Private equity

Alternative managers’ private equity divisions are expected to see improved performances in 2017 on higher liquidity and growth in sectors such as renewables, engineering, defense, and services. Alternative asset managers garner most of their base and performance fees from private equity businesses.

Private equities aim to generate higher returns compared to the broader index (SPY) in order to command higher performance fees. Major triggers for private equities include deployments at low valuations, a stable global economic outlook, and improved public holdings valuations.

Blackstone’s, KKR’s, Carlyle’s Private Equities May Rise in 2017

In 3Q16, Blackstone’s (BX) private equity division reported economic income of $132.1 million on the back of a 3% rise in its portfolio value. Its total revenue stood at $337 million, compared to -$522 million in 3Q15, reflecting improved valuations.

Energy and services

The Carlyle Group’s (CG) private equity holdings’ valuations also rose 3% in 3Q16, mainly due to the rebound in the energy sector (USO). In 4Q16, these valuations could see growth of over 2.5% as broader sectors rise.

KKR & Co.’s (KKR) private equity division contributes nearly 75% to the company’s total revenue. In 3Q16, KKR reported revenue of $549 million in its private equity division, a rise on the back of a 5.8% YoY (year-over-year) rise in its portfolio valuations. The company benefited from higher performance fees and economic net income as its valuations rose.

Apollo Global Management (APO) also saw a rise in its private equity holdings, in part due to its broad market appreciation. Alternatives target diversified portfolios in bids to deal with rising uncertainty and fast changes in sector outlooks.

In the next part of our series, we’ll study private equity fund deployments and how they might look in 2017.

Latest articles

WeWork is gearing up for an IPO. On Wednesday, the company made its IPO filing with the SEC public and expects to garner $3.5 billion from its IPO.

After FCC Chairman Ajit Pai recommended the approval of the T-Mobile–Sprint merger, Representative David Cicilline urged the FCC to allow public comment.

Cresco Labs (CRLBF) is set to report its Q2 earnings on August 21 after the market closes. The company's stock fell 5.3% yesterday.

Cannabis stocks mostly traded in positive territory today. Supreme Cannabis (FIRE) and Aurora Cannabis (ACB) rose about 9.5% and 5.5%, respectively.

NVIDIA (NVDA) stock soared 6% in today’s trading session as its Q2 earnings for fiscal 2020 beat estimates. However, its guidance missed estimates.

Nio Inc. (NIO) has disrupted the automotive space since 2014 but only made waves in the market since its IPO. Investors have suffered numerous setbacks.