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Including dividends, the share value of private equity firm Blackstone has tripled since 1 April 2020, the date on which the economic recovery began, according to The Wall Street Journal.
The firm’s $140-billion treasure chest now exceeds that of Goldman Sachs and rival Blackrock.
KKR’s stock has done slightly better than Blackstone’s, the WSJ noted.
Shares of Carlyle Group traditionally have underperformed those of other private equity firms but have skyrocketed 160 percent during the period; Apollo Global Management’s market value was hampered by former CEO Leon Black’s relationship with accused child sex trafficker Jeffrey Epstein but its shares have more than doubled.
Those gains far outstrip the S&P’s 83-percent growth during the same time.
Artificially low interest rates imposed by the U.S. Federal Reserve when 2020’s crisis began have allowed the firms to borrow at rock-bottom costs to expand into real estate, lending, and insurance, the WSJ noted.
Apollo has more than half of its assets in insurance firms Athena Holdings and Athora Holdings; Blackstone has moved aggressively into rental housing. (See “Blackstone Extends Reach Into Housing Market,” Trends Journal, 29 June, 2021.)
At the same time, investors not content with low yields offered by government securities flooded private equity firms with hundreds of millions of dollars in new capital, which fueled their expansion and diversification.
Also, many private equity firms changed their structures from limited liability partnerships to corporations, which allowed their shares to be listed on exchanges, drawing even more visibility and investors.
TRENDPOST: Like sharks that keep swimming forward and eating, private equity firms keep moving into new areas and buying market share.
In May, KKR established an investment vehicle that offers private real estate to individual investors; Apollo has announced the creation of its own retail distribution system. Blackstone has set up a retail marketing and distribution network targeting well-off households, a market thought to be worth $80 trillion, the WSJ noted.
While attention has been focused on tech giants’ increasing control of the economy, the lengthening tentacles of private equity firms have largely been ignored.
Keeping the Bigs getting bigger trend moving forward, yesterday Brookfield Asset Management’s reinsurance arm announced it will buy up the insurer American National Group for about $5 billion.
TREND FORECAST: The Bigs will continue to gobble up larger and larger shares of the economy unnoticed until high-profile politicians shine the light of publicity on them.
Even then, any potential regulatory remedy will take years, during which these Bigs will continue to take control over more and more of our jobs, businesses, and services.