Alternative Asset Managers

[tytthus]

Alternative Asset Managers deserve their own topic. There are many flavors here, but these firms specialize in managing and investing in assets outside of traditional stocks and bonds. Things like private equity, hedge funds, real estate, infrastructure, commodities, venture capital, and more.

 

Several public ally traded names:

BX, ARES, APO, KKR, BN, CG, HLNE, OWL, MC, PX, TPG

 

I am sure there are more, and firms like GS, Morgan Stanley, Blackrock and other banks dabble in alternatives.

 

I have owned KKR, BN and APO for 10-15 years. These companies have been good to me.

[tytthus]

This was originally posted in the Investment Ideas - BN thread:

 

Here is a dour presentation on the state of private equity & credit:

 

https://lt3000.blogspot.com/2025/11/my-last-few-blog-articles-have-been-on.html

 

There is a difference between investing in PE and investing in the actual asset managers, but the fate of the managers has to be tied to PE performance in some respects. This could have been posted in the APO, OWL, or any of several other threads. Hopefully there’s overlap of readers.

[tytthus]

I did a google search for alternative asset manager primer and this looks like a reasonable place to start:

 

https://alexandersteinberg.substack.com/p/a-primer-on-alternative-asset-managers

 

Without much exaggeration, alternative asset managers are all about fees. For asset-light managers, various fees dwarf other income sources. Asset-heavy managers also benefit from returns on their own capital but still rely on fees as the most consistent and valuable part of their business.

[John Hjorth]

Thank you, @tytthus,

 

The lt3000 blog post mentioned above is long as a bad year, but very good in my personal opinion.

Edited November 20, 2025 by John Hjorth

[Red Lion]

Great topic. I'll be following this, and posting when I have time and something valuable to say. This is one of my favorite little corners of the market, and I follow several of the competitors, but I'd really love to see more on some of the names that I researched at one time but don't follow the day to day (like CG, TPG, PX etc.). 

 

OWL is looking interesting right now.  I think there are really pros and cons, ultimately the question boils down to fundraising, if they can keep even 10% FPAUM growth for a number of years this will be a homerun from here. There has been a lot of negative reporting about private credit, AI bubble, etc, so I do believe this is creating a negative sentiment for OWL, but what really matters is whether LPs keep writing checks. 

 

The sweet spot is to buy an asset light asset manager at a reasonable price while getting some tailwinds of AUM/FRE growth. ARES, BAM, BX, and OWL fall in this category of asset light managers. I've done quite well with all 4, but currently only own a little OWL.

 

I've got the majority of my investment in APO, not because I think it offers the highest upside, but because I believe I'm likely to have a favorable outcome over the next few years. I'm very interested in establishing positions in the capital light managers during an inevitable market pullback. These names have all been pretty great to trade since they perform well over time, but with high volatility, and tend to sell off more than the market as a whole whether that's justified or not. 

[Marco Van Basten]

I think the biggest problem is that private equity is a negative alpha asset class once you adjust returns for leverage.  I saw an increasing statistic that claimed private equity returned 12% per annum over the last forty years while S&P returned 10% per annum.  Given the much higher leverage in private equity vs public markets, the returns are very, very low.  I think LPs are beginning to wake up to that.  Similarly, early in private credits, returns were incredible, now they are pedestrian.  

[Red Lion]

2 hours ago, Marco Van Basten said:

I think the biggest problem is that private equity is a negative alpha asset class once you adjust returns for leverage.  I saw an increasing statistic that claimed private equity returned 12% per annum over the last forty years while S&P returned 10% per annum.  Given the much higher leverage in private equity vs public markets, the returns are very, very low.  I think LPs are beginning to wake up to that.  Similarly, early in private credits, returns were incredible, now they are pedestrian.  

Do you think this could tilt returns in favor of the asset heavy managers with good reputations? Eg kkr and apo. 
 

Both have better than industry numbers on their pe funds, but at some point as aum growth slows, can’t the balance sheet compounders turn into something like the next Berkshire Hathaway? 
 

I know this is heretical, but personally I’m more confident in apo/kkr ability to compound their balance sheets than brk/ffh over the next 20 years. 
 

Personally I think the next chapter for the asset management business is access to the retail / retirement markets, although I think credit / pe infrastructure / pe real estate are probably better suited than the traditional PE drawdown fund type offering. Whether this is enough to offset a pullback from the historical LP investors I do not know. 

Edited November 21, 2025 by Red Lion

[Marco Van Basten]

Sure, top tier managers will do well - if you provide 20% actual annual returns, and not the bullshit way they measure it, sure.  

[Junior R]

holding APO as long as Mark Rowan is there...Good CEO...Good company AUM has grown in the last 5 years ....but with asset managers they fluctuate so some times you might have to wait couple years for it to play out...

 

OWL is a good buy now there AUM growth since going public has been crazy...A lot of bad publicity over the obdc merger but should pass

 

@Red Lion I think apo/kkr and FFH has better ability to compound their balance sheet for next 20 years....brk problem is rule of large numbers 

[Red Lion]

30 minutes ago, Junior R said:

holding APO as long as Mark Rowan is there...Good CEO...Good company AUM has grown in the last 5 years ....but with asset managers they fluctuate so some times you might have to wait couple years for it to play out...

 

OWL is a good buy now there AUM growth since going public has been crazy...A lot of bad publicity over the obdc merger but should pass

 

@Red Lion I think apo/kkr and FFH has better ability to compound their balance sheet for next 20 years....brk problem is rule of large numbers 

Agreed on these points, and I think one really interesting thing about these asset heavy alts is that they have exposure to all these assets but get to pick and choose to leave on their own balance sheet. 
 

They may have $400 billion of capital in lp’s but it doesn’t need to sit on the balance sheet dragging down returns. 

[Red Lion]

30 minutes ago, Junior R said:

holding APO as long as Mark Rowan is there...Good CEO...Good company AUM has grown in the last 5 years ....but with asset managers they fluctuate so some times you might have to wait couple years for it to play out...

 

OWL is a good buy now there AUM growth since going public has been crazy...A lot of bad publicity over the obdc merger but should pass

 

@Red Lion I think apo/kkr and FFH has better ability to compound their balance sheet for next 20 years....brk problem is rule of large numbers 

Agreed on these points, and I think one really interesting thing about these asset heavy alts is that they have exposure to all these assets but get to pick and choose to leave on their own balance sheet. 
 

They may have $400 billion of capital in lp’s but it doesn’t need to sit on the balance sheet dragging down returns. 

[Red Lion]

9 hours ago, Marco Van Basten said:

Sure, top tier managers will do well - if you provide 20% actual annual returns, and not the bullshit way they measure it, sure.  

Maybe another way at looking at these asset heavy managers like kkr and apo, is that they are a super high margin asset light fee stream, coupled with a balance sheet managed by some very good capital allocators with a deep bench of talent on the operations front. 
 

The alt manager business has been remarkably successful, and is now a mature business. Can’t keep growing 20% forever. 
 

But I think the asset management businesses at bx, apo, kkr, bam, etc. are incredibly valuable even if the growth drops since they are high margin capital light cash cows. These names get a huge % of the existing TAM for alternative asset funds and probably stand to gain a big piece of the retirement market as it opens up to 401k and target date funds. 
 

Eventually this asset management fee stream matures, and these businesses can either payout all their cash flows as dividends/buybacks, or start investing their capital. 
 

Every few years we seem to have good buying opportunities based on the value of these lucrative fee streams, but I think in the long run the sector is evolving and we have some historically good operators starting to retain capital. I don’t really think we will know how this pans out for another 5-10+ years. 

[Junior R]

Nice Deck from Apollo

 

Apollo Retirement Services Update 2025

 

Check slide 12 and 13

[tytthus]

Important to consider all sides, so I follow this blog:

 

https://www.privatedebtnews.org/p/private-credit-news-weekly-issue-d7b

 

It covers BDCs, alt asset managers, private equity/credit/banking, and more with a very critical eye. Easy to read either the intro or conclusion without hitting the mid sections:

(From the conclusion)

Blue Owl scrapping its BDC merger after investor backlash demonstrates what happens when market stress meets structural complexity. The math wasn’t complex: merging a private fund into a vehicle trading at 20% discount to NAV meant immediate losses for one set of investors. That Blue Owl thought it could execute the deal until “negative articles” intervened suggests management misjudged how closely the market is watching.

The BlackRock Baker CLO failing its OC test and requiring fee waivers shows stress manifesting through structures designed to be self-correcting. When a CLO holds Renovo debt that went from 100 cents to zero in weeks, plus loans to bankrupt Astra and lender-owned Pluralsight, the self-correction mechanism kicks in by redirecting cash from risky tranches to safer ones. The junior bonds have continuously failed OC tests since April 2024. That’s not a one-time breach. That’s a portfolio under sustained pressure.

The 48Forty situation, where lenders swap $1 billion of debt for equity roughly a year after providing $1.75 billion for an acquisition, captures the current cycle’s dynamics. Summit Partners bought the business in 2022 with private credit financing. By 2025, the company stopped paying interest entirely and lenders are taking the keys. FS KKR marking the loan at 46 cents from 86 cents a year ago shows how quickly valuations move once performance deteriorates.

UBS projecting private credit defaults to rise 3 percentage points versus 1 percentage point for leveraged loans and high-yield provides a quantified outlook for relative stress. The bank’s AI analysis is particularly notable: 30% impairment risk if AI falters, 40% if AI succeeds too disruptively. Either scenario creates problems.

Gundlach calling private credit “garbage lending” with “only two prices, 100 or zero” echoes what the Renovo and 48Forty marks demonstrate: valuations hold until they don’t, then move violently. His comparison to 2006 subprime is provocative but the mechanics he describes, illiquid assets backing liquidity promises, are real.

JPMorgan writing $20 billion checks for EA while private credit CLOs fail OC tests captures the bifurcation. Banks are competing aggressively for credits they want while avoiding those they don’t. Private credit holds what’s left. Fortress’s McKnight is right that stress will separate winners from losers. The separation is already underway.

 

[John Hjorth]

10 hours ago, Junior R said:

Nice Deck from Apollo

 

Apollo Retirement Services Update 2025

 

Check slide 12 and 13

 

Thank you for sharing, @Junior R,

 

The estimates and progressions of total market size development based on population progressions are nothing less than mind blowing.There will be a lot to do for all of them. A structural savings deficit, that just continues to swell.

[Red Lion]

I think the whole space is looking interesting here, and likely to do well over the medium-long term with an entry point here. This is NOT a bottom call, in fact these stocks drop off a cliff every time market volatility or panic arises, so I wouldn't be surprised to see a good long term entry turn into a screaming buy. 

 

I'm seeing my occasionally held basket of APO/KKR/BX/ARES  as a pretty conservative way to play a new investment in the space right now. 

 

I could certainly see OWL as the top performer over the next few years if the private credit fears are overblown and it's able to keep raising FPAUM by mid teens, but in this scenario I'd still see the APO/KKR/BX/ARES basket doing high teens returns. 

 

I'm currently only long APO/OWL, but looking to get back into KKR and possibly others. 

[dealraker]

3 minutes ago, Red Lion said:

I think the whole space is looking interesting here, and likely to do well over the medium-long term with an entry point here. This is NOT a bottom call, in fact these stocks drop off a cliff every time market volatility or panic arises, so I wouldn't be surprised to see a good long term entry turn into a screaming buy. 

 

I'm seeing my occasionally held basket of APO/KKR/BX/ARES  as a pretty conservative way to play a new investment in the space right now. 

 

I could certainly see OWL as the top performer over the next few years if the private credit fears are overblown and it's able to keep raising FPAUM by mid teens, but in this scenario I'd still see the APO/KKR/BX/ARES basket doing high teens returns. 

 

I'm currently only long APO/OWL, but looking to get back into KKR and possibly others. 

The ups go hard and the downs too.   If you are going to buy these things the times to buy seem somewhat generous - but only if past success rates continue.

[Red Lion]

1 hour ago, dealraker said:

The ups go hard and the downs too.   If you are going to buy these things the times to buy seem somewhat generous - but only if past success rates continue.

 

I totally agree. These are not for the faint of heart, but have delivered good returns, and will continue to deliver good returns if they continue to be able to raise fee paying funds. 

 

I believe that the big players have some significant tailwinds with the push into retirement/401k type plans. I don't see 20% growth continuing forever for traditional LBO drawdown funds (although it's continued much longer than I originally thought possible when I started investing in this space), but as long as we can see HSD/LDD growth in fee paying assets, I think all of these names should do well. If they are somehow able to keep growing close to 20% then the returns should be fantastic. 

 

With that said I could easily see these selling off another 30-50% in the event we have a total market selloff. 

 

Investing in the alts feels kind of like holding Bitcoin, but at least they have cash cow businesses that continue to grow notwithstanding the perennial fears of disaster. 

[formthirteen]

https://www.allianz.com/en/economic_research/insights/publications/specials_fmo/260220-private-equity.html

 

 

AI is coming for insurers and alt asset managers (private credit) if you believe the sentiment?!?

[Red Lion]

21 hours ago, formthirteen said:

AI is coming for insurers and alt asset managers (private credit) if you believe the sentiment?!?

 

I don't have a tech or AI background (unfortunately), but I'm a real believer that AI is going to disrupt many businesses and provide efficiency tailwinds for many other businesses. 

 

With that said, I'm a bit more comfortable on the AI risk front with the alt managers than some of my other holdings. AI is the death of software...probably overblown in the short term, but who knows in the long term. 

 

Private credit is an interesting one though...because I can certainly see the risks with concentration in software/AI for portfolio marks, and obviously if an alt manager blows up funds, this can be a serious headwind to future fundraising (CG went through a phase like this as I recall after a bunch of O&G flops). Everyone is worried about OWL for this reason, and even though I see a lot of upside, I'm not adding to my position at this time since I prefer the risk:reward for APO/KKR right now. Aside from fund level sector concentration issues, there is still a lot of demand for private credit from investors/borrowers, and a lot of demographic tailwinds to support this long term trend. 

 

Maybe AI eventually replaces underwriting private credit or running leveraged buyouts, but I feel like there are going to be a lot of other casualties first. 

[gfp]

The AI/Software narrative around private credit is just the flavor du jour - flash back a bit longer and it was Tricolor and First Brands (which had nothing to do with each other despite both being sort of related to automobiles and fraudsters).

 

If the same loans were inside a bank they also wouldn't be marked to market and they wouldn't face the same type of publicity around gating withdrawals and illiquidity.

 

They tried a new model and we'll see if it goes the way of subprime funds being isolated incidents before they weren't...

[Spekulatius]

The problem with private equity and credit is that it long in the tooth in terms of cycle. I think they may have accumulated a lot of junk in Theo asset base and the software is just the latest flavor to jour as @gfp states. They also had sudden sudden writedowns (19% for a credit portfolio for a. DC)

https://finance.yahoo.com/news/blackrock-private-credit-write-down-200929197.html
 

I also think that dumping this stuff into private retirement accounts is probably not going to happen at scale due to all those negative headlines that start to grab attention. So I think we will see some dispersion between the good managers and some also rans. My guess that BX and KKR will be fine.

[Red Lion]

https://www.barrons.com/articles/citrini-report-private-credit-selloff-on-ai-disruption-d1cea960?siteid=yhoof2

 

Interesting read. One of the only contrarian pieces I've seen. I think the consensus  is that private credit is going to implode judging by news articles and share prices. 

 

1 hour ago, Spekulatius said:

I also think that dumping this stuff into private retirement accounts is probably not going to happen at scale due to all those negative headlines that start to grab attention.

 

I really think APO has the right idea on retirement products with their hybrids business. This is the sort of alt asset I'd strongly consider putting in my own retirement accounts due to tax efficiency, which is saying something because I like to invest in the managers not the actual funds. But they have been able to produce equity type returns with these products, and while future performance certainly isn't guaranteed, Apollo has been navigating credit cycles very adeptly for decades and often is getting significant collateral and covenants.  

 

Ultimately, we have some ripples on the water, but Apollo's argument that there is a huge demand for yield for current retirement income. I think this makes hybrid and private credit funds a pretty reasonable equity replacement diversifier for someone entering retirement years. 

 

I guess we will see how all this pans out, but I personally don't think this is the end of the world. I also think with the news cycle that this little private credit freak out session is forgotten history by the time these funds really start ramping up in retirement accounts over the next few years.