Multi-product focus keeps Blackstone’s $150bn fundraising on track

Blackstone expects to reach the $150 billion target set for its latest round of fundraising despite protracted market challenges.

The target, announced in January 2022, is nearly 75 percent met, president and COO Jonathan Gray said in a second-quarter earnings call. “We remain on track to substantially achieve it by early 2024.”

Gray reaffirmed the goal while acknowledging that a major flagship fund which helped launch the $150 billion campaign, Blackstone’s ninth corporate buyout offering, is falling short.

Raising $16.6 billion as of June 30, Blackstone Capital Partners IX will finish “in the low-$20 billion range,” Gray said, below its predecessor, closed in 2019 at $26.2 billion. In the absence of a disclosed target, Fund VIII has up until now been the new flagship’s yardstick.

Of course, Fund IX, like other private equity funds currently on offer, is being hobbled by reduced LP capital available for the asset class. Supply issues may also be impeding Blackstone’s second growth equity vehicle, which has so far secured $4.1 billion against an $8 billion target.

So why does Blackstone remain confident about its fundraising prospects? The answer lies in more than 70 dedicated strategies.

As a sponsor of multiple products under the categories of real estate, private equity, credit and hedge fund solutions, Blackstone has a built-in capacity to adapt to market shifts. If private equity is under pressure because of LP overallocation, it can make up the difference in areas less affected by this factor or that are gaining ground due to macro trends.

A good example is private debt, the profile of which has risen with interest rate hikes and decreased competition. “The greatest demand today is for private credit solutions,” Gray said, noting Blackstone’s corporate credit, insurance and real estate debt businesses took more than half of the second quarter’s $30 billion of inflows.

Another strategy that has over-performed is secondaries. Perhaps in anticipation of a coming surge in GP and LP-led dealmaking, Blackstone earlier this year wrapped up a ninth vehicle at $22.2 billion, the market’s largest on record and well above a $13.5 billion target.

In addition, the firm last fall collected $4.8 billion for a fourth tactical opportunities fund, exceeding its $4.5 billion target. The all-weather strategy, which thrives in periods of volatility, raised another $1.6 billion in the second quarter, much of it through separately-managed accounts.

Blackstone also plans to unveil new funds contributing to the $150 billion goal, among them a third GP stakes offering and a sixth life sciences offering.

Blackstone reported hitting $1 trillion of managed assets in the second quarter, a key milestone in its – and private equity’s – history. This too owes to multiple strategies.

In the earnings call, CEO Stephen Schwarzman said the milestone reflects “Blackstone’s distinctive positioning as the leading innovator in our industry.” At inception, “we determined that building a great company required us to be in a continuous innovation mode, which we have institutionalized as a core competency.”

After Blackstone’s entry into private equity came “a succession of other asset management businesses over time,” he said. “We only entered a new area when we saw the opportunity to generate great risk-adjusted returns for our customers. We identified a remarkable leader. And the new area created intellectual capital that benefited the rest of the firm.”

The product proliferation described by Schwarzman has been especially intense recently. Today’s 70-plus dedicated strategies are more than twice the number only six years earlier.