Blackstone's First-Quarter Profit Gets Boost From Investment Gains

Blackstone beats profit estimates as inflows, asset sales rise

By Isla Binnie and Utkarsh Shetti

Blackstone’s First-Quarter Performance and Market Dynamics

April 23 (Reuters) - Blackstone's first-quarter profit edged past market expectations on Thursday, as the world's largest alternative asset manager raked in new assets and cashed in on its investments at a time when markets were buffeted by war and economic uncertainty.

Asset Growth and Inflows

The New York-based firm's total assets under management leapt 12% to about $1.3 trillion. Its credit and insurance business contributed the largest chunk of new inflows, bringing in $37 billion, followed by private equity with $20.4 billion.

Alternative Asset Manager Landscape

Managers of alternative assets - a wide range of securities that live outside traditional stock and bond markets - have seen their shares slide on fears of slower future growth, potential AI disruption to their portfolio companies and questions around lending standards.

Stock Performance and Market Sentiment

Blackstone's shares have rebounded this month, but are still trading nearly 16% lower for the year as of Wednesday's close. They were down about 1.5% in choppy premarket trading after the results. The S&P 500 Financials Sector index is down more than 4% this year.

Credit Strategies and Returns

Among its private credit strategies, a part of the market that is under intense scrutiny, net returns were flat for the first quarter and 5.7% for over the last twelve months.

Comparison with Leveraged Loans

This is slightly above the performance of leveraged loans trading on the public market, which fell 0.6% in the first quarter and posted gains of around 4.5% over the past year, according to the Morningstar LSTA index.

Financial Results and Analyst Expectations

For the first quarter, distributable earnings, or cash that can be used to pay dividends to shareholders, rose 25% to $1.76 billion, or $1.36 per share. Analysts on average had expected $1.35 per share, according to data compiled by LSEG.

CEO Statement and Strategy

Chairman and CEO Stephen Schwarzman said Blackstone totted up nearly $70 billion in total inflows and achieved positive appreciation across nearly all its flagship investment strategies "despite the turbulent environment".

All-Weather Model and Investment Approach

"Our all-weather model protects us in these times of disruption while also allowing us to invest where we see the greatest opportunity,” he said.

Asset Sales and Realizations

Net realizations rose 26% to $448.4 million. This was bolstered by the private equity business, where Blackstone sold stock in Medline, the medical devices maker it took public last year which soared from its offer price of $29 and is now trading around $47. It also sold space technology provider ARKA to U.S. defense contractor CACI International.

Investor Base and Fund Flows

Institutional Investors

Institutional investors, which typically include pension funds, insurers and other holders of large capital pools who can lock up their funds for long stretches of time, contributed one of their biggest quarterly funding hauls to Blackstone's credit business in its history, the company said.

Wealthy Individuals and Fund Movements

Elsewhere in Blackstone's investor base, wealthy individuals turned nervous about private credit, resulting in net outflows at its flagship BCRED fund in the first quarter, but they added $2.5 billion to the private equity fund.

BREIT Fund Update

But BREIT, a large real estate fund aimed at similar investors that blocked redemptions in 2022, has been gradually clearing the backlog and has now moved back into net inflows, the company said.

(Reporting by Isla Binnie in New York and Utkarsh Shetti in Bengaluru)