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Understanding Blackstone’s Record Funds in Private Equity


Apr. 25 2017, Updated 11:05 a.m. ET

Core business leads the performance

Blackstone Group (BX) has created value for limited partners and investors by generating strong profits through its Private Equity division, as we’ve now seen reflected in its better-than-index (SPX-INDEX) (IVV) performance in 1Q17. The division posted economic income of $360.7 million in 1Q17, as compared to its total revenue of $630 million.

The division’s performance income stood at $397.8 million, as compared to $104.2 million in 1Q16. The valuation of its portfolio rose 6.9% over the previous quarter, mainly due to growth in its private investment portfolio.

Blackstone was managing $99.7 billion in the Private Equity division as of March 31, 2017. In 1Q17, Blackstone brought in 4% more assets on a YoY (year-over-year) basis, backed by new flows and a rise in valuations, partially offset by higher realizations and distributions.

During the same period, the division’s fee-earning assets rose 36% to $68.2 billion. The company saw new flows of $2.6 billion in 1Q17 across its core private equity funds and other offerings.

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Strong realizations

Blackstone has now raised $16.5 billion through its Private Equity division offerings over the past 12 months. The company realized $6.2 billion in 1Q17, reflecting public and strategic sales across segments. Remember, limited partners prefer higher returns and higher churning portfolios. Blackstone deployed $6.7 billion in 1Q17, mainly in the healthcare and energy sectors. The company is now focusing on fee-earning offerings in order to generate higher performance fees and more active offerings.

Notably, Blackstone has the highest dry powder in the industry, as compared to peers like Carlyle Group (CG) and KKR & Company (KKR).


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