Brokerage Oppenheimer downgraded major US investment banks including Goldman Sachs and Morgan Stanley in an unusual move on Tuesday, saying current valuations leave limited room for further gains despite a favorable operating environment. Instead, he recommended investors sell large-cap investment banks and buy alternative asset managers, a group that has been caught up in a sharp selloff that many analysts see as overdone amid concerns about private-credit exposure.

* Morgan Stanley shares were down 1.4% in early trade, while Goldman Sachs fell about 1% after Oppenheimer downgraded both banks to “underperform” from “perform”.

* The brokerage also cut Citigroup and Bank of America to “outperform” from “outperform,” sending their shares down about 1.3%.

* Oppenheimer said that while he doesn’t see anything to derail investment bank stocks from their growth or return path in the immediate future, he believes they have moved into the latter part of an expansion cycle.

* “While the cycle may continue for another 12-18 months or more, we would not prefer to wait for warning signs to appear, and thus, especially in the case of investment banks, we are more inclined to take money and run,” Oppenheimer analysts wrote.

* Instead of exposure to large-cap banks, investors should focus their resources on commercial banks such as US Bancorp and PNC Financial Services, the brokerage said, as they are in the relatively early stages of expansion.

* Among alternative asset managers, brokerages recommended Ares Management, Blackstone and KKR

* Shares of alternative asset managers have lagged this year as investors remain wary of private-credit exposure and the risk of elevated redemptions from flagship funds, despite analysts arguing those concerns are overblown.

* “We suggest that investors maintain their financial exposure by reallocating funds raised in alts,” Oppenheimer said.