Alternative asset managers weathered the market turmoil in the first half of the year relatively well and are gaining momentum as markets shake off concerns about erratic U.S. trade policy.
In a new report, Moody’s Ratings said second-quarter results for the large U.S.-based alternative managers remained strong despite rapidly shifting U.S. trade policy, which was initially a concern for markets generally and the sector in particular.
However, at least for now, markets have adjusted to that erratic policy, it said.
“Despite concerns that markets would suffer because of tariffs in Q2, fixed-income and equity market indexes were both up year-over-year and sequentially, volatility was lower and bond spreads were tighter,” it said, adding that alternative managers’ investment performance was also positive in the quarter.
“In fact, results were excellent across the board,” it said, with the four largest alternative managers growing distributable earnings by 21% in the quarter.
“There was strong performance in base management fees, fee-related earnings, inflows, deployment and realizations,” it added.
On a year-over-year basis, inflows were up 24.7% in the second quarter, the report said.
At the same time, capital deployment rose 14.2% year-over-year, and realizations increased 21%, it noted.
As a result of stronger inflows and deployment, fee-generating assets under management (AUM) also continued to grow, rising 13.2%, Moody’s said, while fee-related earnings rose 27.6% year-over-year.
“Given fundraising trends in private wealth, insurance and infrastructure, we would expect continued growth in [AUM],” it said.
Additionally, accrued performance fees were up 13.3% year-over-year and 3.6% quarter-over-quarter, the report noted.
Leverage also remains low at the major alternative managers, it said.