Private equity giants choose their own adventures

Story time. 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 ir own strategies, and ir first-quarter financials showed m 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. Stey 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 deline 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, 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 first three months of 2024 puts it on track to beat a $300 billion total goal by end of 2026.

As for Blackstone, biggest of 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 end of 2022. Put it all toger, and all four firms grew earnings year-over-year for first time since 2022.

Whatever ir individual journeys, all private equity firms have one thing in common – need to sell ir 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 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 wear in which to sell. For all buyout firms’ conquests, muted deal markets remain a common foe.