Listed giants continue to grow fee-generating AUM

The seven listed managers rated by Fitch hold almost 20% of dry powder available to invest in alternatives.

Limited partners reducing the number of managers they use and increased product diversity is driving more capital for alternative investment into the hands of the largest managers, a report from Fitch Ratings shows.

The seven alternative investment managers Fitch rates are some of the largest in the sector: Apollo Global ManagementAres ManagementBlackstoneThe Carlyle GroupFortress Investment GroupKKR and Oaktree Capital Management.

Fee-generating assets under management for this group expanded at a 12 percent compound annual growth rate from 2010 to the second quarter of 2017, Fitch noted.

“Limited partners clearly still have significant appetite to allocate capital to alternative investments,” Fitch managing director Meghan Neenan said in a statement.

“Additionally, the largest alternative investment managers are reaping the benefits as investors continue to consolidate capital with firms that offer investment capacity and product diversity.”

These large managers are also able to buck broader investment trends. The aggregate value of buyout deals was down 4.2 percent in the first nine months of the year compared with the same period in 2016, while the number of deals was down 3.3 percent, the Fitch analysis shows.

Blackstone invested $8.6 billion of LP capital in private equity during the first half of the year, up 152.1 percent from the same period the previous year, and KKR invested $8.1 billion from its private markets segment, which includes private equity, up 161.1 percent year-on-year.

KKR was the most active manager in private capital by number of deals in the first nine months, making 57 investments with an aggregate deal value of $20.9 billion. Bain Capital was the most active by deal value, announcing 26 deals worth a combined $24.4 billion.

Dry powder for alternative investments hit $1.56 billion in October, of which almost 40 percent is in private equity buyout funds, according to data cited by Fitch.

Dry powder for Fitch’s rated peer group reached $290 billion at 30 June – almost 20 percent of the total – an increase of under 7 percent year-on-year.

Of Blackstone’s $90 billion in dry powder at 30 June, $37.5 billion is earmarked for private equity, and KKR has almost $28 billion available for the asset class.

Carlyle’s private equity dry powder stands at $16 billion. In this year’s second-quarter earnings call, co-founder and co-chief executive David Rubenstein said the firm hoped to hold first closes on three buyout funds targeting a total of $25 billion by the end of the first half of 2018. The firm is seeking to raise at least $100 billion by 2020, as previously reported by Private Equity International.