Market Losses Eat Into Blackstone Profit

Jul 20 2012 | 2:12am ET

Market volatility took a big chunk out of the Blackstone Group's second quarter profit, which plummeted by almost three-quarters.

The private equity firm said its economic net income fell to just $212 million, from $804 million a year earlier. The culprit was performance fees, which fell 80% to $135 million as Blackstone's portfolios lost ground.

Blackstone's private equity assets lost 4.2% of their value in the second quarter, while its real-estate investments appreciated by 2.9%. The firm's credit hedge fund business, GSO Capital Partners, saw its profit jump by 31% to $54.7 million. Blackstone's assets under management rose marginally to $190.3 million in the quarter.

"Generally, a pretty miserable situation in the second quarter," CEO Stephen Schwarzman said. "Markets have been dominated by tepid volumes and limited conviction. Investors remain apprehensive and hesitant to make decisions."

ENI excludes some costs related to Blackstone's initial public offering five years ago. Under generally accepted accounting principles, the firm suffered a $75 million net loss, compared to an $86.2 million profit in the second quarter of last year.

Blackstone's distributable earnings fell by much less, to $188 million from $191 million. The firm said it will pay a 10 cent per share dividend.

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