Wall Street’s largest alternative asset managers are facing a critical test in the coming weeks as they strive to reassure investors. These firms, which manage a broad class of securities outside traditional stock and bond markets including private equity, private credit, and real estate, generate revenue through fees on the assets they oversee. Their shares have been pressured for months by fears of slower growth stemming from potential artificial intelligence disruption to their portfolio companies and a notable pullback in retail private credit demand.
Pressure in the private credit segment has been a significant drag on inflows, with total fundraising remaining nearly flat at $49.9 billion in the first quarter, according to With Intelligence. Direct lending, the segment facing the most scrutiny, saw fundraising plummet to $10.7 billion in the first quarter, marking its lowest quarterly level in three years. Evercore ISI analyst Glenn Schorr anticipates the first-quarter results will not be as robust as bank reports, citing slower fundraising and retail investors seeking exits. Oppenheimer analysts have already cut price targets for several firms, acknowledging a shift in investor perceptions.
The efforts by wealthy individuals to pull money from illiquid private loan funds, once primarily the domain of pension funds, are now a central issue. Retail fundraising has been a growth area for many firms, accounting for approximately 24% of total assets at Blackstone and around 40% at Blue Owl Capital. Debtwire Europe’s Francesca Ricciardi notes that current market pressures appear to be structural rather than merely transitory. Scrutiny has also intensified on sizable investments in software companies amid concerns over AI-driven disruption, alongside challenges in the private equity sector due to higher interest rates hindering company exits. Investors await quarterly earnings, beginning with Blackstone on April 23, for further clarity.
