The four largest publicly traded private equity firms projected a positive tone on third-quarter earnings calls as executives shared an outlook for more active dealmaking in 2025.

The earnings season for the Big Four firms opened Oct. 17, with Blackstone Inc. CEO Stephen Schwarzman predicting moderating interest rates would catalyze transaction activity in 2025. When it closed three weeks later Nov. 7, The Carlyle Group Inc. CEO Harvey Schwartz said those lower rates would combine with the quick, decisive outcome to the US election in "a pretty powerful one-two punch for our markets and business."

"This should be an environment in which we are [well-positioned] to capitalize on monetization opportunities and put capital to work," Schwartz said.

The average net positivity score assigned to the Big Four firms' earnings calls came in above the average for the S&P 500 for the first time since the first quarter of 2023, according to S&P Global Market Intelligence data. While the average net positivity score for S&P 500 companies has slid three consecutive quarters, the Big Four's average score has been steady or rising for four quarters.

Improving positivity

Transcript positivity scores came in higher than the prior four-quarter average for Carlyle and KKR & Co. Inc., which both reported record fee-related earnings in the third quarter, and for Blackstone. The value of Blackstone's various funds appreciated more in the third quarter than in any quarter in the last three years, the firm reported.

Apollo Global Management Inc.'s transcript score came in lower than the prior four-quarter average, but the presentation could hardly be viewed as pessimistic. CEO Marc Rowan laid out a five-year plan to double the business of the firm, which had $733 billion in assets under management at the end of the third quarter.

AUM growth

Apollo, the second largest of the Big Four by AUM, posted the biggest quarter-over-quarter increase in AUM, which grew 5% from the second quarter, Market Intelligence data shows.

KKR and Carlyle grew faster than Apollo over the 12 months leading to Sept. 30. KKR expanded AUM 18% from the year-ago period to $624.4 billion. The $447.4 billion Carlyle reported for AUM in the third quarter was up 17% from the year-ago period.

Fundraising outlook

Although Blackstone and Apollo both posted quarterly fundraising totals in excess of $40 billion in the third quarter, raising new capital from investors has been a slog for most of the private equity market in 2024. A brighter M&A outlook means that trend could shift soon.

Private equity was on pace to produce the most exits since 2021 based on activity recorded in the first three quarters of the year. That is good news for private equity investors who have committed more capital to the asset class than they have seen returned by fund managers in recent years.

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The slowdown in distributions meant large institutional investors had less cash on hand to commit to new funds.

"More realizations working their way through the system will free up capacity from our big customers," said Blackstone COO Jonathan Gray.

Investment performance

All four firms outperformed the S&P 500 on a total return basis between Jan. 1 and Nov. 8, the day after Carlyle reported earnings, according to Market Intelligence data. KKR produced the best performance for stockholders over that period, producing total returns of 84.9%.

Blackstone issued the richest dividend in the third quarter at 86 cents per share and is expected to hike that dividend to $1.25 per share in the fourth quarter, according to Eclipse, a dividend forecasting service.