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Inside Blackstone’s Hedge Fund Performance in 1Q17

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Hedge funds

Blackstone Group’s (BX) Hedge Fund Solutions division has seen improvements backed by commingled strategies, long-term strategies, and profits from volatility. The division mainly consists of the BAAM (Blackstone Alternative Asset Management) business.

In 1Q17, Blackstone saw an 80% rise YoY (year-over-year) in its total revenues, reaching $211.1 million, as compared to $117.4 million in 1Q16. This growth was mainly due to higher performance and investment income. The segment’s ENI (economic net income) rose 217% to $115.2 million, as compared to $36.4 million in 1Q16.

Hedge funds

Blackstone reported an operating margin of 49% for 2016. By comparison, its competitors posted the following operating margins in 2016:

  • BlackRock (BLK): 41.0%
  • Apollo Global Management (APO): 40.8%
  • Carlyle Group (CG): 1.5%

Together, these companies account for 1.6% of the Financial Select Sector SPDR ETF (XLF).

Strong recovery

Blackstone’s hedge funds generated 2.7% growth in 1Q17 and 9.6% growth over the past year, after a weak performance in 1Q16. The company received new funds worth $3.6 billion in 1Q17 and $11.2 billion over the past year across customized solutions, individual investor strategies, commingled products, and specialized solutions.

Blackstone was managing $73.3 billion in hedge fund solutions on March 31, 2017—a year-over-year rise of 7%. Of these funds, $68.8 billion were deployed toward fee-earning strategies to generate higher performance fees. The company closed BAAM’s third-seeding funds with total fundraising of $1.4 billion.

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