Blackstone’s Profit Falls 40% as Market Plunge Hurts Holdings

(Bloomberg) -- Blackstone Group LP saw its profit drop 40 percent as the stock market rout last quarter dented the performance of its investments.

Key Insights

• This quarter Blackstone announced it’s joining KKR & Co. and Carlyle Group LP in switching to distributable earnings from economic net income as the key profit metric. It reflects cash profits on asset sales and fund management fees and doesn’t include mark-to-market valuations, a feature of ENI. The change, beginning with fourth-quarter results for Blackstone and Carlyle, will help make earnings less volatile, said Devin Ryan, an analyst at JMP Securities. “These companies are looking for different ways to help their valuation,” he said. “Let’s see if this helps.”
• Steve Schwarzman’s bedrock private equity business declined 2.9 percent in value, according to a Blackstone statement Thursday. During a quarter that saw the S&P 500 Index sink the most in seven years, Blackstone’s losers included Invitation Homes Inc. and Gates Industrial Corp.
• Blackstone, the world’s biggest alternative asset manager, benefited from the steady stream of investors seeking the returns of longer-term strategies. It had inflows of $38.6 billion in the quarter while raising money for its eighth buyout fund and its largest real estate pool. For the year, New York-based Blackstone brought in $101 billion, shy of its 2017 record.

Digging Deeper

• Blackstone’s distributable earnings fell to $722 million, 57 cents a share, from $1.2 billion, or $1, in the year-ago quarter.
• Assets under management rose to $472.2 billion from $456.7 billion in the third quarter.
• Dry powder, or undeployed capital, rose to $112.9 billion from $95 billion last period.
• The firm also reported that it held a $3.4 billion initial close in the quarter on its eighth Strategic Partners secondaries fund.

Market Reaction

Shares of Blackstone have fallen about 1.3 percent, with reinvested dividends, in the past year through Wednesday, less than its major rivals and the S&P 500 Index.

To contact the reporter on this story: Sabrina Willmer in Boston at swillmer2@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski

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