Blackstone Profits Rise As Growth Strategy Boosts Portfolio

Blackstone Group Inc.

BX 4.47%

profits surged in the second quarter, propelled by a record appreciation in the value of its investments.

The private equity firm posted second-quarter net income of $ 1.31 billion, or $ 1.82 per share, it said Thursday. That compares to earnings of $ 568.3 million, or 81 cents a share, a year earlier.

The value of Blackstone’s private equity portfolio has climbed 13.8% in the most recent period, outpacing the gain of around 8% for the S&P 500. The fund’s combined appreciation across its various lines of business was the highest in the company’s history.

Blackstone’s recent emphasis on investing in fast growing companies contributed to this strong performance. IPO of outsourcing company TaskUs Inc.

and Indian manufacturer of electric vehicle components Sona BLW Precision Forgings Ltd.

increased the firm’s private equity portfolio, while sales of last mile logistics properties in the United States and Australia helped bolster its real estate holdings.

“The pivot to the right neighborhoods has really paid off. ”

– Jonathan Gray, President of Blackstone

Blackstone Chairman Jonathan Gray urged the company’s business leaders to think more thematically about investing, identify global trends and find ways to put money to work in areas who would benefit. These include logistics, software, digital payments and life sciences, areas of the economy that are experiencing disproportionate growth.

“The pivot to the right neighborhoods has really paid off,” Gray said in an interview.

Investors applauded the results, pushing Blackstone stock up about 3.5% to $ 109.57 in morning trading. Its stocks, including dividends, have climbed 78% since the start of 2021, according to FactSet, beating the S&P 500’s gain of around 16% over the period.

Blackstone’s market cap of over $ 130 billion now exceeds that of Goldman Sachs Group Inc.,

the Wall Street giant currently valued at around $ 127 billion.

“Our forward momentum has never been stronger,” said chief executive Stephen Schwarzman, who has long complained that Blackstone’s stock price did not reflect its performance, on a conference call. with analysts.

He called the second quarter “the biggest” on record for the company, as it expanded further into retail and insurance channels. These areas generate so-called perpetual capital, which public investors appreciate because it does not need to be returned so quickly and generates a constant flow of capital costs.

Blackstone’s distributable income, or the amount of money that could be returned to shareholders, was $ 1.07 billion, or 82 cents per share, in the quarter. That compares to $ 548 million, or 43 cents per share, a year earlier.

The company said it would pay a dividend of 70 cents per share for the quarter, up from 37 cents in the second quarter of 2020.

Blackstone invested $ 23.8 billion in the second quarter and pledged an additional $ 28.5 billion, another record. Among its commitments was a June deal to partner with rivals Carlyle Group Inc. and Hellman & Friedman LLC in a deal for Medline Industries Inc. that values ​​the medical equipment supplier at more than $ 30 billion. dollars and represents the largest leveraged buyout since the financial crisis. .

Blackstone’s infrastructure business and unlisted real estate investment trust have also reached a deal to acquire data center operator QTS Realty Trust Inc. for $ 6.7 billion.

The company posted inflows of $ 37.3 billion in the quarter, much of it from its lending business and its giant Core + real estate strategy.

Assets under management increased 21% from a year ago to $ 684 billion. Perpetual capital soared 55% year-on-year to $ 169.5 billion.

This figure is expected to rise, in part thanks to a broad partnership that Blackstone announced last week with insurance company American International Group. Inc.

The investment firm will manage a portion of AIG’s assets and pay $ 2.2 billion for a 9.9% stake in its life insurance and pension business. The deal is expected to bring Blackstone’s insurance assets under management to around $ 150 billion by the end of 2021.

“It really sums up the evolution of our business,” Gray said of the AIG deal.

A decade of low interest rates and strong performance prompted the company to venture beyond its traditional goal of investing institutional money, he said.

The combined market opportunity in insurance and retail is worth much more, he said.

Write to Miriam Gottfried at [email protected]

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