Market Turbulence Creates "Golden" Opportunities Amid Deepening Liquidity Drought | Weekly Pulse

🚨 MUST KNOW: Market Volatility Creates Opportunity Amid Uncertainty

Bottom Line

Private market giants are positioning recent market turmoil as a potential "golden" opportunity while actively deploying capital through strategic market dislocations.

Why It Matters

• Market Resilience: Alternative asset managers with diversified business models are demonstrating remarkable resilience amidst recent tariff-induced market volatility, showcasing their ability to navigate economic uncertainty

• Deployment Strategy: Leading firms have strategically accumulated dry powder and liquid reserves, now being deployed as investment opportunities emerge through market dislocations

• Defensive Positioning: Firms with defensive portfolio positioning and limited tariff exposure are outperforming peers, validating their strategic approach to global market uncertainties

Big Picture

KKR, Blue Owl, Ares, Apollo, and Carlyle all delivered strong Q1 2025 earnings despite market turbulence, highlighting the strength of their diversified business models during periods of uncertainty. While traditional financing channels face disruption from tariff-related volatility, private markets are stepping in to provide stable capital, with several managers citing the longest syndicated loan market shutdown in a decade (15 days) as driving more companies toward private credit solutions.

📊 BY THE NUMBERS

🔹 $31 billion - KKR's new capital raised in Q1 2025, showcasing fundraising resilience amid volatility

🔹 $546 billion - Ares Management's AUM after surpassing half-trillion milestone, up 27% YoY

🔹 $116 billion - KKR's available dry powder for strategic deployment opportunities

🔹 22% - Growth in KKR's fee-related earnings per share (to $0.92), up YoY

🔹 $785 billion - Apollo Global Management's AUM, up 17% year-over-year

🔹 $273 billion - Blue Owl Capital's total AUM, representing 57% growth YoY

🔹 $5.4 billion - Apollo's debut secondaries fund closing, exceeding target amid growing demand for liquidity solutions

🔹 25% - Blue Owl Capital's dividend increase to $0.90 annually despite market uncertainty

🔹 57.2% - Apollo's FRE margin, expanded approximately 200 basis points YoY

🔹 $64 billion - Apollo's available dry powder for investment opportunities

🔹 $453 billion - Carlyle Group's assets under management, reaching a record high after raising $14B in Q1

🔹 $1.5 billion - Value of Apollo's all-stock acquisition of Bridge Investment Group to enhance real estate capabilities

🌎 MARKET SPOTLIGHT: REGIONAL DEVELOPMENTS

🇺🇸 United States: Apollo CEO Marc Rowan characterized the period as transitioning from "hyper US exceptionalism" to a more normalized market environment, where the firm's principle of "purchase price matters" should shine. With 90% of Blue Owl's deployment being domestic, the firm claims limited direct tariff exposure while positioning to benefit from "fortress USA" dynamics.

🇪🇺 Europe: Carlyle Group is looking to expand its European presence as competition grows for U.S. private-credit deals and fundraising. Europe has become a progressively more attractive target due to tougher terms and documentation that benefit lenders as corporate borrowers have seen liquidity options decline.

🇦🇪 Middle East: Abu Dhabi's Mubadala Investment Co. deployed $32 billion last year, with its private credit portfolio rising to $20 billion. The fund's private credit portfolio has been its top-performing asset class for three consecutive years, supported by partnerships with Apollo, Carlyle, KKR, and others.

🇨🇳 China: Chinese sovereign wealth funds have turned off their money tap to the private equity industry more comprehensively, while Canadian and Danish pension funds have been backing away from new US private equity allocations, according to Financial Times reporting.

🇯🇵 Japan: Sumitomo Mitsui Banking Corp. is partnering with Monroe Capital and MA Financial Group to work together on $1.7 billion of lending deals in the US private credit market, targeting US middle-market companies with first-lien senior-secured loans.

💼 DEAL SPOTLIGHT: TRANSACTIONS & STRATEGIES

🔄 Apollo's Bridge Investment Group Acquisition: Announced all-stock transaction valued at approximately $1.5 billion to enhance real estate capabilities; expected to close in Q3 2025.

📊 Hamilton Lane Venture Capital Launch: Launched the Hamilton Lane Venture Capital and Growth Fund ("HLVCG"), a continuously offered evergreen investment vehicle registered under the Investment Act of 1940, available to accredited U.S. investor clients.

💰 OTF Merger Creates Largest Tech BDC: Blue Owl's combined OTF and OTF II will generate $135 million in incremental annual management fees upon listing.

🏢 Digital Infrastructure Expansion: Blue Owl closed Fund III at $7 billion hard cap with IPI acquisition adding critical data center expertise for AI infrastructure boom.

📱 SQ Capital Expansion: Newcomer SQ Capital, formed in January, is bulking up its secondary deals and fundraising teams, focusing on acquiring stakes in smaller private-equity funds often overlooked by bigger rivals.

🏙️ TPG Tower Acquisition: TPG agreed to buy Peppertree Capital Management, a digital infrastructure investment firm with a focus on wireless communications towers, in a deal worth up to $960 million including earnouts.

💰 FUNDRAISING FOCUS: CAPITAL FORMATION

🔍 Apollo Secondaries Success: Apollo announced the successful closing of its first equity secondaries fund at $5.4 billion, exceeding its target, bringing total S3 platform capital to nearly $10 billion since launch.

🌐 KKR North America 14 Launch: Closed flagship fund at $14 billion, maintaining regional focus strategy.

🏦 Edward Jones Partnership: Blue Owl launched products with $2.2 trillion asset manager that previously had zero alternatives allocation.

💵 Hamilton Lane Venture Capital Fund: The firm launched HLVCG, providing investors access to its global venture capital investment platform with investments in disruptive technologies and innovative companies.

📈 Carlyle Fundraising Momentum: The firm raised $14 billion of new capital in the quarter and $50 billion over the past 12 months, pushing overall assets to a record $453 billion.

👥 Capital Group Partnership: KKR launched two public private credit solutions with long-term distribution partner.

💡 INDUSTRY INSIGHTS: STRATEGY & OUTLOOK

📉 Contrarian Market Approach: "Purchase price matters in all markets. In debt, in equity, in up markets and down markets, purchase price always matters. We are not a current period profit maximizer. That means we are willing to sit things out. We are willing to reduce leverage. We are willing to wait for the fat pitch." - Marc Rowan, Apollo CEO

💪 Resilience Advantage: "We're reminded, once again, of the transitory nature of perceived liquidity and the benefits of permanent capital." - Marc Lipschultz, Blue Owl Co-CEO

🌊 Market Positioning: "Volatility brings opportunity, and we benefit from the global and connected nature of our firm." - Robert Lewin, KKR CFO

🔮 Long-term Perspective: "These periods always end. And we typically look back and wish we had invested more when the world is most uncertain." - Scott Nuttall, KKR Co-CEO

🏦 Credit Stability: "Despite the economic uncertainty, we remain optimistic about 2025 and beyond. In the past, our business has proven to be very resilient in more challenging markets and we have no reason to believe that this time will be any different." - Michael Arougheti, Ares CEO

🏗️ Diversification Strategy: "We believe a significant advantage for Ares is that we operate very broad and diversified investment strategies with wide ranging mandates across large global investable markets." - Michael Arougheti, Ares CEO

🚪 Opportunity Creation: "When traditional capital providers and public markets retrench, the stability and certainty of the private markets becomes even more valuable." - Michael Arougheti, Ares CEO

🔮 TRENDS TO WATCH

📈 Private Credit Expansion: Private lenders are making major inroads with blue-chip borrowers as well as traditional middle-market companies, with the potential market estimated at $22 trillion.

🔄 Secondary Market Surge: The secondary market for private equity stakes is booming, with sales projected to hit $162-182 billion in 2025, as institutional investors like Harvard, Yale, and Princeton seek liquidity amid the longest distribution drought in over a decade.

Discounts are widening, with some transactions seeing 10-20% haircuts from face value.

🔽 Distressed Credit Opportunities: Oaktree Co-CEO Robert O'Leary reports private credit fund investors selling stakes at significant discounts ranging from 90 cents on the dollar to as low as "50 cent range" as economic concerns mount, with predictions of high-single-digit default rates in high-yield debt markets and potentially double-digit defaults in private credit.

⚖️ Liability Management Exercises: Private equity firms are increasingly employing "liability management exercises" (LMEs) to help overleveraged portfolio companies avoid bankruptcy, sometimes creating tiered systems giving preferential treatment to certain lender groups while leaving others with significantly devalued positions.

🏦 Bank Partnerships: Banks like Citigroup are ramping up lending to private equity and private credit groups, working to catch up with peers like JPMorgan Chase and Goldman Sachs.

💼 Portfolio Stress Signals: From a custom tile maker to a funeral service provider, a number of companies financed by private lenders started showing signs of stress in Q1, with market watchers expecting the trend to accelerate.

🎯 Defense Sector Focus: Private equity firms are targeting European defense assets, with several raising dedicated funds as Europe pivots toward military expansion. Private equity spending on defense has reached $790 million in 2025 already, on pace to exceed the $1 billion mark reached in only five of the last 20 years.

🏫 Retail Access Growth: Morningstar is expanding its ratings system to semi-liquid private asset funds marketed to individual investors, reflecting asset managers' aggressive push into private markets for retail clients as institutional investors pull back.

👀 Transparency Initiatives: With just 40% of private credit funds using third-party appraisals according to SEC data, concerns about portfolio valuation practices are growing, particularly around payment-in-kind (PIK) loans that are often valued at over 95 cents on the dollar despite market skepticism.

🚪 Limited Partner Strategy Shift: Major pension funds like Ontario Teachers', Omers, and Caisse de Depot et Placement du Quebec are scaling back direct private equity investments in favor of working with external managers and partners to mitigate risks in the current environment.