Blackstone Group LP (BX.N), the world’s largest alternative asset manager, reported a 62 percent slump in second-quarter earnings on Thursday, yet performance fee revenue generated from selling assets surpassed many analysts’ expectations.
Weak global stock markets weighed on the value of Blackstone’s portfolio in the quarter. But investors cheered as the New York-based firm declared its third highest quarterly dividend of 74 cents per share, sending its shares up 2.6 percent to $42.43.
“Stronger than forecast performance fees more than offset modestly lower than estimated management fees,” Jefferies LLC analysts wrote in a research note.
Distributable earnings, which shows actual cash that is available to pay dividends, were a record $1 billion in the quarter as a result of the high performance fee revenue, up 35 percent year-on-year.
While Blackstone’s portfolio appreciated overall more than the wider market, it did so at a slower pace than a year earlier, particularly in its real estate division, resulting in its lowest quarterly earnings since the second quarter of 2012.
The firm’s private equity and real estate funds appreciated 3.5 percent and 1.2 percent in the quarter, respectively, against gains of 8.4 percent and 6 percent a year ago.
Blackstone, the world’s largest manager of alternative assets like private equity and real estate, said economic net income (ENI), a metric of its profitability that takes into account the mark-to-market valuation of its portfolio, was $508 million in the second quarter, down from $1.33 billion a year ago.
This translated into ENI per share of 43 cents, matching an updated analysts’ average estimate of 43 cents per share in a Thomson Reuters poll.
For a third quarter in a row, private equity overtook real estate as Blackstone’s biggest earnings driver. Private equity contributed $169.4 million toward Blackstone ENI, against $137.1 million from real estate.
ENI in Blackstone’s credit investment unit was up 15 percent to $119 million, while its hedge fund investing unit reported an 11 percent increase in ENI to $92.2 million.
During the quarter, Blackstone completed a $14 billion deal to sell orthopedic products maker Biomet Inc to Zimmer Holdings Inc (ZBH.N), and sold shares in Hilton Worldwide Holdings Inc (HLT.N), Nielsen NV (NLSN.N), Catalent Inc (CTLT.N) and Pinnacle Foods Inc (PF.N).
Total assets under management were a record $332.7 billion as of the end of June. Blackstone raised a quarterly record of $31 billion in new funds, including $16.7 billion for its latest global private equity fund, the size of which will be capped at $17.5 billion.
(Reporting by Greg Roumeliotis in New York; Editing by Bernadette Baum and Andrew Hay)