Which Major Private Equity Firm Has the Fastest Fee Growth?

The largest publicly-traded private equity firms in the U.S. — Blackstone Group, Apollo Global Management, KKR & Co., and Carlyle Group — continued expanding their streams of fee-related earnings into the first quarter of 2021.

Blackstone, the world’s largest private equity firm, saw the highest jump in fee-related earnings this quarter with a total of $741 million in fee income. This is an increase of 58 percent from the first quarter of 2021, according to the firm’s first-quarter earnings statement on April 22.

In private equity, Blackstone saw a year-over-year increase in fee-related earnings of 87 percent, while its hedge fund solutions reported a 28 percent jump in fee income from the first quarter of 2020.

In an April 22 report, Goldman Sachs equity research analysts Alexander Blostein, Ryan Bailey, Sheriq Sumar, and Aditya Sharma said Blackstone’s fee-related earnings were above their initial estimate of $62 million. They attributed the increase to stronger performance fees: While the Goldman Sachs analysts had estimated $33 million in performance fee earnings, slightly above the consensus forecast of $25 million, Blackstone beat those predictions, raking in $169 million in performance fee income. 

“Collectively, this should result in upside to management fees over the coming quarters and further FRE margin improvement overtime – bridging the gap between flagship fundraises,” Blostein, Bailey, Sumar, and Sharma wrote in the report. 

Why Carlyle’s Fee Earnings Fell Flat

At Carlyle Group, meanwhile, fee-related earnings in the first quarter of 2021 stayed remained consistent with 2020’s first quarter, landing at $129 million. This number, however, excludes the impact of “one-time litigation cost recoveries” in 2020, which meant the actual fee income for last year’s first quarter was $99 million. Excluding the litigation costs, Carlyle’s fee-related earnings margins increased from 25 percent in 2020’s first quarter to 31 percent in the first quarter of 2021. 

In an April 30 capital markets report, Goldman Sachs analysts opted to maintain their “Buy” rating on Carlyle. As for the fee rate, the analysts noted that on the “distressed Credit side, one of the carry funds had a step-down which may have impacted fees for the segment in the quarter.” 

Apollo Delivers ‘Stronger’ Earnings

One of the latest firms to report earnings was Apollo Global Management, which released its results on Tuesday. The private equity firm reported fee-related earnings of around $287 million, an increase of 26 percent from $228 million in 2020’s first quarter. Fee income was also up 4 percent from the fourth quarter in 2020, according to Apollo’s earnings statement. The firm’s fee-related earnings margin increased 56 percent, a movement Apollo attributed to higher management fees and lower non-compensation expenses. 

Blostein, Bailey, Sumar, and Sharma said the overall quarter was “marginally stronger than expected” for Apollo. They said that “most of the upside was driven by stronger transaction [and] advisory fees,” beating Wall Street predictions by a difference of $10 million.

“FRE expenses were also roughly in line with consensus at $226 million,” the analysts said, adding that growth in management fees has remained concentrated in Apollo’s credit business.

What’s Driving KKR’s Fee Momentum

Finally, KKR & Co. also released its numbers Tuesday, touting a year-over-year fee-related earnings increase of 41 percent. The firm’s asset management segment brought in fee-related operating earnings of over $817 million in the first quarter of 2021, an increase from $523 million in the first quarter of 2020. 

Meanwhile, the firm’s new insurance segment brought in fee income of around $63 million. Total fee-related earnings revenues were about 2 percent above consensus, according to a Tuesday report from Goldman Sachs. 

“Taking a step back, we see these as very strong results for KKR with momentum across all key performance indicators,” the GS report said. “Higher jumping off point for FRE and robust fund-raising momentum is likely to support FRE growth, while significantly stronger investment performance suggests monetization income will remain elevated.”