Goldman Sachs Identifies Top Performers for 2025 Capital Markets

Goldman Sachs Outlines Key Insights for 2025 Capital Markets

Goldman Sachs is reshaping the approach to capital markets as we move into 2025. Analyst Alexander Blostein has highlighted important emerging trends in alternative asset management, brokerage services, and traditional asset management strategies. These insights offer a roadmap for investors looking to navigate the evolving landscape.

Top Picks from Goldman Sachs

In the latest report, strong contenders like KKR & Co. Inc. (KKR) and Raymond James Financial, Inc. (RJF) have been identified as favored investment opportunities. Meanwhile, firms such as Hamilton Lane Incorporated (HLNE) and Cboe Global Markets, Inc. (CBOE) may face downward revisions. The competition among alternative managers has heightened, prompting significant adjustments.

Performance of Alternative Asset Managers

In 2024, alternative asset managers significantly outperformed the S&P 500 by 28%, showcasing an impressive average gain of 51%. Despite this, issues with excessive valuations may hinder their growth into 2025. For instance, KKR soared 82% last year, marking a remarkable comeback, while stocks like StepStone Group Inc. (STEP) enjoyed a 79% increase. However, this growth comes with challenges as the average price-to-earnings (P/E) ratio surged over 30% last year, leading to caution among investors.

Pressing Themes Shaping 2025

Goldman Sachs forecasts three key themes to influence the alternative managers' landscape:

1. Increased Competition in Private Credit: Dominating management fee growth last year, private credit now faces the threat of increased competition and potential commoditization in direct lending, although demand for private investment-grade credit remains robust.
2. Expansion of Retail and Private Wealth Channels: The retail investor segment is poised for growth, but larger players pose a significant challenge.
3. Revival of Private Equity: Corporate private equity managers are expected to benefit from improved fundraising and realization as market conditions stabilize.

Among the prominent investment opportunities, Goldman’s top buys continue to highlight KKR & Co. Inc. and TPG Inc. (TPG) for their promising fee-related earnings growth potential, making them appealing choices for savvy investors.

Brokerage Insights for M&A Growth

The capital markets environment is showing signs of recovery, particularly in mergers and acquisitions. Raymond James Financial, Inc. (RJF) has been upgraded to Buy, credited with a compelling $185 price target. Blostein noted RJF's impressive $2.5 billion in excess capital as a catalyst driving growth.

Other Notable Brokerage Picks

LPL Financial Holdings Inc. (LPLA) continues to be a strong candidate among brokerages, while traditional trust banks such as The Bank of New York Mellon Corporation (BK) and State Street Corporation (STT) are aligned for balanced growth opportunities in the upcoming year.

Traditional Asset Managers: Mixed Signals

Performance among traditional asset management firms is varied as well. Franklin Resources, Inc. (BEN) has seen a positive shift in ratings due to its attractive valuation, showing a 6.5% dividend yield and a 14% free cash flow yield. Furthermore, Janus Henderson Group plc (JHG) also moved from Sell to Neutral thanks to improved performance metrics in fees and growth in their ETF offerings.

Challenges in the Traditional Sector

Conversely, Affiliated Managers Group, Inc. (AMG) was downgraded due to declining EBITDA growth, while Cboe Global Markets, Inc. (CBOE) faced a sell recommendation due to stagnation in growth for their SPX and VIX options products.

Frequently Asked Questions

What companies are highlighted by Goldman Sachs for 2025?

Goldman Sachs emphasizes KKR & Co. Inc. and Raymond James Financial, Inc. as top picks for investors in 2025.

How did alternative asset managers perform in 2024?

Alternative asset managers outperformed the S&P 500, achieving an average gain of 51%.

What themes are shaping the capital markets in 2025?

Key themes include rising private credit competition, expansion of retail investor channels, and a revival of private equity.

What rating change did Raymond James Financial receive?

Raymond James Financial was upgraded from Neutral to Buy, targeting a price of $185.

What challenges are traditional managers facing?

Traditional managers are grappling with mixed performance, with some firms facing downgrades due to changing market conditions and reduced growth prospects.

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