Q3 Smiles On Blackstone’s Hedge Fund And Private Equity Units

Oct 18 2012 | 9:46am ET

Blackstone’s alternatives units boasted a good quarter. Results released today show that revenues for the firm’s hedge fund unit—Hedge Fund Solutions—more than doubled from the year ago quarter driven by an increase of 17% in assets under management, which was a result of growth and fund performance. The last quarter alone saw a 9% jump in AUM.

Also in the hedge fund unit, composite returns were up 3.3% net for the quarter and up 6.2% net year-to-date. Net inflows were $1.7 billion for the quarter and $3.2 billion year-to-date. As of the end of September, $18.5 billion or 77% of incentive fee-earning AUM was estimated to be above high water marks, up from $9 billion or 41% last quarter.

The firm’s private equity unit is also showing strong results, with revenues up substantially year-over-year driven by an increase in performance fees and investment income.

The value of assets was up 7.1% for the quarter with appreciation across all contributed funds. According to Blackstone, improved market conditions drove the segment’s public holdings up 15.1% for the quarter, while private holdings increased 3.2%.

Significant performance fees were driven by BCP IV, and two recently launched funds—BCP VI and Blackstone Energy Partners—which are now above their hurdle rates and generating performance fees.

The firm invested $1.4 billion of total capital with an additional $907 million committed but not yet invested during the quarter, bringing year-to-date total capital invested and committed to private equity to $3.7 billion.

“In the third quarter, Blackstone continued doing what we’ve been doing for 27 years – generating compelling returns for our limited partner investors across our diversified platform. All of our investing businesses performed well in the quarter, including a 7% appreciation in our private equity funds and a 5% increase in real estate,” said Stephen Schwarzman, Chairman and CEO of Blackstone. “Over the past twelve months, we achieved gross organic inflows of $38 billion and returned $14 billion to our investors, driving us to record total assets under management of $205 billion.”


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