Blackstone increases credit AUM by 16%

Firm president Tony James considers the firm’s performance “pretty spectacular” given the low interest rate environment. 

The Blackstone Group’s credit business has increased its assets under management by 16 percent over the last year to $63.3 billion, the firm announced in a third quarter earnings release on Thursday.

The firm invested approximately $287 million on the quarter with an additional $179 million committed but not yet invested. Blackstone has invested or committed $1.4 billion through its credit business so far this year.

“In our credit business, revenue dropped 22 percent, but ENI was about flat. Again, this follows a pattern of lower performance fees due to the quarter’s backup in the credit markets partially offset by management fee revenues that are higher due to continued successful fundraising,” he said.

Despite the declines in total revenue quarter over quarter, the firm’s mezzanine and rescue lending strategies were generating a 20.4 percent and 17.5 percent returns year-to-date respectively, according to the earnings report.  

“The investment performance in our credit business continues to be very strong,” James said. “This is pretty spectacular performance in a zero interest rate world.”

In addition to commenting on the firm’s credit strategies, James also spoke about on the $703 million in new commitments received by its tactical opportunities segment, which invests across Blackstone’s investment platforms. Tactical opportunities includes separate accounts Blackstone manages on behalf of The New Jersey Division of Investment and California Public Employees’ Retirement System.

James attributed the growth to re-ups in separate accounts as well as commitments to tactical opportunities’ pooled fund. The tactical opportunities is seeking approximately $4.5 billion in total commitments for now, added.  

James also commented on the US debt ceiling crisis, which was resolved last night when Congressional Republicans conceded defeat in their effort to defund the Affordable Care Act by refusing to increase the amount the Federal Government can borrow. Many market observers, including James, predicted economic calamity in the event the US had defaulted on its debt. 

“I do think we were pretty well positioned all the way around. One could argue, actually, that if we had a fairly severe short term crisis, that would provide some investment opportunities that we could take advantage of that.”

“Not that we were rooting for that, I don’t want anyone to get the wrong impression. Absolutely to the contrary. But nonetheless, we were poised to take advantage of that because we have a lot of confidence in the long term economic, political and creative strength of the United States would prevail.”