(Bloomberg) — Blackstone Inc. hauled in a record pile of new cash, taking its biggest quarterly leap yet toward a goal of managing $1 trillion.
The cash surge of $155 billion in the fourth quarter put the world’s largest alternative asset manager years ahead of schedule in hitting its asset target by 2026. The haul drove Blackstone’s distributable earnings to a record $2.3 billion, up 55% from a year earlier, it said in a statement Thursday.
Blackstone ran $881 billion in assets at year-end, up from $731 billion at the end of the third quarter, according to the statement.
Shares of New York-based Blackstone were up 7.3% at 11:18 a.m. eastern time.
The gains reflect the search for yield by pensions, endowments, insurers and retail investors in swelling private markets. To feed their appetite for returns, President Jon Gray has pushed Blackstone to focus on areas seen poised for growth — including data centers, digital infrastructure and content creation. The initiative comes with risks.
With the Federal Reserve signaling it will soon raise interest rates to combat inflation, a selloff in technology stocks in recent days is threatening to erode valuations of private equity bets on growth. Gray said he’s unfazed.
“A lot of companies hit the hardest are the ones that are the least mature and generally don’t have earnings, which is not a big component of what we do,” Gray said in an interview. “Rates of revenue growth across tech-enabled companies remain pretty extraordinary, which gives me comfort about valuations.”
Blackstone shares have fallen some 8% this year, though the company’s stock is up more than 80% over the past 12 months.
Half of the new cash from the quarter was insurance assets Blackstone started managing after reaching deals with Allstate Corp. and American International Group Inc. The arrangements were designed to meet insurers’ thirst for higher returns amid low interest rates. At the same time, they give Blackstone funds for perpetual pools that lock up investor money — and produce fees — for the long haul.
New insurance money helped drive up assets in so-called perpetual pools by 132% to $313 billion.
The rise of perpetual capital is transforming private equity, turning an industry once known for high-octane bets to one more focused on delivering steady income that shareholders covet.
Such pools, which include the giant Blackstone Real Estate Income Trust, allow firms to raise money continuously. Analysts said fees tied to that fund’s performance were larger than expected, helping to drive Thursday’s stock surge.
Blackstone executives voiced big fundraising ambitions for the firm on an earnings call after the results, with plans to raise $150 billion across flagship funds in the next 18 months.
“They’re a capital accumulator like no other firm can be,” Piper Sandler analyst Sumeet Mody said by phone. “There are no other alternatives firms that can do what Blackstone can do on a fundraising basis.”
Fourth-quarter earnings highlights:
- Distributable earnings of $1.71 a share in the quarter beat the average analyst estimate of $1.37 a share, according to a survey conducted by Bloomberg.
- Quarterly fee-related earnings, a measure of how successfully the firm generates steady fee revenues, increased 144% to $1.8 billion.
- In the quarter, Blackstone’s funds posted gains, led by opportunistic real estate, which was up 12%, and tactical opportunities private equity, which rose 11%.
- Net income rose to $1.4 billion in the quarter, up from $748.9 million in the year ago period.
- Dry powder available for deals was $135.8 billion.
(Updates share price in fourth paragraph and adds details on fundraising in final paragraphs.)
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