For large public managers, PE is no longer the top dog
June 10, 2023
We just published our quarterly breakdown of the top six publicly traded alternative asset managers ("alts"), which now zooms out to include private GP franchises and the valuations they are fetching in control and non-control transactions.
In bygone years, private equity dominated the AUMs and fundraising at these six giant managers: Blackstone, KKR, Apollo, Carlyle, Ares, and TPG. But PE is the top dog no longer, and that's been the case for many years.
Instead, that mantle has been passed to PE's close cousin, private debt. As of the end of Q1, credit accounted for 45.5% of the $3 trillion in AUM across the big six alts and an even more impressive 54.5% of fundraising over the last year.
Why has credit become so dominant?
The short answer is that yield sells, especially in the wealth management channel that most of these alt managers have carved out and are raising increasing funds from. Higher-yielding product is also more suitable for the perpetual capital structures that are also high on the list of these managers.
The share of perpetual capital has pushed over 36%, or $1.1 trillion. These assets grew by 20.6% over the last year, nearly double the 11.2% growth in total AUM.
Related to this, and perhaps the biggest factor for this growth in credit product at these managers is their collective push into managing long-duration insurance assets.
Whether it enters those relationships through acquisition—as KKR, Carlyle and Apollo have all done (Athene accounts for half of Apollo's AUM)—or making strategic investments or alliances as Blackstone has done (its insurance solutions account for 17% of AUM), a major chunk of life insurance is now managed by PE; 10% of the industry by some accounts.
Insurance assets are primarily allocated to fixed income, so it goes to reason it is migrating to the equivalent in private markets.
Other key takeaways from our quarterly report:
In bygone years, private equity dominated the AUMs and fundraising at these six giant managers: Blackstone, KKR, Apollo, Carlyle, Ares, and TPG. But PE is the top dog no longer, and that's been the case for many years.
Instead, that mantle has been passed to PE's close cousin, private debt. As of the end of Q1, credit accounted for 45.5% of the $3 trillion in AUM across the big six alts and an even more impressive 54.5% of fundraising over the last year.
Why has credit become so dominant?
The short answer is that yield sells, especially in the wealth management channel that most of these alt managers have carved out and are raising increasing funds from. Higher-yielding product is also more suitable for the perpetual capital structures that are also high on the list of these managers.
The share of perpetual capital has pushed over 36%, or $1.1 trillion. These assets grew by 20.6% over the last year, nearly double the 11.2% growth in total AUM.
Related to this, and perhaps the biggest factor for this growth in credit product at these managers is their collective push into managing long-duration insurance assets.
Whether it enters those relationships through acquisition—as KKR, Carlyle and Apollo have all done (Athene accounts for half of Apollo's AUM)—or making strategic investments or alliances as Blackstone has done (its insurance solutions account for 17% of AUM), a major chunk of life insurance is now managed by PE; 10% of the industry by some accounts.
Insurance assets are primarily allocated to fixed income, so it goes to reason it is migrating to the equivalent in private markets.
Other key takeaways from our quarterly report:
- GP deal activity in the alts manager space got off to a slow start in Q1 as those investors stayed highly selective. Q2 began with a bang, however, with TPG's $2.7 billion acquisition of Angelo Gordon.
- The PE fundraising environment remains challenging, even for the industry leaders who are guiding to lower targets after lengthy offering periods.
- Private equity deployment continues its slump in the new year. Other asset classes, including credit and secondaries, are seeing more activity than PE.
- Private wealth stays in scope with more perpetual vehicles launching. Meanwhile, retail redemption requests have subsided from the flare-up in January.
Tim Clarke
Lead Analyst, Private Equity
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