Exit revival hopes lift mood of private equity's Big Four in spite of challenges

Expectations that positive signals from global M&A and IPO markets will soon translate into more private equity exits buoyed the sentiment of the private equity industry's Big Four on first-quarter earnings calls.

The average net positivity score for the four largest listed alternative asset managers — Apollo Global Management Inc., Blackstone Inc., The Carlyle Group Inc. and KKR & Co. Inc. — held steady quarter over quarter in the first quarter even as the average for S&P 500 companies ticked down, according to an S&P Global Market Intelligence analysis of the language used by executives and analysts on the calls. The Big Four's collective score edged closer to the S&P average than it had in three quarters.

Among the four, KKR's net positivity score experienced the greatest surge over the previous four-quarter average, a sign of optimism fueled by the expected reopening of exit pathways.

"As we look at our pipelines, they are better on the monetization side than they've been at any point over the past 12 to 18 months," CFO Robert Lewin said.

Fundraising and AUM

KKR is the third largest of the Big Four by assets under management, but it's also the fastest growing under that metric. The $577.6 billion in AUM KKR reported as of March 31 was up 13% year over year and 4% quarter over quarter.

Apollo reported 12% year-over-year expansion of AUM, as did Carlyle, while Blackstone lagged at 7%.

The private credit strategies that began to attract more investor attention as interest rates rose and banks clamped down on lending in 2022 continue to power fundraising at the Big Four. Meanwhile, the ongoing slowdown in private equity exits is cutting distributions to limited partners and hampering the firms' ability to raise new private equity funds.

Carlyle CFO John Redett confirmed fundraising for private equity "remains somewhat challenging" when the firm reported earnings May 1.

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Blackstone has proven the most adept at attracting capital despite the challenges, raising $26.6 billion for its private equity strategies over the last 12 months — nearly twice as much as any other Big Four firm in that period.

Blackstone can credit some of that success to its expanding slate of products for the private wealth market. Blackstone Private Equity Strategies Fund LP, a private equity fund designed for retail investors, accumulated $2.7 billion in the first quarter, accounting for more than one-third of the quarterly inflows to the firm's private equity strategies.

Total return performance

Apollo turned in the best stock performance for investors through May 6, posting a total return of 20.1% since the start of the year, according to S&P Global Market Intelligence data. Along with KKR, it bested the 9.1% total return for the S&P 500 over that period.

Blackstone was the only one of the four in negative territory, with a total return of negative 6.1% for the year through May 6.

Dividend forecast

Blackstone’s 83-cent dividend was the largest announced among the four listed firms in the first quarter, according to Eclipse, an S&P Global dividend forecasting service.

The data also projects Blackstone's dividend will grow at a much faster rate than the other three firms, with expectations of a $1.50 dividend in the first quarter of 2025.