Blackstone closes record fund

Fresh off of its $4-billion-plus IPO last quarter, The Blackstone Group (NYSE: BX) has completed the largest, and one of the longest, fund-raising drives in private equity history, by closing its fifth fund with $21.7 billion in capital commitments.

Blackstone began raising this fund back in 2004 with a $10 billion target. Seems modest now, but at the time, it would have been the largest PE fund ever raised. Not long after, a fund-raising arms race began. The Carlyle Group in March 2005 secured a combined $10.05 billion for its North American and European funds. Blackstone soon after topped that and gathered $12 billion, but what Blackstone didn’t do, however, was hold a final close.

Instead, the firm decided to push off the end-date to the third quarter of 2006, as the price of buyout deals continued to grow. Blackstone had raised $15.6 billion by last fall, and asked its limited partners for feedback on additional fund-raising. Reports at the time suggested that Blackstone was looking to settle on an even $20 billion, but sources said that such speculation was premature.

The next info nugget came in March, when Blackstone’s IPO filing indicated that the fund had grown to $19.6 billion. Soon after, Buyouts (a PE Week sister publication) reported that everything would be wrapped up by the end of July on about $22 billion in commitments.

Which brings the fund-raising up to date with a $21.7 billion final close announced last week. The fund is more than triple the $6.45 billion vehicle that Blackstone raised in 2003.

It is also the largest single fund ever raised, topping a $20 billion Goldman Sachs vehicle that was partially raised from firm employees. It might also be a short-lived respite for Blackstone’s LPs, as the fund is already two-thirds committed to closed and pending deals, such as the buyouts of Biomet, Center Parcs, Michaels Stores, Freescale Semiconductor, Alliance Data Systems and Hilton Hotels.The announcement of the new fund close comes as faltering debt markets have put a damper on the buyout boom and raised worries over whether take-private deals will dry up further down the road.“This further vote of confidence from our investors is extremely gratifying. The record-breaking amount of capital at our disposal allows us to continue our leadership role in private equity investing on a global basis,” Blackstone CEO Stephen Schwarzman said in a statement. —Dan Primack