Private equity business
Alternative asset managers generate a majority of their base and performance fees from private equity holdings. They seek to generate returns above the broad index (SPY) in order to garner higher performance fees. Alternatives have seen their portfolio valuations rebound since the second quarter of 2016 on improvement in public holdings and increased liquidity in the market.
Among alternatives, Blackstone’s (BX) private equity division posted an economic income of $132 million in the June quarter. The company’s portfolio valuations rose 2.5% during the quarter, and revenues rose to $385 million compared to $313 million. Blackstone’s major holding, Hilton Worldwide Holdings (HLT), remained flat in the second quarter.
Private equities for Carlyle and KKR
The Carlyle Group’s (CG) private equity holdings’ valuations rose 5% in the June quarter, mainly due to increased natural resources and real estate holdings. Over the past year, the company’s fund valuations have risen 3%, mainly due to real estate.
KKR’s (KKR) Private Equity division has seen some consistent recovery over the past couple of quarters. The segment saw a rise of 4.5% in the June quarter, but revenues fell to $453 million compared to $705 million in the prior year’s quarter. Growth in the private equity space was mainly due to a rise of 6% in its private portfolio compared to a rise of 3% for its public portfolio. The company’s real estate and infrastructure funds performed at a good pace. The Energy Income and Growth fund rose a strong 10%, mainly due to high commodity prices.
In the next part of our series, we’ll look at private equities’ capital deployments and why they might take some time to yield returns.