Blackstone: $32 Bln In Dry Powder to Invest

The Blackstone Group on Thursday reported a first quarter profit while firm executives said the results were the best since the investment firm went public four years ago.

The Blackstone Group said it had $32 billion of committed, but uninvested, dry powder at the end of Q1 to invest, its executives said. Shares of Blackstone added 18 cents to $19.18 in late morning trading Thursday.

The New York-based private equity firm said net income was $42.7 million for the quarter ended March 31, compared to a $121.4 million loss for the time period in 2010. Total segment revenues were about $1.2 billion, up 64% from $701 million in 2010.

Economic net income—which represents income from fees, investment income minus expenses and gains on investments–-jumped 58% to $568 million. Total fee-earning assets under management was $124 billion, up 26% from $98 billion in Q1 2010. Total AUM was roughly $150 billion for the quarter, a 43% increase from $104.5 billion in 2010.

“All in all it was a solid quarter, even a bit of a boring quarter,” said Tony James, Blackstone’s president and COO, on a conference call for the media.

By segment, private equity revenues were relatively flat, James said. The unit reported $273.7 million in Q1, compared to $276.8 million in 2010. A decline in investment income of $37.2 million offset a 25% increase in performance fees and a 10% jump in management fees, according to a statement. Private equity, including the amounts raised by Blackstone’s latest fund, BCP VI, had $16.9 billion of dry powder as of March 31.

The investment period for Blackstone’s latest fund, BCP VI, has started, Blackstone said. However, the buyout shop has yet to report the final close for BCP VI (the fund clocked in at $15 billion last year). James, on the call, said that Blackstone has “basically stopped fundraising for BCP VI quite a while ago and we’re just waiting for a couple of documents…[the fund] is officially closed as far as new investors are concerned.”

There has been much PE-backed M&A recently but larger deals, such as LBOs, have been slow. James said there will be much competition for LBOs during the short term. “There is lots of uninvested PE capital, lots of easy credit…there is fair amount of cash on the balance sheet of corporations that they’re working through,” he said.

“Plain vanilla buyouts are pricey for us,” James said. “We have to find more creative ways to invest money.”

James said Blackstone still controls a substantial amount of uninvested capital. However, mega funds have already reduced their dry powder, he said. This is interesting since KKR, in February, said it had $12.6 billion in uncalled PE commitments. However, small and medium funds have not reduced their dry powder, James said.

“We’re still finding plenty of interesting things to do but we’re doing them in emerging markets, in energy,” he said.