Wall Street Journal Reports “Mom and Pop Millionaires Are Driving Blackstone’s Growth”
February 14, 2020
According to a February 14 WSJ article, “Individual investors have become one of Blackstone Group Inc.’s biggest sources of growth, a departure for an alternative-asset giant built on relationships with the world’s largest institutions.”
“Blackstone has built a $571 billion asset pile primarily by selling institutional investors products like leveraged-buyout funds and big real-estate investment pools. But with an eye toward nearly doubling assets in six years and securing a more predictable stream of fees, Blackstone is expanding its horizons to include products like a real-estate offering aimed at less-well-heeled investors that has had outsize success.”
According to the article, in 2019 Blackstone raised a record $26 billion from individual investors, a category it defines as everything from people with millions to invest to those committing as little as $2,500. This represented under 20% of its total fundraising in a year when the firm finished putting together the industry’s biggest-ever private-equity and real-estate pools, at $26 billion and $20.5 billion, respectively.
Blackstone believes that investors with $1 million to $5 million in liquid assets represent around $30 trillion or 44% of the global individual-investor market.
“A sizable chunk of the individual-investor pickup came from Blackstone Real-Estate Income Trust, right now the centerpiece of the firm’s retail strategy. The three-year-old vehicle, a so-called nontraded REIT, closed out 2019 with $13 billion in assets, nearly triple the total a year earlier. BREIT, as the vehicle is known, added another $1.4 billion on Jan. 1 alone as it kicked off relationships with new distribution partners.”
“In a sign of its growing importance, Blackstone President Jonathan Gray said in October that BREIT has the potential to become one of the largest economic contributors to the firm.”
“For a lot of people, BREIT is the first alternative investment they put in their portfolios,” Joan Solotar, Blackstone’s head of private-wealth solutions, said in an interview. She said the firm, which now offers a variety of credit, hedge-fund and real-estate vehicles to individual investors, aims to launch about one new product a year.
BREIT’s average investment is around $130,000, according to people familiar with the matter, which is a tiny fraction of the tens or hundreds of millions of dollars pension and sovereign-wealth investors commit to Blackstone funds. Because BREIT’s cash never needs to be fully returned to all investors, it will provide predictable, long-term revenues to Blackstone.
The article stated that 18% of Blackstone’s assets, or $103.7 billion, were “perpetual” at year-end. The New York firm aims to grow that percentage as it climbs toward a goal of $1 trillion in assets by 2026.
BREIT charges 1.25% a year plus 12.5% of the annual return, providing it exceeds 5%.
At an SEC event last month, Blackstone Chief Legal Officer John Finley spoke about one of the proposals the agency is weighing: allowing target-date retirement funds with longer investment horizons greater flexibility to invest in illiquid assets. That could bring Blackstone into the biggest investment pool of all, the 401(k).
Source: WSJ, Miriam Gottfried at Miriam.Gottfried@wjs.com
