Big stock-picking firms like AllianceBernstein LP (AB) and Janus Henderson Group Plc (JHG) , already decimated by growing demand for index and exchange-traded funds, are losing another battle to a separate class of money managers: buyout firms, which invest in private companies.
Apollo Global Management LLC (APO) , the $232 billion buyout firm headed by Leon Black, netted $35.7 billion of new investor commitments during the second quarter, more than double the amount raised a year earlier, according to a report Wednesday by Craig Siegenthaler, a New York-based analyst for the brokerage firm Credit Suisse. Carlyle Group (CG) and Ares Management LP (ARES) also reported strong inflows.
Buyout funds have thrived this year as U.S. stocks rallied to record highs, buoying valuations on private companies. Most such firms use money borrowed from banks or bond investors to finance their stake purchases, juicing returns above those available to traditional mutual-fund managers that eschew such leverage.
"We continue to believe the alternative asset managers are in a secular growth phase, stealing share from traditionals," Siegenthaler wrote to clients. "They're raising record amounts of capital."
The trend adds to the struggles of traditional stock-fund managers as they try to stave off a decade-long shift by many investors toward low-fee index-funds and ETFs like the SPDR S&P 500 ETF Trust (SPY) from State Street Corp. (STT) .
Over the past decade, actively managed stock funds have seen net outflows of $1.1 trillion, while index funds and ETFs have pulled in a net $1.4 trillion, according to the Investment Company Institute.