In the evolving landscape of alternative investments, investors face a pivotal choice: direct exposure through private equity (PE) and credit funds, or indirect participation via the stocks of leading alternative asset managers like Blackstone (BX), KKR (KKR), Ares Management (ARES), and Blue Owl Capital (OWL). As of January 2026, with private markets surpassing $13 trillion globally and public managers commanding trillions in assets under management (AUM), this debate is more relevant than ever. Private funds promise potentially higher, illiquid returns tied to underlying assets, while manager stocks offer liquidity, dividends, and leverage to industry growth—but with market volatility.This article examines historical and recent returns, risks, and forward-looking factors to help determine which path might yield superior results. Note that returns are not guaranteed, and individual outcomes depend on timing, fees, and market conditions. All data is as of early January 2026 unless specified.
Understanding the OptionsPrivate Equity and Credit Funds: Direct Asset ExposurePrivate equity funds invest in non-public companies, often through buyouts, growth capital, or distressed assets, aiming for high returns via operational improvements and exits like IPOs. Private credit funds, meanwhile, provide loans to middle-market companies, offering yields in a space underserved by banks post-financial crisis.
These funds are typically illiquid, with lock-up periods of 5-10 years for closed-end structures or limited redemptions in perpetual vehicles like Blackstone's BCRED or Blue Owl's offerings. Access often requires accredited investor status and minimums starting at $25,000-$100,000 for semi-liquid products, though traditional funds demand millions.Benchmarks like the Cambridge Associates US Private Equity Index provide insight into sector performance, though specific fund returns vary by manager. For private credit, the Cliffwater Direct Lending Index (CDLI) is a key gauge, tracking middle-market loans.
Publicly Traded Alternative Managers:
Stocks like BX, KKR, ARES, and OWL give investors a piece of the management business itself. These firms earn stable base fees (1-2% of AUM) plus performance fees (20% of profits above hurdles), benefiting from AUM growth without direct asset risk. They pay dividends (yields around 2-6%) and trade like any stock, offering daily liquidity.In 2025, these stocks faced headwinds from interest rate cuts, which compressed lending spreads, and investor redemptions in retail-oriented vehicles. However, long-term tailwinds include rising demand for alternatives from pensions, insurers, and retail investors, potentially driving AUM to $20 trillion by 2030.
Historical Returns: A Side-by-Side ComparisonComparing returns isn't straightforward—private funds report internal rates of return (IRR) net of fees, often over multi-year horizons, while stocks deliver total shareholder returns (TSR), including price appreciation and dividends. Private returns are "smoothed" due to quarterly valuations, reducing apparent volatility, whereas stocks fluctuate daily.Private Fund BenchmarksPrivate Equity: Over the long term, US PE has delivered annualized net IRRs of 12-15%, outperforming public equities in many vintages. However, recent data shows variability; for instance, amid 2025's economic slowdown, PE realizations slowed, but strong vintages from 2020-2022 continue to perform.
Private Credit: The CDLI has posted a 9.55% annualized total return since its 2004 inception
, with 9.5% over the past 20 years. In 2024, it returned 11.3%, and for the trailing 12 months through Q2 2025, 10.06%. Specific funds like Blackstone's BCRED have achieved 10% annualized net returns since inception (2021), outperforming high-yield bonds.
Manager Stock Performance (as of early January 2026)
These stocks showed mixed results in 2025 due to rate pressures, outflows in some private credit vehicles, and macro factors, but long-term track records remain strong.Blackstone (BX): Trading around $157–$162 recently (with some volatility from news like single-family home policy discussions), consensus analyst targets suggest upside to ~$180 (14-17% potential). Long-term annualized returns have been 20-25%+ over 5-10 years.
KKR (KKR): Around $133–$135, with "Strong Buy" ratings and targets implying 15-20% upside. Strong fundraising momentum noted for 2026.
Ares Management (ARES): Around $170–$175, with "Buy" consensus and targets near $190 (8-10% upside). Credit-focused strength supports outlook.
Blue Owl Capital (OWL): Around $15–$16, facing pressure from redemption dynamics in private credit but seen as undervalued by some with recovery potential.
Over 5-10+ years, manager stocks have often outperformed private fund benchmarks (20-30% annualized TSR vs. 8-15% for funds), thanks to scalable fees and market leverage. However, 2025 brought challenges, with some stocks down significantly amid rate cuts and sector headwinds.Risks and Key ConsiderationsLiquidity & Volatility — Private funds lock capital but offer smoother rides; stocks provide instant exits but can drop 20-40% in tough periods.
Fees & Access — Private funds charge 1-2% management + 20% performance fees, but top managers deliver alpha. Retail access grows via vehicles like BDCs and interval funds.
Economic Factors — Credit thrives in higher-rate environments but faces default risks in slowdowns; PE benefits from deal activity recovery. Manager stocks amplify cycles but gain from AUM growth in alternatives (projected to trillions more by 2030).
Diversification — Funds give direct exposure; stocks add equity-like beta.
2026 Outlook: Optimism with CautionPrivate markets face tailwinds like AI infrastructure demand, insurance partnerships, and economic resilience, potentially boosting fundraising and realizations. Private credit could see moderated but solid yields (~8-10%). Manager stocks appear positioned for rebound, with analysts forecasting AUM growth and earnings beats—especially as rates stabilize and deal flow accelerates.Conclusion: Which Path for Better Returns?Over multi-year horizons, publicly traded alternative managers (BX, KKR, ARES, OWL) have historically provided superior total returns through fee leverage and liquidity, often 20%+ annualized vs. 8-15% from private fund benchmarks. This makes them attractive for growth-oriented investors seeking easier access and dividends.For those prioritizing steady income, lower volatility, and direct asset exposure (especially in credit), private funds shine—particularly with resilient benchmarks like CDLI showing consistent performance.
Comments