Some private-equity firms are taking a page from sovereign-wealth funds and putting money into struggling financial companies. Texas Pacific Group bet on Washington Mutual (WM) and KKR on Legg Mason (LM). Neither has fared well.

Some private-equity firms are taking a page from sovereign-wealth funds and putting money into struggling financial companies. Texas Pacific Group bet on Washington Mutual (WM) and KKR on Legg Mason (LM). Neither has fared well.

Freescale's financial performance has been disappointing. Nonetheless, Blackstone seems to be valuing it at a big premium to Texas Instruments, a better-performing semiconductor outfit.

Apollo and two of its managing partners are being sued for more than $3 billion by Huntsman, a chemical maker. At issue: Apollo's role this summer in trying to end a $10 billion LBO of Huntsman by Hexion Specialty Chemicals, an Apollo-controlled concern. Jon Huntsman, Huntsman's chairman, has blasted the Apollo partners, Leon Black and Joshua Harris, whom he says should be "disgraced" for personally enticing Huntsman to enter the deal and then seeking to back out. Apollo calls the suit meritless. Huntsman stock is trading in the low teens, half the buyout price.

The markets already have recognized the diminished prospects for private equity as shares of industry leader Blackstone now languish at 17, down sharply from its IPO price last June of 31. Fortress Investment Group (FIG), another private-equity specialist, has seen its stock plunge to 10 from 37 shortly after its 2007 IPO at 18.

Even at their current prices, private-equity shares aren't bargains. Traditional asset managers such as AllianceBernstein (AB), Franklin Resources (BEN), BlackRock (BLK) and T. Rowe Price (TROW) look like better bets on a recovery in the markets. They're cheaper (based on assets under management) and more diversified, and they don't depend on incentive fees for a sizable chunk of their profits

Even at their current prices, private-equity shares aren't bargains. Traditional asset managers such as AllianceBernstein (AB), Franklin Resources (BEN), BlackRock (BLK) and T. Rowe Price (TROW) look like better bets on a recovery in the markets. They're cheaper (based on assets under management) and more diversified, and they don't depend on incentive fees for a sizable chunk of their profits

Even at their current prices, private-equity shares aren't bargains. Traditional asset managers such as AllianceBernstein (AB), Franklin Resources (BEN), BlackRock (BLK) and T. Rowe Price (TROW) look like better bets on a recovery in the markets. They're cheaper (based on assets under management) and more diversified, and they don't depend on incentive fees for a sizable chunk of their profits