BREAKINGVIEWS-Time for buyout barons to buy their own dip

By Liam Proud

LONDON, March 18 (Reuters Breakingviews) - For many years, traditional asset managers have been on the defensive while the private-capital crowd grabbed an ever-larger slice of clients' portfolios. This trend was reflected in the listed investment houses' stock-market valuations: Blackstone BX.N, KKR KKR.N, Ares Management ARES.N and their ilk on average traded at giant premiums to classic fund managers like BlackRock BLK.N, Janus Henderson JHG.N and Amundi AMUN.PA between the start of 2019 and the end of 2025. That gap has since closed. The question is what buyout barons and private-credit titans can do about it.

Over the past six months, the stocks of a dozen major U.S. and European alternative investment firms have dropped 32% on average in dollar terms. The cohort includes Steve Schwarzman's Blackstone, Henry Kravis's KKR, and Sweden's EQT EQTAB.ST. Public investors seem to be worried about rising default risks in private credit, which has also prompted outflows from vehicles aimed at wealthy individuals. Concerns also abound over artificial intelligence's threat to software companies, many of which sit in buyout funds, threatening writedowns.

As a result of the selloff, the private-market dozen now on average trade at just over 14.3 times 12-month forward earnings. That's barely higher than the average multiple of 13.1 for nine traditional managers including BlackRock, Franklin Resources BEN.N, France's Amundi and Germany's DWS DWSG.DE, equivalent to a 9% valuation premium. Back in February 2025, the alternative giants boasted a rating double that of the traditional managers. Look at the changing fates of Blackstone and BlackRock. While Larry Fink's group has been tangled up in the private wealth pain, it has a robust stock-picking and index-tracking business to fall back on, and so now trades at a premium to Schwarzman's group. It's usually been the other way around in recent years.

Schwarzman and his fellow buyout barons can argue that the reaction is overdone. The private cohort's average annual organic growth in assets under management — a metric that excludes M&A and fluctuating markets — was 16% between 2021 and 2025, compared with 1% for the traditional fund houses, according to Visible Alpha data. Analysts are projecting annual asset growth of 10% and 4% respectively for the next three years. Far more institutional investors, like pension funds and insurers, are planning to increase their private equity allocations this year than shrink them, Bain & Co. reckons, implying that fleeing wealth customers are hardly a death sentence.

It follows that private-market titans should be doing what they always claim to do: buy cheap. CVC Capital Partners CVC.AS recently launched a $400 million share repurchase programme, which is a good start. Mass buybacks would signal confidence. M&A is another option: private managers have been increasingly joining forces, and giants like KKR now have the opportunity to snap up rivals seemingly on the cheap. After all, if buyout barons don't like their own sector's stock at these levels, why should public-market investors take any interest?

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CONTEXT NEWS

As of morning UK time on March 18, a dozen major U.S. and European private-capital managers traded at a mean 12-month forward price-earnings multiple of roughly 14, according to Breakingviews calculations based on LSEG Datastream figures. Nine major Western traditional asset managers, meanwhile, traded at around 13 times forward earnings.

The implied 9% premium for the private-capital cohort compares with a 49% premium as recently as January 6, using the same data set.