Private equity giants emerge from the darkest hour, management fee feast cannot conceal hidden concerns about profit margins.

For private equity giants, the darkest hour has passed. Industry leaders such as Apollo Global Management, Blackstone, Carlyle, and KKR have weathered the trading winter under high-interest rate environments, seizing the opportunity to strengthen their differentiated development strategies. With more opportunities for private equity and credit assets to be included in retirement investment portfolios, a new wave of fund raising frenzy has begun. How to maintain this growth momentum has become a new challenge facing them. In the second quarter, these four alternative asset management giants collectively recorded $4.2 billion in management fees. Among them, Blackstone led with approximately $1.9 billion in revenue, a 4% increase from the previous quarter, marking the best quarter-on-quarter growth since 2022. KKR and Apollo also delivered their best performances in years, while Carlyle recorded a 12% quarter-on-quarter growth in their closing financial report on Wednesday, ending this round of impressive performances. The amount of funds returned to investors has also expanded in sync. In the past 12 months, Blackstone achieved nearly $100 billion in asset realization, an increase of over 40% from the previous year. Carlyle Chairman Harvey Schwartz even announced in a high-profile manner that they would return $15 billion to fund investors, three times the industry average. Although trillions of dollars of existing investments are still struggling with liquidity constraints, private equity firms are actively launching innovative products: from ETFs that mix public and private assets to perpetual fund structures without fixed maturity dates. Some institutions also use this as a selling point to attract new retail investors, emphasizing that the overvalued market of 2021 has subsided and now is the time to enter. However, Apollo Chairman Mark Rowan warned that he does not think "leveraged buyouts (LBO) for high returns" is a suitable strategy for individual investors. Nevertheless, to meet the increasing demand in the private equity industry, it is necessary to continuously expand asset size; the same applies to credit businesses - organizations like Apollo consider themselves as unique players that can provide safe and high-yield loans. Rowan and Blackstone President Jon Gray both stated that the investment-grade bonds issued by their companies can earn an additional 190 basis points in benchmark spreads compared to more easily tradable loan products. But maintaining this excess return (alpha) may not be easy. Overall, credit spreads are continuously narrowing. Nomura analyst data shows that in July, the yield on AAA loan mortgage bonds (CLOs) was only 1.6 percentage points higher than the benchmark, compared to 2.2 percentage points in 2021. In order to maintain their competitive edge, Apollo, Blackstone, Carlyle, and KKR have all turned their attention to lending areas that other institutions are unable or unwilling to enter. For example, Apollo owns an aviation loan business; all giants are moving into the artificial intelligence-related track, providing financing to companies in fields such as chips. As the investable fund size continues to expand, creating excess returns will become an increasingly daunting challenge.