Life sciences and real estate to advance Blackstone’s $150bn fundraising goal

While capital raising across strategies 'tends to ebb and flow, the overall path of travel is towards more alternatives,' says Blackstone’s president and COO.

Funds focused on life sciences, real estate debt and green energy are expected to drive Blackstone’s capital raising efforts this year, the firm revealed on its fourth-quarter and full-year 2022 results call on Thursday.

“We had a $150 billion target that we’ve been talking about now for more than a year,” said president and COO Jon Gray. “The good news is we are at $100 billion, so we are two-thirds of the way through this.”

Gray added that a “meaningful chunk” of the outstanding $50 billion balance will include a real estate debt fund. The firm also expects to launch the next vintage of its life sciences business at some point in 2023. Blackstone Life Sciences V held a final close on $4.6 billion in July 2020.

Gray noted that fundraising via the individual investor channel is “another tool in our toolkit to help us raise this capital.” Roughly $3 billion of the $43.1 billion the firm raised in the fourth quarter came from this investor base, he said.

“We feel good about [fundraising], but I would acknowledge it is a tougher environment than when we started,” Gray said.

The main challenges to capital raising include LP overallocation to private equity, specifically from US pensions, as well as currency headwinds for overseas investors, he added.

Gray said in January last year that the firm expects to have launched and substantially completed fundraising for nearly all of Blackstone’s major drawdown strategies.

Blackstone has raised $15.2 billion for its private equity flagship vehicle BCP IX as of the end of Q4, a slight increase from $14.4 billion in the third quarter, and has yet to hold a final close. Gray noted during the call that the firm expects to raise a similar amount as the prior fund. The firm is also in the market with its second growth offering, which has gathered $3.5 billion as of end-December.

Its secondaries unit, Blackstone Strategic Partners, raised a total of $25 billion for two private equity secondaries funds last year: Strategic Partners IX gathered $22.2 billion, while Strategic Partners GP Solutions closed at $2.7 billion.

Asked where he sees innovation on product offerings, Gray noted there was a lot of room to grow in private credit, infrastructure and secondaries.

“We think about private credit as a huge area of opportunity, because investors – be it insurance companies or individual investors or institutions – are realising now that they can lend directly to borrowers with help from someone like Blackstone. That is a very big market, and we today are still a small percentage of that.”

Total AUM for private equity, which also includes secondaries, tactical opportunities and infrastructure, was up 10 percent to $288.9 billion at year-end. Inflows were $8.7 billion in the quarter and $52.7 billion for the year.

Dry powder for private equity stood at $86.7 billion at the end of December.

Blackstone recorded $226 billion of inflows as of end-December. Total AUM stood at $975 billion at the end of 2022, up 11 percent from 2021.