Several years ago, I heard a presentation from Laurence Fink, the mastermind behind the asset management giant, BlackRock (NYSE: BLK). At the time, he gave some frank advice; that is, he warned that investors needed to be very cautious.

Of course, it was spot-on (and saved me lots of money). And, I'm sure Fink's investors also appreciated the counsel.

Well, this week BlackRock became the king of asset management because of its $13.5 billion acquisition of Barclays Global Investors (NYSE: BCS). In all, the assets under management will now amount to $2.8 trillion.

A bank stock? In this market? Indeed preferred bank plays exist, with several community banks scoring high on that list. But it's understandable if you may want to avoid the investment banks for awhile.

Still, there are selected investment/commercial banks with superior business models, and among these the Bank of New York Mellon is worth a review.

Bank of New York Mellon (NYSE: BNY) is one of the world's leading asset management and corporate trust services banks, with an astounding $20 trillion in assets under custody and more than $1 trillion of assets under management.

In general, analysts expect BK's merger-adjusted revenue to rise about 8-10% in F2008, and 10-12% in F2009. Analysts also expect BK's merger with Pittsburgh-based Mellon Financial to enhance the company's business mix.

Further, the Bank of New York has also done a good job restricting non-merger expense growth, and it could also benefit as several competitors more-involved in the subprime mortgage sector struggle with credit-related issues. The Reuters F2008/F2009 EPS consensus estimates for BK are $2.99/$3.41.

Readers of this space know that the investment thesis offered here favors large-cap companies with demonstrated business models and that have a competitive advantage in established markets, preferably with a favorable global trend as a support.

Still, every once in awhile an exception is made, in this case to get-ahead-of the-curve regarding a sector's recovery, and with the aforementioned in mind, Bear Stearns is worth an evaluation.

Bear Stearns (NYSE: BSC) is a leading investment banking, securities, and derivatives trading, clearance, and brokerage firm serving corporations governments, institutional, and individual investors worldwide.

Analysts expect Bear's prime brokerage and asset management businesses to continue to grow, along with adequate-to-good results from its trading division.

Further, there's a sense now among analysts that BSC's mortgage securities and leveraged loan commitments on its balance sheet have been sufficiently written down. That's not to say that there won't be more write-downs or an additional financial bump or two, but the worst appears to be over, at least for Bear.

Franklin Resources (NYSE: BEN), an asset management company that works under the name Franklin Templeton Investments, came out yesterday with strong numbers. They reported income of $518.3 million, or $2.12 per share diluted, on revenues of $1,685.6 million for the quarter ended December 31, 2007. In the quarter ended September 30, 2007, net income was $436.9 million, or $1.76 per share diluted, on revenues of $1,629.1 million. For the quarter ended December 31, 2006, net income was $426.8 million, or $1.67 per share diluted, on revenues of $1,427.8 million.

Operating income for the quarter ended December 31, 2007 was $635.7 million, as compared to $541.4 million for the prior quarter and $508.1 million for the quarter ended December 31, 2006.

In what many considered a very challenging environment for the asset management industry, they continue to grow their business. The stock has gotten pounded along with the rest of the market, and is over 30% off its' high.

This seems like a great long-term play. Their are many catalysts that should help drive earnings in the coming quarters.

1) A 33.3% increase in its quarterly dividend over the dividend paid the prior quarter and the same quarter last year. The company has increased its annual dividend rate every year since 1981.

2)10 million shares stock buyback

3)The Industrial and Commercial Bank of China, China's largest commercial bank, selected Franklin Templeton Investments to manage its newest Qualified Domestic Institutional Investor fund for domestic Chinese retail and institutional investors.

This may be the biggest driver going forward, as they will get a big chunk of Chinese retail and institutional money.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has a position and is long BEN. He has no positions in any stock mentioned as of 1/25/08

In "Wall Street shares: Poised to play catch-up with other financials," I suggested that investment bank and broker/dealers shares could be vulnerable to further weakness in the period ahead.

Another group that may also be at risk because of the fast-spreading contagion in global credit markets is the asset management sector (e.g., Standard and Poor's 500 Asset Management & Custody Banks Index).

Up until recently, the shares of publicly traded money managers have done well in comparison to the broader equity market (e.g., S&P 500 index). What's more, relative to other financials, the sector has been a star performer.

Arguably, investors seem to believe that the positive fundamentals of the last few years -- strong inflows, booming global markets, favorable demographic trends, and sheer momentum -- will outweigh any near-term negatives.

Based on how rapidly conditions have deteriorated so far, that optimism seems unwarranted. In fact, logic suggests further credit market woes could soon negatively impact the sector in a number of ways. Among the possibilities:

• Investors increasingly favor "safer" investments (i.e., with smaller management fees) such as money market and short-term government bond funds
• There is a growing preference for traditional savings vehicles such as bank certificates of deposits and savings accounts, which draws assets away from publicly traded, non-bank money managers
• Falling market returns lead to increased competition, boosting marketing costs and pressuring revenues
• Rising financing costs cut into margins and limit management flexibility
• Concerns about risk to reputation force some firms to step in and bail out ailing funds at considerable expense

With that in mind, the recent outperformance may actually represent a decent selling opportunity.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World.

Investors who have been following the ETF market in the last year have most certainly come across offerings from WisdomTree Investments (Other OTC: WSDT). After the stock's recent slide, in my opinion due to high naked short interest (the stock was on the Regulation SHO list for the fall) , I think the company's shares are starting to look interesting. But this isn't a traditional investment for most people -- the company trades on the pink sheets. However, I don't believe that should cause investors to stop looking at this company.

WisdomTree has essentially revolutionized the ETF industry by creating their own way of "weighing" indexes. While there is tremendous debate among both academics and financial professionals, WisdomTree's website is loaded with academic research and backtesting to justify its claims that their weighting methods are optimal. I highly recommend readers check out WisdomTree's website.

Unlike many companies trading on the pink sheets without financial filings, WisdomTree has voluntarily been making its financial filings public since 2005. Although these filings aren't pretty -- the company is losing money and not producing much revenues, I believe it says something about the company that they voluntarily file their information.

WisdomTree's products actually seem to be doing very well on both a return and assets under management basis despite being in operation for only a little more than one year. For example, WisdomTree's core offerings include:

• WisdomTree Dividend Index: $357 million under management
• WisdomTree DEFA Index: $393 million under management
• WisdomTree Interntaional Communications Sector Index: $390 million under management
  
• WisdomTree International Basic Materials Sector Index: $462 million under management
  
• WisdomTree International Utilities Sector Index: $375 million under management
  
• Wisdom Tree Pacific ex-Japan Index: $452 million under management

In addition, some of the company's more recent offerings -- the earnings-weighted products -- are also doing very well. Many of them are already in the $200-250 million AUM range despite only launching a couple months ago.
As you can see, the company has a rather significant asset base for a very young company. The company's products are also doing well. For information on their performance I recommend that you view this video.

I really love the asset manager business model -- it's extraordinarily scalable and it's usually not a very capital intensive model. However, the way WisdomTree has launched with marketing, launching fees, and so on, is not typical for most money managers. That being said, I believe it creates a long term value for the company. An acquirer would receive more than 20 ETF listings with tried-and-true strategies, a much better proposition for most bigger asset managers or banks than buying a one-trick-pony hedge fund. I think that investors have to look out 2-3 years to see any potential value in this name. However, looking out to late 2008, I think the company will have nearly 40 ETF offerings and $7-10 billion in assets. If that's the case, I think the $440 million price-tag on the company today will look cheap because I've seen money managers bought out for 12-22% of AUM.

After speaking with my good friend and fellow writer Zac Bissonnette he raised the issue of ETF price wars that he expects to come as a result of Vanguard more aggressively entering the space which he covered here.While this is certainly a valid risk, I think it doesn't affect WisdomTree as much as it will affect major players like Barclay's with products that aren't unique or innovative.

There's one other potential catalyst: WisdomTree's goal to become listed on the NASDAQ. The company hopes to be listed on the NASDAQ. I don't think this is a distant goal -- the company already files audited financials and its management team is very "plugged-in." If the company does in fact get listed, WisdomTree will gain exposure and trust because it will no longer be traded amongst the pump-and-dump stocks of the pink sheets.

Add it all up and I think the risk-reward proposition is very interesting. While the stock is certainly speculative, I think the company has valuable, innovative and popular products that are going to continue to gain in popularity in coming years as investors realize the changes that different weightings can have on returns.

If you are bothered by the down-turn in the stock market perhaps you need to think longer term when you invest. In the long term the market will be up. If you are hit with a cold sweat by rapid downward movement in stock prices perhaps you have not set aside enough reserve capital to ride out the storm. You should increase your cash reserves or invest a greater amount in a mix of bond funds. You should not put long term money in short term investments, nor should you put short term money (needed in the next six months) in long term investments.

Momentum can move a market up and it can move a market down very rapidly and good companies can get caught in the "group think" which may be very irrational. If your tolerance for volatility is low then you should increase your investment diversification, trade less, use index funds and continue to adjust your portfolio using a proven asset manager if you do not have the ability to do it yourself.

Any good investment company or manager will ask you to assess your risk tolerance early in the process of setting up an account, but you should ask yourself this question even if you do not have an adviser. If you are feeling anxious about the current market you were not honest with yourself when you considered this question, or you did not address the issue at all.

At times like these I am reminded of what the economist, John Maynard Keynes, said, "The market can stay irrational longer than you can stay solvent." If you foresee potential liquidity problems in your future you should address them now; you should not hope for a turn-a-round to save you. Yes, the market will turn around, but when is the question, and you do not want to be worried about when. This is where long term thinking and value investing have a great advantage over momentum investing, technical analysis, growth stories and of course day trading.

Check out my other posts for BloggingStocks here.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.