What Happened to Blackstone’s Hedge Fund Solutions Segment?



Total revenue fell

The Blackstone Group’s (BX) Hedge Fund Solutions segment generated total revenue of $167.8 million in 4Q17 compared to $176.4 million in 4Q16, implying a fall of 5% as a result of a fall in interest, dividends, and other revenue.

The segment saw a marginal 1% fall in net management fees from $131.5 million in 4Q16 to $130.3 million in 4Q17.

The segment’s gross return stood at 1.5% in the BPS Composite in 4Q17, while its net return during the same period was 1.3%. In 2017, its gross return stood at 8.3%, and its net return was 7.3%. The returns in the BPS Composite for both periods reflected the returns in the company’s hedge fund strategies.

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Assets under management

The Hedge Fund Solutions segment’s total AUM (assets under management) rose 6% on a YoY (year-over-year) basis in 4Q17. The segment’s 4Q17 AUM stood at $75.1 billion. In 4Q17, the segment saw total AUM inflows of $4.1 billion, while in 2017, these inflows amounted to $12.1 billion.

The Hedge Fund Solutions segment incurred total expenses of $69.1 million in 4Q17 compared to $74.6 million in 4Q16, representing a 7% fall. This fall was mainly the result of a fall in the segment’s performance fee compensation from $9.6 million in 4Q16 to $2.4 million in 4Q17.

Blackstone’s market cap is $41.9 billion. Its peers (XLF) Oaktree Capital Management (OAK), Ares Management (ARES), and Ameriprise Financial (AMP) have market caps of $7.2 billion, $4.9 billion, and $24.7 billion, respectively.


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