Blackstone Inc. has become the first private equity firm to manage $1 trillion, an accomplishment tempered by a dealmaking slump that weighed on second-quarter results.
(Bloomberg) — Blackstone Inc. has become the first private equity firm to manage $1 trillion, an accomplishment tempered by a dealmaking slump that weighed on second-quarter results.
Distributable earnings, which measures profit available to shareholders, tumbled 39% to $1.2 billion, or 93 cents a share, New York-based Blackstone said Thursday in a statement. That was 1 cent better than the average estimate of analysts surveyed by Bloomberg. The firm now oversees $1.001 trillion, up from $940.8 billion a year earlier.
Blackstone slowed the pace of doing new deals and cashing out of existing bets as more buyers and sellers struggled to agree on valuations for private assets. The results underscore that, for all its heft, the world’s largest alternative-asset manager isn’t immune to an industrywide dealmaking rut.
Read more: Blackstone’s $1 Trillion Mark Ushers In New Era of Buyout Titans
Today, private equity firms that grew rapidly during a dealmaking boom and easy-money policies face more scrutiny from investors and regulators on how they will weather higher rates. That includes Blackstone, now the world’s largest owner of commercial real estate, a major hedge fund allocator and a giant lender in its own right.
“There is more focus on us these days given our scale,” Blackstone President Jon Gray, 53, said in an interview. “Scale allows us to do large transactions.” It also gives the firm more visibility into the economy, he added.
Inflation Ebbing
Wage and cost data from Blackstone’s portfolio companies, for example, suggest that inflation is “coming down probably more broadly than what other people are seeing,” Gray said.
The market, too, is coming to recognize that inflation is under control as the Federal Reserve works to cool the economy, he said.
Despite the slump in distributable earnings, a different measure of profitability improved in the second quarter. Fee-related earnings — the recurring profits that come from managing assets — climbed 12% from a year earlier, according to the statement. The increase was fueled by fees from new funds, and a rally in equity markets helped boost asset values.
Still, Blackstone is finding it harder to raise fresh cash from investors for new deals. Net flows for the second quarter totaled $17 billion, a 77% plunge from a year earlier.
Credit was the biggest contributor to inflows, a reminder of how the firm is rising to become a bigger nonbank lender as it extends beyond its buyout roots. Credit products accounted for roughly half of gross inflows.
Shares of Blackstone have surged 46% this year, outperforming the 19% advance for the S&P 500 as well as rivals KKR & Co., Carlyle Group Inc. and Apollo Global Management Inc.
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