US unlisted giants caught up with poor market health

After KKR, Blackstone and Apollo, Carlyle closed the earnings ban for private equity heavyweights. Accounts are under pressure, but investor money continues to flow.

After KKR, Blackstone and Apollo, Carlyle closed the earnings ban for US private equity heavyweights.  Performance is declining, but investor money continues to flow.

Global private equity heavyweights have not escaped market shocks, with mixed financial results. But the double-digit performance of their funds has never attracted institutional investors so much.

Like his peers, Carlyle, who closed the ban on unlisted giants’ results on Wednesday, posted a loss of $ 16 million in the last quarter (in US GAAP standards). At the end of last week, the world number one in the sector, Blackstone had reported a loss of $ 10.9 million, KKR of -393 million and Apollo of -196.4 million.

Carlyle and KKR on the rise

These results are to be put in relation with the S&P 500, the stock market index having signed its worst quarter of the last seven years. However, the index has a direct impact on private equity income statements, with large firms referring to comparable stock exchanges to value their portfolios.

To look better, the big names in the sector actually prefer to communicate on their distributable income (excluding US GAAP). At least two of them present a more flattering picture: Carlyle and KKR reported increases of 35% ($ 211 million) and 23.5% ($ 460 million) in their profit, respectively. “In 2018, Carlyle delivered a record level of profit, raised over $ 33 billion in new capital, and generated attractive returns for investors in our funds”, declared the two leaders of the firm, Kewsong Lee and Glenn Youngkin.

As for Blackstone and Apollo, the leaders of the world market by assets under management, they saw their profits fall respectively by 42% (722 million dollars) and 20.4% (252.4 million dollars).

Record of capital to invest

Investor money, however, continued to flow. KKR, Blackstone and Apollo together collected $ 71 billion in the last quarter of 2018 alone. Blackstone president Jon Gray told him that his firm wanted to raise $ 100 billion this year.

More broadly, last year some $ 757 billion poured into unlisted funds around the world, according to Preqin. An amount in decline compared to 2017, even if the stock of liquidity “dormant” in the funds without being invested has crossed a historic record to 2.100 billion dollars, the double of 10 years ago.

Lower prices in sight

This situation could change as purchasers’ prices begin to decline. “We have started to see valuations pull back in Asia and part of Europe over the past two years and we should see the same momentum in the US”, said Scott Nuttall, co-president of KKR.

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