What to Expect from Alternatives’ Earnings in 1H17
2017 expected performance
Alternatives expect marginal growth in 1Q17 due to rising equities and improved liquidity across asset classes. The companies expect 10%–15% rises in their bottom lines for the full year on higher performance fees. In 1Q17, Blackstone Group (BX) and Apollo Global Management (APO) are expected to report EPS (earnings per share) of $0.73 and $0.56, respectively.
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The Blackstone Group’s private equity, real estate, and hedge funds divisions are expected to drive its growth over the next few quarters. In 2Q17, Blackstone is expected to see EPS of $0.69, reflecting a sequential decline due to strong performance in the first quarter.
KKR and Carlyle deploy funds
The Carlyle Group (CG) and KKR (KKR) are expected to post EPS of $0.41 and $0.49, respectively, in 1Q17. These expectations reflect Carlyle’s rebound in performance mainly due to increased energy prices and higher valuations of private market holdings. In 2Q17, CG and KKR are expected to have EPS of $0.42 and $0.49, respectively. KKR is expected to see marginal growth in 1H17 sequentially, mainly due to the higher realizations and distributions in 2H16.
Institutional and retail investors are leaning towards ETFs or passive funds with lower costs, as alternatives have failed to generate high premium returns compared to the broader market (SPX) (SPY). As a result, investors are targeting cost savings. However, performing alternatives have continued to attract new funds.
Alternatives could see growth in 2017 with major drivers including the performance of the broad economy, inflation, rate hikes, and the global economic outlook.