Alternatives expect marginal growth in 4Q16 due to stable equities and marginally improved liquidity across asset classes. However, these companies expect 10%–15% rises in their bottom lines in 2017 on higher performance fees.
Blackstone saw subdued growth in 2016, but as the company increases its deployments and the valuations of its asset classes improve, it could see higher earnings in 2017. In 1Q17, Blackstone is expected to see EPS of $0.69, reflecting sequential growth due to strong deployments in 2016.
The Carlyle Group (CG) and KKR & Co. (KKR) are expected to post EPS of $0.36 and $0.51, respectively, in 4Q16. These expectations reflect Carlyle’s weak performance on lower managed assets resulting from higher distributions. In 1Q17, CG and KKR are expected to have EPS of $0.42 and $0.48, respectively. KKR is expected to see a marginal fall in 1H17 due to the higher realizations and distributions expected for it in 4Q16.
Apollo Global Management is expected to see improved earnings on higher investments in 2017. The company is expected to post EPS of $2.15 in 2017, compared to $1.82 in 2016.
Institutional and retail investors tend to prefer ETFs—passive funds with lower costs—because alternatives have failed to generate premium returns compared to the broader market (SPY). However, these companies have generated good returns in recent quarters, beating performances by mutual funds and ETFs.
Alternatives could see higher growth in 2017, as the global economy is expected to be more stable in the wake of the Brexit vote and the US presidential election.