Private equity giants choose their own adventures

Story time. The four biggest U.S. private equity firms have a combined asset hoard of nearly $3 trillion, but within that big number, each is on a different quest. Blackstone, Carlyle, KKR and Apollo Global Management are all pursuing their own strategies, and their first-quarter financials showed them hitting some important new targets. Each, though, has ogres to vanquish.

Apollo’s earnings on Thursday reflected its transformation into a gigantic private lender, powered by dollars from its in-house insurance business. Steady fees, which shareholders generally like, and income from investing policyholders’ premiums accounted for nearly all of net income. Apollo boss Marc Rowan wants its various divisions to lend out a total $250 billion a year and is likely to surpass that goal well before a promised five-year deadline arrives in 2029.

KKR and Carlyle are also on track, but with different destinations in mind. Carlyle boss Harvey Schwartz promised cost-cuts and delivered; after expenses and recently tweaked dealmakers’ pay, the firm now keeps 47 cents out of every fee dollar it collects, up from 35 cents a year ago. KKR’s near-$31 billion of new funds raised during the first three months of 2024 puts it on track to beat a $300 billion total goal by the end of 2026.

As for Blackstone, the biggest of the four, it’s focused on raising money from small-dollar investors for a new fund. Steve Schwarzman’s buyout shop is also managing to keep things stable at flagship property fund BREIT, which experienced dramatic outflows at the end of 2022. Put it all together, and all four firms grew earnings year-over-year for the first time since 2022.

Whatever their individual journeys, all private equity firms have one thing in common – the need to sell their investments at a profit. That’s where reality is still a drag. Interest rates are staying high, which dampens appetite for buying private equity castoffs at high prices. Income from deals compared to last quarter fell at all the firms except Carlyle. At Apollo, such revenue is 85% below its pandemic-era peak. Blackstone has been a buyer of real estate, but even it needs friendly weather in which to sell. For all the buyout firms’ conquests, muted deal markets remain a common foe.