Growth rates for alternative investment managers' fee-earning assets under management have slowed in recent years, but are poised to speed up in 2018, said a new report from Fitch Ratings.
According to the report, released Thursday, fee-earning assets under management growth slowed in 2017 "as fund realizations outpaced capital deployment."
Across the seven alternative managers examined, fee-earning assets under management totaled $876.1 billion as of Sept. 30, compared to $854.3 billion as of year-end 2016, $815.5 billion in 2015, $763.6 billion in 2014, $727.4 billion in 2013 and $601.6 billion in 2012. The seven examined firms were Apollo Global Management, Ares Management, Blackstone Group, Carlyle Group, Fortress Investment Group, KKR & Co. and Oaktree Capital Group.
Looking ahead, Fitch said it believes managers' fee-earning assets under management will grow in 2018 due to strong fundraising trends and the fact that several flagship funds are set to begin their investment periods.
Additionally, the report found that the firms' management fees grew 5% over the 12 months ended Sept. 30, up from 3.3% for the year ended Sept. 30, 2016, but below the 14.2% annual average recorded for 2011 to 2014.
"We haven't seen management fees grow to the same magnitude that we saw a few years ago, because of growth in lower fee rate credit funds, slower deployment of capital in drawdown structures, which earn fees on invested capital, and the simple law of large numbers as managers gain increasing scale" said Meghan Neenan, managing director at Fitch Ratings, in a news release about the report.
Regarding transaction fees, the report found for most firms, these fees remain below historical standards as a higher proportion are now shared with investors. For KKR, however, transaction fees accounted for 35.8% of the firm's total fees in the 12 months ended Sept. 30, up from 25.8% in 2016 and 35.9% in 2015 as the firm's capital markets business expanded its primary and third-party activity in 2017.