Will Alternative Asset Managers Recover from the Recent Rout?
Alternative asset managers, including Blackstone (BX), Carlyle (CG), KKR & Co. (KKR), and Apollo Global Management (APO), among others, have seen their stock prices fall substantially in 2016 on weak operating performance and the falling values of their holdings due to macroeconomic factors.
The stocks have fallen by 30%–50% over the past year. Despite the recent rout, alternatives have been deploying capital at a record pace in order to take advantage of discounted valuations. Asset managers with substantial dry powder are well positioned to take advantage of attractive buyout options.
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Blackstone and other alternatives missed their fourth-quarter earnings estimates. The company missed Wall Street analysts’ economic net income estimates of $0.64. It posted economic net income of $0.61. It reported an economic net income of $436 million in the fourth quarter, mainly due to lower performance fees. This was partially offset by higher interest and dividend income.
Carlyle Group reported 4Q15 EPS (earnings per share) of $0.24, missing Wall Street analysts’ consensus estimate of $0.31. Carlyle Group’s holdings improved in private equity and fell in global market strategies. Its distributable income on a pretax basis stood at $145 million, and its economic net income stood at $73 million in 4Q15. In 4Q14, the company reported an economic net profit of $181 million.
KKR missed Wall Street analysts’ EPS estimates of $0.26 per unit, with posted earnings per share of $0.08 per unit. The company’s net earnings rose 53% on portfolio appreciation and higher fees.
Institutional and retail clients prefer ETFs over alternatives, as the former carry lower management costs. Alternatives face competition from traditional asset managers such as BlackRock (BLK), Vanguard, and other asset managers that form part of the SPDR S&P 500 ETF (SPY).
In this series, we’ll discuss deployment, fund performance, assets under management, and valuations of alternative asset managers.