Company Profile
Founded
Blackstone Group (ticker: BX) is a well-known private equity investment and investment management company founded in 1985 by Schwarzman and Peter George Peterson.
Founders
Stephen A. Schwarzman, a 38-year-old Jewish immigrant, and his mentor Peter G. Peterson left Lehman Brothers to co-found Blackstone, a $400,000 firm that specializes in leveraged buyouts. The name comes from the two founders, who commemorate their ancestral home. Schwarzman is translated as black in German, and Peter is stone in Greek.
Relationship with BlackRock
In 1988, the predecessor of BlackRock – Blackstone Financial Management was established. In 1992, BlackRock became independent from Blackstone Group (ticker: BX) and changed its name to BlackRock.
For BlackRock, please read my article “How does BlackRock, the world’s largest index and asset management company, make money?”
Key M&A History
- Bought the late Sam Zell’s empire for a record $36 billion.
- Take Hilton Worldwide private for $26 billion.
Innitial public listing
In 2007, Blackstone went public successfully, raising more than US$4 billion in public funds, which was the second largest IPO since Google went public that year.
Main business
History of Business Expansion
Blackstone’s eyes are not limited to private equity, but it sits on Wall Street. It has long realized the need to diversify beyond the acquisition business, and has begun to develop other asset management businesses:
- Launched hedge fund business in 1990
- Involved in real estate investment in 1991
- Involved in credit investment in 1998
- Launched a dedicated private wealth business in 2011
- 2017 Launch of Infrastructure Strategy
- Commencement of insurance solutions management and life sciences business in 2018
- 2020 has its first growth stock fund
The company’s business objectives
Today, nearly all of these major business areas are leaders in their respective asset classes, with exceptional long-term performance. Over the past 30 years, the Big Mac has risen fiercely and built a huge financial empire. Schwarzman said: “We started with a private equity fund, and now we have done more than 70 different things.” Looking back, doing large-scale is one of the most steadfast pursuits of Blackstone’s rise.
A Milestone in Asset Management
1 trillion dollars
On July 20, 2023, Blackstone released its financial report for the second quarter of 2023. Blackstone’s latest total assets under management (AUM) officially exceeded 1 trillion US dollars (1.00136 trillion US dollars), setting a historical record. Blackstone is the first asset management company whose assets under management exceed US$1 trillion. This pace has been far ahead of other competitors.
Where did $1 trillion come from?
The company’s total asset management scale was US$1 trillion, an increase of 6% year-on-year, including:
- Fee AUM was $731.1 billion, up 7% year-over-year
- Perpetual capital under management was $384.3 billion, up 8% year-over-year
Important asset growth record
When Blackstone went public in 2007, its assets under management had reached US$88 billion, and by the end of 2009, this figure had soared to US$100 billion. Break through 1 in 2023
Performance of Q2 2023
Revenue and net income
In the second quarter of 2023, the two key indicators of Blackstone’s financial report are:
- Revenue was US$2.815 billion, a year-on-year increase of 3.47 times.
- Net income rose to $601.3 million, or 79 cents a share, compared with a loss of $29.4 million, or 4 cents a share, in the same period in 2022.
Fund use
- $30.1 billion inflows for the quarter and $158.4 billion for the LTM (past year) period
- $19.5 billion in deployments and $80.3 billion in LTM deployments this quarter
- Realizations of $17.2 billion and LTMs of $64.4 billion in the quarter
In terms of distributable earnings, or cash that can be returned to shareholders, Blackstone fell 39% to $1.21 billion from $1.99 billion in the second quarter of 2022. The main reason is the decline in asset sales and the poor environment for initial public offerings. Net profit on asset sales plunged 82% to $390 million from $2.2 billion in the same period in 2022 as rising interest rates, inflation and economic uncertainty continued to weigh on its M&A activity.
Business unit performance
The performance by BUs are as follows:
- The biggest hole came mainly from its real estate unit, which saw a 94% drop in net profit.
- Net income in the credit division also fell by 46%. Especially compared to the second quarter of 2022, when Blackstone sold the Cosmopolitan Hotel and Casino in Las Vegas and recapitalized its large European logistics business.
Portfolio Valuation
In terms of investment performance, Blackstone’s portfolio valuations for almost all major strategies increased in the second quarter:
- Corporate private equity and private credit strategies were the best performers, with Blackstone’s private credit segment yielding a stunning 12.7% over the past 12 months.
- Only its high-risk, high-reward real estate holdings were flat.
- Inflows were $30.1 billion, with insurance and credit (including real estate credit) driving inflows above the threshold. But net inflows totaled $17 billion, down 77% year-over-year.
- In the private equity sector, as of the end of the second quarter of this year, the total asset management scale of Blackstone’s private equity business increased by 7% to US$295.3 billion. This quarter, US$8.5 billion was raised, which is US$36.3 billion higher than the long-term asset management scale.
Investment performance
The following is investment performance (appreciation/total return) by market segment:
- Real Estate: Opportunistic 0.0%; Core%+1.7%
- Private Equity: Corporate Private Equity +3.5%; Strategic Opportunities +1.8%; Secondary Opportunities +2.3%
- Hedge Fund Solutions: +1.9%
- Credit and insurance: private credit +3.3%; liquid credit +2.8%
Unused investment funds
It is worth mentioning that Blackstone currently has unused investment funds of more than $190 billion:
- Private equity sector totals $83.5 billion
- Real estate sector totals $64 billion
- The credit and insurance segment totaled $39.9 billion
- Hedge fund sector totals $7.1 billion
Competitors
KKR
KKR & Co (ticker: KKR) is a private equity and real estate investment firm specializing in direct investments and fund-of-funds investments.
Carlyle Group
The Carlyle Group (ticker: CG) is an investment firm specializing in direct investments and fund of funds investments.
TPG
Founded in 1992, TPG (ticker: TPG) is a world-leading alternative asset management company with more than US$109 billion in assets under management.
Apollo
Apollo Global Management (ticker: APO) is a private equity firm that specializes in investing in the credit, private equity and real estate markets. Apollo, the company known for its pioneering insurance business and large credit arm, has also set a goal of reaching $1 trillion in assets by 2026.
Related articles
- “How does BlackRock, the world’s largest index and asset management company, make money?”
- “How Does Private Equity Giant Blackstone Make Money?“
- “Most investors should invest ETFs tracking broad market“
- “US issued ETFs tracking US market is your best bet“
- “Top 10 ETFs and important major US stock market index“
- “Investors should care annualized rate of return (IRR), How to calculate?“
- “IRR Calculator“
- “Querier to Annualized rate of return for S&P 500 Index”
- “S&P 500 index, the only stock worth holding forever“
- “Should investors chase the ESG?“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
