PitchBook News - Good signs for PE firms

When it comes to the business of being a GP, the seven largest US-listed alternative asset managers provide an excellent looking glass through which we can peer.

This week, we released our Q2 Public PE and GP Deal Roundup, which extracts the key PE metrics posted by Blackstone, KKR, Apollo, Carlyle, Ares, TPG, and Blue Owl in a strictly "GP" context. We use their earnings reports to monitor all things PE-related, such as trends in capital deployment, realization, fundraising, and performance.

In the report, we also track transactions that involve private GPs as targets. This allows us to gauge consolidation prospects for the industry as well as demand for minority stakes, also known as GP stakes—a strategy that has gained significant investor interest over the last few years.

Key takeaways from this quarter's report:

• Stakes in GPs changed hands at a brisk pace in Q2, with nearly half representing control transactions by strategic buyers, such as TPG's blockbuster deal for Angelo Gordon. The other half represented minority stakes acquired by dedicated GP stake funds, such as Blue Owl's investment in Stonepeak, a $56 billion AUM infrastructure manager.

• Perpetual capital at these GPs surpassed $1.2 trillion, or 38.4% of total AUM. Perpetual capital has an indefinite duration, and the industry's largest managers are in a footrace to push these assets as high as the market will allow. Over the last year, perpetual AUM at these managers has grown by 13.2% outpacing total AUM growth of 9.8%.

 

• The big seven managers all posted positive returns in their respective PE portfolios, with a median gross return of 3.1%. This marks the third consecutive quarter of low-single-digit positive returns. On a TTM basis, these managers posted a median gross return of 9%, below the 13% return on the S&P 500 during the same span.

• PE capital deployed remains soft, with TTM value down 22.3% YoY. Still, there are signs of improvement as Q2 deployment figures were higher QoQ for most of the public PE firms.

• PE fundraising rebounded from a weak Q1 but is still down 57.4% YTD. Total fundraising across all strategies of the seven firms combined for $106.7 billion in Q2—a 6.4% increase from Q1. This ended a three-quarter skid of sequential declines. However, on a TTM basis, most managers are still tracking below their prior run rates.

While the PE industry is well off its 2021 peak on most operating metrics, being a GP is still a very good business.

One only needs to look at the healthy deal flow in GP stakes and the strong performance of the publicly listed GP stocks. Collectively, these seven alt managers now command $313 billion in market value, nearly twice that of the $174 billion in market cap of the top seven US-listed traditional asset managers.

Clearly the market is signaling for now that the good times will continue to roll for GPs and their alt management franchises—and investors are taking notice.

For more data and analysis, download our free US Public PE and GP Deal Roundup.