The four largest publicly traded alternative asset managers reaffirmed their optimistic outlook on first-quarter earnings calls, even as they grappled with an ongoing slowdown in private equity fundraising and dealmaking.

The average net positivity score for Apollo Global Management Inc., Blackstone Inc., The Carlyle Group Inc. and KKR & Co. Inc. rose for the second consecutive quarter, surpassing the average for S&P 500 companies for the first time since the second quarter of 2022, according to an analysis of the language used by executives and analysts on earnings calls. That brightening tone shone through on the calls amid some frank talk about disappointing private equity performance.

Few put it more bluntly than new Carlyle CEO Harvey Schwartz, who opened the firm's earnings call by telling the analysts on the line, "Let me be clear, we're not pleased with our first quarter results." Schwartz said the firm fell short of goals for fundraising and realizations of private equity investments in the first quarter, and he predicted Carlyle's earnings would contract in 2023 due to weak private equity performance.

"That said, importantly, we are confident that Carlyle is well positioned for when markets stabilize and activity levels ultimately pick up," added Schwartz who, like other private equity leaders, expects market turbulence to open low-price entry points into new investments, eventually. They have been scarce so far in 2023.

Still, there is much more to the Big Four than buyout funds, and that may explain some of the positivity that seeped through on the first-quarter calls. Even as their private equity strategies stagnate, they are seeing business pick up for their private credit and secondaries funds.

AUM expands

Although private equity fundraising was slow, assets under management for all four of the largest listed private equity firms continued to expand in the first quarter, thanks in part to investor demand for other investment strategies, particularly private credit.

Carlyle CFO Curt Buser noted the firm's fundraising in 2023 was running ahead 2022's pace but said the "composition of that fundraising has skewed further towards global credit and investment solutions and less from corporate private equity."

Carlyle posted the biggest year-over-year gain in fee-earning AUM, up 17.2% in the first quarter to $381.2 billion. Blackstone, the largest of the four by AUM, grew 8.3% year over year, ahead of KKR, which was up 6.5%, but behind Apollo, which expanded 16.6%.

– Download a spreadsheet of raw data from this story. – Read about an uptick in private equity coinvestment activity. – Catch up on the record dry powder for private equity secondaries.

Apollo Director Scott Kleinman confirmed that "fundraising trends in traditional private equity are still facing some headwinds," particularly as institutional investors in the US and Europe are allocating cautiously. But other investors are stepping up.

"Investors based in the Middle East and Asia actually turned up their focus and seem to have viewed it as an opportune time to allocate capital," Kleinman said.

Uneven return performance

Blackstone and KKR posted a better total return performance than the S&P 500 in the year to March 31. Apollo and Carlyle performed worse than the stock market index on that metric, which combines both stock price movements and dividends to measure the actual return of an investment.

Carlyle's total return performance turned sharply negative after the end of the quarter, a dip coinciding with its announcement of first-quarter results on May 4. The firm's stock price shed 13.5% of its value after the firm reported an 82% year-over-year drop in quarterly earnings and a greater than 10% year-over-year decline in the distributable earnings paid out to shareholders.

Apollo and Blackstone are projected to raise their dividends over the course of 2023, while Carlyle and KKR are expected to hold their dividends steady, according to Eclipse, an S&P Global forecasting service. Eclipse assigned the highest confidence to its projection for KKR, citing strong investment performance in the face of macroeconomic headwinds.