Tariffs Effect On Blackstone

 

Since 'Liberation Day', the 2nd of April when President Trump announced sweeping tariffs increase Blackstone Inc.'s stocks is down circa 16 %.

The market is assuming the probability of a recession is higher now, which if turns out to be true will hurt the capital intensive, profit making companies in Blackstone's private equity portfolio, its real estate investment portfolio and its private credit loans disbursed to medium sized companies at high interest rates, which will be hurt during a recession, according to Wolfteam Ltd.'s projections and estimates.

It is true that initially Blackstone's private equity, real estate and private credit business will be hurt if there is an economic slowdown. But the Federal Reserve already announced that it is decreasing the pace of its balance sheet run off and it is also highly likely that the Federal Reserve will step in and decrease the Federal Funds rate more than the two times in 2025 currently forecast by Wall Street economists.

It is true that Wall Street economists have swiftly raised the estimates of Federal Reserve interest rate cuts to three and even four in 2025 in the wake of higher than expected tariffs, the stock market's large fall and the dramatic decrease of 10 year US Treasury yields to below 4 %.  

The probable lower interest rates and more money in circulation will support Blackstone's current private equity portfolio as the companies therein will be valued using lower discount rates and will be consequently valued higher than in a higher interest rate environment. Lower interest rates will also improve Blackstone's private credit and real estate portfolio as loans will be disbursed at lower rates and real estate will be valued higher with lower discount rates, according to Wolfteam Ltd.'s projections and estimates.

In short, after a probable fall of 30 % or even more Blackstone's market capitalization could recover and even surpass markedly previous levels in Wolfteam Ltd.'s view. 

A risk for the above forecast is if the Magnificent 7 Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla technology stocks fall more than 40 % from their recent peaks. This will drag down the value of technology along the curve. Blackstone's investment portfolio is heavily exposed to technology and technology public stocks and private technology firms' value disruption, which could be defined as a fall by more than 40 % could temporarily bring Blackstone's portfolio in disarray.

The Tariffs Effect On Private Equity Giants

 

The announcement of higher than expected tariffs on US imported goods sank US and global stock markets.

The stocks of Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC etc. and other leading alternative investment - private equity, private credit, real estate, infrastructure investment management firms fell by more than the market and even by more than JPMorgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Citigroup, Wells Fargo and other leading banks' stocks.

The explanation offered by Wall Street analysts is that due to a possible tariffs invoked recession  Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC's portfolio companies will be hurt and thus Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC's private equity investment portfolios will sour and bring down the respective firms' value.

In addition, the real estate and private credits investment management lines of Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC will suffer as a global recession will invoke a fall in real estate prices and medium sized firms will face difficulty paying off the 8 % + loans they have been disbursed by the private credit investment management lines of Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC  etc., further eroding the value of Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC  and other leading private equity firms.

The effect on Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC  and other leading private equity firms will not be as bad as Wall Street traders currently and Wall Street equity research analysts forecast for the future in their Microsoft Excel models, according to Wolfteam Ltd.'s projections and estimates.

The Federal Reserve will be quick to lower the Federal Funds rate and thus the interest rate levels in the US and by extension the global economy by 3 or 4 times in 2025 and thus stave off a coming recession or make it shallower. Lower interest rates will again beget deal activity by Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC  and other leading private equity firms, because they will able to fund acquisitions more cheaply. All this velocity of money will feed into the economy and help the US and global economy avoid or experience a shallower recession. Lower interest rates will support Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC  and other leading private equity firms' real estate and private credit businesses as the leading private equity firms will be able to disburse loans more cheaply and firms will naturally be able to repay them more successfully.

In short, Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC  and other leading private equity firms' stocks could fall by 30 % or slightly more where they will prove undervalued, in Wolfteam Ltd.'s view.  Afterwords Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC's stocks could surpass easily the previous peaks.

The Tariffs Effect On The Stock Market

 

Contrary to what we are seeing now, the new, higher, US tariffs on imported goods will have temporary, be it a profound effect on the US and global stock markets.

US stock market could enter a bear market with a fall of more than 20 % or my even fall by 30 % measured by the main indices, but US stock market will recover in 5 to 7 months, according to Wolfteam Ltd.'s projections and estimates.

Most probably the Federal Reserve will react relatively swiftly and lower the Federal Funds Rate 3 or 4 times in 2025 and thus lower the interest rate levels in the US and global economy.

In addition, after the initial scare investors will understand that the tariffs are not that frightening or dangerous for financial markets, in Wolfteam Ltd.'s view.

Investors will go back in the market once they realize that the situation is not as bad as everybody seems to be assuming now. The adaptation to tariffs will be gradual and the effect on US based company's earnings will not be as high as most Wall Street equity research analysts are forecasting now. Wall Street equity research analysts earlier estimated a 15 % earnings growth for 2025, now most of them are estimating a 5 % earnings growth or no earnings growth of US based publicly listed companies.

US companies' earnings will grow by circa 7 % in 2025, according to Wolfteam Ltd.'s projections and estimates.

 

 

AI Stocks Should Recover in 1 Year

 

AI stocks experienced a 30 % on average fall in price since the beginning of 2025.

AI stocks will recover in 1 year's time, according to Wolfteam Ltd.'s projections and estimates.

Artificial intelligence, AI is simply too strong a transformational force to be ignored.

Mid-term, we could end in a bubble, of course and experience the boom and bust associated with every new technology that changes everything.

However, in the long-term some AI giants will survive akin to Amazon and Google in the previous Dot Com boom and bust.

CVC Is Undervalued. Intrinsic Valuation

 

CVC Capital Partners, the globally leading alternative investment management firm is undervalued on the boom in private equity and private credit, according to Wolfteam Ltd.'s projections and estimates.

With total assets under management of 200 billion EURs and Fee Paying Assets Under Management, FPAUM of 147 billion EURs, which grew 50 % in 2024 CVC is poised to benefit from the ongoing boom in private markets.

With 79 billion EURs in FPAUM in private equity, private equity remains the largest focus of CVC. Private equity is the largest private markets asses subclass and CVC is a global leader in private equity. 

CVC continues to fund raise strongly by raising 16 billion EURs in 2024.

CVC is growing its private wealth and insurance business portfolio by investing 170 + insurance clients.  

CVC expanded its EBITDA and MFE margins in 2024 compared to 2023.

 CVC's market capitalization is 19.68 billion EURs. 

CVC's intrinsic value is 27 billion EURs, according to Wolfteam Ltd.'s projections and estimates.

 

Here are CVC's annual 2024 report highlights:

 

CVC 2024 Full-Year Results
Strong growth and recovery in investment activity
CVC Capital Partners plc announces results for the financial year ended 31 December 2024.
Financial highlights1:
– Strong financial performance:
• Fee-paying Assets under Management (FPAUM) of €147.3bn as at 31 December 2024,
+50% vs. FY 2023. Assets under Management (AUM) of €200bn.
• Management fees of €1,328m, +23% vs. FY 2023.
• Management fee earnings (MFE) of €780m, +40% vs. FY 2023.
• MFE margin of 59%.
• Performance related earnings (PRE) of €182m, +5% vs. FY 2023.
• EBITDA of €966m, +31% vs. FY 2023.
• Profit after tax of €830m, +36% vs. FY 2023.
• Recommended half-year dividend of €0.21 per share (€225m in total) to be paid on 18
June 2025 to shareholders registered on 23 May 2025, subject to shareholder approval.
Key business updates:
– Total AUM reached €200bn.
– FPAUM increased to €147bn or +50% vs. FY 2023, driven by the activation of Europe / Americas
Fund IX and Asia VI, continued growth across Credit and Secondaries, and the inclusion of
Infrastructure.
– Strong recovery in deployment activity: €25.6bn or +71% vs. FY 2023, primarily driven by a
significant increase in Private Equity investing together with record levels of deployment across
Credit and Secondaries. The CVC Network continues to be critical in generating attractive
investment opportunities across all asset classes, while maintaining our highly disciplined
investment approach.
– Realisations more than doubled year-on-year to €13.1bn or +114%, as we selectively harvest our
existing portfolio and return cash to our clients, and we continue to generate very strong realised
returns2 of 4.0x Gross Multiple of Money (MOIC) and 30% Gross Internal Rate of Return (IRR) in
2024. Based on current market conditions, we anticipate realisations in 2025 at, or slightly above,
2024 levels.
1 References throughout this document to Revenue, EBITDA, Profit after tax, Management fees, Operating expenses,
Management fee earnings and Performance fee earnings are equivalent to the pro forma and adjusted pro forma measures
presented in the Group's 2024 Annual Report & Accounts. Pro forma financial information reflects the results of the Group as if
the Pre-IPO Reorganisation and the acquisition of CVC DIF had been completed on 1 January 2023. Adjusted measures
illustrate the underlying operating performance of the Group and exclude non-recurring items (including but not limited to: IPO
and acquisitions expenses, items related to fund NCI, amortisation of acquired intangible assets, change in value of the forward
liability related to CVC Secondary Partners and CVC DIF acquisitions). Key statutory metrics for the year are: Total revenue of
€1,566m, EBITDA of €474m and Profit after tax of €308m.
2 Weighted average by invested capital, for Private Equity (Europe / Americas, Asia, StratOps, Growth) signed realisations in
the period. Gross MOIC denotes gross multiple of invested capital; IRR denotes internal rate of return.
2
– Our investment portfolios continue to be resilient across all strategies, with EBITDA growth of
c.10% across our Private Equity portfolio, consistent value creation of +12% across our combined
Private Equity and Infrastructure portfolios, and all material CVC funds3 remain on or above plan.
– We expect further strong growth in MFE in 2025 underpinned by our ongoing fundraising, and the
full year impact of funds activated in 2024. We currently expect PRE in 2025 to show material
growth vs. 2024, and whilst we expect 2025 PRE to remain well below the medium-term range,
the overall carry potential from key funds remains unchanged.
– As a firm, we have made significant progress towards embedding AI-driven solutions to optimise
knowledge sharing, further improve our investment origination and investment selection, and
enhance operational productivity. In addition, we are focussed on rolling out AI across our
investment portfolio, including product R&D, software engineering and augmenting customer
service.
– We continue to successfully execute on our fundraising targets with c.€16bn4 of capital raised in
2024 and we are achieving significant progress on our current fundraises.
– We are accelerating growth in Private Wealth and Insurance with the launch of our first two
evergreen products: CVC-CRED and CVC-PE. We raised c.€1.5bn from the wealth channel in
2024 – more than double 2023 – and we are excited by our ability to achieve significant future
growth. In addition, we have raised over €15bn of capital from insurance clients over the past five
years, and we see a significant opportunity for growth as we further increase our focus on this
channel.
Rob Lucas, CEO, said: “2024 was a landmark year for CVC, in which we successfully completed our
IPO, delivered continued growth and made significant strategic progress. Our strong performance has
been driven by the unique CVC Network, our deep and longstanding client relationships, and the
quality of the team we have built.
Whilst the economic and geopolitical environment remains uncertain, our experience shows that
these conditions can provide some of our most attractive investment opportunities. Following our
recent fundraising success, we have over €40bn of capital available to invest prudently across our
seven strategies, and we are excited about our opportunities for future growth.”
The 2024 Annual Report and Accounts for CVC Capital Partners plc in the European single electronic
reporting format and also in PDF format can be found here:
https://www.cvc.com/shareholders/reports-and-presentations/
Presentation and Q&A:
Management will hold a webcast to present the results and answer questions from analysts and
investors at 09:00 GMT / 10:00 CET on Thursday, 20 March 2025.
Participants can register at this link: https://reg.lumiengage.com/cvc-capital-partners-plc-full-year-
results-presentation/cvcfy24analyst/Site/Register
Annual General Meeting (AGM):
The first AGM of CVC Capital Partners plc will be held at the Radisson Blu Waterfront Hotel, Rue De
L’Etau, St. Helier, Jersey JE2 3WF, on Tuesday, 20 May 2025 at 09:00 BST. The notice of meeting
has been published, and can be found here: https://www.cvc.com/shareholders/shareholder-
information/agm/
3 List of material funds and definition of “on plan” and “above plan” as per the Group’s 2024 Full-Year Results Presentation.
4 Total capital commitments made across CVC’s seven strategies (including Infrastructure) from 1 January 2024 through 31
December 2024, including commitments accepted to CVC’s private funds, separate accounts, and evergreen products.
Amounts shown may include GP commitments and, in respect of private credit strategies, leverage.
 

Here is CVC's income statement from the annual 2024 report:

 

€m)
FY 2022 FY 20232 FY 20242 FY 2023-24
Growth
Management fees 888 1,080 1,328 23%
(+) Performance fee earnings 144 174 182 5%
(+) Other operating income 3 3 3 (4%)
Revenue 1,036 1,257 1,513 20%
(-) Personnel expenses (279) (369) (399) 8%
(-) Other expenses (128) (153) (148) (3%)
EBITDA 628 734 966 31%
(-) D&A (27) (37) (39) 8%
(-) Net finance charges (22) (18) (27) 50%
(-) Tax (20) (71) (70) (1%)
Profit after tax 560 609 830 36%
of which attributable to CVC DIF non-controlling interests 303
Select KPIs:
Management fee earnings (MFE) 481 557 780 40%
Management fees (% of revenue) 86% 86% 88%
MFE margin 54% 52% 59%
EBITDA margin 61% 58% 64%