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Why Apollo and KKR Are Private-Equity Buys

RiverPark Advisors an independently-owned investment firm, recently published its first-quarter RiverPark Long/Short Opportunity Fund commentary. During the first quarter of 2020, the RiverPark Long/Short Opportunity Fund returned 9.48% (institutional shares), compared to the total return of -19.60% by the S&P 500 Index. You should check out RiverPark’s top 5 stock picks which helped them beat the market by nearly 30 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, RiverPark Advisors highlighted a few stocks and Apollo Global Management Inc. (NYSE:APO) and KKR & Co. Inc. (NYSE:KKR) are some of them. Apollo and KKR provide investment and private equity asset management services. Here is what RiverPark Advisors said:

“Apollo Management and KKR have $331 billion and $218 billion of assets under management, respectively, both growing double-digits annually, across hedge funds, credit strategies, real estate, private equity and more. While both may recognize near-term mark-to-market headwinds and a temporary slowdown in investment realizations from the current crisis, significant equity market declines are beneficial for the long-term, as most of their capital is long-dated or even permanent, much of their fees are not sensitive to the market (both have high-margin recurring fee-related earnings on permanent capital), and both have billions of dollars of capital available to invest ($20 billion for APO and $60 billion for KKR). Between each company’s fee related earnings and balance sheet value, at current prices, neither has any market value ascribed to its incentive fees on $130-$140 billion of eligible AUM.”

As you can see RiverPark believes Apollo and KKR have huge potential for long-term growth. In Q4 2019, the number of bullish hedge fund positions on APO stock increased by about 21% from the previous quarter (see the chart here). Similarly, in Q4 2019, the number of bullish hedge fund positions on KKR stock increased by about 30% from the previous quarter (see the chart here). We see that a number of other hedge fund managers seem to agree with Apollo and KKR’s huge upside potential.

Disclosure: None. This article is originally published at Insider Monkey.

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