Blackstone’s new PE flagship adds to money pile, secondaries fund nears $20bn close

Blackstone's ninth secondaries offering hit $17.2bn in Q3, putting it within reach of a $20bn target. If it gets there, it would be the market’s biggest pool on record.

Blackstone inched closer to meeting its ambitious cross-platform fundraising goal, despite mounting headwinds for GPs of all types and sizes.

“With the support of our LPs, we are progressing toward our $150 billion target, with more than half achieved at this point,” president and COO Jonathan Gray said in a third-quarter 2022 earnings call.

Capital inflows between July and September totaled $45 billion, bringing the tally so far this year to $183 billion. Over the past 12 months, inflows rose to $338 billion.

Thanks to this robust activity, fundraising is “largely completed” for two of Blackstone’s top three flagship vehicles, Gray said.

They include the firm’s latest secondaries offering. Blackstone Strategic Partners IX hit $17.2 billion in the third quarter, putting it within reach of a $20 billion target. The fund, which got underway with a $13.5 billion target, would at $20 billion be the market’s biggest pool ever.

Blackstone is also near to wrapping up a new real estate offering. Rolled out with a target of just over $30 billion, Blackstone Real Estate Partners X now stands at $26.5 billion.

Interestingly, a large chunk of the $45 billion gathered in the third quarter – $14.5 billion – went into the private equity strategy. This despite the fact that fundraising challenges are mostly focused on this asset class.

North American PE fundraising declined in 2022’s first half, with $255 billion secured, according to Buyouts’ data, down 18 percent year over year. The culprit is a demand-supply imbalance, as proliferating funds encounter barriers created by overallocated LPs, especially among US institutions.

In the earnings call, Gray acknowledged “it’s harder out there,” something he believes will continue “until markets get better.” However, he said, Blackstone’s ability to raise $183 billion since January, “60 percent higher than our previous best,” reflects its “differentiated spot” in the industry.

Another factor working in Blackstone’s favor is the scope and diversity of its global LP base, chairman and CEO Steve Schwarzman said.

“Starting from our first fund in 1987, we have had a very significant component of non-US investors,” he said. This foreign source of capital provides a “terrific balance” at a time when US institutions are cash-constrained.

For these reasons, the firm’s new buyout offering grew to $14.4 billion as of the third quarter. Gray said Blackstone Capital Partners IX is expected to be “at least as large as the prior fund,” closed in 2019 at $26.2 billion. Against this measure, the vehicle is now more than halfway there.

The flagship could be seeking as much as $28 billion, Buyouts reported in July, with sources saying it would collect more than half by the fall.

Blackstone’s latest growth equity offering, Blackstone Growth II, was also increased to $3.4 billion as of the third quarter, against a target of $7 billion to $8 billion.

Assets managed by the firm totaled $951 billion at the end of September, up 30 percent from a year earlier. Blackstone has repeatedly stated that its assets are likely to approach or exceed $1 trillion this year.