Dropping steeply along with a sagging economy, the four largest publicly traded private equity firms all turned in sharply lower performances during the 3rd quarter. All but one of them swung to a loss, a sharp reversal from the substantial profits they posted just three months ago.
Overall, the tougher economy of the past quarter led to lower valuations for the firms’ investment portfolios, and also made exits less favorable. In the meantime, deal financing got tighter.
Despite the loss, Blackstone’s fee-earning assets under management rose sharply to $132 billion, a 27 percent gain over the same quarter a year ago. Furthermore, the firm’s “dry powder” reached $33 billion, giving the firm ample resources to do deals when the opportunity strikes.
Michael Kim, an analyst covering Blackstone for Sandler O’Neill, told Reuters, the sister news service of Buyouts, that Blackstone showed “strength beneath the surface” and that the firm’s “fundamental story is even better than expected.”
A positive note for the firm was its 41 percent rise in fee-related income. Dry powder stood at $12.8 billion at the close of September. And while the firm’s assets rose by 6 percent to $58.7 billion compared to a year ago, the firm’s assets fell $3 billion when compared to the second quarter.
The firm’s assets will get a boost in the fourth quarter from the deal that KKR signed with the
Apollo’s assets were $65.1 billion at the end of September, up 13 percent from a year ago. However, assets were down nearly 10 percent from the $72 billion under management at the close of the second quarter. Along with KKR, Apollo’s assets will benefit from its contract with Texas Teachers’ to manage $3 billion of the pension’s money.
Apollo said it was keen to capitalize on opportunities from Europe’s debt crisis, particularly with regard to the region’s banks. The firm said it likely would spend some of its $9.4 billion in dry powder on bonds that Europe’s giant banks are looking to dump in order to recapitalize their balance sheets. Apollo said it earned $300 million from such investments in the third quarter.
Rounding out the four publicly traded firms was
Assets at Fortress were $43.6 billion at the close of September, down slightly from the $44 billion that the firm managed a year ago. The firm’s assets were about even with the second quarter.
On a conference call, Daniel Mudd, the firm’s chief executive, succinctly summed up the landscape affecting his and other firms: “It was a pretty brutal environment from basically every single perspective.”