Credit, insurance to benefit from Blackstone’s record $193bn of dry powder

Blackstone’s nearly $200 billion of dry powder will be more heavily deployed to credit and insurance than private equity, the firm revealed on its first-quarter earnings call on Thursday.

“It’s not one size fits all. We will see more activity on the credit and insurance side because of the tightness in the banking system. I think deployment there should accelerate,” Blackstone president and COO Jon Gray said in response to an analyst question on capital deployment.

“I do think for private equity, [for] real estate private equity, those things take a little bit of time. There tends to be a need for a little more confidence in markets, a little more stability. And I think that will be a little while in the making,” Gray said. “A lot of it does tie to sentiment overall. Obviously, as inflation comes down, I think that’s a very important indicator in market confidence… It will happen in waves, in different segments.”

Along with credit and insurance, Gray added that the firm has seen transaction activity pick up in secondaries – the highest level since Q4 2021, he noted – as LPs who are looking for liquidity try to get below their target allocation levels.

Blackstone entered into an agreement in March to acquire events software company Cvent in a transaction with an enterprise value of approximately $4.6 billion. Abu Dhabi Investment Authority is a significant minority investor alongside Blackstone.

Capital deployed by Blackstone for its private equity strategies was down 52 percent year-on-year to $3.6 billion, from $7.5 billion in the first quarter of 2022. Travel, leisure and energy transition companies will remain a focus for its corporate private equity portfolio, Gray said.

The dry powder figure is a record for the industry, according to the firm. Of the $193 billion, $85.6 billion – or 44 percent – is in private equity. This compares with 19 percent ($35.9 billion) in credit and insurance, and 34 percent ($65.4 billion) in real estate.

Almost 64 percent, or $2.3 billion, of capital invested in Q1 was in secondaries and various follow-on investments, according to the earnings statement.

The fundraising environment has become more challenging, Gray said. Capital raised for the first quarter reached $40.4 billion, and $217 billion over the past 12 months. That compares with $49.9 billion and $288.7 billion in the previous period.

Private equity inflows, which include corporate private equity, secondaries, tactical opportunities and infrastructure, halved in the first quarter to $4.6 billion, from $9.2 billion in Q1 2022. Credit and insurance dominated capital raising across strategies in the quarter, with about $19.6 billion gathered, accounting for nearly half of Blackstone’s $40.4 billion of inflows from January to March.

Blackstone is in the market with its latest buyout flagship fund, Blackstone Capital Partners IX, with an undisclosed target. It has gathered $15.5 billion as of end-March – a small bump from the $15.2 billion collected as of the end of Q4 – and expects additional closings for the vehicle in the second quarter. Gray noted in previous earnings calls that the vehicle is likely to be as large as the prior fund, which closed in 2019 at $26.2 billion.

It has also gathered $4 billion as of Q1 2023 for its second growth vehicle, from $3.5 billion in end-December.

Total assets stood at $991.3 billion as of end-March, up 8 percent year-on-year.