WSJ What’s News: Summary of Episode "What's News in Earnings: Why Some Money Managers Are Trailing the Market"

Release Date: August 11, 2025
Host: Miriam Gottfried, The Wall Street Journal

1. Introduction to Alternative Asset Managers

In this episode of What's News in Earnings, Miriam Gottfried delves into the performance disparities between alternative asset managers—such as Blackstone, Apollo, and KKR—and traditional asset managers like BlackRock and State Street. These alternative managers, often referred to as publicly traded private equity firms, have historically mirrored the fluctuations of public markets but have recently shown a divergence from broader market trends.

2. Performance of Alternative Asset Managers

Miriam begins by highlighting the typical relationship between alternative asset managers and the public markets:

"Shares of publicly traded private equity firms, also known as alternative asset managers, typically rise and fall with public markets, often with slightly bigger swings in both directions."
— [00:33] Miriam Gottfried

However, this year, the stock performances of major firms like Blackstone, Apollo, and KKR have started to decouple from the general market movements, showing a relative lag despite strong quarterly earnings reports.

3. Factors Affecting Stock Performance

To explore why these firms' stocks are underperforming despite optimistic earnings, Gottfried introduces Telus Demos, a columnist and host from Take on the Week. Together, they discuss several key factors influencing this trend:

• Spreads and Lending Margins:
  Telus explains that alternative asset managers are currently experiencing narrower spreads—the difference between the interest earned on loans and the cost of funding those loans. With treasury yields rising, the profitability from lending has diminished.

  "They're not making a ton of money doing that right now relative to where treasury yields are."
  — [02:00] Telus Demos

• Asset Sales Challenges:
  Many of these firms acquired businesses during the post-COVID boom at high valuations. Currently, they face difficulties selling these assets at favorable prices, leading to lower returns to investors and reduced incentive fees.

  "There’s some real concern that they're just not going to be able to sell what they've got now at good prices."
  — [02:50] Telus Demos

• Higher Interest Rates:
  Elevated interest rates increase the cost of capital for these firms, compounding the challenges in raising and deploying funds effectively.

  "Interest rates are a lot higher, which means that they are funding themselves more expensively."
  — [03:22] Telus Demos

These factors collectively dampen investor confidence and limit the upward momentum of these firms' stocks.

4. Case Study: Carlyle Group's Outperformance

Amidst the challenges faced by its peers, Carlyle Group has bucked the trend, with its stock rising year-to-date and improving in the last quarter. Miriam and Telus explore the reasons behind Carlyle’s resilience:

• Valuation Alignment and Management Leadership:
  Carlyle trades at a slightly lower valuation compared to its peers, making it an attractive candidate for investors looking to close the valuation gap. Additionally, under the leadership of Harvey Schwartz, a former Goldman Sachs executive, Carlyle has strengthened investor confidence.

  "Investors are just really kind of buying into the idea that Carlyle Group ... is in the same sort of class as some of these other alternative asset managers."
  — [04:24] Telus Demos

• Operational Excellence:
  Carlyle’s adeptness in private equity and private credit has allowed it to maintain robust operational performance, contributing to its stock’s positive trajectory.

5. Comparison with Traditional Asset Managers

Contrastingly, traditional asset managers like BlackRock and State Street have seen their stocks surge this year, outperforming the broader market despite occasional setbacks, such as BlackRock's stock dip following a significant client withdrawal:

"The S&P 500 is way up. That means that they're managing a bigger pool of money and they collect more fees from that."
— [06:15] Telus Demos

The success of traditional managers is primarily driven by the bullish public equities market, which directly benefits their fee structures due to increased assets under management.

6. Future Catalysts for Alternative Asset Managers

Looking ahead, Telus identifies key catalysts that could help alternative asset managers regain their growth momentum:

• Successful Asset Realizations:
  Continued positive outcomes from the sale of assets would bolster investor confidence and improve financial performance.

• Asset Growth:
  Expanding the assets under management (AUM) is crucial. An increase in AUM leads to higher fee revenues, which are the lifeblood of these firms.

• Expansion into Retirement Accounts:
  A significant potential growth area is the expansion into retirement accounts.

  "This expansion into retirement accounts... could be a huge boon to them."
  — [07:08] Telus Demos

7. Impact of Executive Order on Retirement Accounts

Miriam discusses the recent executive order signed by President Trump, aimed at simplifying the inclusion of private assets like private equity and private credit in 401(k) plans. This legislative change could unlock a massive inflow of retirement funds into private markets, providing a substantial opportunity for alternative asset managers:

"The president's executive order has essentially given them the green light to do so... It could potentially open up this huge market for private markets asset managers."
— [07:47] Miriam Gottfried

While this development is still in its early stages, it represents a promising avenue for growth, potentially reversing the current lag in stock performance for alternative asset managers.

8. Conclusion

The episode underscores the complex dynamics affecting the performance of alternative asset managers in the current economic landscape. While facing challenges from narrower lending margins, higher interest rates, and difficulties in asset sales, firms like Carlyle Group demonstrate that strategic management and valuation alignment can yield positive results. The potential expansion into retirement accounts, facilitated by recent executive actions, may serve as a pivotal catalyst for these firms to regain their growth trajectory and close the performance gap with traditional asset managers.

Produced by Zoe Culkin and Michael Lavalle, with supervising producer Michael Cosmides. Miriam Gottfried wraps up the discussion, encouraging listeners to stay tuned for the PM edition of What's News.