A private equity firm's earnings come from two primary routes: management fees, where LPs pay a set fee based on the size of their investment, and performance fees, where firms take a cut of their investment returns. Lately, the five largest publicly traded PE firms have been more focused than ever on the former as a way to boost their overall earnings.
Our latest analyst note examines the most recent earnings reports from Apollo Global Management, Ares Management, Blackstone, The Carlyle Group, and KKR to see how all five managed to grow their fee-related earnings in 2020 on a year-over-year basis. Some key takeaways:
- Perpetual capital vehicles have become a popular tool for helping firms boost their AUM and collect more management fees.
- Large insurance transactions have proven particularly useful, with Apollo and KKR leading the way.
- Pandemic uncertainty contributed to a healthy fundraising year, as many LPs focused on existing relationships.