Core Viewpoint - The asset management industry is experiencing growth driven by a shift towards higher-yielding investment vehicles, deregulation, and the adoption of tokenized assets, positioning BlackRock and Blackstone favorably to capitalize on these trends [2][25]. Group 1: BlackRock (BLK) - BlackRock has a total AUM of $11.58 trillion as of March 31, 2025, and has expanded through acquisitions, including a 75% stake in SpiderRock Advisors and a deal for HPS Investment, which has nearly $148 billion in AUM [4][5]. - The company has achieved a five-year CAGR of 9.2% in AUM from 2019 to 2024, with continued growth in Q1 2025, supported by its iShares unit and ETF operations [5][6]. - BlackRock's GAAP revenues have seen a CAGR of 7% over the last five years, with ongoing momentum in Q1 2025, bolstered by strategic acquisitions and a diversified product suite [6][25]. - The Zacks Consensus Estimate for BlackRock's revenues indicates a year-over-year growth of 11.83% for Q2 2025 and 10.40% for the current year [7][17]. - BlackRock is considered a stronger investment for 2025 due to its diversified growth strategy, robust AUM expansion, and consistent revenue and earnings growth [25][26]. Group 2: Blackstone (BX) - Blackstone has a total AUM of $1.17 trillion as of March 31, 2025, with available capital of $177.2 billion, positioning it to capitalize on market dislocations despite near-term headwinds [11][12]. - The company is focusing on key sectors such as digital infrastructure and life sciences, with growth opportunities in India and Japan [12][13]. - The Zacks Consensus Estimate for Blackstone's revenues shows a year-over-year growth of 8.88% for Q2 2025 and 2.83% for the current year [16][17]. - Blackstone faces challenges from tighter credit markets and geopolitical uncertainties, which may hinder its near-term growth prospects [14][26]. - Despite a higher return on equity (ROE) of 19.84% compared to BlackRock's 15.57%, Blackstone's deployment challenges and market conditions make it a less compelling buy for 2025 [20][21][26].

Core Insights - Three alternative asset managers are increasing their dividends, indicating a strong commitment to returning capital to shareholders in a volatile market environment [3][12]. Industry Overview - Over the past 20 years, alternative assets have grown from 6% to 15% of global assets under management (AUM), with expectations of continued growth at around 10% annually through 2029 [2]. Company Summaries KKR & Co. Inc. - KKR announced a 5.7% increase in its quarterly dividend, bringing the annual dividend to $0.74, resulting in a dividend yield of 0.6% [3][4]. - The company has a diversified portfolio with credit strategies (38%), real assets (26%), and private equity (33%) [5]. - KKR aims to reach $1 trillion in AUM by 2030 and has grown its AUM by 15% and annual adjusted net income (ANI) by 37% over the last 12 months [6]. Apollo Global Management - Apollo increased its dividend by over 10% to $2.04 annually, yielding approximately 1.42% [8][10]. - The company primarily focuses on credit investments, which constituted around 88% of its nearly $600 billion in fee-bearing capital [9]. - Apollo reported record fee-related earnings of $559 million in Q1 2025 and significant AUM inflows [9][11]. Blue Owl Capital - Blue Owl raised its dividend by 25%, resulting in an annual dividend of $0.90 and a yield of 4.59% [12][14]. - The company has raised its quarterly dividend eight times since going public in 2021, with credit strategies making up 51% of its $273 billion AUM [15]. - Blue Owl's strategy includes taking minority ownership in other private equity and hedge fund companies, allowing it to benefit from their profits [16].

Financial Data and Key Metrics Changes - Ares Management reported a year-over-year growth in management fees of 18%, with fee-related earnings (FRE) increasing by 22% and after-tax realized income per share of Class A common stock growing by 36% [5][24]. - The company declared a quarterly dividend of $1.12 per share, representing a 20% increase over the same quarter last year [3][4]. - Total assets under management (AUM) reached $546 billion, marking a significant milestone as the company crossed over $5 trillion in total AUM for the first time [6][24]. Business Line Data and Key Metrics Changes - Fundraising activities were robust, with over $20 billion in gross new capital commitments, the highest level for first-quarter fundraising on record [6][14]. - Deployment activities also saw strong performance, with over $31 billion deployed in the quarter and a gross to net deployment ratio of 49% in private credit strategies [6][9]. - The company experienced significant inflows across various strategies, with over 45% of quarterly fundraising coming from outside the credit group, including real estate, infrastructure debt, and private equity [14][15]. Market Data and Key Metrics Changes - The market environment has been characterized by increased volatility and uncertainty, particularly following geopolitical events and tariff announcements [7][20]. - Despite these challenges, Ares has maintained a record amount of dry powder, with $142 billion of available capital, which positions the company well to capitalize on market opportunities [9][36]. - The company noted that over 72% of total AUM is in credit-related products, with more than 92% of these being senior loans, indicating a defensive positioning in the current economic climate [12][20]. Company Strategy and Development Direction - Ares Management aims to leverage its flexible private market strategies to gain market share during periods of volatility, emphasizing its asset-light business model and focus on third-party client interests [10][36]. - The integration with GCP International is progressing well, with expectations of realizing significant synergies and enhancing vertically integrated capabilities in real estate [23][24]. - The company is optimistic about growth opportunities in real estate, particularly in response to anticipated increases in construction costs due to tariffs, which may constrain supply [14][20]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainty, citing a strong investment pipeline and the ability to invest opportunistically across various strategies [20][36]. - The company remains optimistic about 2025 and beyond, highlighting its resilience during challenging market conditions and the strength of its diversified investment strategies [36][37]. - Management noted that while M&A activity may slow, there are still significant opportunities in direct lending and credit markets, with expectations of continued strong performance in these areas [20][66]. Other Important Information - The company reported a significant increase in fee-related performance revenues, totaling $28 million, up from $4 million in Q1 2024, driven by strong fund performance [26][27]. - Ares Management's corporate loan portfolios are performing well, with strong credit quality and low loan-to-value ratios, indicating a solid foundation for future growth [32][40]. - The company is actively engaged with new partners in the reinsurance sector, expanding its reach in both the U.S. and APAC regions [23][24]. Q&A Session Summary Question: What do you expect for the remainder of 2025 regarding private credit quality? - Management highlighted that 96% of their Global Credit exposure is in senior loans, with low loan-to-value ratios, indicating a strong position against defaults and non-accruals [40][42]. Question: Can you discuss the momentum in wealth management and product growth? - Management noted record capital gathering in wealth management, with a broadening distribution network and new product offerings, maintaining strong inflows despite market turbulence [50][52]. Question: What is the outlook for FRE margin expansion? - Management remains optimistic about achieving zero to 150 basis points of margin expansion, citing ongoing integration efforts and synergies from GCP [56][59]. Question: How does the M&A backdrop affect deployment strategies? - Management indicated that even with subdued M&A activity, they have demonstrated the ability to invest across various strategies, particularly in opportunistic credit and secondaries [62][66]. Question: What is the opportunity set in Europe for private credit? - Management observed increased investor appetite for European products, with a modest acceleration in deployment and a favorable competitive position in the market [78][80].

Financial Data and Key Metrics Changes - In Q1 2025, the company reported a year-over-year growth in management fees of 18%, FRE growth of 22%, and after-tax realized income per share of Class A common stock growth of 36% [6][25][32] - The total AUM reached $546 billion, marking a significant milestone as it crossed over $5 trillion for the first time [7][25] - The company declared a quarterly dividend of $1.12 per share, representing a 20% increase over the same quarter last year [4][5] Business Line Data and Key Metrics Changes - Fundraising activities reached over $20 billion in gross new capital commitments, the highest level for Q1 fundraising on record [7][15] - The private credit strategies saw a gross to net deployment ratio of 49%, with capital deployment in drawdown funds increasing nearly 20% over the previous quarter [7][9] - The company experienced strong performance across various strategies, with significant inflows in real estate, infrastructure debt, secondaries, and private equity [15][17] Market Data and Key Metrics Changes - The company noted a shift in market conditions due to increased volatility and uncertainty, particularly following the announcement of tariffs and geopolitical events [8][22] - Despite market challenges, the company maintained a record amount of dry powder, with $142 billion available for deployment [9][12] - The European direct lending business saw a 20% year-over-year increase in deployment, indicating a modest acceleration in the European market [82] Company Strategy and Development Direction - The company aims to leverage its asset-light business model and flexible private market strategies to capitalize on market dislocations [10][11] - A focus on credit-related products is emphasized, with over 72% of total AUM in credit-related assets, primarily senior loans [12][22] - The integration with GCP International is progressing well, with expectations of realizing significant synergies in the coming months [24][76] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about navigating current economic uncertainties, citing a strong investment pipeline and the ability to invest opportunistically [22][37] - The company anticipates slower M&A activity until more certainty regarding tariffs and economic conditions is established, but sees potential for enhanced investment opportunities [22][23] - Management highlighted the resilience of the business model during past market dislocations, reinforcing confidence in future performance [10][37] Other Important Information - The company reported a significant increase in fee-related performance revenues, totaling $28 million, a substantial rise from $4 million in Q1 2024 [27] - The effective tax rate on realized income was reported at 8.1%, with expectations of a lower range of 8% to 12% for the remainder of the year [32] Q&A Session Summary Question: What is the outlook for private credit quality given potential negative GDP growth? - Management indicated that 96% of exposure in the Global Credit business is in senior loans, with low loan-to-value ratios, suggesting limited risk of defaults [40][42] Question: Can you discuss the momentum in wealth management and product growth? - Management noted record capital gathering in wealth management, with a broadening distribution network and new product offerings [50][51] Question: What is the outlook for FRE margin expansion? - Management remains optimistic about achieving zero to 150 basis points of margin expansion, despite some drag from GCP integration [58][59] Question: How is the pipeline for M&A and deployment in the current market? - Management highlighted the ability to invest across various strategies even in a subdued M&A environment, with significant dry powder available for opportunistic investments [63][67] Question: What are the opportunities in the European market compared to the U.S.? - Management noted an increase in investor appetite for European products and a modest acceleration in deployment in Europe [80][82]

Financial Data and Key Metrics Changes - The company's assets under management (AUM) ended the quarter at $1,540 billion, a decrease from the prior quarter due to long-term net outflows at Western Asset and negative market impacts [18][19] - Adjusted operating income was $377.2 million, a decrease of 8.6% from the prior quarter, primarily due to compensation expenses and the impact of Western [28][29] Business Line Data and Key Metrics Changes - Long-term inflows increased by 9% quarter over quarter, with gross sales increasing across all asset classes [19] - Multi-asset and alternatives generated a combined $9.7 billion in positive net flows, while equity long-term inflows were $38.9 billion, despite equity net outflows of $5.4 billion primarily in growth strategies [20][21] - Fixed income net outflows were $30.5 billion, but excluding Western, there were net inflows of $2.8 billion in multisector, munis, stable value, and high yield strategies [20][21] Market Data and Key Metrics Changes - The institutional unfunded pipeline increased by $2.3 billion to $20.4 billion during the quarter, the highest level since 2022 [6] - The company noted a shift in global market dynamics, with several foreign markets outperforming US indices for the first time in years [9][10] Company Strategy and Development Direction - The company aims to help clients navigate market volatility and benefit from emerging trends, emphasizing a diversified approach to asset allocation and portfolio construction [5][6] - There is a focus on growth in alternative assets, ETFs, and digital assets, with significant investments in these areas [22][30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding global equity markets, citing uncertainty tied to US growth and tariff impacts [11][12] - The company anticipates that increased market volatility may spur interest in secondary private equity offerings and alternative credit businesses [16][17] Other Important Information - The company has offices in over 30 countries, with approximately 30% of AUM in countries outside the US [9] - The ETF business saw its fourteenth consecutive quarter of positive net flows, attracting $4.1 billion during the quarter [25][26] Q&A Session Summary Question: Guidance on fiscal year expenses given market movements - Management expects effective fee rates to remain around 38 basis points for the third quarter, with expenses projected to be flat compared to 2024 [36][39] Question: Estimate for base fee organic growth rate including Western - Management noted that long-term net flows excluding Western were about $7.4 billion, with positive flows in fixed income and alternatives [44][45] Question: Update on fixed income strategies and Western's health - Western experienced $10 billion in outflows but also had $5 billion in gross sales, indicating ongoing institutional interest [78][79] Question: Insights on international business contributions - The company reported positive momentum in gross sales across all regions, with AUM of approximately $470 billion outside the US [90]

Financial Data and Key Metrics Changes - Assets under management (AUM) decreased to $1,540 billion, primarily due to long-term net outflows at Western Asset and negative market impacts [18][19] - Adjusted operating income was $377.2 million, a decrease of 8.6% from the prior quarter, mainly due to compensation expenses and the impact of Western [27][28] Business Line Data and Key Metrics Changes - Long-term inflows increased by 9% quarter over quarter, with gross sales rising across all asset classes [19] - Multi-asset and alternatives generated a combined $9.7 billion in positive net flows, while equity long-term inflows were $38.9 billion, despite net outflows of $5.4 billion in growth strategies [20][21] - Fixed income net outflows were $30.5 billion, but excluding Western, there were net inflows of $2.8 billion [20][21] Market Data and Key Metrics Changes - The institutional unfunded pipeline increased by $2.3 billion to $20.4 billion, the highest level since 2022 [5] - International markets accounted for approximately $470 billion, or about 30% of AUM, with positive net flows in the EMEA and Americas regions [7][26] Company Strategy and Development Direction - The company aims to leverage market volatility to enhance client asset growth through diversified investment solutions [4][17] - Focus on expanding alternative assets and wealth management channels, projecting $800 billion to be allocated to democratize alternatives industry-wide over the next five years [22][64] - Continued integration of Western Asset to create efficiencies while maintaining investment team autonomy [28] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously constructive on global equity markets, citing concerns over US growth and tariff impacts [10][11] - The company anticipates that a recession in the US is not a foregone conclusion, with the economy being better insulated compared to export-dependent countries [11][12] - Positive sentiment around the potential for growth in private markets and alternatives, with a strong focus on educating financial advisers [63][64] Other Important Information - The company launched its first perpetual secondary private equity fund, raising an initial $2 billion [23] - The ETF business saw its fourteenth consecutive quarter of positive net flows, attracting $4.1 billion during the quarter [24][25] Q&A Session Summary Question: Guidance on fiscal year expenses given market movements - Management expects effective fee rates to remain around 38 basis points, with expenses projected to be flat compared to 2024 [36][39] Question: Estimate for base fee organic growth rate including Western - Management noted that long-term net flows excluding Western were about $7.4 billion, with positive flows in fixed income and alternatives [45][46] Question: Update on fixed income strategies and Western's health - Western experienced $10 billion in outflows but also had $5 billion in gross sales, indicating ongoing institutional interest [78][79] Question: Contribution of international business to revenues and flows - The company reported positive momentum in gross sales across all regions, with AUM outside the US at approximately $470 billion [92]

Group 1 - Blackstone is the world's largest alternative asset manager, founded in 1985 with $400k in assets under management (AUM) [1] - The firm has been a leader in the growth of alternative investments, indicating a strong market position and expertise in this sector [1] Group 2 - The focus of the analysis is on identifying high-quality companies with strong balance sheets and shareholder-friendly policies [1] - A disciplined approach to valuation is emphasized, incorporating both quantitative and qualitative measures to find underappreciated opportunities [1]