Private equity, asset manager stocks sink as asset prices come under pressure
As the Federal Reserve aggressively tightens policy, raising its key interest rate by 75 basis points on Wednesday, asset prices are prone to weakness. Indeed financing conditions are becoming stricter and borrowing costs are increasing, limiting the number of potential buyers for businesses.
That's hitting the stocks of companies that buy entire companies as investments with the intention of selling them a few years later at a profit. Shares in Blackstone (NYSE:BX), the world's largest private equity firm, are tumbling 8.9% in Thursday afternoon trading. KKR (NYSE:KKR) is down 8.2%, Apollo Global Management (NYSE:APO) -7.9%, Carlyle Group (NASDAQ:CG) -8.3%, and Ares Management (NYSE:ARES) -7.9%.
While lower asset prices could help these companies pick up bargains, they may also have to hold onto them longer to get the kind of return they require.
Asset manager stocks are also feeling the pressure, as their assets under management lose value, BlackRock (BLK), which also owns iShares ETFs, is down 3.4%, Brookfield Asset Management (BAM) -4.7%, T. Rowe Price (TROW) -4.6%, AllianceBernstein (AB) -4.5%, and Franklin Resources (BEN), also called Franklin Templeton (BEN), - 3.9%.
By comparison, the largest U.S.-based money center banks, in general, aren't falling as much as the private equity or asset management sectors. When interest rates go up, they're able to earn more as they raise their lending rates. JPMorgan Chase (JPM) -1.9%, Bank of America (BAC) -0.7%, Citigroup (C) -1.5%, Goldman Sachs (GS) -2.3%, Wells Fargo (WFC) -1.9%, and Morgan Stanley (MS) -3.5%.
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