uploads///Dry powder

How Blackstone Can Benefit from Increasing Dry Powder

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Oct. 21 2015, Updated 9:06 a.m. ET

Undrawn capital

Blackstone (BX) has continually attracted a large amount of capital backed by the strong operating performance of its various funds. However, the company reported its first loss in 3Q15 since 2011. It has continued to attract new capital across its product offerings. The company’s total dry powder, or undrawn capital, increased by 101%, to a record $84.9 billion as compared to the corresponding quarter last year. The increase in undrawn capital was driven by fundraising for the latest global private equity and real estate funds. Blackstone made significant realizations in the real estate and private equity segments.

Performance-fee-eligible assets under management increased by 25% to $247.1 billion in 3Q15 as compared to 3Q14. The company’s performance fee eligible funds not yet invested jumped by 116% on a year-over-year basis to $85 billion.

Blackstone deployed capital of $6.5 billion in the third quarter. Its total deployment in the current year stood at $16.6 billion.

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Expanding balance sheet

Blackstone had $4.2 billion in total cash, corporate treasury, and liquid investments. The company’s total net value expanded by 13% to $9.8 billion, or $8.28 per common unit, from $6.51 a year ago. The company can take advantage of a distressed market environment and deploy dry powder at lower valuations.

Blackstone generated a 28% return on equity in the last fiscal year, the highest among its alternative investment peers that form part of the iShares Dow Jones US Financial ETF (IYF). In comparison, Blackstone’s peers posted the following returns on equity:

  • The Carlyle Group (CG) generated a 13.9% return on equity
  • KKR & Co. (KKR) generated a 12.5% return on equity
  • Apollo Global Management (APO) generated a 3.1% return on equity

The company maintained its rating of A+/A+, as its net debt was nil and its overall capital structure remained strong.

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