Blackstone’s cash pile will buy only so much time

Pressed for time. Blackstone is grappling with a peculiar sort of funding mismatch. investment shop managing more than $1 trillion says market ructions present acquisition and lending opportunities, but it is also selling less. Moreover, growing likelihood that interest rates stay higher for longer threatens deal activity. If dynamic persists, it will sharpen divide between fund backers focused on profit and public shareholders benefiting from capital deployment.

firm led by Steve Schwarzman has accumulated an impressive war-chest. Even as U.S. Federal Reserve me borrowing costs pricier, Blackstone kept raising cash to invest, surpassing $200 billion. It more than doubled amount invested in first quarter from a year earlier. upped pace shows in deals like plan to buy Tricon Residential, an owner of apartment buildings and single-family homes.

It’s good news for Blackstone shareholders. Fees clients paid to manage ir investments snapped a six-month losing streak. Money earned from performance of so-called “perpetual” vehicles, or funds without an expiration date largely marketed to wealthy individuals, was 60% higher than amount forecast by analysts, according to Jefferies. profit helped push up what was available to be distributed to shareholders.

At same time, however, an uptick in asset sales last quarter, when Schwarzman said industry h exited its darkest days, resumed ir downward march. sum tumbled 16% from a year earlier, marking six declines in seven quarters.

This struggle speaks to an industry-wide problem. Private equity is demanding more capital from investors than it’s paying out, a multi-year trend only briefly reversed by a 2021 boom. same is true in private credit, according to Barclays, where Blackstone is also a giant.

Schwarzman and his lieutenants are painting this as a boon. It’s time to acquire, when Blackstone is flush with cash and prices are depressed, but recovery can be seen on horizon. surprising stickiness of inflation, however, may keep interest rates elevated and delay return of economic strength. firm has proven its investment nous through previous gyrations. But because of how big Blackstone has become, degree of difficulty is higher, as are stakes.

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Blackstone said on April 18 that it h generated nearly $1.3 billion in earnings in first quarter of 2024, using alternative-asset management industry’s preferred measure which excludes unrealized gains from investments. firm’s net profit from asset sales during period fell 25% from a year earlier, to $293 million, resuming a string of declines that was briefly broken in previous quarter. Capital deployed into new investments increased 126% year-over-year, to $24.5 billion. During first three months of year, Blackstone raised more than $8 billion from wealthy individuals, with more than 80% of sum dedicated to funds without an expiration date.