Among financial sector stocks, only insurance companies have outperformed the diversified financial services industry. Of the six largest asset management firms, four are alternative asset managers, all of which have underperformed the S&P 500 over the past 12 months and for 2022 to date. The two traditional asset management firms in the top six also underperformed the S&P 500 index.
Unlike their traditional rivals that invest primarily in stocks, bonds and cash, alternative asset managers also may invest in private equity, venture capital, hedge funds, managed futures, art and antiques, commodities, derivatives and real estate. While originally targeted at high net-worth individuals and institutions, alternative asset ETFs and funds offer retail investors an opportunity to follow the smart money.
That tactic may not always be a winner, though. Earlier this week, Bloomberg reported that equity hedge funds like Tiger Global, D1 Capital, Pelham Capital and Lone Pine Capital were down an average of 15% for the year to date. Tiger Capital has tumbled by 52%, and Lone Pine Capital is down 42%.
Analysts at Deutsche Bank recently reviewed their coverage universe of both traditional and alternative asset management firms. Of the six alternative firms the bank reviewed, five have a Buy rating, and one is rated as a Hold. Deutsche Bank cut its price target on all six, expressing wariness about the health of the global economy, an extended correction in equity markets and higher tax rates.
Apollo Global Management
Apollo Global Management Inc. (NYSE: APO) is a private equity firm that invests in credit, private equity, and real estate. The firm’s market cap is around $26.7 billion. Deutsche Bank analysts have a Buy rating on the stock and have lowered their price target from $87 to $78. The analysts expect the firm to increase feeelated earnings by 17% annually between 2021 and 2024 and have a price-to-earnings (P/E) multiple of 17 on estimated after-tax feeelated earnings.
Apollo reports quarterly results on November 2, and consensus estimates call for earnings per share (EPS) of $1.28, which would be up 36.2% sequentially, on revenue of $2.56 billion, up 2.8% sequentially and 14.8% year over year. The consensus price target is $67.50, and the stock’s 52-week trading range is $45.62 to $81.07. Apollo pays a dividend yield of 3.36% and the payout ratio for the past 12 months is negative 30.2%.
Blackstone
The largest of the alternative asset managers, Blackstone Inc. (NYSE: BX), has a market cap of around $96.6 billion. The company specializes in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies.
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