The alternative and private asset management industry is actively developing. PricewaterhouseCoopers expects alternative assets under management to grow by nearly $8 trillion from 2023 to 2028. This represents a compound annual growth rate (CAGR) of just under 7%. This may not sound all that impressive, but in relative terms it is. This 7% rate exceeds the projected CAGR for non-alternative assets by about 1%.
In this regard, it is important to know about the firms that are key players in this field. This is especially true since firms that manage alternative assets typically charge much higher fees than those that manage traditional assets. This could allow these firms to increase revenue and give them more room to potentially increase profits.
A promising signal for the industry comes from CalPERS, the largest pension fund in the United States. He approved a proposal to increase the share of private capital assets to 40% of the total portfolio. Below I will detail three firms that make money from alternative and private wealth management.
Apollo: King of Alternative Credit
Apollo Global Management Today
Apollo Global Management
(As of 11/29/2024 ET)
- 52 week range
- $88.58
▼
$176.75
- Dividend yield
- 1.06%
- P/E ratio
- 18.29
- Target price
- $155.05
Apollo Global Management New York Stock Exchange: APO specializes in the management of investment funds using various private and public market strategies. The company’s shares have fallen sharply in 2024, providing a total return of 90% as of the close on November 25th. The company is the world’s largest alternative credit manager. It has nearly $600 billion in this asset class. This may include lending to private companies that banks may find too risky to lend to. Higher risk allows the company to charge a higher interest rate. This provides returns to fund investors and indirectly increases company profits.
Key tailwinds helped the firm. These include a $6 trillion increase in Federal Reserve assets since 2007, which has injected huge amounts of liquidity into the financial system. This has made borrowing cheaper overall, helping private equity funds that are heavily leveraged. In addition, US pension funds have become seriously underfunded. This forces them to look for alternative assets and private capital to catch up, as these investments often generate higher returns.
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If fourth-quarter results meet expectations, revenue will grow 15% from 2023 and adjusted earnings per share (EPS) will increase 6%. The company plans to double adjusted earnings per share by 2029, for a compound annual growth rate of more than 15%.
Brookfield: Renewable energy investor looking to double his assets
Brookfield Asset Management Today
Brookfield Asset Management
(As of 11/29/2024 ET)
- 52 week range
- $34.80
▼
$58.53
- Dividend yield
- 2.66%
- P/E ratio
- 50.58
- Target price
- $53.46
Brookfield Asset Management New York Stock Exchange: BAM is another major player in this area. The Canadian financial services firm specializes in investments in renewable energy and the energy transition. As of the end of 2023, $102 billion had been invested there. This involves investment in hydroelectric dams, wind and solar power plants, and carbon capture technologies. Infrastructure, real estate, private equity and credit also make up a significant portion of invested assets.
Overall, the company had $539 billion in fee assets as of the third quarter. For the quarter, revenue increased 25% and fee-based income increased 14%. Analysts currently expect the company’s adjusted earnings per share to grow 20% and 17% in 2025 and 2026, respectively. The company also has high expectations for itself, aiming to double its fee assets over the next five years. This will result in an average annual growth rate of profits and dividends exceeding 15%. The stock currently boasts a respectable dividend yield of 2.6%. That’s significantly higher than the 1.2% return provided by the SPDR S&P 500 ETF Trust. NYSEARCA: SPY over the past 12 months.
Carlisle: setting records for high fund performance
Carlisle today
Carlisle Group
(As of 11/29/2024 ET)
- 52 week range
- $34.13
▼
$55.11
- Dividend yield
- 2.63%
- P/E ratio
- 183.55
- Target price
- $53.33
Carlisle Group NASDAQ:CG is another leading specialist in the field of alternative and private assets. It distributes private capital into three segments: global private equity, global credit and global investment solutions. As of the third quarter, the company had $447 billion in assets under management. Global Private Equity and Global Credit account for 38% and 43% of the company’s total assets, respectively.
Last quarter, the company reported its highest ever commission-related profit. Compared to last year they increased by 36%. This was helped by strong performances from the two largest private equity buyout funds in the US, as both funds rose more than 7%. The company recorded its largest ever quarterly increase in net accrued sales income. The Company calculates these unrealized gains based on the incremental value of its funds. These funds generate income in part through performance fees. Thus, when the value of the fund increases, the performance rewards the company expects to receive also increases. As of the close on November 25, Carlyle’s 2024 earnings yield was 38%.
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