A report published recently by Morningstar identifies four traits of successful asset managers and three firms that embody them. This according to an article in Institutional Investor.

The report says that BlackRock, T. Rowe Price Group, and Charles Schwab Investment Management, the article says, “exemplify these qualities” which include the following:

1. Differentiation: “Successful firms can do many things well (products, asset classes, geographies); do one thing extremely well (steadfast active manager T. Rowe Price, for example); have serious scale (like BlackRock); or benefit from vertical integration.
2. Price Point: The article cites comments from Warren Buffett, who says that “by gradually lowering management  fees and expense ratios, active asset managers can give their products a leg up over higher-cost offerings in the same category, as well as eventually make themselves more cost-competitive with passive products.”
3. Consistently outperforming the competition: The Morningstar report states that “the impetus is on active managers to improve the disparity that exists between their performance and their benchmarks.”
4. Adaptability of business model: Investment companies either have to adapt their models proactively as the market evolves, “or they rot.”