FORTUNE -- One year ago I recommended that you buy stock in publicly-traded private equity firms, like Apollo Global Management (APO) and The Carlyle Group (CG). My theory was that such issuers were being undervalued by analysts who obsessed over assets under management (i.e., fund management fees), while paying too little attention to underlying portfolio performance (i.e., investment profits).
Hope you listened, since such shares have since risen by an average of 65 percent.
That's a big jump, and I'm not so bold as to issue another editorial buy. But I would suggest you keep ignoring most of the bank analysts.
Last Thursday, Kohlberg Kravis Roberts & Co. (KKR) released first quarter earnings and held the obligatory conference call. Several of the analyst questions dealt with a new dividend policy, while one asked about the outlook for underlying portfolio companies. The majority, however, still related to assets under management.
Among those was the following from Michael Kim, an analyst with Sandler O'Neill:
"As you continue to build out your investment capabilities across the new strategies and geographies, is there an opportunity to maybe offer LPs sort of a multi-asset class fund that maybe has a broader mandate? Do you feel like there's demand for that type of strategy that's more flexible and might offer more of a shorter timeline relative to sort of a traditional PE fund?"
And this from Matthew Kelly of Morgan Stanley (MS):
"I was hoping you could give us an update on LPs and your cross-sell, because there's been a lot of change in additions, moving parts to the business, as you indicated. So I'm just wondering if you can tell us kind of how many LPs you have now, how many of them own multiple products and if there's any sort of subset they can't own multiple products, just based on what they can kind of invest in?"
In other words, how can you get more dollars from existing investors?
The notion of multi-asset class products is not new. Warburg Pincus, arguably, has been doing it for years with "private equity" funds that include everything from expansion-stage venture capital to large leveraged buyouts. And The Blackstone Group (BX) has raised $1.7 billion for a new platform that takes "a multi-asset class approach to investing in illiquid assets focused on timely opportunities that fall outside other Blackstone alternative fund strategies."
But, generally speaking, these are exceptions rather than the rule. Not because private equity firms don't want to raise more money from existing LPs, but because most LPs prefer that each of their fund commitments fit into a dedicated "bucket."
There's a "bucket" for early-stage venture capital, one for growth equity, one for mid-market buyouts, one for large-cap buyouts and so forth. This is particularly prevalent in the fund-of-funds world, but also exists at many university endowments and public pension plans.
In fact, many LPs would much prefer to invest in three different funds managed simultaneously by the same firm (each focused on a different asset class), than in a single fund that makes the same deals under a consolidated umbrella. It just works better for their models, and also helps enable secondary sale flexibility. Do KKR's analysts know any of this?
To be clear, I'm a bit reluctant to knock people for asking questions. Partially because it's what I do for a living, and also because that's the purpose of the quarterly earnings call. But when those paid to analyze publicly-traded private equity firms ask questions that reflect a lack of sophistication about the underlying subject matter... Well, I guess that's why so few of them had proper price targets last May.
Sign up for my daily email newsletter on deals and deal-makers: GetTermSheet.com
Private equity's placement agent saga takes a strange twist.
FORTUNE -- Is it chutzpah, a breach of contract or both?
Former "placement agent" Al Villalobos yesterday sued Apollo Global Management (APO) in a Nevada bankruptcy court, alleging that the firm had improperly withheld payments related to his capital-raising work on behalf of the firm. The complaint also includes the transcript of a recent deposition of Apollo founder Leon Black, which (finally) shines MOREDan Primack - Apr 17, 2013 11:52 AM ET
Not all private equity firms keep fundraising close to the vest.
FORTUNE -- Private equity firms aren't supposed to talk publicly about fundraising. Not because it's considered impolite, but because the Securities and Exchange Commission a longstanding rule that bans such blabbery.
Not everyone, however, seems to care.
Take Josh Harris, co-founder and senior managing director with Apollo Global Management (APO). During a keynote speech this past Tuesday at the BoA Merrill Lynch MOREDan Primack - Nov 15, 2012 3:43 PM ET
New charges in public pension corruption saga.
FORTUNE -- The Securities and Exchange Commission yesterday filed federal fraud charges against CalPERS CEO Fred Buenrostro and his placement agent pal Alfred Villalobos, alleging that they bilked private equity firm Apollo Global Management (APO) out of around $20 million.
For regular readers, this shouldn't be too surprising. Buenrostro and Villalobos were the tips of a pay-to-play spear that corrupted the nation's largest public pension MOREDan Primack - Apr 24, 2012 9:58 AM ET
A rich guy threw a party. Get over it.
Leon Black, head of private equity firm Apollo Global Management (APO), is getting skewered today for spending millions of dollars on his 60th birthday party this past weekend.
Elton John did the singing, Vera Wang did the dressing and and it didn't help that attendees like Sen. Chuck Schumer (D-NY) and Mayor Mike Bloomberg added to an air of corporatist complicity. For example, MOREDan Primack - Aug 19, 2011 2:30 PM ET
Apollo Global Management (APO) struggled in its public market debut, with shares falling 4.21% to close at $18.20. The private equity firm had raised $565 million in its IPO last night, after selling around 19% more shares than originally expected.
The fact that so many people wanted Apollo stock yesterday is what makes today's drop so surprising. Companies with oversubscribed IPOs often choose to leave some prospective buyers wanting more, in MOREDan Primack - Mar 30, 2011 4:29 PM ET
Apollo Global Management (APO) is expected to price its IPO tonight, becoming the first private equity firm to go public since The Blackstone Group in June 2007. While we wait to see if Apollo can hit its upper target of $500 million, a bunch of related notes:
* No, the KKR "IPO" didn't count. It was basically a listing transfer from Europe to New York, without any new capital raised.
* From MOREDan Primack - Mar 29, 2011 9:41 AM ET
Apollo Global Management has delayed the start of its long-awaited IPO roadshow, due to market turmoil caused by the Japanese earthquake. CNBC reports that the private equity firm now plans to begin soliciting investors next Monday, with hopes of raising around $500 million by the end of March.
In other words, prospective investors have a bit more time to get their list of questions collated. Let me add one to the MOREDan Primack - Mar 17, 2011 9:33 AM ET
Apollo Global Management on Friday filed an amended IPO prospectus, in which we learned that the private equity firm paid a small fortune to hire new president Marc Spilker last November.
Spilker, a 20-year Goldman Sachs (GS) vet who most recently served as co-head of investment management, received $48.9 million in 2010 compensation from Apollo -- including $20.65 million worth of restricted stock and $28.1 million in stock options. He also has an MOREDan Primack - Feb 22, 2011 10:36 AM ET
When Evan Bayh announced last year that he wouldn't be running for a third term as U.S. Senator from Indiana, he said: "At this time, I simply believe I can best contribute to society in another way: creating jobs by helping grow a business, helping guide an institution of higher learning or helping run a worthy charitable endeavor."
Apparently that can translate into: "I'm joining a private equity firm."
Apollo Global Management MOREDan Primack - Jan 21, 2011 3:49 PM ET
|China to fight pollution with drones|
|The medical marijuana ad that never aired, despite contrary media headlines|
|Boeing reports wing cracks on Dreamliners|
|2 million students missing out on college aid|
|Bitcoin matters. Ignore the media circus.|