Credit drives higher inflows and deployment activity at four largest alts managers
The four largest alternative asset managers saw a significant uptick in inflows and deployment activity last year, mainly driven by credit.
Moody’s Ratings surveyed Apollo, Blackstone, Carlyle and KKR on their performance during the fourth quarter of 2024.
The research found that aggregate inflows, including capital raised from the asset management and insurance segments, were up 27.5 per cent year-on-year, although they were down 1.5 per cent in the fourth quarter of 2024.
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Much of this reflects growth in credit, which accounted for 64 per cent of total inflows and increased by 32 per cent year-on-year.
Apollo, which owns the insurer Athene, led in credit inflows with $143bn (£110.4bn), a 35 per cent increase from 2023.
Meanwhile, deployment activity among the four firms rose by 79 per cent year-on-year, ranging from 48 per cent at Carlyle to close to 90 per cent at KKR, also driven by credit.
Fee-related earnings (FRE) grew by 25.2 per cent in 2024, compared to 6.1 per cent growth in 2023. In the fourth quarter, FRE growth in aggregate was up 45 per cent.
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“The strong results reflect the continued, steady growth in management fees but more significantly were large fee-related performance revenue at Blackstone, which was $1.4bn in the fourth quarter of 2024 compared to $0.2bn the prior year,” Moody’s said.
“Also, capital markets revenue at KKR was strong and Carlyle, as it has all year, benefited from the change in its compensation model, which applies more compensation to realised carry and less to FRE.”
Looking ahead, the managers expect a favourable operating environment in 2025, Moody’s said, although macro-economic uncertainty related to the Trump administration’s tariff policy could derail their momentum.
“Our outlook for 2025 is generally favourable for global credit conditions,” the report said.
“The global default rate was 4.8 per cent as of January 2025, but we expect the default rate to decline to 2.2 per cent by January 2026, well below the 4.2 per cent long-term average. As it says in the January 2025 default report, the projected decline is ‘underpinned by a resilient economy, healthy corporate fundamentals, and accessible capital markets.’”
However, Moody’s noted that its trends forecast is based only on rated companies.
“The view, according to a special report by Moody’s Analytics, is more pessimistic,” the report added. “Their model, which includes approximately 5,000 companies (about 80 per cent unrated) indicates that default risk is at a post financial crisis high, although the risk is more contained among the direct lenders.
Read more: Moody’s: Corporate credit quality has bounced back from Covid
“However, our revised global macro outlook has become more pessimistic given policy changes in the US. We are expecting the G-20 advanced and emerging economies to expand by 2.5 per cent in 2025 and 2026, down from the 3.2 per cent average over the decade before Covid-19.
“As we are writing this, the Trump administration has announced a series of potential tariffs, including against Mexico and Canada. If these tariffs cause the US and global economy to slow it could dampen the appetite of investors for risk taking and slow down fundraising, deployment, realisations and earnings growth for the alternative managers.”
