Blackstone Inc. (NYSE: BX) reacts as bear stock to drop 1.66% in pre trading session on Thursday after the world’s largest alternative-asset manager reports first-quarter distributable earnings plummeted 36% year on year, owing to a sluggish real estate market that prevented it from cashing out on some holdings.
Blackstone said in a statement Thursday that distributable earnings plummeted 36% year on year to $1.25 billion, or 97 cents per share. This was more than the 94-cent average expectation of 16 analysts polled by Bloomberg. Assets under management increased 8% to $991.3 billion, bringing them closer to the $1 trillion threshold.
Outside of equities and bonds, Blackstone has become a dominant power in the financial realm. It is a behemoth in take-privates, buyouts, and real estate transactions. Now it must contend with how the Federal Reserve’s rate hikes are stifling dealmaking and bringing an end to a period of robust development.
“A slower deal environment is not a shock,” President Jon Gray said in an interview. “Things move slowly given the uncertainty.”
When compared to the previous year, Blackstone dealmakers held up longer on cashing out investments, resulting in a 22% decrease in revenues from sales. They also reduced the rate at which they placed fresh bets by more than half.
Economic instability is putting investors’ enthusiasm for options other than equities and bonds to the test. Blackstone received $29.5 billion in net inflows in the third quarter, down from $39.9 billion the previous year.
Its real estate business was the largest source of net inflows in the quarter, boosted by the closing of a massive institutional fund. This helped to mitigate the impact of the $70 billion Blackstone Real Estate Income Trust’s redemption backlog. In recent months, the property fund for rich individuals has curtailed redemptions as more clients attempted to exit.
One business unit benefited from rising interest rates. Blackstone’s private credit investments outperformed the market in the quarter, returning 3.4%.
Gray stated that the turmoil caused by the failure of three US regional institutions last month has generated investment possibilities, even after Blackstone supported a firm’s failed bid for Silicon Valley Bank. Blackstone has been in discussions with small banks about lending alongside them as more attempt to trim their balance sheets. Gray added “Because of the focus on liquidity, they may want to find partners.”
