Blackstone Stands Out as KBW’s Top Alternative Asset Manager Pick

The KBW analysts said they modestly adjusted their earnings estimates primarily "to reflect aggregate investment performance" in the fourth quarter. "Among other things, positive investment returns in 4Q10 improve the prospects for near-term performance fee realizations. Recall, our estimate changes for the private equity managers, such as BX and KKR, largely reflect non-cash mark-to-market adjustments, which tend to be modest."

Despite the recent rally in stocks, KBW said it continues to see solid value in the private-equity group. "We anticipate net flows into hedge fund and many other alternative products remained positive in 4Q10," wrote the KBW analysts. "We believe this should remain the case over the coming quarters as institutional investors rebalance portfolios and increasingly look for sources of alpha."