Apollo’s third-quarter earnings plunge as funds lose value

* Profit drops 91 percent

* PE funds depreciated 2 percent in quarter

* Recent earnings stronger

A halt to the stock market rally weighed on the earnings of all of Apollo’s publicly listed peers, with KKR & Co LP and Carlyle Group LP also posting lower profits. But Apollo’s profit decline—it reported its lowest quarterly profit in two years—dwarfed those of its peers.

Apollo’s private equity funds depreciated by 2 percent in the quarter, versus a 3 percent appreciation at Carlyle’s private equity funds, a 2.2 percent appreciation at KKR and a 3.7 percent appreciation at Blackstone Group LP.

Apollo is particularly exposed to stock market jitters because it likes to take many of its companies public, and so historically more than half of its private equity portfolio has included publicly-traded securities.

Prior to this quarter Apollo’s recent earnings had been stronger, and the company still manages some of the best-performing private equity funds in its industry. Apollo Fund VII, for example, reported a 29 percent net internal rate of return as of the end of September.

Economic net income after taxes was $48 million versus $550.9 million a year earlier. That translated into ENI per share of 12 cents, much lower than the analysts’ average estimate of 38 cents in a poll by Thomson Reuters I/B/E/S and the lowest since the 5 cents reported in the second quarter of 2012.

While Apollo’s private equity division posted an ENI loss of $23.1 million, its credit division, which includes publicly traded credit, direct lending and collateralized debt obligations, reported ENI of $109.2 million, up from $79.5 million a year ago.

Distributable earnings after taxes and related payables, which show actual cash available to pay dividends, fell to $342.7 million from $455.6 million.

Asset sales in the quarter included the divestment of stock in Berry Plastics Group Inc, Athlon Energy Inc and Sprouts Farmers Market Inc.

Assets under management were $163.9 billion at the end of September, down from $167.5 billion at the end of June.

Apollo declared a third-quarter dividend of 73 cents a share.

Reporting by Greg Roumeliotis of Reuters news service in New York.