Why Private Equity Asset Raising Has Stalled?

 

In the last two years leading private equity, private credit, real estate asset management firms like Blackstone, KKR, Apollo, Carlyle, Ares, CVC, etc. have encountered certain difficulties in raising new capital.

They have either raised lower than planned new funds or stopped raising capital for some funds, whatsoever.

The reason is twofold, according to Wolfteam Ltd.'s analysis.

The leading private equity, private credit, real estate asset management firms like Blackstone, KKR, Apollo, Carlyle, Ares, CVC, etc have invested large part of their assets under management in artificial intelligence, AI related investment themes like data centers, infrastructure, energy production and online merchandise assets like distribution centers. Many market analysts and investors seem to think that the AI trade is satiated and we may be at or close to a bubble, which stalls any new investments to AI, which hurts the private equity firms.

In addition, many investors in private equity funds like pension funds, endowments and insurance companies have hit their limits to the sector. This also suppresses new investments to private equity firms.

That said, private equity, real estate and private credit asset management firms remain a hot investment sector.

 

 

What Could Derail The Stock Market Rally?

 

The US stock market rally could be stopped in its tracks by a policy error on the part of the Federal Reserve, sudden realization of investors that stocks are way overvalued or regulations that could force banks to account for some assets in a different way.

A fourth reason is trouble in the shadow banking sector, in private equity, private credit and real estate that is, according to Wolfteam Ltd.'s projections and estimates.

All these reasons for a stock market crash seem far away, but the probability of them happening is non-negligible at about 10 % to 20 %. With sudden geopolitical events able to raise this probability markedly.

Why Private Equity Companies Are Underperforming The Market?

 

The main reason private equity stocks are under-performing the S&P 500 in the last 5-7 months is the high concentration of private equity firms' investments in artificial intelligence, AI data centers, delivery centers and other infrastructure, according to Wolfteam Ltd.'s projections and estimates.

The leading private equity firms like Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. have invested via their private equity, real estate, private credit assets under management heavily and also often in a leveraged way in artificial intelligence, AI.

And the recent AI stock market correction caused a disproportionate fall in the leading private equity firms' stocks, which have not recovered as the AI firms' stocks did.

The main reason for this development is the leveraged nature of  Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc.'s investments.

Most probably, however in time the private equity firms' stocks could recover more strongly than the market due again to their leveraged nature.

 

 

 

Private Equity Assets Under Management Growth

 

The growth of private equity firms' assets under management has stalled in the recent months, prompting poor performance of the leading private equity firms' stocks like Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. compared to the general indices Dow Jones Industrial Average, S&P 500, Nasdaq Composite.

The slowing pace of asset gathering of the leading Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. private equity, private credit, real estate firms could be due to two factors mainly, according to Wolfteam Ltd.'s projections and estimates.

First, there could be doubts in the further growth of the artificial intelligence, AI technology, which could reflect fears of a stock market bubble. Second, the growth of assets under management of the largest private equity firms Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. was so steep, that a moderation was in order.

AI is relevant for private equity as large part of private equity firms' investments goes into artificial intelligence, AI data centers, infrastructure and computing power. 

In short, the current slowdown of private equity assets under management is most probably temporary, barring a sudden stop of the AI boom.