Blackstone Profit Tops Estimates, Boosted by Strong Fundraising

(Bloomberg) -- Blackstone Group Inc.’s fundraising machine is accelerating, gathering $45.1 billion in the second quarter and putting it on pace to exceed its goal for the year.

Key Insights

• Blackstone, the largest alternative asset manager, has benefited from a fundraising boom as investors dole out more money to the biggest firms. Its second-quarter haul gives it a total of $88 billion for the first half, and the firm expects to raise ‘significantly more’ than $100 billion -- its previous goal -- for the year, President Jonathan Gray said on the conference call Thursday. As a sign of the times, Blackstone is poised to raise a $25 billion flagship buyout fund, the biggest ever.
• Alternative investment shops have been accumulating dry powder, or undeployed capital, as asset prices soar and competition for deals grows fierce. Blackstone’s cash pile grew in the quarter to a record $150.3 billion, according to the earnings statement. Industrywide the massive stockpile of capital is a concern and may push down investment returns, Bloomberg Intelligence analyst Paul Gulberg wrote in a July note.
• Blackstone deployed $18.3 billion in capital compared with $8.4 billion in the year-ago quarter.

Digging Deeper

• Blackstone’s distributable earnings rose 1.3% to $709 million, or 57 cents a share, from $700 million, or 56 cents, in the year-ago quarter. The results beat the average estimate of 48 cents from analysts surveyed by Bloomberg.
• Assets under management rose to a record $545.5 billion.

Market Reaction

• The shares rose 1% to $45.72 in New York trading at 10:38 am. Blackstone’s fundraising, coupled with its conversion to a corporation announced in April, spurred the firm’s biggest quarterly share gain since 2010. The stock jumped 27% in the second period, but has lost some ground in July.

• Blackstone said on the call that following the C-corp shift it expects to be added to three indexes in the fall. Chief Executive Officer Steve Schwarzman said the conversion was one of his firm’s most significant decisions in its history.

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