Key facts
- Oppenheimer downgraded Goldman Sachs and Morgan Stanley to "underperform" from "perform."
- Citigroup and Bank of America were downgraded to "perform" from "outperform."
- The brokerage advised investors to sell large-cap investment banks and focus on alternative asset managers.
- Recommended alternative asset managers include Ares Management, Blackstone, and KKR.
- Oppenheimer cited limited room for further gains in investment bank valuations and the later stage of their expansionary cycle.
Brokerage Oppenheimer has made significant adjustments to its recommendations for major U.S. investment banks, including downgrading Goldman Sachs and Morgan Stanley to "underperform" from "perform." The firm also cut Citigroup and Bank of America to "perform" from "outperform." Oppenheimer cited concerns that current valuations for these large-cap banks offer limited room for further gains, suggesting they are in the later stages of an expansionary cycle.
Instead of large-cap investment banks, Oppenheimer recommended investors shift their focus to alternative asset managers such as Ares Management, Blackstone, and KKR. This recommendation comes as shares of alternative asset managers have lagged this year due to investor wariness regarding private-credit exposure and potential fund redemptions, concerns that many analysts believe are overblown.
Oppenheimer suggested that investors maintain their financial exposure by re-deploying funds raised from investment banks into these alternative asset managers, which it believes are in a relatively early phase of expansion. The firm noted that while the expansionary cycle for investment banks could continue for some time, it prefers to act proactively rather than wait for warning signs to emerge.