Apollo Global Management Inc., Blackstone Inc. and their rivals handed back $45 billion to investors last quarter as they reported record earnings in a hot market for deals.

Photo Credit: Bloomberg News

Rising markets fueled the industry’s frenzied pace. Exits by private equity in the U.S. reached a record $638 billion this year through September, according to data from Pitchbook. And firms including Carlyle Group Inc. and KKR & Co. are rapidly spending current funds as they prepare to return to the market with bigger buyout pools.

“It is a perfect storm right now,” said Patrick Davitt, an analyst at Autonomous Research. “The IPO markets are open, the debt markets are open. Pretty much every avenue for exiting positions is.”

Apollo capitalized on that last quarter. The company reported third-quarter assets sales of $8.8 billion. Carlyle last week reported a record $14 billion in monetizations.

KKR also posted record earnings. Chief Financial Officer Rob Lewin said the fourth-quarter is shaping up to be a record for exit activity based on deals already closed or that are expected to in the period.

In October, Blackstone President Jon Gray said that it was a good time to be selling assets although it wasn’t necessarily “the top of this market.” A slowdown of asset purchases by the Federal Reserve would put pressure on prices, Gray said.

The realizations should help as firms approach investors for new money. Apollo plans to start raising money for its next flagship buyout pool in the first quarter. Carlyle is reportedly seeking as much as $27 billion for its next fund and Blackstone may seek as much as $30 billion for its next main buyout pool, which would make it the industry’s largest.

But some investors eager to get into private equity have become over-allocated to the asset class. That could constrain the industry’s fundraising efforts.

Nevertheless, firms are coming to market faster than ever before as they spend record amounts of cash in ever larger deals. The amount of spending has surpassed what it was at the height of the buyout boom in 2006 and 2007. Club deals, a remnant of the buyout boom, have also cropped up. Blackstone, Carlyle and Hellman & Friedman are buying Medline Industries Inc. in a deal valued at over $30 billion.

KKR deployed a record amount for new investments — $24.4 billion, the company said in a statement. “Our overall business has seen a fundamental shift, an inflection point in its operating level,” Lewin said on KKR’s earnings call Tuesday.

All this activity has spurred huge gains in shares of alternative asset managers. Blackstone has more than doubled this year through Monday and KKR is close behind with a 92% gain. Carlyle rose 76% and Apollo gained 56% in that period.

“During the financial crisis, a lot of companies pulled back when they should have been stepping on the gas,” said Pete Witte, global private equity lead analyst at EY. “And when the pandemic occurred, they decided they weren’t going to make that mistake again.”