Blackstone Group’s Assets Jump 22% to Record $450 Billion

• April 19 2018
• Heather Perlberg

Blackstone Group LP just keeps raking in money from investors.

Blackstone Group LP just keeps raking in money from investors.

Total assets under management in the first quarter jumped to a record $449.6 billion through a combination of fundraising and financial gains, Blackstone said in a statement Thursday. That surpasses the $434.1 billion in assets at the end of last year. Inflows were $18.2 billion in the quarter.

Private equity firms are coming off a record year for fundraising. The industry brought in $453 billion globally in 2017, more than the previous high of $414 billion a year earlier, which was the most since the financial crisis, according to Preqin. They’re expected to keep benefiting as investors search for better returns and flee more expensive alternatives such as hedge funds.

But it’s yet to be seen whether these behemoths can continue to produce the gains that have attracted investors or if they’ll be able to put much larger amounts of money to work.

“Amid declining global markets and a sharp increase in volatility, Blackstone continued to protect and grow our investors’ capital in the first quarter,” said Stephen Schwarzman, Blackstone’s chief executive officer. “Investors in the institutional, retail and insurer channels are allocating more capital to our firm.”

“The focus for the next couple years will shift toward prudent deployment of capital into a U.S. market with arguably fewer value-driven opportunities,” said Gerald O’Hara, an analyst at Jefferies Group LLC. “Funds that are more global in nature, like Blackstone and Apollo, will have an advantage.”

The firm’s first quarter economic net income was 65 cents a share, exceeding analysts’ estimates. The company said it will make a distribution of 30 cents per unit to be paid out over the next three quarters.

Blackstone, the world’s largest private equity firm, has said it plans to double assets under management over the next five years. Part of its expansion depends on a push into the market for retail investors. The firm is targeting people with $1 million to $5 million. But offering private equity to individuals hasn’t been easy because the investments are hard to liquidate quickly and come with higher fees than traditional mutual funds.

“If you look out two to three years, these firms are going to continue to innovate and Blackstone will be at the forefront of that,” said Devin Ryan, an analyst at JMP Securities LLC. Investors “want to give them more money not less, so as long as they can come up with products that have good risk-adjusted returns, there’s no reason to doubt their ability to grow.”

Schwarzman’s Blackstone has made several leadership changes in the past year. The firm recently promoted real estate head Jon Gray to president and chief operating officer, making him an heir apparent. Ken Caplan and Kathleen McCarthy replaced him. In January, John McCormick was named to take over the hedge fund business as Tom Hill stepped into a chairman role. And in June, the former head of the firm’s energy debt practice, Dwight Scott, became president of the credit unit, GSO Capital Partners.

Blackstone’s credit arm grew significantly last year with the addition of a new insurance platform and an energy investment management firm. The credit group oversaw $138 billion in client assets at year end, close to a third of the total managed by New York-based Blackstone.

Earlier this year, a group led by Blackstone agreed to buy a majority stake in Thomson Reuters Corp.’s financial and risk unit in a deal that values the business at $20 billion, sealing plans for the firm’s biggest buyout in a decade.

— With assistance by Melissa Mittelman