Blackstone’s profit tops estimate on credit strength, fee gains

A sign for The Blackstone Group L.P. investment firm stands in front of their offices, Oct. 15, 2018, in New York. (AP Photo/Mark Lennihan, File)

Blackstone beat second-quarter profit expectations on Thursday on strong gains in its credit and private equity businesses and a pickup in performance-related fees tied to perpetual capital funds.

Shares of the world’s largest alternative asset manager rose 3.2 per cent, turning positive for the year.

Even though tariffs uncertainties remain a source of concern for the economy, resilient investors have propelled equity markets to record highs, enabling large asset managers such as Blackstone to capitalize.

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Asset sales in the credit and insurance segment were US$10 billion, while the company also sold US$7.3 billion of private equity assets. It had US$181.2 billion of capital available for deployment.

Fee-related performance revenue more than doubled to US$472.1 million, powered by a 16 per cent growth in perpetual capital assets under management.

Perpetual capital refers to long-term assets under management that does not have a fixed end date and cannot typically be redeemed by investors on demand.

Distributable earnings, which represent cash that can be used to pay dividends, grew 25 per cent to US$1.6 billion, or US$1.21 per share, for the three months ended June 30.

It exceeded analysts’ expectation of US$1.10, according to data compiled by LSEG.

Blackstone has said it remains capable of executing deals even in uncertain environments, underscoring its resilience should trade tensions escalate further.

As of last close, Blackstone’s shares were down slightly this year, compared with an eight per cent gain in the benchmark S&P 500 index.

Strong inflows

Inflows of US$52.1 billion helped push Blackstone’s total AUM to US$1.2 trillion, up 13 per cent from a year ago.

The credit and insurance segment attracted more than half of the total inflows. The unit is a key driver of Blackstone’s growing influence in private credit, as more companies turn to investment firms for flexible financing.

The private equity arm also recorded segment distributable earnings of US$751.4 million, up 55 per cent from a year ago.

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AUM at the real estate division fell three per cent, but segment distributable earnings grew 10 per cent.

“Blackstone is deploying more in real estate than it is realizing, indicating some bullishness on its part as it is putting more money to work than it’s taking off the table,” Oppenheimer analyst Chris Kotowski wrote in a note.

The company had said tariffs could drive up construction costs and reduce new supply, potentially elevating real estate values if the economy avoids a recession.

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Reporting by Niket Nishant in Bengaluru and Isla Binnie in New York; Editing by Arun Koyyur