Alternatives Are Sitting on Record Capital, Lack of Opportunities
Alternatives Have Record Dry Powder, Fewer Opportunities in 2016
Undrawn capital
Alternative asset managers (XLF) can take advantage of lower valuations in the present Market across sectors and make decent returns over the next few quarters. Managers with record amounts of dry powder (undrawn capital) and commitments can benefit.
Blackstone (BX) has continually attracted a large amount of capital backed by the strong operating performances of its various funds. The company has continued to attract new capital across its product offerings.
The company’s total dry powder rose by 37% to a record $88.6 billion compared to the same quarter last year. This increase in undrawn capital was driven by fundraising for the latest global private equity and real estate funds. Blackstone made significant realizations in the real estate and private equity segments.
Carlyle and KKR
The Carlyle Group (CG) had total dry powder of $56.6 billion, forming 32% of the total assets under management as of March 31, 2016. This reflected the solid funding power of the company. It included $23.1 billion in corporate private equity, $4.7 billion in global market strategies, $15.4 billion in real assets, and $13.3 billion in investment solutions.
KKR & Co. (KKR) raised $20 billion in new capital for 2015, resulting in record dry powder. The company is making investments in distressed credit and energy to take advantage of lower valuations.
Apollo Global Management (APO) had $25.6 billion in dry powder as of March 31, 2016. The number included $9.1 billion of AUM (assets under management) with a future management fee potential.
Alternative asset managers held between $4 billion and $10 billion on their balance sheets in the form of cash and short-term equivalents, reflecting strong liquidity. Blackstone generated a 28% return on equity in the last year, the highest among its alternative investment peers that form part of the iShares Dow Jones US Financial ETF (IYF).
Next, let’s see how alternatives are maintaining high payouts in the midst of declining profits.
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