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Alternative Market Briefing

Alternative asset managers bullish on 2019 fund rising environment: Fitch

Monday, January 14, 2019

Laxman Pai, Opalesque Asia:

Fundraising should remain strong in 2019 as investors seeking higher yields in a low-interest-rate environment are broadly interested in the space, Fitch Ratings reported.

However, alternative asset managers are seeing rising levels of uninvested capital as realizations and investment opportunities slow amid higher valuations, the rating agency added.

According to the report, growth in fee-paying assets under management (FAUM) was strong in 2018, as fundraising outpaced exit activity.

"Management fees for the rated peer group rose 9.1% for the trailing 12 months (TTM) ended Sept. 30, 2018 from the same period in the prior year, supported by strong FAUM expansion," it said.

Carlyle, KKR, Apollo and Ares saw double-digit management fee growth during the TTM period, driven by robust fundraising in various strategies.

Management fee rates for the industry are expected to trend downward as firms continue to diversify into lower-yielding credit and real estate funds and permanent capital vehicles (PCVs).

Fees as a percentage of FAUM were relatively flat at 0.89% for the TTM ended 3Q18. Apollo was lowest at 0.72% due to the lower advisory fees charged on insurance assets, with Ares at the higher end of peers given its lower exposure to CLO-related AUM.

PCVs should be a continued focus given the growing trend of alt-IMs to employ longer-duration vehicles in an effort to increase management fee stability and investment flexibility......................

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