Three large alternative asset firms reporting first-quarter results Thursday came up short, both of expectations and -- more dramatically -- in comparison with a year ago.
Talking about their financial performances in the quarter, management of the firms sounded regretful that they sold so many assets during the bulge in valuations that occurred in 2014 that they had no chance of reprising the performance.
Realizations have exceeded investing for three or four years, management of Apollo Global Management (APO) said in a conference call Thursday following the release of quarterly results. The firm reported 23 cents a share in economic net income -- an economic metric the private equity business prefers to use as a financial yardstick -- vs. 56 cents in the year-earlier first quarter, and south of analysts' forecasts of 34 cents a share.
"We've come to the tail end of a large realizations cycle," one executive continued on the conference call. "Now we're in a 'build value' cycle."
Ironically, it was Apollo's own chief executive, Leon Black, who captured the headiness of the portfolio-emptying period by saying at a conference three years ago the industry ought to be "selling everything that isn't nailed down," owing to the escalating valuations that assets were commanding as public market valuations soared.