Blackstone's profit falls as choppy market tempers investment exits

Blackstone Reports 13% Drop in Q3 Profit as Market Volatility Stalls Investment Exits

Blackstone’s Third-Quarter Performance and Market Impact

Challenging Market Conditions Affect Investment Exits

Oct 22 (Reuters) - Blackstone, the world's largest alternative asset manager, posted a drop in third-quarter earnings on Thursday, as a turbulent market environment weighed on its ability to cash in on investments.

Global markets have been roiled by surging bond yields, expectations of higher-for-longer interest rates and elevated market volatility from the Iran war.

As a result, many prospective deals are being put on hold, leading to a slowdown in deals and IPOs in the first half of the year. Global M&A activity fell 41% sequentially in the third quarter, according to LSEG data.

Decline in Net Realizations and Earnings

Blackstone's net realizations, which track proceeds from investment exits, fell 34% to about $332 million, weighed down by a nearly 50% drop in its private equity business.

Distributable earnings, or profit available to shareholders, fell 13% to $1.32 per share. Analysts on average had expected $1.26, according to data compiled by LSEG.

Shares of the company fell 2.2% in premarket trading.

Resilience Amid Market Headwinds

Net Inflows and Asset Growth

Blackstone's results, however, were cushioned by net inflows of more than $63 billion, pushing assets under management to $1.37 trillion and boosting fee-related earnings by 6%.

Its credit and insurance business marked the largest chunk of new inflows, bringing in nearly $36 billion, followed by private equity with $12.6 billion.

Fee-related earnings from managing investments in its private equity funds jumped 26% to $619 million.

Broader Industry Trends and Investor Sentiment

Stock Price Volatility and Investor Caution

Alternative asset managers are grappling with a slide in their stock prices this year, as investors turned cautious on prospects of slower future growth and potential disruption from AI advancements on companies in their portfolios.

Private credit in particular has been subject to investor jitters, with large managers reporting a surge in redemption requests over the prior quarters.

BCRED Fund and Portfolio Fundamentals

Blackstone said last month that requests in its BCRED fund remained elevated in the third quarter, but has maintained that fundamentals of the portfolio remain healthy.

Its shares have plummeted nearly 30% this year, largely in line with other asset managers and compared with a 13% gain in the broader market and about 2% in the S&P 500 Financials index.

(Reporting by Utkarsh Shetti in Bengaluru; Editing by Arun Koyyur)