By Bill Alpert
Shares of private asset managers like Blackstone and KKR came down to earth last year, falling by double-digit percentage points while the market rose. Private-equity funds found fewer exits from their holdings and a private-credit scare panic swept the legs from Blue Owl Capital's stock.
For all that, there has been little basic change in the alternative asset management business, according to Oppenheimer analysts Chris Kotowski and John Coffey in their Tuesday preview of the sector's earnings reports.
"Despite the much bemoaned 'difficult fund-raising environment,' the stocks under our coverage generally ground out solid midteens growth in fee-paying assets under management," wrote the analysts. They think the stocks' retrenchment is an opportunity to buy Blue Owl, KKR and Ares Management.
Blue Owl has become the poster child for the market's concerns about private credit, but Oppenheimer sees no major problems in the business.
Worries that private-equity firms will stop borrowing from lenders like Blue Owl are at odds with the recent uptick in mergers and acquisitions, the analysts wrote, concluding: "We cannot have both a credit blowup and M&A boom."
When Blue Owl reports fourth quarter results on Feb. 5, Oppenheimer expects distributable earnings per share for the 2025 year to be $0.90 pretax, and $0.82 after tax. For 2026 and 2027, they forecast pretax earnings of $1.12 and $1.34, respectively.
Believing Blue Owl stock will regain favor and an above-market multiple, the analysts see more than 70% upside from today's price of $15.57.
The private credit pioneer Ares will also report on Feb. 5, and the analysts expect the 2025 year's after-tax earnings to be $5.06 a share. Forecasting $6.57 and $7.65 for this year and next, Oppenheimer believes Ares stock can rise more than 35% from its current level of $163.40.
KKR should report fee-related earnings of $4.08 a share, when it reports 2025 year results on Feb. 5, Oppenheimer estimates. Insurance and other holdings could lift total operating earnings to $5.48. Operating earnings could reach $6.66 in 2026 and $7.42 in 2027, which would imply more than 45% upside for the $124 stock, the analysts say.
The private asset sector's shares traded to a 165% premium of the market's multiple in the year-ago excitement over Donald Trump's presidency. The group fell to a relative 105% in the autumn angst over private credit. At a 127% premium today, Oppenheimer thinks the group still has some upside.
"The industry's fundamentals change much more slowly than these market sentiment swings," write the analysts, "and one should take advantage of the periodic disconnects."
Write to Bill Alpert at william.alpert@barrons.com
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(END) Dow Jones Newswires
January 21, 2026 15:15 ET (20:15 GMT)
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