UBS Group AG 2026 U.S. Asset Management Outlook: Market sentiment shifts to "moderately optimistic" with recommendations for Apollo (APO.US), Charles Schwab Corp (SCHW.US), etc.

Recently, UBS Group AG released a research report on the US securities and asset management industry, pointing out that the industry as a whole is showing a "moderately optimistic" trend, with investors being more rational than last year, and the market is expected to maintain a mild upward trend by 2026. The report covers many well-known institutions and gives "buy" ratings to some companies, including TPG (TPG.US), Apollo Global Management Inc (APO.US), and Charles Schwab Corp (SCHW.US). UBS Group AG stated in the report that companies with a buy rating generally have strong growth certainty, reasonable valuation, or clear catalysts. As a representative of "both growth and value," Apollo Global Management Inc benefits from the multi-channel strategy of its insurance platform Athene and strong annuity demand. It is expected that its recurring earnings (FRE) compound annual growth rate can reach 20% by 2029, and its current valuation is still attractive. TPG is expected to achieve over 20% FRE growth through the expansion of its credit business, wealth management channel expansion, and the introduction of potential insurance partners. UBS Group AG predicts that its FRE profit margin by 2029 will reach 50%, significantly higher than the company's set 45%+ target. Charles Schwab Corp is widely regarded by the market, but its stock price has not yet reflected its growth potential. UBS Group AG's analysis indicates that if its legacy Ameritrade client assets achieve a 5% annual growth, it could contribute approximately 1 percentage point to the company's overall net new assets (NNA) and drive long-term growth. In an optimistic scenario, earnings per share could reach $8.38 by 2028, with approximately a 14% upside from current expectations. Despite market concerns about risks related to Jefferies Financial Group Inc. (JEF.US) First Brands, UBS Group AG still gives the stock a "buy" rating. The bank's analysis shows that the current market pricing already reflects a net income loss of $150-250 million, while the actual direct impact is only $40-45 million. With the company's continued rise in market share in M&A advisory and capital markets business, the 2027 expected P/E ratio is only 11 times, lower than the industry average over the past three years, offering significant valuation attractiveness. For companies such as Ares Management (ARES.US) and LPL Financial (LPLA.US) that received a "neutral" rating, UBS Group AG clearly stated the core reasons for their cautious stance. Ares, although fundamentally strong, is expected to exceed its goals of managing $750 billion in organic assets and a compound growth rate of 16%-20% FRE. However, with a 2026 expected P/E ratio of 25.9 times, which is 132% premium to peers, further upside would depend on exceeding performance expectations or expanding valuation premiums. LPL's neutral rating is due to short-term growth pressures, as the company focuses on retaining the Commonwealth advisory team, organic NNA growth recovery may be slower than market expectations, with organic growth rates expected to be maintained below 7% in the coming quarters, and core management fees in 2026 may be higher than industry consensus, putting short-term performance under pressure. Industry trends and investment opportunities outlook Additionally, UBS Group AG emphasizes in the report the multiple structural opportunities that the industry will present by 2026. The allocation of private assets in 401(k) plans is expected to gradually increase, with target date funds (TDFs) becoming the main channel. It is expected that by 2028, the proportion of private assets in TDFs will increase from the extremely low level in 2024 to 5%, with institutions like KKR (KKR.US), Blackstone (BX.US), and Apollo being the most competitive. In the insurance market, there is a potential market of $3.5-6.5 trillion in the private credit sector, and if Blackstone can achieve about 15% market share, it could potentially add $500-750 billion in asset management scale and $20-30 billion in revenue in the future. In the M&A market, it is widely expected that the fee scale will return to 100%-105% of the peak in 2021 by 2026, further expanding to 100%-115% by 2027. However, UBS Group AG's forecasts are more conservative at 90% and 105%, respectively, believing that the current consensus expectations already reflect optimism, and the risk-return ratio in the boutique investment bank sector is becoming more balanced.