional investor interest in its products.
• The stability of FRE growth at institutionally oriented private credit platforms such as APO and ARES.
• Whether large strategic M&A continues to dominate fee pools and whether sponsor transactions genuinely recover.
• Whether software M&A activity bottoms out from levels near the COVID lows.
• Cash sweep balances at wealth brokers, client migration behavior, advisor willingness to promote alternatives, and changes in platform access.
• Whether consensus estimates for MC revenue and EPS are revised downward and whether valuation multiples continue to compress.