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How Did Blackstone’s Private Equity Portfolio Perform in 1Q16?

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Core business

Blackstone (BX) reported an economic income of $163 million in its private equity division for the December quarter. Its total revenue was $361 million, compared with $908 million in the same quarter last year. Blackstone’s private equity portfolio value rose by 2.8% over the previous quarter, which was mainly due to public portfolio appreciation. Domestic equity (SPY) improved marginally after the stock market rout in the beginning of 2016. The company’s holding in Hilton Worldwide (HLT) rose by 5% in the first quarter of 2016.

The division’s assets under management expanded by 29% over the same quarter of last year, to $94 billion as of December 31, 2015. Its fee earnings from assets under management expanded by 17% to $51 billion during the same period.

In 1Q16, Blackstone’s major holding, Zimmer Biomet (ZBH), rose by 4%, NXP Semiconductors (NXPI) fell by 3.8%, Brixmor Property Group (BRX) fell by 1%, and Michaels Companies (MIK) rose by a record 27%.

The company’s private equity portfolio rose by 9.5% in 2015, while the S&P 500 fell by 0.7% during the same period. The division’s performance and investment income stood at $161 million and $33 million, respectively.

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Strong fund deployment

During the December quarter, Blackstone achieved total realizations of $3.4 billion on public and strategic exits in corporate private equity funds. Blackstone raised commitments of $5.2 billion for the private equity segment in the fourth quarter. The amount included the final close for the seventh flagship private equity fund, with total third-party commitments reaching $17.5 billion.

The company deployed new capital of $5.3 billion during the quarter. It committed an additional $1.2 billion for new investments and accretive add-on acquisitions to the portfolio. The company’s deployments in the fourth quarter formed almost 50% of the full-year investments. Blackstone has been aggressive in terms of fund deployment when the market offers attractive valuations. The company has stronger dry powder (undrawn capital) than alternatives such as The Carlyle Group (CG) and KKR (KKR).

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