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A year ago self-help guru Tony Robbins released a book called The Holy Grail of Investing, a paean to alternative investments in general, private equity in particular, and private equity firm shares especially.
Lately, it has looked more like when Nazi collaborator Walter Donovan chugged from a fake Holy Grail in the last of the good Indiana Jones films. Here’s a chart showing the relative performance of the larger American alternative asset managers since the turn of the year.
It ain’t Tesla, but it’s definitely not a great look. Some of this is just giving up some of the market-beating gains many of the large alternative asset managers made in recent years, but there does seem to be a more fundamental reassessment of the industry’s outlook.
More traditional asset managers like BlackRock and Franklin Resources are also down, but by far less. So what caused this Robbins-defying private capital quake? Some might suggest there have been some ill omens of late.
For a more rigorous analysis of what ails alternative manager stocks, here’s what Goldman Sachs’ Alex Blostein wrote overnight, with his emphasis below:
Alternative Manager stocks are down 14% YTD (26% off recent peaks and 12% below pre-Election levels) as growth concerns and policy uncertainty drove market volatility higher. The sharp decline has largely been a function of rising earnings risks to Capital Markets sensitive earnings streams (realization income, transaction fees, deployment-based fees, retail flows, etc.) and normalization in the group’s frothy multiples, with 2026 P/E (net of SBC) now at 21X vs. ~24X pre-Elections.
We expect the capital markets environment to remain relatively more challenged over the near-term, pressuring the group’s PRE recovery and to some degree weighing on FRE growth amid risks of slower capital deployment, more elongated capital raising campaigns and moderation in retail flows – resulting in a mid-single digit negative EPS revisions across the group.
That said, we believe the group’s sharp de-rating does not properly reflect the sector’s increasingly durable earnings mix, lower FRE risks than perceived (management fees grew in every prior market downturn), and increasing dividend yield support for several stocks with asset-light balance sheets and high/FRE-covered pay-outs. In the report, we present a bottom-up stress scenario analysis, flexing Performance Related Earnings to below-cyclical averages, slowing fundraising / deployment activity, and reducing level of transaction fees through 2026.
The analysis points to about 15% EPS risk in 2025/2026 on average from a more challenging capital markets backdrop; CG, STEP, and BX derive a relatively higher portion of earnings from capital-markets sensitive sources (in the 30%-40% range), resulting in a 25%- 30% risk to consensus 2025/2026 EPS in our stress scenario. APO and BAM screen as having the least EPS risk in our stress scenario of <10% relative to 2026 consensus. Overlaying these scenarios with stress valuation/recent stock price performance shows OWL, TPG, KKR, and BAM as the most favorable tactical near-term risk reward, while the risk/reward on HLNE, STEP and BX is relatively more balanced.
In other words, Blostein still wants to stay friends with the companies he covers (they are Wall Street’s biggest fee generators, after all) but he reckons that earnings and valuations are coming down across the board due to the current financial and economic turmoil.
You might wonder what all the recent financial and economic uncertainty means for private capital investments. Well, here at Alphaville we aim to also provide timely, forward-looking analysis, so here are our highly-rigorous estimates for probable portfolio marks YTD.
