Hedge fund solutions
Blackstone’s three segments other than private equity and real estate have seen good inflows and helped the company diversify its product offerings as well as investor base. Hedge fund solutions revenues fell by 5% to $185 million compared to the first quarter of the previous year—mainly due to difficult global conditions for the players. As the compensation increased due to additional bankers, the overall economic net income fell by 22% to $88 million compared to the previous year. The total AUM (assets under management) increased to $66.4 billion on growth of customized strategies and continued diversification of the platform.
Blackstone manages $75 billion across its credit offerings. The offerings serve as a hedge in times of downturns or recession as investors deploy their funds in debt markets. The revenues in the division were down by 22% to $166 million compared to the first quarter of the previous year.
The main reason for the decline was credit-focused fund performance affected by weaker market conditions for lower-rated credits. Blackstone has deployed 75% of the new fund in the European debt markets, reflecting strong diversification.
Blackstone provides advisory services to its portfolio companies, investors, and third-party clients for fund raising, mergers and acquisitions, and joint venture activities. The division generated around $87 million in total revenues and economic loss of $2.5 million.
Blackstone’s partner advisory fees increased by 40% due to improving global mergers and acquisitions activity as well as a greater number of closed transactions. But the same was offset by a decrease in restructuring fees.
Blackstone (BX) uses its advisory division to provide all solutions under one roof. It faces competition in these divisions from its peers in the alternative management space. Its peers include the Carlyle Group (CG), KKR & Co. L.P. (KKR), Apollo Global Management (APO), and T. Rowe Price (TROW). Its peers also include other major players that form part of the Financial Select Sector SPDR Fund (XLF) and the iShares U.S. Financials ETF (IYF).