In this article, we will look at the 15 Small Cap Financial Stocks Hedge Funds Are Buying.
How to Navigate Adding Financials To Your Portfolio Amidst Tariff Uncertainty?
Much like other sectors of the economy, the financial and banking sector is likely to take a hit from the tariff uncertainty and recession fears. On April 8th, Reuters reported that the bank earnings season will likely shift from profit-making banks to losses. Mike Mayo, who is an analyst at Wells Fargo noted that the bank’s earning season will unveil the largest effect of tariffs in the coming quarters because banks will have to set aside higher reserves for loan losses due to recession fears. Moreover, Stephen Biggar, director of financial institutions at Argus Research, noted that banks are a direct reflection of the economy, therefore as the market slows down, this sector could be the one to take the hardest hits.
To talk about the impact of tariffs on the banking sector Suryansh Sharma, senior equity analyst at Morningstar joined Yahoo Finance for an interview on April 10. He noted that the tariffs were substantially aggressive compared to what the market expected. This aggressiveness was in terms of the breadth of countries and products these tariffs targeted. Although the policy is on pause for 90 days, however, the uncertainty is far from over. Sharma believes that if these tariffs continue to stay in effect, they will be harmful to the US economy. This is important for the banking sector as the sector is tied closely to the macroeconomic performance of the United States. Therefore if the economy is not doing well, the banking and financial sector will not perform well.
Sharma further elaborated on the impact of tariffs. He highlighted that if the tariffs stay in place, the macroeconomic conditions are likely to get worse, which can lead the economy towards a recession, meaning that the Fed will cut rates faster than expected. While many sectors benefit from lower interest rates, the banking sector does not. Lower interest rates mean contracting net interest income for asset management and banking stocks. Moreover, given the high levels of uncertainty, loan growth is also anticipated to head downwards, thereby impacting the overall Merger and Acquisition activity. Sharma highlighted that the market anticipated that the Trump administration would result in a lot of M&A activity leading to a banking sector boom, however, the current situation points towards a banking sector bust.
Lastly, the analyst highlighted that Morningstar believes that the banking sector is still undervalued compared to other sectors, however, very slightly undervalued. Therefore, he suggests investors be very selective in choosing the banks they want to invest in. He likes financial stocks that have strong fee-generating capabilities and are comparatively more undervalued than their fair value.
With that let’s take a look at the 15 small-cap financial stocks hedge funds are buying.
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Our Methodology
To compile the list of 15 small-cap financial stocks hedge funds are buying, we used the Finviz Stock Screener and Insider Monkey’s Q4 2024 hedge funds database. Using the screener we aggregated a list of financial services stocks that are trading at a market cap of at least $10 billion. For the purpose of this article, we are defining small-cap financial services stocks as those that trade between a market cap of $10 billion and $20 billion. Next, after cross-checking the market capitalization from Yahoo Finance, we ranked the stocks in ascending order of the number of hedge fund holders. In cases where two or more stocks were held by an equal number of hedge funds, we used the market cap as a tiebreaker. Please note that the data was collected on April 18, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
15 Small Cap Financial Stocks Hedge Funds Are Buying
15. Houlihan Lokey, Inc. (NYSE:HLI)
Market Capitalization: $10.752 Billion
Number of Hedge Fund Holders: 28
Houlihan Lokey, Inc. (NYSE:HLI) is an international investment bank that specializes in providing advisory services through three main segments. Its main segments are Corporate Finance, Financial Restructuring, and Financial and Valuation Advisory. The company not only serves corporations but also helps institutions, governments, and sponsors around the globe.
During the fiscal third quarter of 2025, Houlihan Lokey, Inc. (NYSE:HLI) delivered robust financial performance across all its business segments. The Corporate Finance segment closed 170 transactions, up from 117 last year. This took the segment revenue to $422 million, contributing 66% to the total revenue which grew 24% year-over-year to $634 million. Moreover, the Financial and Valuation Advisory segment also continued to benefit from the improved Merger and Acquisition market, along with the Financial Restructuring which posted modest growth as well. Management noted while the average transaction fees declined in some segments the overall revenue mix helped take the profitability and liquidity higher. Houlihan Lokey, Inc. (NYSE:HLI) is one of the small-cap financial stocks hedge funds are buying.
14. The Carlyle Group Inc. (NASDAQ:CG)
Market Capitalization: $12.946 Billion
Number of Hedge Fund Holders: 32
The Carlyle Group Inc. (NASDAQ:CG) is another international investment management company that specializes in private equity, alternative assets management, and managed financial services. It operates through three main segments including Global Private Equity, Global Equity, and Global Investment Solutions.
On April 10, Barclays analyst Benjamin Budish maintained a Buy rating on the stocks with a price target of $43. Ariel Fund mentioned The Carlyle Group Inc. (NASDAQ:CG) in its Q4 2024 investor letter stating that the company traded higher during the fourth quarter on the election news which was viewed as a positive catalyst for the industry. Moreover, the fund also believes that the financial company is trading at a healthy discount to its sector.
In fiscal 2024, The Carlyle Group Inc. (NASDAQ:CG) delivered record results with fee-related earnings growing around 30% year-over-year to reach $1.1 billion. Moreover, the total assets under management also grew 4% during the same time to reach $441 billion. The growth was mainly driven by the Global Credits segment, which remained the fastest growing for the company as revenue grew 22% year-over-year and assets under management reached $190 billion. It is one of the small-cap financial stocks that hedge funds are buying.
Ariel Fund stated the following regarding The Carlyle Group Inc. (NASDAQ:CG) in its Q4 2024 investor letter:
“Additionally, alternative asset manager, The Carlyle Group Inc. (NASDAQ:CG), traded higher over the quarter with the U.S. election widely viewed as a positive catalyst across the industry. Investors expect the incoming administration to emphasize deregulation and exhibit a greater openness to business combinations compared to the prior regime. Hence, management’s positive commentary around the expectation for increased capital market activity, fee-related earnings growth, private equity fund appreciation as well as returning capital to shareholders via buybacks sent shares higher. At current levels, we believe CG trades at a healthy discount to our private market value estimate.”
13. East West Bancorp, Inc. (NASDAQ:EWBC)
Market Capitalization: $10.67 Billion
Number of Hedge Fund Holders: 33
East West Bancorp, Inc. (NASDAQ:EWBC) is a bank holding company of East West Bank. It provides a range of banking services through Consumer and Business, Commercial, Treasury, and other Banking segments. The company had more than $70 billion in assets in 2024.
On April 8th, Jared Shaw, an analyst from Barclays maintained a Buy rating on the stock with a price target of $105. Over the past 5 years, East West Bancorp, Inc. (NASDAQ:EWBC) has been focused on growing its deposits as one of the key drivers of its balance sheet. As a result, the bank has been able to fund new loans while maintaining a strong liquidity position. In 2024 alone, the bank achieved a 13% growth in deposits and reached $63.2 billion. Moreover, the company also grew its total average loans by 6% in 2024, which was in alignment with the previous guidance. Management expects Commercial and Industrial Lending to pick up growth in Q1 of 2025, which will improve the overall business for the company. It is one of the small-cap financial stocks that hedge funds are buying.
12. Morningstar, Inc. (NASDAQ:MORN)
Market Capitalization: $11.856 Billion
Number of Hedge Fund Holders: 33
Morningstar, Inc. (NASDAQ:MORN) is a leading financial investment research, data, and analysis company that operates in more than 29 countries. It serves a variety of clients ranging from individual investors to asset managers. Its key segments include Morningstar Data and Analytics, PitchBook, Morningstar Wealth, Morningstar Credit, and Morningstar Retirement.
Morningstar, Inc. (NASDAQ:MORN) reported double-digit revenue growth in 2024. Its fourth-quarter revenue grew 9.7% year-over-year, whereas the full-year revenue grew 11.6% during the same time. Morningstar Data and Analytics was one of the biggest contributors to growth with $196.0 million in Q4 revenue and was driven by increased headcount, spending on marketing, and also the impact of the sale of the Company’s Commodity And Energy Data business. On the other hand, the PitchBook segment contributed $162.5 million after improving 12.5% year-over-year. Management noted that the integration of PitchBook with aftermarket equity research and the use of AI to transform workflows were the biggest drivers of growth. Morningstar, Inc. (NASDAQ:MORN) is one of the small-cap financial stocks hedge funds are buying.
11. TPG Inc. (NASDAQ:TPG)
Market Capitalization: $16.076 Billion
Number of Hedge Fund Holders: 33
TPG Inc. (NASDAQ:TPG) is a global alternative asset management company that utilizes a diversified investment approach across asset classes, including private equity, credit, real estate, and public market strategies. On April 8th, Wells Fargo analyst Michael Brown maintained a Buy rating on the stock with a price target of $66.
The company started fiscal 2024 after recently acquiring Angelo Gordon, which the management noted to be a significant move to expand TPG Inc.’s (NASDAQ:TPG) capabilities in credit and real estate. The newly acquired firm is now operating as a fully integrated entity and has already started generating revenue opportunities for the company. Moreover, during the year the company also exceeded its fundraising ambition by raising $30 billion, reflecting a 54% increase from the previous year on a pro forma basis.
Vulcan Value Partners mentioned buying a position in TPG Inc. (NASDAQ:TPG) in their Q1 2025 investor letter. The fund highlighted that they have been following the company since its IPO in 2022 and have been impressed by its execution. They consider the company to be an alternative assets management company that has a great reputation and proven track record. Vulcan Value Partners also believes that the company will benefit from its long-term capital investment, which acts like an annual fee stream. It is one of the small-cap financial stocks that hedge funds are buying.
Vulcan Value Partners stated the following regarding TPG Inc. (NASDAQ:TPG) in its Q1 2025 investor letter:
“We purchased three positions during the quarter: Medpace Holdings Inc., Stanley Black & Decker, and TPG Inc. (NASDAQ:TPG). TPG is an alternative asset manager with a great reputation and proven track record. The alternative asset manager industry benefits from long-term capital, which leads to annuity-like fee streams. In addition, the industry continues to enjoy tailwinds from increasing capital flows into private markets. We have followed TPG since their IPO in 2022 and have been impressed with their execution. We expect TPG to continue to expand their market share in a growing industry, and we expect fundraising, fee revenue, and fee earnings to accelerate. TPG is in a great position to fundraise as the company consistently returns capital to LPs. Many in the industry struggle to return funds, and this differentiates TPG.”
10. Kinsale Capital Group, Inc. (NYSE:KNSL)
Market Capitalization: $11.321 Billion
Number of Hedge Fund Holders: 36
Kinsale Capital Group, Inc. (NYSE:KNSL) is a specialty insurance company that focuses on excess and surplus lines markets in the United States. The excess and surplus lines market refers to clients with high-risk insurance needs, which are not covered by regular insurance. The company operates in both commercial and personal lines, operating through a network of independent brokers.
On April 10, Morgan Stanley analyst Bob Huang maintained a Buy rating on the stock with a price target of $515. Giverny Capital Asset Management also mentioned Kinsale Capital Group, Inc. (NYSE:KNSL) in its Q1 2025 investor letter, stating that they like the founder and CEO of the company along with the cost discipline, technology, and underwriting that has been delivering results. Moreover, the company has maintained a clear strategic focus on small Excess & Surplus accounts, leveraging absolute control over underwriting and claims processes. As a result, Gross written Premium for Q4 2024 grew by 12.2%, along with casualty division growing 15%.
Management also noted that they are focusing on technology driven, low-cost operating model, which is one of the key advantage of Kinsale Capital Group, Inc. (NYSE:KNSL). It plans to invest in technology, automation, data, and analytics to drive continued growth. The company expects 10% to 20% long-term growth in gross written premiums, by steady submission growth and selective pricing strategies. It is one of the small-cap financial stocks hedge funds are buying.
Giverny Capital Asset Management stated the following regarding Kinsale Capital Group, Inc. (NYSE:KNSL) in its Q1 2025 investor letter:
“We added to existing positions in Medpace and Kinsale Capital Group, Inc. (NYSE:KNSL), both of which are now among our top 10 holdings. Medpace is a clinical research organization that helps emerging biopharma companies conduct trials on new compounds. I’ve written about Kinsale at length in prior letters (all of which are available on our www.givernycam.com website) but as a reminder, it writes so-called excess and surplus lines of insurance, which are less regulated coverages often offered to small businesses. Kinsale has a strong founder-CEO at the helm in Mike Kehoe, along with exceptional cost discipline, best-in-class technology and consistent underwriting results.”
9. Reinsurance Group of America, Incorporated (NYSE:RGA)
Market Capitalization: $12.207 Billion
Number of Hedge Fund Holders: 38
Reinsurance Group of America, Incorporated (NYSE:RGA) is an international insurance holding company that specializes in health and life reinsurance and other financial services. It provides its clients with reinsurance products that cover life, health, disability, and long-term care.
On April 2, JPMorgan upgraded the stock from Neutral to Overweight with a price target of $237, up from $232. The firm noted that the upgrade is based on the earnings expectations from the Equitable Holdings deal, followed by Reinsurance Group of America, Incorporated’s (NYSE:RGA) defensive risk portfolio, and an overall attractive valuation.
Moreover, during fiscal 2024, the company achieved a record Return on Investment of 15.4%, which exceeded the company’s intermediate target. This was driven by record operating earnings and a significant capital deployment for transactions. The Asian traditional business market remained one of the strongest growth contributors. Reinsurance Group of America, Incorporated (NYSE:RGA) has expanded its presence in Asia, especially in Hong Kong and China. It is one of the small-cap financial stocks hedge funds are buying.
8. Globe Life Inc. (NYSE:GL)
Market Capitalization: $10.093 Billion
Number of Hedge Fund Holders: 43
Globe Life Inc. (NYSE:GL) is another insurance holding company that through its subsidiaries provides life and health insurance products for middle-income Americans. Its insurance products include traditional whole life and term life insurance, supplemental health insurance, Medicare, and more.
On April 2, Piper Sandler analyst John Barnidge maintained a Buy rating on the stock, while increasing the price target from $130 to $152. During the fiscal fourth quarter of 2024, Globe Life Inc. (NYSE:GL) reported a net income of $255, which was slightly down from $275 net income from a year ago. However, regardless the earnings per share increased as there were fewer outstanding shares. More importantly, net operating income increased 12% year-over-year driven by Life insurance premium revenue and Health insurance premium revenue growth of 4% and 7%, respectively.
Looking ahead, Globe Life Inc. (NYSE:GL) expects Life premium revenue to grow by 4.5% to 5% and Health insurance premium revenue by 7.5% to 8.5%, reflecting continued growth and stale margins for 2025. It is one of the small-cap financial stocks hedge funds are buying.
7. SoFi Technologies, Inc. (NASDAQ:SOFI)
Market Capitalization: $12.123 Billion
Number of Hedge Fund Holders: 43
SoFi Technologies, Inc. (NASDAQ:SOFI) is a financial technology company that provides a digital financial platform to help individuals achieve financial independence through a single platform. Its main business segments include Lending, Financial Services, and Technology Platforms, through which it provides technology services.
On April 17, SoFi Technologies, Inc. (NASDAQ:SOFI) announced securing a $3.2 billion expansion to its Loan Platform Business through two major agreements with Fortress Investment Group and Edge Focus. The agreement includes a $2 billion extension agreement with Fortress and a new two-year agreement of $1.2 billion as a joint venture between Fortress and Edge Focus. Management anticipates that this expansion will allow them to meet the growing demand for personal loans while helping it to shift towards a less capital-intensive, fee-based revenue stream.
During the fiscal fourth quarter of 2024, SoFi Technologies, Inc. (NASDAQ:SOFI) delivered a record revenue of $734 million, reflecting 19% growth. This was driven by a 52% combined growth in the Financial Services and Technology Platform segments. Looking ahead, management plans to move towards an incremental EBITDA margin of around 30%. It is one of the small-cap financial stocks hedge funds are buying.
Patient Capital Management stated the following regarding SoFi Technologies, Inc. (NASDAQ:SOFI) in its Q4 2024 investor letter:
“The top performers in the fourth quarter were once again Financials and Travel names. We’ve been over-indexed to them since the pandemic, which has served us well. We strategically added to certain financial names like SoFi Technologies, Inc. (NASDAQ:SOFI) and Coinbase Global Inc. (COIN) during the year. Both companies rebounded strongly in the fourth quarter.
Sofi Technologies Inc. (SOFI) was a standout in the quarter, climbing 95% and up 156% from the intra-day lows in June. The company benefited from Fed rate cuts and the market’s growing optimism that the economy will avoid a recession. The company continues to grow its customer count while successfully cross selling into their loans and financial service products. In the quarter, we saw the company take on a new revenue stream by originating loans for third parties, creating an attractive balance sheet-light revenue source, helping improve return on equity and margins. Sofi is early in its life cycle, currently being a small player in a very large total addressable market (TAM). With their strong management team, we believe the company will continue to deliver on their guidance of strong growth and expanding margins.”
6. Unum Group (NYSE:UNM)
Market Capitalization: $13.37 Billion
Number of Hedge Fund Holders: 43
Unum Group (NYSE:UNM) is a global provider of workplace benefits and other financial services. It mainly operates through its Colonial Life and Unum brands, offering a range of services including disability, life, accident, critical illness, cancer coverage insurance, and more.
On April 11, Barclays raised the firm’s price target on the stock from $85 to $89, while keeping an overweight rating on the stock. During fiscal 2024, Unum Group (NYSE:UNM) grew its earnings per share by 10%, which came in above expectations of 7% to 9% growth. Management noted that most of its products exceeded expectations, whereas the overall ROE from operations remained high at over 20%.
Moreover, Unum Group (NYSE:UNM) also raised its dividends by 15% and repurchased $1 billion in shares throughout the year reflecting a strong performance year-wise. Management noted that its UK operations remained strong with full-year premium growth of 9.4% and sales growth of 6.6%. Looking ahead, the company expects to maintain growth in the upper GBP 20 million range for 2025, reflecting continued confidence in the UK market’s performance. It is one of the small-cap financial stocks hedge funds are buying.
5. Corebridge Financial, Inc. (NYSE:CRBG)
Market Capitalization: $15.301 Billion
Number of Hedge Fund Holders: 43
Corebridge Financial, Inc. (NYSE:CRBG) is another financial services company based in America. It specializes in retirement solutions, operating through four core business segments including Individual Retirement, Group Retirement, Life Insurance, and Institutional Markets.
On April 11, Barclays maintained a Buy rating on the stock with a price target of $36. Since its IPO in 2023, Corebridge Financial, Inc. (NYSE:CRBG) has consistently delivered robust top and bottom-line growth. Over 5 years, the company has grown its top line by 7.13% and net income by more than 113%. During the fourth quarter of 2024 as well, the company delivered robust organic growth. As a result of effective balance sheet management, improved expense efficiency, and active capital management, the net income of the company made a dynamic turnaround from a loss of $1.3 billion in 2023 to $2.2 billion in the latest quarter. Moreover, the Group retirement segment delivered steady results, with advisory and brokerage sales up 31% year-over-year, though net outflows were impacted by plan losses and required distributions. It is one of the small-cap financial stocks hedge funds are buying.
4. Citizens Financial Group, Inc. (NYSE:CFG)
Market Capitalization: $15.515 Billion
Number of Hedge Fund Holders: 43
Citizens Financial Group, Inc. (NYSE:CFG) is an American bank holding company that operates through two main business segments including Consumer Banking and Commercial Banking. While Consumer Banking serves individuals and small businesses, Commercial Banking deals with middle market and larger corporations.
On April 17, RBC Capital analyst Gerard Cassidy maintained a Buy rating on the stock with a price target of $44. During the fiscal first quarter of 2025, Citizens Financial Group, Inc. (NYSE:CFG) demonstrated its financial strength. The company grew its Net Interest Income by 3 basis points to reach 2.90%. Moreover, the core loan also grew by 1% during the same time. As a major strategic initiative, the company expanded into Florida, Southern California, and New Jersey, which resulted in the Private Bank segment reaching $8.7 billion in deposits and $5.2 billion in assets under management.
Looking ahead, management has reaffirmed its full-year EPS guidance. It expects volatility during the first half due to the macroeconomic environment but improved business activity in the later half on the bank of a favorable policy environment. Citizens Financial Group, Inc. (NYSE:CFG) is one of the small-cap financial stocks hedge funds are buying.
3. KeyCorp (NYSE:KEY)
Market Capitalization: $15.868 Billion
Number of Hedge Fund Holders: 43
KeyCorp (NYSE:KEY) is a bank holding company that primarily operates through its KeyBank National Association. It provides a range of services through its Consumer and Commercial banking segments. The bank has a vast network of more than 1,000 branches and 40,000 ATMs across 15 states in the US.
On April 7, Baird analyst David George upgraded the stock from Neutral to Outperform with a price target of $18. The analyst noted that the recent softness has resulted in the best risk/reward situation for the company. He also mentioned that their firm has not seen such an attractive risk/reward situation since 2023.
During the fiscal first quarter of 2025, the management of KeyCorp (NYSE:KEY) acknowledged the impact of uncertainty and tariffs on the business, which has resulted in the pause of new capital projects. However, regardless of the uncertainty the company delivered 16% year-over-year growth in revenue to reach $1.8 billion. Moreover, the profitability also increased as net income grew 65% during the same time. It is one of the small-cap financial stocks hedge funds are buying.
2. Equitable Holdings, Inc. (NYSE:EQH)
Market Capitalization: $14.381 Billion
Number of Hedge Fund Holders: 47
Equitable Holdings, Inc. (NYSE:EQH) is a diversified financial services company that provides a range of services including retirement planning, wealth management, and asset management. The company mainly focuses on high-return segments such as retirement and assets management and had more than $1 trillion in assets under management as of 2024.
On April 10, Jefferies analyst Suneet Kamath maintained a Buy rating on the stock with a price target of $66. During fiscal 2024, Equitable Holdings, Inc. (NYSE:EQH) experienced strong inflows in retirement and wealth management driven by favorable market performance. This led the assets under management to grow by 10% year-over-year. Management noted that these higher assets under management have led to increased fee-related earnings supporting the company’s growth in 2025 and beyond.
Equitable Holdings, Inc. (NYSE:EQH) is targeting growing annual cash generation to $2 billion by 2027 while maintaining a payout ratio of 60% to 70%. It is one of the best small-cap financial stocks hedge funds are buying.
1. TransUnion (NYSE:TRU)
Market Capitalization: $14.224 Billion
Number of Hedge Fund Holders: 58
TransUnion (NYSE:TRU) is an international financial information and insights company that operates through two business segments namely, the US Markets and International segment. Its key services include credit risk management, fraud mitigation, customer marketing, identity verification, and financial inclusion.
On April 10, Jefferies analyst Surinder Thind maintained a Buy rating on the stock with a price target of $90. During the fiscal fourth quarter of 2024, TransUnion (NYSE:TRU) exceeded revenue and adjusted EBITDA guidance. Its revenue grew by 6% led by the International segment which grew 12% on a constant currency basis. Moreover, the company also executed several strategic initiatives such as prepaying $45 million in debt and refinancing over $2.3 billion in term loans. It also relocated over 1,000 roles to global capability centers to improve productivity and enable more services from diverse geographies.
TransUnion (NYSE:TRU) expects 3.5% to 5% revenue growth and 3% to 6% adjusted EBITDA growth in 2025, along with optimizing its global operating model and technology transformation to accelerate innovation. It is the best small-cap financial stock hedge funds are buying.
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READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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