WSJ What’s News - What's News in Earnings: Why Some Money Managers Are Trailing the Market

Episode Date: August 11, 2025

Bonus Episode for Aug. 11. Shares of publicly traded private-equity firms like Blackstone and Apollo are down year-to-date, trailing the broader market, while shares of traditional asset managers like BlackRock have outperformed. Heard on the Street columnist Telis Demos discusses this divide and how it relates to the firms’ second-quarter earnings. WSJ reporter Miriam Gottfried hosts this special bonus episode of What's News in Earnings, where we dig into companies’ earnings reports and analyst calls to find out what’s going on under the hood of the American economy. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey listeners, it's Monday, August 11th. I'm Miriam Gottfried for the Wall Street Journal, and this is What's News in Earnings, our look at the broad themes that stood out in the latest earnings season. So shares of publicly traded private equity firms, also known as alternative asset managers, typically rise and fall with public markets, often with slightly bigger swings in both directions. That's because their earnings are tied to the value of the companies they own in their portfolios. And those tend to track comparable public companies,

but they also usually carry a significant amount of debt, which means that the ups and downs can be magnified. Ever since the start of this year, though, the stock performance of firms like Blackstone, Apollo, and KKR seems to have come a little bit uncoupled from the performance of the broader markets. And President Trump's tariffs are only part of the story. Now, the performance of these companies matters

matters because they're the biggest fee payers to Wall Street banks. And their earnings can also be a window into the health of the capital markets more broadly, especially the IPO market. Heard on the street columnist and take on the week host, Telas Demos is here to take a look at the second quarter results for these asset managers and see if we can unpack what is going on. Hi, Tellis. Hi. So tell us, if there's one thing I can always say about the CEOs of publicly traded private equity firms after years of covering them, it's that they're perennial optimists, and this quarter was no different. Blackstone called it, quote, one of the best quarters in our history, and Apollo talked up its record origination. But if things are going so

well, why are these firm's stocks all down year to date? There are a couple things that are bothering the market about alternative asset managers right now, why they haven't joined in the big market rally. One is a focus on what in the business they call spreads. They're That basically means how much money they make lending out to companies. They're not making a ton of money doing that right now relative to where treasury yields are. And so it's just not a great time for them to be lending money. The other thing is that they've got all these businesses they bought back in the post-COVID boom. But a lot of cases, they paid a lot of money for those things.

And now they've really got to be selling them. And the longer it takes and the worse sort of prices that they might get now for those companies relative to what they paid for them a few years ago really just means that they're not going to be returning as much to their investors. They're not going to be raising as much money from those investors. They don't get the same incentive fees, like for the firms themselves that they might have. There's some real concern that they're just not going to be able to sell what they've got now at good prices. And that's really dragging on the market's forward expectations for a lot of these firms. And interest rates are a lot higher, right?

Yeah, interest rates are a lot higher, which means that they are funding themselves more expensively. So the same squeeze that's felt by banks, private asset managers are not banks, but they have to get money in from investors and they have to deploy it in the market. And so private equity firms need to sell the companies they buy either to other companies, to other private equity firms, or to the public through IPOs. And while those markets, people were expecting them to be really gonzo this year after Trump's election because, you know, deregulatory, fervor, things like that, people thought maybe interest rates would go down. They haven't yet much to the president's consternation, of course. But those things mean that it's not

necessarily like a bountiful market for private equity firms being able to sell their investments to others and sort of lock in the gains that they have on paper. But one exception within the world of these so-called alternative asset managers has been Carlisle. Its stock is actually up year to date and it actually rose in the last quarter after the last quarterly report. So how has it been able to buck the trend. I think that people feel like Carlyle Group has the same ingredients that all the other major asset managers do, right? They're good at private equity. That is, like, the buying and selling of companies. They've got many irons in the fire in the world of private credit. And so I think the question was, could Carlyle just enter the same kind of rarefied air

in terms of like the stock valuation that some of the other firms like Blackstone and Apollo and KKR have been in. And Carlisle's had new management. They've got Harvey Schwartz, a former Goldman Sachs, top executive who's been leading the firm for the last couple of years. And I think investors are just really kind of buying into the idea that, yeah, Carlisle Group, you know, is in the same sort of class as some of these other alternative asset managers. And so what I think investors are looking for is really a catch-up of that stock's valuation versus some of the other managers. So Carlisle was just trading at a slightly lower valuation to some of the other managers. So Carlisle was just trading at a slightly lower valuation to some of its peers. And I think investors have been waiting to

say, okay, should that gap close? And I think that's what we're starting to see this year. So, you know, often in a bold market, you have to look for a company that maybe is a little not quite as shiny as others, but seeing if it could get there. And I think that's what's happening with Carlisle right now. So I also want to talk a little bit about traditional asset managers. We've been spending a lot of time with alternative asset managers, which are the thing that I focus on most of the time. These traditional asset managers, particularly firms like Black Rock and State Street, are doing pretty well this year from a stock perspective. Both are beating the market, and that's despite one-off events like a single Asian client pulling $52 billion from

Black Rock in the second quarter, which actually did cause its stock to fall. But why are these stocks surging overall year-to-date while shares of the private equity firms, the alternative asset managers are lagging? A simple answer to that is that because they are managers of public equity money, much more so than the alternative asset managers, and public equities have gone up, right? The S&B 500 is way up. That means that they're managing a bigger pool of money, and they collect more fees from that. So the bull public market is really good for these guys, whereas it's not as directly impactful for the alternative asset managers, except insofar as they can then maybe take some of their companies public and realize them. And as discussed, realization's selling is going okay to not great

for a lot of alternative asset managers. So that's the simplest reason why you see a big difference. What could a catalyst be for people to regain faith in the growth story for alternative asset managers? Do you think it's just an interest rate cut? I think a couple of key things will be one that realization selling, just continuing to see those results go well. And then the other is, can they continue to grow their businesses? Meaning, can they manage more assets? Can they get more money from people? Because really, the lifeblood of these companies is fees. And so the big thing will be something Miriam, I know you're following pretty closely, which is this expansion into retirement accounts. So the president's executive order has essentially given them the green light to do so. Will it

happen? Will they start managing billions, tens of billions, hundreds of billions, trillions of dollars worth of our retirement money? As you said, the president last Thursday signed an executive order that was aimed at making it easier for employers to include private assets like private equity and private credit in 401K plans. And that could potentially open up this huge market for private markets asset managers for the Blackstones, Carlisles, and Apollos of the world. If we start to see inflows from 401Ks, and that could be a huge boon to them, it's still. a bit theoretical right now, but we're definitely on that path, and that's something to be looking out for. Okay, thank you, Tell us. That was a very interesting discussion.

Thanks. Thanks for having me. That was What's News and Earnings. Today's show was produced by Zoe Culkin, and Michael LaValle, with supervising producer Michael Cosmides. Later today, we'll have the PM edition of What's News out for you as usual. I'm Miriam Gottfried. Have a great day. Thank you.