Private-equity exit recovery still takes time, JEF downgraded to Neutral, while KKR and SF offer better cyclical leverage

Overview

This report is UBS's weekly 'Brownie Points' update on the U.S. brokers and asset management sector, focusing on private-equity exits, investment-banking pipelines, monthly broker metrics, and valuations and risks for covered names. The core conclusion is that private-equity exit opportunities have not materially improved in the near term, and capital-markets recovery expectations have already been reflected in some stocks, so investors need to be more selective in positioning for beneficiaries.

Core views

First, private-equity exit routes are becoming more diversified, with strategic sales, secondary transactions, and continuation funds all important paths expected by GPs, but the pace of improvement remains slow. Second, JEF's recent rally has already priced in a lot of optimism around advisory and capital-markets recovery, so UBS downgraded it from Buy to Neutral. Third, if the M&A and capital-markets cycle continues to improve, KKR and SF are relatively better indirect beneficiaries. Fourth, SCHW and LPL monthly metrics are better than or close to expectations, showing that wealth management and brokerage businesses still have some operating resilience.

Analysis framework

The report combines the PitchBook private-equity industry survey, Dealogic investment-banking fee and transaction pipeline data, company monthly operating indicators, UBS earnings forecasts, and valuation frameworks to make a cross-sectional comparison of U.S. brokers, boutique investment banks, traditional asset managers, and alternative asset managers.

Methodology notes

• Valuation methodsP/E multiple

  P/E valuation

  Target prices for brokers, wealth managers, independent investment banks, and traditional asset managers are mainly based on P/E multiples applied to 2027 expected EPS.

• Valuation methodsP/E and SOTP blend

  P/E and sum-of-the-parts blend

  Alternative asset managers are valued using a 50%/50% blend of the P/E multiple and SOTP framework to reflect management fees, performance fees, and the value of different business platforms.

• Valuation methodsP/E and P/TBV blend

  P/E and tangible book value blend

  JEF is valued using a 50%/50% blend of P/E and P/TBV, which is suitable for companies exposed to capital markets, asset management, and balance sheet assets and liabilities at the same time.

• data_trackingDealogic fee pipeline tracking

  Investment-banking fee pipeline tracking

  The report uses Dealogic data to track quarterly fees, announced deals, pending deals, and revenue pipeline changes for advisory, ECM, and DCM.

Asset mapping & comparison

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

• JEF

  Downgraded to Neutral; recovery in capital markets and advisory is already largely reflected in the share price

  Strengths

  F2Q26 advisory and ECM are expected to be solid, with ongoing support from an improving investment-banking cycle.

  Weaknesses

  After the recent strong share-price rally, expectations are high, and results that merely meet expectations may not be enough to drive further upside.

  Comparison

  Compared with KKR and SF, JEF has more direct exposure to capital-markets expectations, and valuation and earnings expectations have already more fully reflected the recovery.

  Risks

  M&A recovery slower than expected, weak sponsor activity, credit issues, lower-than-expected MD hiring productivity, intensifying competition, and limited buybacks.

• SF

  Highlighted as an indirect beneficiary of a capital-markets recovery

  Strengths

  Institutional business accounts for about 30% of revenue, and valuation is 10.3x; the combination of wealth management, institutional business, and net interest income provides lower exposure to any single cycle.

  Weaknesses

  In the advisory pipeline data, SF's three-month and six-month transaction value changes were weak, so near-term investment-banking leverage still needs validation.

  Comparison

  Compared with pure investment-banking firms, SF has a more diversified business mix; it can benefit if activity recovers, but its cyclicality is relatively lower.

  Risks

  Economic slowdown, prolonged weakness in M&A and underwriting markets, slower-than-expected Stifel Bank loan growth, regulatory reform-related revenue pressure, compensation-ratio pressure, and cybersecurity risk.

• KKR

  Highlighted as an indirect beneficiary of a capital-markets recovery

  Strengths

  The stock is still out of favor, and its 13.2x valuation is below the 17x historical average; performance fees, capital-markets fees, and strategic holdings growth all benefit from an improving deal and monetization environment.

  Weaknesses

  The alternative-asset business is complex, and valuation is sensitive to market conditions, interest rates, and insurance earnings.

  Comparison

  Compared with JEF, KKR is a more balanced way to participate in the cycle, with exposure to diverse platforms including private equity, insurance, wealth, and infrastructure.

  Risks

  Valuation complexity, insurance earnings and interest-rate volatility, market sensitivity, competition, regulation, and the difficulty of forecasting and valuing the business.

• SCHW

  Monthly operating data were better than expected

  Strengths

  May 2026 NNA grew 4.8%, and new-account growth, transactional cash, and margin loan demand all performed well.

  Weaknesses

  The discount brokerage business still faces NIM compression, pricing pressure, and volatility in capital-markets activity.

  Comparison

  Compared with names with stronger investment-banking exposure, SCHW is more tied to the wealth-management and brokerage cycle.

  Risks

  Economic slowdown, weaker capital-markets activity, regulatory revenue pressure, NIM compression from yield-curve changes, competition, and cybersecurity risk.

• LPL

  Monthly NNA growth accelerated sequentially

  Strengths

  Monthly NNA grew 4.3%; recruited assets in May were five times April's level, and June recruiting continued to progress.

  Weaknesses

  UBS expects quarterly core organic NNA growth of 3.8%, below the 4.3% consensus expectation.

  Comparison

  Like SCHW, LPL is more influenced by wealth-management distribution channels, advisor recruiting, and asset inflows.

  Risks

  Economic slowdown, declining capital-markets activity, NIM compression, pricing pressure, regulatory revenue pressure, and cybersecurity risk.

Key data

• Expected exit routes for GPs over the next 12 monthsStrategic sales 44%, secondary transactions 44%, continuation funds 44%The PitchBook survey allowed multiple selections, so the percentages can appear side by side.
• Expectation of a strong improvement in private-equity exit opportunities2%Only 2% of respondents think exit opportunities will improve strongly over the next six months; 26% expect a slight improvement, and 39% expect stability.
• Main source of the buy-sell valuation gap30% of respondents point to differences in revenue growth assumptionsDifferences in revenue growth expectations are an important source of current valuation divergence.
• Declining software allocation26% of respondents said software was the most underweighted industryAmong the eight industries listed in the survey, software was cited as the most significant underweight.
• LPL monthly NNA growth4.3%Monthly net new assets accelerated sequentially; UBS expects quarterly core organic NNA growth of 3.8%.
• SCHW May 2026 NNA growth4.8%Better than UBS expectations, with new-account growth, transactional cash, and margin loan demand all standing out.
• SF valuation10.3xThe report believes SF's institutional business accounts for about 30% of revenue and is undervalued at the current valuation.
• KKR valuation13.2xBelow the 17x historical average and benefiting from a rebound in deal activity, monetizations, and capital-markets activity.

Impact & implications

The report suggests a more selective allocation approach to U.S. capital-markets-related financial stocks: direct bets on investment-banking names that have already rallied and whose expectations are full carry higher risk; companies with diversified businesses, valuations still below historical levels, and positive operating leverage to the transaction cycle may offer better risk-reward as M&A and capital-markets activity recover.

Risks

• Private-equity exit improvement may take longer than expected, delaying investment-banking advisory fees and asset-management monetization.
• Capital-markets recovery expectations have already been priced into some stocks, so results that only meet expectations may not continue to push share prices higher.
• An economic slowdown could lead to credit losses above expectations and suppress trading, financing, and wealth-management activity.
• Changes in rates, the yield curve, and NIM could affect the profitability of brokerage and wealth-management companies.
• Regulatory reform, intensifying competition, fee pressure, and cybersecurity incidents could create downside risks to revenue or valuations.

What to watch

• Whether JEF F2Q26 results are enough to exceed already elevated market expectations.
• Whether private-equity exit opportunities shift from stable to materially improving over the next six months.
• Weekly changes in Dealogic advisory, ECM, and DCM fee pipelines.
• Whether LPL advisor-recruited assets and core organic NNA growth catch up with market consensus.
• Whether SCHW new-account growth, transactional cash, margin loans, and DATs continue to outperform expectations.
• Whether KKR performance fees, capital-markets fees, and strategic-holdings monetization are released as the deal cycle improves.