Blackstone’s second GP stakes fund set to blow past target, hitting $5.5bn

Along with fundraising, Blackstone has been active adding to its GP stakes portfolio, deploying an expected $1.5bn-plus to deals backing GTCR, Sentinel and a third firm.

Private equity giant Blackstone said it expects to soon wrap up fundraising for a sophomore GP stakes offering at roughly $5.5 billion.

Blackstone Strategic Capital Holdings II should hold a final close in the fourth quarter, president and chief operating officer Jonathan Gray said in the firm’s Q3-2021 earnings report. If it succeeds in reaching $5.5 billion, the fund will exceed by 37 percent an initial target of $4 billion.

The target was reported last year by Buyouts. Fund II, which had the option to go higher, was then already larger than Blackstone’s inaugural GP stakes vehicle, which secured $3.3 billion in 2014.

Blackstone Strategic Capital Advisors, part of Blackstone Alternative Asset Management, is one of three strategies that dominate the GP stakes market. Together with Blue Owl Capital, formerly Dyal Capital Partners, and Goldman Sachs’ Petershill Partners, it has in recent years accounted for the lion’s share of the market’s capital raised and deals done.

Along with fundraising, Blackstone has been active adding to its portfolio of PE and hedge fund managers. Recent GP stakes deals include acquisitions of minority interests in GTCR and Sentinel Capital Partners, both announced in the summer.

In the Q3-2021 report, Gray said a third transaction is “in process.” Across it and the GTCR and Sentinel investments, Blackstone expects to deploy a total of more than $1.5 billion, he said.

The close of a third GP stakes deal will increase the number of North American, European and Asian firms held in Blackstone’s portfolio to 16. Others include BC Partners, Francisco Partners, GI Partners, Kohlberg & Company, Leonard Green & Partners, Marlin Equity Partners, New Mountain Capital, PAG and Rockpoint Group.

Managers sell pieces of themselves to GP stakes funds to bolster their balance sheets and finance major priorities, such as GP commitments to new offerings and growth initiatives. They also gain a hands-off, value-adding partner with a long investment horizon.

Fresh leadership

Blackstone Strategic Capital Advisors this year saw a change in leadership. In March, the firm said Scott Soussa, at the time the strategy’s co-head, would leave at year’s end for another opportunity. Mustafa Siddiqui, tapped as co-head in 2020, became the sole top executive. Siddiqui was previously a senior managing director in the private equity group.

Soussa, an 18-year Blackstone veteran, will join Angelo Gordon early next year in the newly created role of chief strategy officer.

Blackstone’s primary competitors in the GP stakes market have had an eventful 2021. Blue Owl was born in May following the merger of Dyal, a long-time affiliate of Neuberger Berman, with Owl Rock Capital Partners. The $12.5 billion transaction was facilitated by Altimar Acquisition Corp, a blank check company.

In addition, Goldman Sachs’ Petershill in September listed on the London Stock Exchange, raising more than $1.6 billion.

Blue Owl and Goldman Sachs are also in fundraising mode. Dyal Capital Partners V, targeted to bring in $5 billion, was in May about halfway to collecting $9 billion to $10 billion, Buyouts reported. Petershill IV is seeking $4 billion.

Limited partners who have signed on to Blackstone’s second GP stakes fund include State of Michigan Retirement Systems. It committed $250 million to the main vehicle and another $100 million to a separate account for co-investing.