Why Blackstone’s Credit Segment Could See Subdued Growth
Fed rate hike
After raising interest rates in 1H17, further rate hikes from the Fed are also expected in 2H17. More rate hikes could negatively impact Blackstone’s (BX) credit business. The rate hike could pull down bond prices in the coming quarters of 2017.
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According to Blackstone’s top management, the company’s credit segment could be impacted by macro themes. Management believes attractive risk-adjusted returns are offered from senior secured loans in Europe and the United States.
In 1Q17, gross returns for performing credit stood at 3.5%. For distressed strategies, gross returns stood at 2.8%. Total capital committed or deployed stood at $3.6 billion, benefitting from investment opportunities in the energy sector and Europe.
Asset under management growth in the credit division
As of March 31, 2017, Blackstone’s (BX) credit division has assets under management of $93.1 billion, a rise of 18% on a year-over-year basis. During the same period, the company’s fee-earning assets under management stood at $71.3 billion, a rise of 15% on a year-over-year basis. This rise in the company’s fee-earning assets under management seems to have come on the back of strong investment performance and rising investment activity. Alternative asset managers (XLF) had the following assets under management in their credit divisions as of March 31, 2017.