Publicly traded private equity firms are expected to focus on fundraising, real estate returns and deployment of capital in the third quarter, as markets remain at the mercy of rising interest rates, inflation and geopolitical tensions.

Earnings season for publicly traded PE firms starts Thursday, and analysts say they are expected to report profitable quarters across the board. Blackstone reports first, and Apollo Global Management, Blue Owl, The Carlyle Group, KKR and TPG—all tracked in PitchBook's US PE Earnings Dashboard—will report in the coming weeks.

Blackstone is expected to highlight its vast real estate portfolio after years of continued dominance in the investment space, BMO Markets said in a note.

"We admire BX's business, which benefits from impressive scale across four platforms (Real Estate, Private Equity, Credit, and BAAM) and compelling growth opportunities in new areas like BREIT, BCRED, BEPIF, Insurance, Growth Equity, Life Sciences, and Core strategies," BMO said.

However, the mood is different now compared with the end of the Q1 earnings season, when PitchBook analysts noted that the overall mood in earnings calls had turned circumspect.

"Executive teams were more cautious in their tones and discussed interest rates and inflation at length. Firms with substantial assets in floating rate credit, real estate, and infrastructure were quick to highlight these fund offerings as they are seeing a pickup in attention from LPs," according to PitchBook's Q1 report analyzing US PE firm earnings.

With Q2 earnings season kicking off, Morgan Stanley said it expects Blackstone's focus to remain unchanged by the global market's recent volatile performance.

"Priorities and focus of the firm remain unchanged, even against a more challenging macro backdrop," Morgan Stanley said in a report. "[Blackstone] sees compelling opportunities across private markets floating credit rate, hard assets with shorter duration income, and businesses with strong fundamentals and less exposure to input costs."

Blackstone has been a leader in real estate investments in multiple sectors, leading real estate fundraising totals and crushing competitors in the student and college housing sector as it seeks to capitalize on a sector which has been hit hard by a global student housing shortage. In Q1, Blackstone reported its opportunistic real estate returns climbed 10.3% in the quarter, while its Core+ real estate portfolio returned 7.9%.

However, from a retail-investor standpoint and based on value, BMO said it sees more upside for Apollo, KKR and Carlyle over Blackstone.

"In an environment of rising interest rates, APO's spread-based insurance businesses could benefit from higher net spreads (from higher new money yields relative to funding costs, and higher floating rate income)," BMO said.

Investors undervalue Carlyle's global credit business and expect the firm to place more focus on its Holland-based AlpInvest Partners business, BMO said.

With KKR, BMO said it believes the market is failing to fully appreciate the growth potential of the firm's asset management business and the value of KKR's balance sheet, adding that KKR's expansions into Asia and Europe should be another source of growth as they are not yet fully scaled.

The most recent PE firm to go public, TPG, is expected to face steeper challenges than some of its peers because of its less diversified business and its plans to expand into new verticals at a time of market volatility, the investment bank's analysts said.

As markets have wavered and public PE firms' stocks have fallen from 2021 highs, fundraising performance has remained a silver lining for US PE firms. For instance, TPG is expected to accelerate the closings of its ninth flagship fund and eighth Asia fund.

Through the first half of this year, US PE firms have raised $176 billion across 191 funds, more than half of last year's total of $340 billion. Private equity firms are in one of the most crowded fundraising markets in history, according to our latest US PE Breakdown.

Some firms that closed funds earlier this year are reportedly seeking to launch follow-on funds by year's end.

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This article originally appeared on PitchBook News