Inflows into Blackstone’s Credit and Insurance segment blew past the others in the first quarter, attracting $13.1 billion of capital, more than 50 percent above the next highest segment, real estate, at $8.6 billion.
“In credit, demand for our products remains robust,” Jon Gray, Blackstone president, said during a conference call with analysts, after Blackstone reported it had swung to a record quarterly profit of $1.75 billion, or $2.46 a share, from a year-earlier loss of $1.07 billion, at the outset of the pandemic in the US.
Inflows into Blackstone Credit and Insurance represented more than 40 percent of the firm’s overall inflows in the quarter of $31.6 billion. Originations also reached a record in the quarter, of nearly $11 billion deployed or committed.
“We are encouraged by what we saw in the quarter,” Dwight Scott, global head of Blackstone Credit, told Private Debt Investor. “The business is in a period of significant growth, with assets under management growing by nearly one-quarter in the last twelve months,” he said.
Private credit, which includes mezzanine, direct lending, distressed and energy strategies, returned 7 percent in the quarter, with Blackstone’s direct lending business alone growing to $28 billion of assets under management. Liquid credit strategies had a gross return of 1.6 percent in the quarter. Private credit returned 38 percent in the last 12 months, nearly double the 21 percent return of liquid credit strategies.
“The market is turning to private debt,” Scott said. “There was a great level of activity both on the investment and the realisation side,” he added.
Blackstone Credit achieved strong performance, Lou Salvatore, co-head of performing credit, told PDI. He cited Blackstone’s largest exit in the quarter, Acrisure, an insurance brokerage business that it realised for $1.3 billion. The company was attracted to Blackstone, he said, by its ability to “commit large-scale capital and solve problems”.
Salvatore also said that there was a secular trend developing, where companies are seeing “a lot of advantages in doing a private transaction and avoiding the public markets”. He said some of the larger companies “are realising that we provide incremental benefits.”
That’s a significant change from five years ago, Salvatore said, when “the larger players were focused on getting a lower cost of capital”. He noted that Blackstone had looked at “a dozen billion dollar unitranche deals” over the past 12 months.
“With the end of the 35-year bull market in rates, people are a little worried about fixed income,” Scott said. In public markets, “you have to buy and justify”, whereas in private credit, “you don’t have to swing at every pitch”.