Alternative managers’ private equity divisions have seen a rebound in their holdings’ valuations since the second half of 2016. The companies could see improved performances in 1H17 on higher liquidity and growth in sectors such as manufacturing, engineering, renewables, defense, and services. Private equities aim to generate superior returns compared to the broader index (SPX) (SPY) in order to command higher performance fees.
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In 4Q16, Blackstone’s (BX) private equity division reported economic income of $222.9 million on the back of a 4.5% rise in its portfolio value. The division’s performance income rose to $252.8 million compared to $161.1 million in 4Q15.
The Carlyle Group (CG) saw a 5% appreciation in portfolio valuation in 4Q16 and 12% in 2016, reflecting an improved performance on a YoY (year-over-year) basis. The rise was mainly due to appreciation in its private equity, legacy energy, real estate, and investment solutions. The company’s private equity space saw 4% growth backed by gains in the second and third European buyout funds and fifth US buyout funds, partially offset by a 1% decline in the sixth US buyout fund.
KKR’s (KKR) private markets division contributed ~71% of the company’s total revenues in 4Q16. In 4Q16, the segment reported revenues of $351 million as compared to $550 million in the prior year and $549 million in the previous quarter. The growth was boosted by portfolio appreciation of 3.4% YoY (year-over-year) in 4Q16 and 11.6% in 2016.
Apollo Global Management (APO) also saw a rise in its private equity holdings, mainly due to its broad market appreciation. In the next part of our series, we’ll study private equity fund deployments in 2017.