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Blackstone Is Trading at a Premium among Alternatives



Blackstone is highest in alternative asset management class

In the alternative asset management industry, the preferred indicators are the price-to-economic-net-income multiple and the price-to-distributable-earnings measure. Distributable earnings include the net realized fees and total management fees. Economic net income combines distributable earnings as well as unrealized fees.

On a price-to-economic-net-income-multiple basis, the Blackstone Group L.P. (BX) is valued at 10x. On a price-to-distributable-earnings basis, the company is trading at a premium at 14x, the highest in the alternative asset manager class. Its investments in the energy sector at current valuations and the building up of its portfolio in undervalued emerging and European markets will decide its growth in 2015 and forward.

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Focus on performance and innovative offerings

Blackstone’s focus on performance of its portfolio companies and constant innovative offerings to its network of limited partners will continue to be important factors in the future performance of the company.

Alternative asset managers on the whole are trading at a discount compared to traditional asset managers such as BlackRock (BLK), Bank of New York Mellon Asset Management (BK), and Franklin Resources (BEN). Together, they make up 2.73% of the Financial Select Sector SPDR Fund (XLF).

Diversification through offerings such as a hedge fund, credit, and advisory will decrease the general risk perception of investors for Blackstone. The debt markets are expected to generate returns in the range of 4%–5% in the future. The attractiveness of the equity is expected to increase and thus the overall perception for alternative asset managers, especially bigger players such as the Blackstone Group (BX), the Carlyle Group (CG), and other major players that form part of the iShares US Financials ETF (IYF).


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