Blackstone expects to approach $200B of inflows in 2021
July 22, 2021 | Madeleine Farman | S&P Global Market Intelligence
The Blackstone Group Inc. expects it will near $200 billion of inflows in 2021, driven by its perpetual capital platforms, pending insurance partnerships and other fundraisings, President and COO Jonathan Gray outlined to listeners on its second-quarter earnings call.
The alternative asset manager saw total inflows of $37.3 billion in the quarter, and the firm brought in $116.3 billion over the preceding 12 months, according to an earnings release.
Blackstone recorded total assets under management of $684 billion, up 21% year-over-year, “despite record realizations” of $63.4 billion over the last 12 months, Senior Managing Director and CFO Michael Chae said. Fee-earning AUM rose 14% year over year to $498.9 billion.
Its perpetual capital assets under management, a key driver for the firm, increased 55% year over year to $169.5 billion, the release said.
“The sustained strength of the firm’s recent inflows without raising any of our largest flagship funds highlights the significant expansion of product offerings and growth in perpetual capital,” Chae said.
Perpetual continues to climb, further insurance expansion
Blackstone’s increasing inflows come as the firm continues to expand its product offerings and pursues investors outside of the institutional base on which it once exclusively focused.
Describing the quarter as the “most consequential [quarter] in our history, not just in terms of financial results but more importantly, in terms of setting the foundation for the firm’s long-term growth trajectory,” Chairman and CEO Stephen Schwarzman said the firm’s “wisdom” of its decade long investment in its distribution capabilities across the retail and
insurance channels “is becoming apparent” as it expands its product line up, including its moves into “lower risk-return areas like core+ real estate and private credit.”
Giving some color, Schwarzman said the retail and insurance channels combined have approximately $110 trillion of assets globally, nearly double the size of Blackstone’s historical investor base, the institutional channel.
Two of its mainstay permanent capital products, its non-traded real estate investment trust, Blackstone Real Estate Income Trust Inc., or BREIT, and its business development company Blackstone Private Credit Fund are now together raising $4 billion per month, Schwarzman said.
“We believe that demand for these two products will continue for years to come and I believe will continue to grow, that this powerful distribution channel is ideal for other products we’re developing as well.”
Schwarzman said Blackstone is launching a new European vehicle that is similar to BREIT, with sales to start in September. The firm also has additional products in the planning and development stage.
It was announced July 14 that Blackstone would also acquire a 9.9% equity stake in American International Group Inc.’s life and retirement business for $2.2 billion in cash.
As part of the deal, AIG and Blackstone agreed to enter into a partnership that will see Blackstone manage an initial $50 billion of Life & Retirement’s existing investment portfolio. The firm expects that transfer by the end of 2021, Chae said. The amount will increase to $92.5 billion over the next six years.
Separately, BREIT will also acquire AIG’s interests in a U.S. affordable housing portfolio for $5.1 billion in cash. The transaction is expected to close in the fourth quarter.
The AIG partnership will bring Blackstone’s total insurance AUM to $150 billion when the transfer is made later this year and to “at least $200 billion” when remaining capital is “fully phased in,” Gray said. The partnership is “a compelling illustration of the continued expansion of our business model and marks our third large-scale mandate with a major
insurance client.”
Blackstone is sticking to its knitting when it comes to its insurance strategy, opting to make “a minority investment in a company in which we see meaningful value” rather than bringing an insurance company onto its balance sheet, a strategy some of Blackstone’s peers have opted for.
Other areas that will drive inflows are its credit segment, its perpetual infrastructure vehicle, funds across its secondaries platform, private equity and real estate funds raising in Asia, and hedge fund solutions business BAAM’s new Horizon platform, which focuses on minority investments in fast-growing companies as they prepare to go public.
