How Will Blackstone Fare amid Low Interest Rates?


Sep. 22 2016, Published 1:41 p.m. ET

Growth story

Analysts have revised Blackstone Group’s (BX) earnings per share (or EPS) estimate to $0.66 in the September quarter and $2.08 for the full year, translating to a price-to-earnings ratio of 12.7x and 8.8x on expected earnings in 2017. Blackstone’s performance is expected to improve in the upcoming quarters on portfolio holdings, growth in real estate holdings, and stabilizing hedge funds. In the June quarter, Blackstone posted economic net income of $0.44 beating Wall Street analysts’ economic net income estimates of $0.39.

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Blackstone is the world’s biggest alternative asset manager. The company has underperformed its peers in recent quarters due to the weak performance of its private equity holdings, partially offset by its real estate performance. However, it deployed a record amount of idle capital at the beginning of 2016 at low valuations. These deployments have started yielding results in the form of higher valuations.

Low interest rates

The Federal Reserve decided against raising interest rates at its September 2016 meeting. However, it indicated there could be at least one rate hike in 2016. Low interest rates have helped alternative managers, as investors are looking for avenues that can generate higher risk-adjusted returns. As a result, equities have advanced substantially over the past few months. Blackstone has attracted capital across its offerings. The company’s assets under management rose 7% on a year-over-year basis to $356 billion. The company invested $4 billion in new opportunities.

Blackstone’s revenue fell 23% in the last fiscal year. The Carlyle Group (CG), KKR (KKR), and Apollo Global Management (APO) fell 22%, 24%, and 3%, respectively.

Alternative giant

Blackstone provides financial advisory services to clients around the world. The company’s alternative asset management includes investment vehicles focused on private equity, real estate, hedge fund solutions, funds of funds, non-investment-grade credit, and multi-asset class exposures outside other funds’ mandates.

Blackstone also provides financial advisory services, including financial and strategic advisory services, restructuring and reorganizing advisory services, and capital market and fund placement services. The company faces competition from alternative asset managers as well as traditional asset managers that form part of the SPDR S&P 500 Index (SPY).

In the rest of this series, we’ll take a look at Blackstone’s private-market performance, public markets, credit, advisory, competition, dividends, and valuations.


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