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Second-Quarter Earnings Show How Major Managers Are Coping With Choppy Markets

Fee-related earnings are dropping, but dry powder remains high.

Three asset management giants reported their second-quarter earnings Thursday, revealing how the market drop — and rebound — has impacted their businesses.  

The second quarter was kind to Apollo Global Management: the firm’s assets under management surpassed $400 billion for the first time. But for the Carlyle Group and Man Group, assets were tougher to hold onto.  

Meanwhile, levels of dry powder remain high, but fee-related earnings by and large declined.  

Apollo’s total assets under management grew by nearly $100 billion during the second quarter, according to its presentation. Sixty percent of Apollo’s total assets under management are invested in permanent capital vehicles. 

But this was not the case for others. Carlyle’s assets under management have dropped one percent so far this year, to $221 billion. However, its credit business’ assets under management grew 1 percent year to date, thanks to inflows from its acquisition of reinsurance business Fortitude, as well as net growth in its structured credit business.   

Man Group, meanwhile, said assets under management have fallen 8 percent since the fourth quarter of 2019, to $108.3 billion. 

The firm reported net outflows for the quarter of $1.7 billion, driven by redemptions in its Japanese equities and quantitative equities strategies. Total outflows were slightly offset by allocations to the Man Group’s alternatives strategies, its presentation showed.   

“We saw an increase in redemptions as certain institutional clients sought cash in response to various impacts of the Covid-19 crisis, and others made asset allocation changes,” the presentation said. 

During the second quarter, Carlyle raised $4.8 billion, adding to its $73 billion in investable assets.   

Meanwhile, Apollo has $47.4 billion ready for deployment, much of which has been invested in its ninth fund. Investors in that fund include the Oregon Investment Council and the State of Michigan Investment Board, meeting minutes show. 

During the quarter, Carlyle’s fee-related earnings were $127 million, as compared with $133 million in the second quarter of 2019. The firm attributed the decline to lower catch-up management fees, which were partially offset by higher transaction fees, and lower general and administrative expenses.  

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Management fees, meanwhile, were $386 million during the second quarter, a 7 percent decline from the year-ago quarter. Carlyle attributed this decline to a net deferral of $4 million in subordinated fees in its structured credit business.  

The Man Group, which reports earnings on a half-year basis, said its net management fees were $358 million for the first half of the year, a five percent decline year-over-year. The Man Group attributed this to a product mix shift that has resulted in lower margin strategies growing more quickly. The firm reported $29 million in performance fees for the first half of the year, a 77 percent drop year-over-year.  

Apollo reported $401.8 million in management fees for the second quarter, a 9.7 year-over-year increase. Performance fees declined year-over-year, from $9.2 million in the second quarter of 2019, to $3.4 million during the most recent quarter.  

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