Investors' Outlook For Alternative Asset Managers Is Dimmed By Challenging Markets

It is also the case that there is a cautious approach to both the stock market and to estimates for profits at alternative asset managers such as Apollo Global Management APO -0.03% and Blackstone Group APO -0.03%.

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According to analysts at UBS Securities, Blackstone (ticker: BX), Apollo (APO), Carlyle Group (CG) +0.43% (CG), and seven other alternative asset managers have had their price target lowered by an average of 9% by their analysts. According to the report, those companies are expected to experience a decline in earnings of 6% this year and 2% in 2024, as a result of the current economic situation.

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Considering that UBS analysts had been more upbeat about the economy and banking sector than they were a month ago due to last month's bank failures and mounting fears that a recession might be on the cards in the near future, they have now become less optimistic.

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In his analysis of the alts, UBS analyst Brennan Hawken wrote, "This year's financial results and fundamental growth targets appear increasingly reliant on business acceleration in 2H23 among the alts." As a result of the volatile market conditions, firms are likely to face greater challenges in attracting new assets from retail wealth management in the near future, in response to client redemptions.

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Blackstone, Bridge Investment Group Holdings, GCM Grosvenor, Hamilton Lane HLNE, P10, and StepStone Group are among the firms affected by concerns about the real estate market, especially commercial real estate.

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According to Trade Algo, Blackstone has limited investors' withdrawals from its Blackstone Real Estate Income Trust due to continued redemption requests. As a result of rising interest rates and tighter funding conditions, private equity firms have also been worried about sitting on paper losses as their valuations for the companies that these firms hold in their portfolios have fallen as interest rates rise and funding conditions tighten.

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It is Hawken's expectation that the stocks of alternative asset managers whose stock he covers will trade for an average of 12.4, which is a full standard deviation below the group's historical average, which is expected to be 12.4 times the per-share earnings expected for 2024. In Hawken's opinion, the group's stock price has traded between 12 and 16 times forward earnings for the past 12 months, with technical resistance emerging at 12 times earnings, according to Hawken.

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During Blackstone's first-quarter earnings report on Thursday, investors will be able to get a better view of the health of asset managers. On May 4, Carlyle will post its earnings and on May 9, Apollo will release its results.

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