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The Truth behind Blackstone's Record 1Q17 Numbers

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Part 5
The Truth behind Blackstone's Record 1Q17 Numbers PART 5 OF 8

Gauging Blackstone’s Credit Performance after 1Q17

Credit performance

The US Federal Reserve raised the interest rate for the second time since 2008 in 1Q17, and this move has affected investments toward existing Treasury and corporate bonds carrying lower coupons. As expected, the prices of various bonds have come under pressure.

The Fed is expected to raise rates two more times in 2017, which should further impact the bond market. Sequentially, Blackstone Group (BX) has seen subdued growth and is expected to see a continued trend.

Gauging Blackstone&#8217;s Credit Performance after 1Q17

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In 1Q17, Blackstone’s Credit division grew to $228.7 million, however, as compared to $109.7 million in 1Q16. The division’s economic income rose to $129.0 million, as compared to $82.2 million in the previous year. Credit markets have seen high growth over the past year, mainly due to a revival in corporate performances and the rebound in energy prices (USO).

Blackstone’s total assets under management had risen to $368.2 billion as of March 31, 2017. The managed assets of its peers are as follows:

  • Apollo Global Management (APO): $163 billion
  • BlackRock (BLK): $5.4 trillion
  • Carlyle Group (CG): $155 billion

Together, these companies account for 1.6% of the Financial Select Sector SPDR ETF (XLF).

YoY performance

Blackstone’s managed assets rose 18% to $93.1 billion in 1Q17, and these were deployed mainly in Europe and in the energy sector. The company now manages $71.3 billion in fee-earning assets, led by nine new CLOs (collateralized loan obligations), significant investment activity, and record investment performance.

In 1Q17, Blackstone managed composite gross returns of 3.5% in performing credit and 2.8% in distressed strategies, which are lower than the returns generated in its Private Equity division and other divisions. The company invested $3.6 billion in 1Q17 and realized $3.3 billion.

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