Fitch Says Alternative Asset Managers 'Stable' Despite Dry Powder

Nov 20 2014 | 10:30am ET

Ratings agency Fitch says the outlook for seven publicly traded alternative asset managers is “stable” despite high levels of dry powder and “frothy” credit markets.
Fitch also affirmed its long-term issuer default ratings for Apollo Global Management, Ares Management, The Blackstone Group,  Carlyle Group, Fortress Investment Group, KKR & Co. and Oaktree Capital Group.

Dry powder for the firms in Fitch's review totaled $188.2 billion as of Sept. 30, 2014, representing a 6.3% increase from a year earlier.

Real estate funds saw peak levels of dry powder this year, reaching $217.6 billion in October 2014, while distressed and buyout funds saw slight decreases to $63.1 billion and $470.5 billion respectively, according to the agency.

That said, uncalled buyout capital remains near all-time highs, despite a record level of exit activity to date in 2014. Fitch expects real estate funds to remain relatively active in the next year, given the volume of assets potentially for sale in the U.S. and abroad, while buyout and credit funds look for more unique pockets of attractive opportunities around the globe.

“Alternative asset managers are trying to take a measured approach with their dry powder,” said Meghan Neenan, senior director. “Having high levels of dry powder on hand positions these firms with investable capital to use in the next downturn in the credit cycle, but waiting for the opportunity to materialize can be challenging.”

Here's what Fitch had to say about each of these managers:

Apollo Global Management

Founded in 1990, Apollo is a contrarian, value-oriented private equity, credit and real estate investor with  significant distressed investment expertise. As of September 30, 2014, the firm had total assets under management of approximately $164 billion, a team of 837 employees and 10 offices around the world. Apollo completed its public offering in April 2011.

  • Long-term IDR: A-
  • Outlook: Stable
  • Fee-Earning Assets Under Management (FAUM) Q32014: $130 billion
  • Dry Powder (As of September 30, 2014): $33.6 billion
  • Realizations/Outflows Trailing 12 Months (Ended September 30, 2014): $16.5 billion
  • Funds/Services Offered: Traditional PE, Real Estate, Credit, Hedge Funds
  • Management Fees/Average Fee-Earning AUM: 0.89%
  • Base Compensation/Fees Trailing 12-Months (Through September 30, 2014): 27.39%
  • Performance Compensation/Performance Revenue Trailing 12-Months (Through September 30, 2014): 50.29%
  • Unfunded Co-Investment Commitments to the Funds (Q3 2014): $660 million
  • Payout Ratio (Dividends/Distributable Earnings) Q3 2014: 94.8%

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