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Blackstone Posts Loss in Private Equity Portfolio

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Core business falls

In its 3Q15 earnings release on October 15, Blackstone (BX) reported an economic loss of $512.5 million in its private equity division, with total revenues being -$524.5 million, as compared to $387.9 million in the corresponding quarter last year. The fall in profitability was mainly due to a rout in domestic equity (SPY), as well as global equity markets on concerns related to slowness in China (EEM). The company’s holding in Hilton Worldwide (HLT) lost more than $2 billion in value. The division’s assets under management expanded by 31% to $91 billion when compared with the corresponding quarter last year. Its fee earnings from assets under management expanded by 15% to $50 billion during the same period.

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Blackstone’s private equity portfolio depreciated by 2.3%, mainly due to a fall in public investment values. The portfolio rose 7.7% year-to-date and 8.5% LTM (last 12 months), outpacing broader market indices. The division’s performance and investment income fell to -$594 million and -$63 million, respectively.

Realizations and investments

Blackstone achieved total realizations of $2.7 billion during 3Q15 on public and strategic exits in corporate private equity funds. Its major transactions included:

  • completion of the private sale of Center Parcs, CMS Info Systems, and Agile Electric
  • public share sales of Summit Materials (SUM), Michaels Stores, and Scout24
  • the announcement of the strategic sales of AVINTIV, SunGard Data Systems, and Vivint Solar (VSLR), expected to close later this year

Blackstone raised commitments of $3.7 billion for tactical opportunities and corporate private equity mandates. The company has also launched fundraising for the seventh secondary fund. The company deployed new capital of $1.7 billion during the quarter and committed an additional $1.2 billion for new investments and accretive add-on acquisitions to the portfolio.

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