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Blackstone fundraising led by secondaries, mezz, long-life funds

  • Firm expects up to $60 bln this year
  • Fundraising not as lumpy as in the past because of new products
  • Blackstone Strategic Partners Fund VII draws in $4.3 bln

Blackstone Group drew in $21 billion of fresh capital in the second quarter, with its latest secondaries fund pulling in $4.3 billion as one big contributor.

The fundraising bonanza came as credit and M&A markets recovered from dislocation earlier in the year, only to become more volatile in the final days of the half with the Brexit vote.

“All kinds of odd things are happening,” Chief Executive Stephen Schwarzman said during the second-quarter earnings call Thursday. “We see interesting investing opportunities.”

After wrapping up its two massive flagship funds in real estate and private equity last year, Blackstone expects it won’t match the “monster year” of $94 billion in 2015, COO Tony James told analysts on the call.

For example, Blackstone Capital Partners VI drew in $17.5 billion last year. That fund shifted into investment mode in the second quarter.

For 2016, Blackstone expects roughly $47 billion to $60 billion in fundraising as it adds new products for LPs.

“What drives this company is innovation,” James said. “We’re constantly having new products. It may start out as a separate account with a few LPs and then we convert it to a fund and take it to a broader market. Increasingly we have always-open funds and permanent capital vehicles.”

While the firm may still have some lumpiness in years it’s not raising big flagship funds, its new products have been making its fundraising smoother.

All told, Blackstone grew its total assets under management by 7 percent to $356.3 billion, with contributions from fundraising and organic expansion. Its private equity portfolio grew to a bit less than $100 billion from $92 billion in the year-ago quarter.

Among the highlights in the quarter, Blackstone held a closing for its seventh secondary fund, Strategic Partners Fund VII, which has a hard cap of $6.5 billion, according to an LP document. The pool drew a commitment of as much as $250 million from Pennsylvania Public School Employees’ Retirement System in February.

The firm also drew in $2.5 billion for its Core Private Equity fund, a pool investing in slower-growing companies for longer hold periods; and $280 million for its Tactical Opportunities Fund.

On the credit side, the firm’s mezzanine strategies drew in $3.5 billion and in real estate, its fifth European opportunistic fund notched $1.4 billion.

The firm attracted bigger checks from LPs, with several $1-billion-plus commitments in the second quarter alone, James said.

Overall, net income attributable to Blackstone Group rose 48 percent to $198.6 million from $134.2 million, while revenue dipped 3 percent to $1.19 billion from $1.23 billion. GAAP net income rose 32 percent to $463 million.

Action Item: Blackstone Q2 results,

Stephen A. Schwarzman, co-founder, chairman and CEO of Blackstone Group, attends a conference on sovereign wealth funds at the Asia Society in New York on April 14, 2008.  Photo courtesy Reuters/Shannon Stapleton