Ever wondered what the ultimate business would look like? A business that prints money with infinite scalability, guaranteeing a long-term increase in value? Look no further than asset management. Investing people’s money and earning a percentage of assets as fees is an incredibly lucrative business.
A Goliath in Asset Management
Blackstone, founded in 1985, is the king of asset managers and reigns with $1 trillion in assets under management. With a revenue model diversified across real estate, private equity, credit & insurance, and hedge funds, Blackstone is a force to be reckoned with.
Follow the Money
When it comes to fees, Blackstone champions with an average expense ratio of 0.91%. While index funds are challenging traditional asset managers, alternative asset managers still have an 87% untapped market potential, signifying immense growth opportunities.
The Clash of Titans: Blackstone vs. Apollo
Recently, comparisons have arisen between Blackstone and Apollo Global Management, Inc., the third-largest alternative asset manager in the world. So, how does Apollo fare against the heavyweight in the industry?
A Business Model That Reigns
With its asset-light model and a retirement service business called Athene, Apollo strongly stands as a formidable contender. However, the 80% share of fee-bearing assets managed in private credit slightly tips the scales in Blackstone’s favor due to its diversified investment across industry sectors.
Profitability: A Clear Victor
When it comes to profitability, Blackstone’s 85% free cash flow margins propel it into a league of its own. The company’s free cash flow is expected to nearly triple in just three years, a testament to its solid financial performance.
High Growth Rates: A Silver Lining
While Blackstone shines in fee management and profitability, Apollo boasts staggering growth rates, expected to emulate Warren Buffett’s 21% annual growth in the foreseeable future, outshining its counterparts.
Total Return Potential: Apollo Takes the Lead
In terms of total returns from dividends and growth, Apollo emerges as the victor. It offers about 24.0% return potential, making it an attractive prospect for income growth investors.
Financial Strength: A Mark of Distinction
With an A+ credit rating and a 0.6% fundamental risk, Blackstone exemplifies a strong financial position. On the other hand, Apollo, with its A stable credit rating and a 0.66% fundamental risk, stands firm, boasting $62 billion in liquidity.
Apollo’s Valuation Takes the Crown
Despite Blackstone’s exponential growth, Apollo’s fair valuation and superior growth potential make it a compelling investment, offering a 17% annual return potential through 2025, surpassing market averages and overshadowing its rival, Blackstone.
Income Growth History: Blackstone Outshines
Blackstone’s annual income growth of 14% over the last eight years portrays its consistent dividend growth, a key attraction for income investors. Meanwhile, Apollo has struggled to maintain steady dividend growth, trailing its competition.
Conclusion: The Ultimate Victor
With a final score of 4 to 3, Apollo edges out Blackstone, armed with faster growth, better long-term return potential, and strong fundamentals. However, Blackstone’s stable income growth history makes it a favorable choice for high-yield investors.
When you ride with Blackstone, you’re aligning with the legendary king of alternative asset management. While Apollo has its own impressiveness, Blackstone remains a stalwart force in the industry. Both are titans in the alternative asset management industry, offering distinct investment opportunities.