VALUE: After Hours (S08 E10): Why Asset Managers Like Blackstone, KKR, and Blue Owl Are So Cheap

During their recent episode Tobias Carlisle and Tim Travis discussed Why Asset Managers Like Blackstone, KKR, and Blue Owl Are So Cheap. Here’s an excerpt from the episode:

[Tim] So they all have pretty much. So Blackstone sold off, KKR, Aries, and then Blue Owl, of course, and there’s others as well. And so I think it’s an interesting opportunity in a lot of the space.

We’ve sold some cash-to-care puts on KKR, on Blackstone, on Aries, because you’re getting, with the volatility as high as it is, you’re getting to get some, you’re getting to manufacture some pretty low valuations for high quality managers. And once again, these are way better businesses than banks. Like banks, I’ve been, you know me, I’ve been an advocate for Citigroup for a long time when everyone was saying how terrible it was and when you could buy it at 60% of tangible book value.

And it’s like, well, you know, if they get to 10% return on tangible capital, it gets the book value again. And it’s at 100. Now we’re at 110 on Citigroup.

These are nothing like the banks. These are way better businesses, way higher margins, way better growth prospects. And it’s interesting because these are so cheap.

And I’m not talking about the BDCs, by the way, I’m talking about the asset managers, the manager of the BDC are way better business. BDC is a loan portfolio. It’s a bond fund.

But these are way better businesses, way better growth prospects, way higher margins. And the banks are trading pretty expensively. So you’d think that if there’s credit issues on first lien loans in private capital, you’d think you’d see some of these banks trading at discounts to book value or at least low multiples.

And that’s not the case at all. And I’ll grant you, it’s a good environment for banking with M&A and with the yield curve. And I think the administration’s pretty bit favourable towards banking.

But I think that there is a disconnect there.

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