Blackstone Seeks About $15 Billion for New Secondaries Funds

Blackstone Group Inc. is seeking to raise about $15 billion for two new investment funds in the fast-growing private equity secondaries market.

Blackstone Strategic Partners, a $38 billion unit focused on investing in existing private equity portfolios, aims to raise $12 billion to $13 billion for a ninth flagship fund, which would be its biggest ever, and a smaller vehicle of at least $2 billion to focus on so-called general partner-led secondary deals, according to people familiar with the plans.

The firm’s secondaries business grew roughly eightfold over the past six years and should continue to expand at a “very rapid rate,” Blackstone President Jonathan Gray said on an earnings call last month, when he discussed plans for further secondaries funds without elaborating on fundraising targets.

The value of secondaries transactions more than tripled over six years to $88 billion in 2019 and totaled $60 billion last year, data from Greenhill & Co. show, driven by private equity investors seeking to offload their stakes early in otherwise illiquid funds. The structure has evolved in recent decades as a solution for institutional investors to rebalance their portfolios and draw on cash when needed.

Private equity managers also turn to the market as a way to hold onto a company while providing an exit strategy for investors who want out, in a transaction known as a GP-led secondary deal, an area being targeted by the smaller of the funds Blackstone is raising. Under this arrangement, secondaries funds buy out the original investors for a negotiated price.

A spokeswoman for New York-based Blackstone declined to comment.

The sector’s growth has been drawing increasing interest from Wall Street players. Last year, Jefferies Financial Group Inc. hired five Greenhill managing directors to help build out its secondaries advisory services. And in January, Rothschild & Co. brought in two senior secondaries advisers formerly at PJT Partners Inc.’s Park Hill unit.

“I don’t think we’re anywhere sort of near the end for secondaries, in terms of growth,” Gray said last month.

©2021 Bloomberg L.P.

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