瑞信-美股股票策略：资产与财富管理指南-2021.5.25-153正式版

TheCreditSuisseGuidestoAsset&WealthManagement5/25/2021EquityResearch

AmericanInvestmentConclusions–

Our12-mo+Outlook.

(i)

We

are

cautious

on

the

US

Traditional

Asset

Managers

after

“beta”

drove

significant

EPS

growth/earningsrevisions

over

the

last

12

months.

We

also

expect

“cyclically

peak”

retail

net

flows

to

normalize

lower

afterthe

reaction

to

the

strong

stock

markets

and

government

stimulus

subsides

while

retail

redemptions

couldaccelerate

in

2H21

before

potentially

higher

taxes.

Alternatively,

(ii)

we

remain

bullish

on

the

US

AlternativeAsset

Managers

which

offer

sustainably

strong

organic

growth

with

pricing

stability,

and

(iii)

we

are

morebullish

on

the

US

Brokers

due

to

the

improving

interest

rate

outlook

combined

with

solid

organic

growth..

Alternatives’

secular

growth

trajectory

to

continue

given

low

rate

backdrop

+

GP

consolidations

+expansion

in

retail/insurance

channels:

Expect

strongest

NT

fundraising

at

KKR

(US

buyout,

Infra,

Eurobuyout)

and

the

largest

fundraising

re-acceleration

at

CG

(into

2022

with

next

super-cycle).

We

forecastcontinued

strong

fundraising

at

BX

as

it

scales

multiple

FRE-rich

permanent

capital

vehicles

in

parallel

(ourPPP

Thesis

=

perpetual

product

pivot)

and

enters

its

own

fundraising

cycle

next

year

(BREP

X)..

Continued

robust

inflows

across

fixed

income

(active

&

passive)

as

investors’

thirst

for

yieldcontinues:

We

believe

BLK

is

by

far

the

best-positioned

given

its

scaled

bond

platform

across

active,institutional

index

and

ETFs.

Higher

yields

and

evolving

demographics

(baby-boomer

retirement)

drive

ourconfidence

in

our

fixed

income

migration

thesis

and

expect

robust

flows

this

year

into

riskier

credit

categories(loans,

high

yield)

which

are

also

less

impacted

by

the

steeper

yield

curve..

M&A/industry

consolidation

wave:

We

look

for

a

record

M&A

year

in

the

US

RIA

segment

which

willbenefit

FOCS

and

also

expect

LPLA

to

generate

a

record

level

of

net

new

assets

through

its

broadeningrecruiting

effort.

We

think

IVZ,

with

motivations

from

activist

shareholder

Trian,

could

announce

anacquisition

in

2021

that

is

complementary

but

also

provides

expense

redundancies.

Additionally,

we

note

thatthe

media

has

highlighted

interest

in

Banco

do

Brasil’s

AM

in

Brazil

and

BBVA’s

AM

in

Spain.2InvestmentConclusions–

Our12-mo+Outlook.

Best-positioned

1:

Alternative

Asset

Managers

&

To

p

Outperforms

(Carlyle

Group,

Blackstone,Patria)

-

The

Alts

offer

secular

growth

and

are

beneficiaries

of

the

very

low

interest

rate

backdrop

(aidsfundraising,

especially

in

private

debt).

In

1Q21,

CG

became

our

top

long

due

to

our

expectation

that

it

willexperience

(1)

an

acceleration

in

EPS/FRE

growth,

(2)

positive

EPS

revisions,

and

(3)

valuation

expansionas

its

business

quality

improves.

We

are

also

more

bullish

on

BX

(Outperform)

due

to

our

PPP

thesis

andthe

expectation

of

a

Russell

1000

add

in

late

June

and

potentially

the

S&P

500

Index

this

year

too..

Best-positioned

2:

Focus

Financial

(FOCS,

Outperform)

-

FOCS

is

a

pure

RIA

business

which

exists

inthe

fastest

growing

segment

of

financial

services.

With

~$250B

of

AuA

in

a

TAM

of

$7Tn+,

we

look

for

verystrong

EPS

growth

from

FOCS

over

the

next

3

years.

It

trades

cheaply

at

11x

EPS

and

we

think

FOCS

isundervalued

and

fast

EPS

growth

fueled

by

accretive

M&A

is

the

key

driver

of

our

Outperform

thesis.

FOCSalso

has

experienced

an

acceleration

in

acquisition

activity

in

2H20

and

we

expect

record

RIA

M&A

activityin

2021,

partly

due

to

the

expectation

of

higher

capital

gains

tax

rates

in

the

US.

We

also

remain

bullish

onIBKR

which

has

the

strongest

organic

growth

trajectory

in

our

entire

coverage

and

its

undervalued

relative

toits

future

growth

prospects..

Cautious:

Traditional

Asset

Managers

-

We

remain

cautious

on

the

traditionals

despite

depressedvaluations

and

stronger

equity

markets

due

to

the

prospects

of

decelerating

organic

growth

as

retail

investoractivity

normalizes

and

higher

taxes

trigger

tax

planning

in

2H21

–

this

net

flow

slowdown

will

mostly

impactequities

and

not

fixed

income.3TableofContentsIndustryTopicsRatingsMatrixCompSheet56StrategicInitiativesGlobalUpdateRegulations/WashingtonDC5GreatMigrationsESGWealthManagementTechnologyCOVID-19/BearMarketRisksScaleAdvantagesFeePressure1128333545475567717376848591929495M&ASPACSProprietaryDataVentureCapitalPrivateEquityAssetSensitivityValuationsCompany-SpecificResearchIndustryOrgChart7PublicsPrivates1001374OurUSCoverageMatrix–

2021Positioning5ComparablesSheet–

USAssetManagers&BrokersEPSEstimatesEPSGrowthValuationP/Cons52-WeekHigh20212022CYCYAuMMktCap($Bn)DividendYieldTargetPriceTotalEV/2022EBITDARatingPriceReturnLowCSConsUpsideCSConsUpside2021202220212022($Bn)P/AuMRetailBrokersSCHWTheCharlesSchwabCorpOOUNNNNO136.528.922.318.912.18.11.0%0.6%0.0%1.1%0.7%0.7%4.1%0.0%72.267.240.5133.5148.868.846.447.7$86$110$4120%64%2%$73.6$80.6$52.9$138.6$159.7$72.2$47.7$56.6$31.6$38.2$27.8$63.9$66.5$29.4$25.0$26.23.133.320.829.007.115.513.963.753.203.090.919.247.435.354.033.76-2%7%3.383.361.018.518.715.694.004.173.473.111.169.359.245.494.384.17-2%8%30%30%16%47%10%21%10%28%25%8%1%22.5x21.7x44.5x14.5x20.0x12.9x11.5x12.7x17.2x20.8x21.6x34.8x14.3x16.1x12.5x10.6x11.4x15.2x14.1x13.3x42.2x10.0x16.5x8.2x7,0693311.9%8.7%16.8%1.7%1.3%2.1%2.0%1.9%2.0%IBKRXPInteractiveBrokersGroup,Inc.XPInc.-10%-3%-4%3%-13%-9%-6%4%23%-5%22%3%133RJFLPLASFRaymondJamesFinancialLPLFinancialServicesStifelFinancial$135$166$832%1,08595812%22%10%19%16%379LAZFOCSLazardltd.5.4$49-2%0%-9%0%1%6.4x265FocusFinancialPartners3.8$5711%6%12.6x13.0x200USBrokersMedian-4%355EPSEstimatesValuation52-WeekHigh20212022CYCYP/ConsAuMMktCap($Bn)DividendYieldTargetPriceTotalEV/2022EBITDARatingPriceReturnLowCSConsUpsideCSConsUpside2021202220212022($Bn)P/AuMTraditionalAssetManagersBLKBlackRockONUNNNNRO132.844.216.512.512.36.81.7%1.9%3.2%2.9%6.3%0.2%3.8%0.2%1.7%860.8192.233.526.944.5157.737.422.56.9$984$194$2716%3%$880.8$193.3$35.5$29.0$46.9$176.8$38.3$24.0$7.2$503.0$113.4$17.5$7.137.1612.263.1737.0612.493.192.813.4016.663.631.560.330%-2%-1%1%42.6212.943.2742.5713.113.402.993.7218.353.662.410.360%-1%-4%5%10%28%21%47%20%22%20%14%46%21%15%6%23.2x15.4x10.5x9.5x20.2x14.7x9.9x14.6x9.7x7.9x6.5x8.3x9.2x6.6x7.1x14.6x8.3x8,9851,5181,4991,4046971.5%2.9%1.1%0.9%1.8%0.9%1.6%1.1%1.6%1.5%TROWT.RowePriceGroupBENIVZFranklinResourcesInvesco-16%41%8%3%$372.853.1410%13%5%9.0xABAllianceBernsteinAffiliatedManagersGroupJanusHendersonGroupBrightSphere$45$23.6$62.2$18.8$8.23.483%3.925%13.1x9.5x11.9x8.6xAMGJHGBSIGWETF$148$35-6%-4%16.343.61-2%-1%17.183.62-6%-1%7386.41%10.3x14.4x20.6x13.1x10.2x9.4x4051.835%12%10%163WisdomTree1.1$819%$2.70.356%0.4010%19.1x10.2x70USTraditionalAssetManagersMedian5%0%738EPSEstimatesValuation52-WeekHigh20212022CYCYP/ConsAuMMktCap($Bn)DividendYieldTargetPriceTotalRatingPriceReturnLowCSConsUpsideCSConsUpside2021202220212022P/2021FRE($Bn)P/AuMAlternativeAssetManagersBXBlackstoneONOROON109.048.625.415.115.12.02.5%1.0%3.5%2.9%2.4%2.3%2.1%90.755.257.455.042.514.925.2$100$6613%20%11%$91.7$59.2$58.5$59.2$45.2$23.3$27.1$49.3$26.2$36.4$34.5$23.5$13.4$10.33.563.132.783.563.092.882.222.451.003.360%1%3.983.835.103.973.483.782.723.001.193.490%34%74%37%21%15%121%-20%28%12%22%83%10%28%13%-9%25.5x17.9x19.9x24.8x17.3x14.9x7.5x22.9x15.9x15.2x20.2x14.2x12.6x7.2x52.4x50.7x28.8x46.8x50.8x31.1x74.5x50.7x6493674612072601416.8%13.2%5.5%7.3%5.8%14.4%4.0%6.5%KKRAPOARESCGKKR&Co.L.P.Apollo10%35%$62-4%AresManagementCarlyleGroupPatria$51$30$2222%101%-3%2.361.143.97-4%14%18%3.011.293.630%8%4%4%PAXSCUSculptorCapital1.537USAlternativeAssetManagersMedian17%17%18.9x15.5x314Source:CreditSuisseEstimates,FactSet:pricesason05/21/2021.ARES&Brightspherearerestricted6IndustryOrgChart7CharlesSchwab:UpgradedtoOutperformduetoSizableInterestRateTailwind(April2021)

OurmacroeconomicdependentOutperformThesis–

NowisthepointinthecycletoownSCHW:WeremainbullishonSCHW’sconsistentlystrongorganicgrowth(5-10%range)givenitstwoseculargrowthbusinessesintheretail(onlinebroker)andinstitutional(RIA)channels.However,theUSisatthepointinthecycle(lowrates=>normal/higherrates)wheretheSCHWstockhistoricallygeneratedoutsizedoutperformanceandcouldexperienceanunusuallystrongtailwindfromhigherratesoverthenext3-4years.WearelookingforitsEPSgrowthtrajectorytoreplicateapatternsimilartothelastcycle(2016-2018),whichwaswhenSCHW’s

EPSgrewby140%overthreeyears.WebelievethereareveryfewUSmega/largecapsthatofferthisrobustlevelofgrowthpotential.SCHWistheMostAssetSensitiveBroker

SCHWisthemostinterestratesensitivenameinourcoverageandoneofthemostintheS&P500:Justaslowerinterestratesfrom2018-2020wereasignificantnegativeforSCHWandtheinterestratesensitivebrokers,higherinterestratesareaclearpositive,whichshoulddrivetheonlinebrokertogenerateunusuallystrong(25%+)EPSgrowthineachof2023and2024.WethinkSCHW’sNIMisgoingtotroughthisyearandthenimprovesignificantlythrough2025.Specifically,SCHWgenerates55-60%ofitsrevenuesfrombank-likenetinterestrevenues(plusfeewaiverreversal),whichrepresentitsspread-basedfeesgeneratedfromitsbalancesheet,withliabilitiesfundedmainlybyitslowcostclientcashsweepdeposits.Additionally,thisrevenuestreamexhibitsveryhighoperatingleveragewhichwillmagnifytranslationintoEPS.WealsonotethatSCHW’smoneymarketfeewaiversarecostingthefirm$300Mofrevenuesannually,butthesewilldisappearafterFedraisesratesabove50bps.Expect1FedRateHikein2023withHighProbabilityof2+Hikesin2024Source:Bloomberg,Companydata,CreditSuisseestimates8Blackstone:OurPPP(PerpetualProductPivot)InvestmentThesis=HighVisibilityintoFiveYearFRETrajectory

BX’s

PPPisnotfullyfactoredintomarketestimates+providesa“bridge”

toBX’s

nextfundraisingsuper-cycle(2022-23):Blackstoneraised$32Bin1Q21andcontinuesfundraisingatanimpressivepacedespitenoflagshipsinthemarket.AtBX,wehavemonitoredasteadyincreaseinitsFREcontributionfromperpetualproductsanditsPPPisfueledbyitsexpansionintheretailchannel(UHNW,HNW).

BX’s

PPPisdrivingatransformationofitsearningsquality:Perpetualproducts’

attractivecharacteristicsincludinghighFREfeeswhichalsocompoundwithappreciation,superiorincrementaloperatingmargins,nonetredemptionriskandrobustclientdemandgivenBX’s

strongbrand/trackrecord.Specifically,with$150BofAuMacrossits15perpetualstrategiesandasteepgrowthtrajectory(+50%y/y),welookforBX’s

PPPtohelpbridgethefirmwithstrongfundraising/FREgrowththrough2022-23,whichiswhenBXwillenteritsnextflagshipfundraisingsuper-cycle(BCPVIII,BREPX…).PerpetualProducts:FeeCalculationsPerpetualProducts:Flows&PerformanceAuM($B)ManagementFeePerformanceFeeCalc10%,crystalizeson3rdyearanniversaryofinvestorsubscription12.5%ofthereturn(NAVappreciation)10%,crystalizeson3rdyearanniversaryofinvestorsubscription($B)AuMInflowsPerformanceNetIRR9.0%1Q2054.916.613.70.01Q21

3Q20

4Q20

1Q21

2Q21ECore+BREIT$77.0$25.21.00%1.25%Core+77.025.213.73.02.311.67.97.53.51.03.0BREIT1.00.0--2.00.0--3.50.03.09.0%13.0%n/aInfrastructureBCREDInfrastructureBCRED$13.7$3.01.00%1.25%12.5%ofyield(NII)TotalPP101.1149.17.924.721.025.0n/aPerpetualProducts:Flows&PerformanceFundraisingEstimates($B)AuM($B)2023IncrementalForecasts($M)PerfFee

IncrementalMargin20202282021E30142022E261242023E281342020772514--2021E107392022E133522023E161652638Mgmt.Fee841FRE2,179703Core+2,27251270%70%70%70%70%70%BREIT49212143380InfrastructureBCRED1----234182240436851912--125136511224309FutureLaunch/Incubation--91--51123680112Total46481371841,4753,0653,1789Source:Companydata,CreditSuisseestimates,BREITisincludedinCore+TheCarlyleGroup:Upgradingto#1OutperformduetoAcceleratingGrowthTrajectory(February2021)

CGremainsourhighestconviction12-month+Outperformgiven:(1)significantFRE/DEaccelerationoverthenext2yearsdrivenbyitsCG’sAccruedCarryvs.PerformanceFees:Weestimatefundraisingsuper-cyclebeginningin2H21($130B+2021-24);(2)recordaccruedcarrybalanceandstronginvestmentperformancewillprovidealifttoPRE;(3)attractivevaluationgiventhatitisoneofthecheapestlargecapUSAltstocks(14xvs.17-23xforpeers)andanticipatevaluationexpansionasbusinessquality/earningscompositionimproves.sizablerealizedp-feerampinto2022-234,0003,5003,0002,5002,0001,5001,00050014121082012-17realizationcyclerange6

Updateonfundraising(2021-24super-cycle):Managementguidedto$130B+offundraisingin2021-24,brokendownby$65BfromPE,$45BfromGlobalCreditand$20BfromInvestmentSolutions.The$130Btargetisabaseline,asCGhashistoricallybeattheirtargets(raised$110Bcomparedtotheiroriginaltargetof$100Bin2016-19).Additionally,CG’s

flagshipfunds(USRE,EuroPE,Asia&JapanPEandUSPE)shouldraise$50B+whichis20%higherthanthepriorvintages.WeestimatethatCGcouldgenerateinflowsof$140-150B,whichis30-40%higherthanitspreviouscycle.42002Q122Q132Q142Q152Q162Q172Q182Q192Q20AccruedCarry/RealizedPerfFees(RHS)RealizedPerfFees(4QFwd-rolling,$M,LHS)AccruedCarry($M,LHS)Source:Companydata,CreditSuisseestimates10StrategicResearchInitiatives-UpdateThrough

our

research,

we

occasionally

discover

unique

opportunities

for

the

industry

to

progress

which

presentspecial

situations

for

the

companies

in

our

verticals

and

attractive

opportunities

to

create

shareholder

value.I.

Vehicle

Evolution

–

Semi-transparent

ETFs,

Variable

Fee

Shares,

SMAs…

mutual

funds

are

dying.II.

Alts’

C-Corp

Conversions

of

2018-20

-

Capital

return

policies

can

still

improve

and

potential

for

S&P500

addsIII.

Direct

Indexing

–

SCHW,

BLK,

MS

and

GS

have

recently

cornered

the

market

via

M&A

and

we

thinkother

large

wealth

managers

(Fidelity,

Vanguard,

JPM)

could

still

enterIV.

Blockchain

–

Provides

potential

efficiency

gains

for

the

industry

(including

via

tokenized

financial

assets)V.

Alt-Life

Insurance

Opportunity

–

Alts

are

better

at

asset/risk

management

and

trade

at

significantpremiums

to

life

insurance

companies

(KKR

and

Brookfield

entered

this

segment

in

2020)11VehicleEvolution.

Semi-transparent

ETFs

(STETFs):

The

first

batch

of

STETFs

were

launched

in

2020

with

AmericanCentury’s

two

STETFs

began

trading

in

April

of

last

year

(licensing

Precidian’s

model),

then

Clearbridge(Precidian)

in

May,

Fidelity

in

June,

TROW

in

August

and

we

expect

additional

launches

from

BLK

and

JPM.However,

we

believe

STETFs

will

need

to

establish

a

2Y+

track

record

before

we

will

see

sizable

AuMaccumulation.

In

conclusion,

these

ETF

structures

have

the

potential

to

provide

retail

the

most

attractivevehicle

option

and

also

could

move

more

fund

manager

AuM

onto

exchanges

by

cutting

economics

from

thebrokers

(shelf

fees).

We

prefer

STETFs

to

mutual

funds

because

of

their

low/transparent

fee

structure,liquidity/trading

advantages

and

also

they

may

have

some

tax

efficiencies

(like

passive

ETFs).

STETFs

willalso

help

active

participants

in

the

generational

tailwind

that

includes

the

millennials/gen-x

and

migration

toRIAs

and

robos/models.

Precidian

(BEN)

and

Blue

Tractor

offer

two

third

party

models,

while

Fidelity

andTROW

use

their

own

models.

We

have

favored

Precidian

due

to

its

simplicity..

Variable

Management

Fees:

Aperture

is

a

private

asset

management

firm

established

by

former

AB

CEOPeter

Kraus

which

leverages

a

new

vehicle

structure

that

he

helped

pioneer

at

AB.

Peter’s

business

isfocused

on

the

performance-linked

model

that

solves

for

three

issues

with

the

current

active

mutual

fundvehicle:

(1)

size

–

manage

capacity

tighter,

(2)

compensation

–

pay

portfolio

managers

on

alpha

generation,(3)

cost

alignment

–

offer

variable

management

fees

that

only

charge

a

low

ETF-like

fee

if

manager

doesn’toutperform.

The

performance-linked

model

has

already

been

approved

by

the

SEC

and

adopted

by

severalother

larger

managers

(AB,

PIMCO,

Fidelity

International).12Alts’C-CorpConversionsof2018-20:“ElDoradoorFool’sGold”In

early

2017,

we

published

a

research

report

titled

“El

Dorado

or

Fool’s

Gold”

which

advised

the

Alts

to

(1)

convert

their

partnershipstructures

into

“Up-C”

Corps,

(2)

simplify

their

accounting

(drop

economic

net

income)

and

(3)

migrate

to

a

fixed/growing

dividend.KKR

was

more

open

to

our

idea

and

they

converted

in

2018

and

generated

significant

outperformance

for

their

shareholders.

Then

in2019

BX

and

APO

followed

and

CG

eventually

converted

in

January

2020.13Alts’C-CorpConversionsof2018-20:KeyissuesforPubliclyTradedPartnershipsKey

issues

for

the

Alts

under

the

previous

partnership

structure–

Limited

Investor

base

for

PTPs

(Publicly

Traded

Partnerships):

According

to

our

proprietary

buysidesurvey,

~50%

of

our

clients

can

own

the

Alts

under

the

former

PTP

structure

(but

not

across

all

fundvehicles

and

client

segments).–

Passive

Ownership:

We

estimate

that

passive

ownership

for

the

Alts

was

~0%

(pre

conversion),

whilefor

the

C-Corp

traditional

asset

managers

it

is

double

digits.–

Hedge

Funds

used

to

make

up

the

majority

of

the

Alts’

pre

C-Corp

investor

base:

Many

hedgefunds

hold

the

stocks

for

shorter

time

periods

and

owned

the

shares

via

swap.

Also,

many

are

catalystdriven

and

sell

the

news

or

buy/sell

for

macro

reasons

and

not

company-specific

factors.

This

createdsignificant

volatility

in

shares

which

also

negatively

impacted

the

shareholder

bases.–

Alignment

with

long-term

investors:

We

believe

the

long-only

investor

base

is

better

suited

for

theAlts,

given

(1)

the

long-term

growth/defensive

profile

of

the

Alts

business

model

(including

locked-upcapital)

and

(2)

these

investors

can

hold

the

stocks

through

a

bad

performance

quarter

or

two.14Alts’C-CorpConversionsof2018-20:What’snext?.

C-CorpSuccesstoDate:ThestockreactionstotheconversionswerestrongerthanweinitiallyestimatedandthesecatalystsarebehindusnowasAPO,BX,CGandKKRhavebeenaddedtoallIndexAdditionDetailExpectedPassiveTrackingforAPOIndexAnnouncementDateExpectedDateSeptember18th-24th,2019Est.%ofFloatEst.#ofShareanguard-CRSPS&PTotalMarket(TMI)DJTSM7%1%1%2%3%1%13%13%December20th,2019December20th,2019May29th,2020June26th,2020June26th,2020MSCIGlobalStandardDMMay12th,2020June5th,2020June5th,2020oftheexpectedindices(seechartonright).Russell1000Additionally,asexpected,theAltsnowtradewithhigherFREmultiples(25-30x).Russell1000Growth/3000S&P500FuturePassiveBuyingTBD-eligibleasofJan.2022ExpectedPassiveTrackingforBXIndexExpectedDateEst.%ofFloatEst.#ofShares247Vanguard-CRSPS&PTotalMarket(TMI)DJTSMSeptember18th-24th,2019September20th,2019September20th,2019November26th,2019June25th,20214%1%1%2%3%7.

ExpectationsforFuture:C-CorpcatalystshaveMSCIGlobalStandardDM141790108Russell1000S&P500FuturePassiveBuyingTBD-eligibleasofFeb.202113%reemergedwithadditionalmodificationsatBXandAPO.BXwillbeaddedtotheRussell1000/3000indicesinlateJune2021andweestimatethereisa~50%probabilitythatBXcouldbeaddedtothe3%ExpectedPassiveTrackingforCGIndexExpectedDateMay29th,2020June17th-23rd,2020June19th,2020June19th,2020June26th,2020June26th,2020Est.%ofFloatEst.#ofShares2811411414MSCIGlobalStandardDMVanguard-CRSPS&PTotalMarket(TMI)DJTSMMay12th,20202%7%1%1%3%1%13%13%June8th,2020June12th,2020June12th,2020June5th,2020June5th,2020Russell1000S&P500Indexin2021/22andagreaterthanRussell1000GrowthIndexS&P500FuturePassiveBuying50%probabilitythatAPOcouldbeaddedin2022/23.IfBXisadded,thenKKRcouldbenextgiventhatthebothoperateunderasimilarExpectedPassiveTrackingforKKR(Convertedin2018)IndexDJTSMMSCIGlobalStandardDMVanguard-CRSPS&PTotalMarket(TMI)ExpectedDate201820182018Est.%ofFloatEst.#ofShares61%2%7%1%3%1%13%13%114061652018corporate/shareclassstructure.WhileCGistheRussell1000June5th,2020June5th,2020June26th,2020June26th,2020TBD-eligiblenowRussell1000Growth/3000S&P500FuturePassiveBuying7272onlyAltthatcurrentlymeetsallofS&P’s

criteriaandhasequalvotingrights,weestimatealowerprobabilityofaCGaddgivenitssmallerfloat-adjustedmarketcap.Sources:Companydata,CreditSuisseestimates,CRSP-IndexrebalanceoccursoverthecourseofWednesdaytoTuesday;S&PIndexRebalancedate;MSCIEffectiveDateadd15Alts’C-CorpConversionsof2018-20:“ElDoradoorFool’sGoldPartIII”:C-CorpCatalystsReemerge.

BX:

Estimate

there

is

a

50%

probability

that

Blackstone

is

added

to

the

S&P

500

in

2021/22

and

if

added

wouldgenerate

~28

days

of

buying

activity

(~90M

shares).

In

its

2020

10-K

which

was

released

in

late

February,

BX

quietlynotified

the

markets

that

it

migrated

to

one

common

equity

share

class

and

essentially

replicated

KKR’s

model.

While

bothBX

and

KKR

do

not

have

equal

voting

rights

between

the

common

equity

shares

and

preferred

shares

(which

the

seniorpartners

own),

we

estimate

both

BX

and

KKR

meet

all

of

the

published

criteria

provided

by

S&P.

Additionally,

as

BX’smarket

cap

crosses

$100B

it

represents

a

huge

blue-chip

financial

services

firm

in

an

industry

that

is

significantlyunderrepresented

in

its

index

(zero

Alts

are

in

the

S&P

500).

However,

the

S&P

500

additions

are

uncertain

and

based

on

apartially

subjective

process..

APO:

We

expect

Apollo

to

be

added

to

the

S&P

500

in

2022/23.

APO

will

go

one

step

further

than

BX

and

KKR

inJanuary

2022

and

convert

to

a

full

C-Corp,

with

one

common

equity

share

class

where

each

share

will

equate

to

one

vote(and

this

includes

the

senior

partners’

shares

unlike

BX

and

KKR).

Additionally,

the

merger

with

ATH

will

improve

its

marketcap

by

$10B,

which

implies

the

APO-ATH

combo

will

have

a

market

cap

of

~$30B

which

significantly

helps

its

probability

ofbeing

added

next

year.

APO

could

be

added

in

March

2022

at

the

earliest

given

that

it

will

meet

all

criteria

and

poses

nosubjectivity

risk,

and

we

estimate

buying

would

take

about

14

days..

KKR:

We

estimate

the

probability

of

a

KKR

add

is

lower

than

both

BX

and

APO.

Given

the

bigger

size

of

BX

(3x

bigger

thanKKR)

and

the

fact

that

APO

will

not

have

any

issues

with

unequal

voting

rights,

we

rank

KKR

behind

both

firms

in

gettingadded

to

the

S&P

500.

However,

if

BX

gets

added

in

2021,

we

then

think