Blackstone has come to a close in 2023.
Recently, Blackstone Group announced its Q4 distributable profit of $1.4 billion for the fourth quarter and full year of 2023, a year-on-year increase of 4%, ending a consecutive quarterly decline that began at the end of 2022. The latest total AUM climbed to 104 trillion US dollars, is a well-deserved king of global PE.
We have come out of a turbulent year for global markets. Schwarzman, head of Blackstone, said, "The quarterly report reflects the strong momentum across all Blackstone's businesses, with a significant acceleration in fundraising and investment activity. "And on the road ahead, Blackstone will still be in an advantageous positionThere are nearly $200 billion in spare ammunition (dry powder).
Strike when others are afraid. As we enter 2024, Jonathan Gray, president and chief operating officer of Blackstone, believes that the private equity industry will reach an inflection point after one of the worst years in history, and Blackstone will aggressively pursue PE mergers and acquisitions before the market recovers.
To this end, Blackstone's series of personnel expansion plans are quietly underway.
PE weather vane:
In 2023, 1,000 billion will be raised
We try to get a glimpse of the situation of the largest PE in the universe from the latest financial report.
In the face of higher interest rates and an uncertain economic outlook, Blackstone reported fourth-quarter revenue of 12US$8.5 billion, down 25% year-on-year; Net profit increased by 85% year-on-year, down to 1US$0.9 billion; Diluted earnings per share from 0$75 shrank by 73% to 0$20, mainly due to the decline in the value of real estate investments.
However, if you extend the horizon to the whole of 2023, the decline in these figures is relatively flat, and the total annual revenue is 80US$2.3 billion, down 6% year-on-year; Net profit attributable to Blackstone was 13$9.1 billion, compared to 17 in 2022$4.8 billion.
At the same time, Blackstone's distributable earnings, or 1.4 billion per share, were $1.4 billion$11, compared to $13 in 2022$300 million, $1.1 per share$07, up slightly.
At the fundraising level, Blackstone still shows a strong appeal. In the fourth quarter, Blackstone raised $52.7 billion, the sharpest quarter since the second quarter of 2022, with a large portion of the inflows related to credit investments; In 2023, a total of 148.5 billion US dollars (more than 1,000 billion yuan) has been raised, stunning.
As of the current quarter, Blackstone's total AUM has increased from 101 trillion dollars rose to the current 104 trillion dollars. At the time of the second quarter financial report in July last year, Blackstone's total AUM officially exceeded one trillion US dollars, setting a global PE milestone.
Even though the external environment is volatile and complex, Blackstone did not stop deploying $31.1 billion in the fourth quarter, and the investment amount was 25 times, which is also the most since the third quarter of 2022. And throughout 2023, Blackstone invested $73.8 billion abroad.
Focus on Blackstone's PE business. In 2023, Blackstone raised $23.8 billion in the PE sector and invested $24.5 billion. What impressed me was the $2.3 billion cash acquisition of Rover, the world's largest pet care market, which is about 10 times Rover's expected revenue in 2023.
Have mixed feelings. According to the financial report, most of Blackstone's business segments will show positive returns in 2023, such as the PE sector bucking the trend, and many of the best performance in this sector in 2022 will be negative in 2023Blackstone's corporate private equity** and infrastructure** both appreciated by 12 percent, cross-platform investment** appreciation of 6%. Credit & Insurance performed even better, with private credit** appreciating by 16% and liquid credit value up 13%.
Surprisingly, the value of Blackstone's core real estate strategy sector has declined to varying degrees, with opportunistic real estate investment falling by 6 percent in 20233%, while its more stable income-generating "core+" investment fell by 43%。This is already the worst performance of Blackstone's real estate business for at least four consecutive quarters.
Looking at valuations, we do see property values bottoming out," Jonathan Gray said on the latest earnings call, "but things are looking for the better as inflation and the cost of capital environment eases." ”
At the exit level, Blackstone also faces challengesThe number of exits in 2023 is limited, especially in the first three quarters, and the fourth quarter has improvedBlackstone realized $15.8 billion in the fourth quarter, a year-on-year increase of 17%; Realized for the year was $65.7 billion.
Looking back over the past 12 months, Blackstone's share price** has outperformed the end of last year by more than 35%, but it still lags behind rivals Apollo Global Management and KKR.
The PE team is hiring
In 2024, Blackstone is on full fire.
Just earlier this month, Blackstone quietly completed its first fundraising of the year, and on January 8, Blackstone submitted documents to the regulator, and Blackstone launched a retail PE** product Bxpe (Blackstone Private Equity Strategies Fund L.) to high-net-worth individualsp.After nine months, the initial fundraising reached about US$1.3 billion, equivalent to RMB9.2 billion.
This is Blackstone's first-ever retail model**. Although the figure of $1.3 billion is not too big for Blackstone, which is a trillion-dollar scale, it is still one of the largest first hurdles of its kind in the overall market.
In fact, as early as six years ago, Blackstone was brewing this kind of ** internally, until the official launch of the plan in March 2022A flagship strategy for wealthy individuals to participate in its private equity business**BXPE, with an investment threshold starting at $5 million, which was expected to launch in early 2023.
It is understood that BXPE was established to invest in corporate acquisitions and equity-oriented strategies, including late-stage venture capital and the purchase of shares in other private equity companies or their **. More public information shows that BXPE follows a "perpetual-life strategy", which allows investors to redeem on a regular basis, with a redemption cap of 3% per quarter.
It is worth mentioning that the management fee and carry ratio of BXPE is also relatively low, and the management fee is based on 125% charged, and management fee waived for the first 6 months; Carry is 125% is charged, and a threshold rate of return of 5% is agreed. Based on the past**, Blackstone generally charges 15% 2% management fee; If the rate of return is higher than 6%, a 20% performance fee will be charged.
According to the SEC's filing, BXPE's current portfolio consists of 17 projects, covering direct investments, secondary shares and structured investments, as well as digital infrastructure, business services, financial services, aerospace and more.
More than that, we will witness the birth of more fundraising of the king of PE. At the latest earnings conference, Michael Chae, CFO of Blackstone Group, revealed that Blackstone expects to launch a new private equity flagship in the near term, which has raised $18 billion to date, with a goal of at least $20 billion.
At the same time, Blackstone is also raising funds for the next phase of several strategies, including:The recently launched fifth private credit opportunistic strategy** with a target size of $10 billion
The headwinds from inflation and the cost of capital are waning and we are heading into a better cycle. Jonathan Gray said at the earnings conference. As he said, in 2024, Blackstone will further layout and expansion. And the most direct embodiment is in "people".
On the occasion of the earnings report, Jonathan Gray revealed in a Bloomberg TV interviewBlackstone will continue to expand its headcount in 2024, especially in the second half of the year. He believes that with the increase in Blackstone's trading activity and the acceleration of the pace of fundraising, more people will inevitably need to participate. In other words, Blackstone will be hiring intensively this year.
Among them, Blackstone will expand its PE fleet in the Asian market. Reuters reported in mid-January that Blackstone was doubling the number of employees in its private equity business in Singapore over the next two years in hopes of making more deals in Southeast Asia. Amit Dixit, head of Blackstone's Asia PE practice, also said the expansion in Singapore would also bring the asset manager closer to its investor base, which includes sovereign wealth**, family offices and individual investors.
The Chinese team is also quietly reset. In the fourth quarter of last year, Blackstone officially announced a major personnel appointment to spend 10 years in Blackstone's PE segment, and senior managing director Haide Hong was promoted to head of China acquisitions to lead Blackstone's investment efforts in Shanghai. The investment community has also noted that Blackstone has expanded its office in Shanghai, and the new team may be starting new business.
Going through the worst year
An inflection point is coming
Global PE has had an unforgettable year, especially when it comes to exiting, facing unprecedented pressures.
Pitchbook data shows that U.S. private equity exit activity fell to an unprecedented low relative to the size of capital under management in the sector last year, with the median holding period for exiting investments now reaching 6.4 years, the highest level in more than a decade.
The situation is more dire than expected. Foreign media reported that institutional LPs, including the Abu Dhabi Investment Authority and Singapore's sovereign wealth **GIC, began to explicitly tell GPs that they would only invest money in the next ** after receiving the returned capital of the old **, and even LPs directly asked for a deduction of management fees.
We're going through an industry revolution," said William Barrett, managing partner of Reach Capital, a PA agency that connects LPs and GPs, "and this is the first time we've seen LPs so directly link the allocation of one to a new commitment from another." ”
Will 2024 be good after the end of global turmoil in 2023?
We will see 2023 as the cyclical bottom of Blackstone's encounter, with many good things happening。Facing the future, Schwarzman said optimistically. Having experienced many cycles over the past 40 years, he believes that soon we will see a recovery in the IPO market, and private equity firms will have more assets in their hands, and there will be an increase in M&A deal activity.
Schwarzman further noted that as the economy recovers, the industry will first experience a bottoming effect, and then the valuation of the portfolio will begin to show an upward trend, and the consensus will change with the biggest investment opportunities at this stage.
Following this logic, Jonathan Gray revealed that Blackstone will increase its investment before the market recovers and the investment target begins. "We're at the bottom**, the wheels of M&A activity are accelerating, and we want to invest more before we reach consensus. "It's too late to lay out at that point, when the valuation has changed.
Blackstone has historically been a bellwether in the PE sector, and while the current market environment remains uncertain, Jonathan Gray is optimistic about the future exit of the private equity industry, as private equity realizations increase in 2023, while the real estate industry is in a transition period and is expected to pick up in the second half of 2024 and 2025.
Now is a good time to move forward. Similarly, KKR co-CEO Scott Nuttall recently said, "There is less competition in deals, and the price-to-earnings ratio has also decreased. In his view, the best who make new investments at this time will be the beneficiaries, and throughout KKR's journey, it is during such periods that KKR has created a lot of high-return investment cases.
Historical experience has shown thatPE always creates the best vintages in volatile times。As Schwarzman firmly believes, the best investments often happen in turbulent times.