The alternative and private capital asset management industry is growing strongly. From 2023 to 2028, PricewaterhouseCoopers expects alternative assets under management to grow by nearly $8 trillion. That represents a compound annual growth rate (CAGR) of just under 7%. This may not sound all that impressive, but in relative terms, it is. That 7% rate outpaces the CAGR predicted for non-alternative assets by around 1%.
Due to this, it is important to be aware of firms that are key players in this space. This is particularly true since firms that manage alternative assets typically charge much higher fees than those managing traditional assets. This can allow these firms to drive higher revenues and give them more room to potentially expand margins.
A promising sign for the industry comes from CalPERS, the largest pension fund in the United States. It has approved a proposal to increase its allocation to private capital assets to 40% of its total portfolio. Below, I’ll detail three firms that make their hay in alternative and private capital asset management.
Apollo: The King of Alternative Credit
Apollo Global Management (NYSE: APO) specializes in managing investment funds using a variety of both private and public market strategies. The company’s stock has been on an absolute tear in 2024, providing a total return of 90% as of the Nov. 25 close. The company is the world's largest alternative credit manager. It has nearly $600 billion in the asset class. This can involve lending to private companies that banks may deem too risky to extend credit to. The higher risk lets the company charge a higher interest rate. This drives returns for fund investors and indirectly boosts firm revenues.
Key tailwinds have helped the firm. These include a $6 trillion increase in the Federal Reserve's assets since 2007, injecting massive amounts of liquidity into the financial system. This has generally made borrowing cheaper, helping private equity funds that use a lot of leverage. Additionally, U.S. pension funds have become severely underfunded. This is causing them to look toward alternative assets and private capital to catch up, as these investments often generate higher returns.
If Q4 results are in line with expectations, revenues will have grown 15% since 2023, and adjusted earnings per share (EPS) will have increased 6%. The company is looking to double its adjusted EPS by 2029 for a CAGR of over 15%.
Brookfield: Renewables Investor Looking to Double Its Assets
Brookfield Asset Management (NYSE: BAM) is another big player in this space. The Canadian financial services firm specializes in investing in renewable power and energy transition. At the end of 2023, it had $102 billion invested there. This involves investing in hydroelectric dams, wind and solar farms, and carbon capture technology. Infrastructure, real estate, private equity, and credit also make up large amounts of its invested assets.
Overall, the firm had $539 billion in fee-bearing assets as of Q3. Revenues increased by 25%, and fee-related earnings increased by 14% in the quarter. In 2025 and 2026, analysts currently expect the firm’s adjusted EPS to rise by 20% and 17%, respectively. The company is also placing high expectations on itself, looking to double its fee-bearing assets over the next five years. This would result in a CAGR in earnings and dividends of over 15%. The stock currently boasts a solid 2.6% dividend yield. This is significantly above the 1.2% figure provided by the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) over the last 12 months.
Carlyle: Setting Records on Strong Fund Performance
The Carlyle Group (NASDAQ: CG) is another head honcho in alternative and private assets. It deploys private capital across three segments: Global Private Equity, Global Credit, and Global Investment Solutions. As of Q3, it had $447 billion in assets under management. Global Private Equity and Global Credit account for 38% and 43% of the firm's total assets, respectively.
Last quarter, the company posted its highest-ever fee-related earnings. They grew by 36% from last year. Strong performance in its two largest U.S. private equity buyout funds helped this, as both funds increased in value by over 7%. The company saw the largest quarterly increase in its net accrued performance revenues ever. The company calculates these unrealized revenues based on the increasing value of its funds. These funds generate revenue partially from performance fees. So, when the value of the fund increases, the performance fees the company expects to generate do as well. Carlyle has returned 38% in 2024 as of the Nov. 25 close.
