Blackstone private credit strategies earned 12.7% in 12 months ending June 2023

The mega-manager has exceeded $1trn of AUM, a landmark, but says its flagship private equity fund’s fourth close puts it on track to be short of its predecessor.

New York-based alternative investment giant Blackstone said in its second-quarter earnings report that it earned a 12.7 percent return on its private credit strategies in the last twelve months.

At the same time, Blackstone reported that its firm-wide assets under management surpassed $1 trillion. Stephen Schwarzman, chairman and chief executive, said that Blackstone is the first alternative manager to top that mark. “This milestone reflects the extraordinary trust we have developed with our investors – built through performance – as well as our distinctive position as an innovator,” he said.

Not all numbers have gone up for Blackstone. Its flagship private equity fund, Blackstone Capital Markets IX, held a fourth close on $16.62 billion, with the firm stating it expects a final close “in the low $20 billion range.” This is compared with its predecessor Blackstone Capital Partners VIII, which had a final close on $26.2 billion in October 2019.

Credit and insurance

Blackstone’s credit and insurance segment AUM makes up more than one-quarter of the firm’s trillion-dollar AUM. The Q2 earnings report showed inflows of $12.3 billion into the credit operations in the second quarter, and inflows of $64.2 billion in the last twelve months. These inflows brought the segment’s AUM up 11 percent to $294.6 billion, as against the like quarter in 2022, when the credit and insurance AUM was $264.8 billion.

The quarter’s inflows included $5.7 billion for the global direct lending strategy alone.

Over the trailing twelve months approximately $29 billion in credit assets have been deployed.

In other credit-related disclosures: the private credit green energy strategy raised $1.3 billion in the quarter, bringing its total capital raised to $6.9 billion. Blackstone also closed one US CLO for $599 million.

Blackstone is working with regional banks and other loan originators that have regulatory constraints on their lending in such areas as auto finance, renewables, and home improvement. The firm has reached or neared agreements in five negotiations for such partnerships that will together have a value of $6 billion.

No sacrificing growth for size

Blackstone’s president, Jonathan Gray, in an appearance on Bloomberg TV the day of the release, expressed optimism about growth on the credit side. “The deal market feels like it’s unfreezing a bit. If you look at our credit area, our direct lending pipeline is up more than double than where it was 90 days ago. We are seeing more activity there.” Gray also pointed out, with reference to reaching $1 trillion in assets, that Blackstone was created in 1985 by Schwarzman and Pete Peterson in 1985 with just $400,000.

In an interview with the Financial Times, Gray expressed his optimism in more macro terms. He said that markets had survived the shock of higher interest rates, and he expects a normalization with an increase in transactions. “I feel better about how the markets look today than they did 12 months ago.”

With regard to Blackstone specifically, Gray told the FT that he doesn’t accept the premise of some that “as you get to a certain size, your growth has to decline.”

Real estate is Blackstone’s largest business, as noted in a report on affiliate title Private Equity International. That segment reached an AUM of $333.2 billion in the second quarter, followed by private equity with $295.3 billion. That leaves credit and insurance in the third position, with $294.6 billion. The total exceeds $1 trillion after including hedge fund solutions, at $78.2 billion.