Mostly Strong Gains Logged In Second Quarter

An exception was Kohlberg Kravis Roberts & Co, whose economic net income dropped by nearly 74 percent to $144.4 million. KKR reported that the value of its private equity portfolio grew by less than 1 percent in the second quarter, slower than the 5.1 percent growth rate of a year ago.

ENI is considered the most relevant metric of a private equity fund manager’s performance because it takes into account the value of unrealized assets in the firm’s portfolio. But such values can be volatile because of the difficulty of putting valuations on illiquid holdings, such as privately owned companies.

KKR also stood out from the group in the measure of fee-earning assets under management, which swelled by 44 percent from a year earlier, largely as a result of the $6 billion fundraise for KKR Asian Fund II LP, the largest such fund ever raised in the industry.

In terms of earnings growth, The Carlyle Group LP arguably had the strongest quarter, as its $155.8 million of ENI represented a 4x swing of more than $200 million from a year-earlier loss. Again underscoring the volatility of valuations, the year-ago period featured a $57.2 million ENI loss, the result of a drop in the value of its fund assets during that earlier period.

The Blackstone Group LP, which reported earlier, in mid-July, could also make a claim to having the strongest quarter. Blackstone Group, the largest alternative asset manager, said its ENI more than tripled to $703 million. Among its holdings, one highlight was SeaWorld Entertainment Inc, which completed a $702 million initial public offering in April. At the end of the quarter, SeaWorld was valued at 3x Blackstone Group’s investment.

Oaktree Capital Group LLC, a publicly traded fund manager that is primarily an investor in distressed debt, also saw ENI surge by 66 percent to $172.6 million. Oaktree Capital’s assets under management slipped by 3 percent, however, to $76.4 billion, which the firm attributed to the current year’s high level of realizations and resulting distributions.

Not included in this roundup was Apollo Global Management LLC, the other major public buyout firm, which reported too late to make the production deadline for this edition of Buyouts.

The fund giants also benefited from strength in the stock market, which enabled them to take advantage of strong demand for IPOs. In addition to its SeaWorld offering, Blackstone Group sold shares in PBF Energy Inc, Travelport Ltd and TV ratings company Nielsen Holdings NV at an average valuation of 2.6x its investment, as sister news service Reuters reported.

Likewise, Carlyle Group reported exits from companies including Hertz Corp, the Nielsen Co, CommScope Inc, SS&C Technologies Inc, Wesco Holdings Inc, Cobalt International Energy, Boston Private Financial Holdings Inc., among others. While the firm did not report earnings multiples, it said those exits propelled growth in its realized net performance fees, which rose 55 percent to $118 million in the second quarter from $76 million a year earlier.

The firms also stayed busy on the fundraising front.

KKR, in addition to its $6 billion Asia fund, reported that its flagship KKR North American Fund XI had secured just more than $8 billion from investors. Scott Nuttall, the firm’s global head of capital and asset management, told analysts on a conference call that the firm is in the market for two other new funds, one targeting real estate, and another targeting royalty and drilling investments in the energy sector. Without discussing it in detail, Nuttall said fundraising efforts for new vehicles typically take in about $1 billion, and estimated that these funds could be in that ballpark.

Blackstone Group reported the completion of the first fundraising period of its inaugural Asian real estate fund in June, with $1.5 billion in total commitments from investors, while its latest real estate debt strategies drawdown fund has so far raised $3.5 billion. Blackstone Group also said its second rescue lending fund had raised $5 billion by the end of the quarter, hitting its fundraising limit, while its tactical opportunities investment vehicles had amassed $3 billion.

Oaktree Capital said its Oaktree Real Estate Opportunities Fund VI LP has received commitments of $1.2 billion following its fourth interim close in June. Oaktree Emerging Market Opportunities Fund LP, which will invest in distressed emerging market corporate debt, held a first close in May without commencing its investment period. That fund has committed capital $193 million. Capital commitments to its strategic credit strategy, which seeks to achieve an attractive total return on an unleveraged basis by investing in stressed credits, have reached $1.5 billion. Oaktree Capital said it also is marketing Oaktree Principal Fund VI LP, Oaktree Real Estate Debt Fund LP and Oaktree European Dislocation Fund LP, earmarked for European private debt.

Additional reporting by Steve Gelsi and Greg Roumeliotis.