While there was a modest uptick in private equity and alternative asset manager stocks following the announcement, O’Hara said that had more to do with a valuation problem in the sector. “The group is trading well below premium,” he said.

Michael Cyprys, analyst with Morgan Stanley in New York, noted that the Oaktree-Brookfield deal could improve “investor perceptions of strategic value across the sector, but not without some debate.”

He wrote in a research note that “strategic partnerships” like Oaktree-Brookfield offer an alternative to converting to a C-Corp as a means of providing a more certain liquidity path for “aging founders” — an apparent reference to 72-year-old Oaktree founder Howard Marks.

Growth pressure

The Oaktree-Brookfield deal and the Ares restructuring are different means to a similar end: growth.

Other high-profile private equity firms, including industry leaders Blackstone Group, Apollo Global Management and Carlyle Group, are all looking at strategic options.

“This is a very cyclical business,” said Stephen Moyer, a lecturer in finance and business economics with the USC’s Marshall School of Business. “It’s very hard to continue growing,” he said.

“There is a trend to consolidate,” Moyer said. “It’s driven by the fact that these public companies, like Ares, Blackstone, Carlyle, Apollo and KKR, need to continue to grow. So they will to do it organically or buy.”

An Apollo spokesman provided a transcript of a Dec. 5, 2018, conference call at a Goldman Sachs conference where Leon Black, Apollo’s chief executive, chairman and founder said his company is mulling the C-Corp conversion but is taking a wait-and-see approach.

“I think C-Corp is a very important issue,” Black said at the conference. “It’s one we take extremely seriously. Frankly, I would love to have a shareholder base which included a lot more long-only investors. I would love to get on an index. I’m the biggest shareholder in Apollo. Of course, I would like those things. The question is at what cost?”

Black said his company is closely watching how Ares and KKR are performing as publicly traded corporations. “Hopefully, over a period of a year, you should have some feeling as to what could be sustainable or not, and then we’ll make a decision,” he said.


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