The global economic outlook is relatively stable for 2017 after a global run in equities and broad markets. Retail and institutional investors have selected funds or ETFs tied up with equities, real estate, and structured offerings. Alternative asset managers (XLF) have successfully raised new funds across various asset classes.
However, alternatives face high competition from low-cost ETF offerings from Vanguard, BlackRock (BLK), and State Street (STT). Asset managers have to consistently demonstrate alpha generation or superior returns in a bid to attract more funds.
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Alternatives have managed high powder on fund raises and realizations over the past few quarters. The broader market (SPX) (SPY) and the real estate sector have advanced in recent quarters as earnings have improved across sectors. Any fall in valuations of assets can attract more investment as fundamentals improve globally.
Blackstone Group (BX), the biggest alternative asset manager, attracted $16.7 billion across its offerings in 4Q16, bringing its total over the past year to $69.7 billion. These inflows resulted in record dry powder of $101.3 billion, a rise of 27% on a year-over-year basis.
KKR (KKR) also raised $4.5 billion in 4Q16, bringing its total to $28.8 billion over the past 12 months. The company saw higher distributions of $7.1 billion on higher realizations, and it saw a market appreciation of $1.1 billion during the same period.
Apollo Global Management (APO) saw strong fundraising of $6.6 billion and deployed $3.5 billion during the quarter. The company had $25.9 billion in dry powder. It’s raising new funds in private equities, credit markets, and hedge funds.
Carlyle Group (CG) has seen its assets under management decline consistently over the past few quarters. The company reported assets of $157.6 billion as compared to $169.1 billion in 3Q16 and $182.6 billion in 4Q15. In 4Q16, the company saw an inflow of $1.8 billion. It had total dry powder of $50.1 billion.
Next, let’s study how alternatives are maintaining their distributions.