New York: Blackstone’s ambitions to raise as much as $30 billion for a record-breaking buyout fund have crashed headlong into a new reality.
The private equity giant, which began preparing for the effort in late 2021 and hoped to complete it by the first-half of this year, pushed back the timeline to the second-half, according to people familiar with the matter. Blackstone has been reining in expectations about how much it will ultimately raise.
Now, the world’s biggest alternative-asset manager is saying that it may collect about $25 billion, the same size of its previous flagship fund.
Last year’s inflation-fueled market swoon rattled institutional investors, whose portfolios were suddenly over-exposed to private equity after stocks and bonds tumbled. Blackstone’s fundraisers, in turn, expressed concerns to associates about whether the firm would be able to meet its goal for that fund on time, one of the people said.
“We will raise roughly a similar amount as the prior fund in a difficult private equity fundraising environment,” Blackstone President Jon Gray, 52, said in a conference call Thursday after the firm reported fourth-quarter results.
That’s a change from three months earlier, when Gray said the fund would be at least as big as the previous one. Blackstone also had told clients within the past year that it hoped to raise as much as $27.5 billion, some of the people said.
A representative for the New York-based firm declined to comment.
Blackstone and other buyout firms flourished during a prolonged period of low interest rates, raising one record pool after another as institutional investors such as pension funds and endowments turned to private equity for higher-yielding assets. Firms that set lofty fundraising targets at the height of the market are now being forced to walk them back.
About 1-in-5 buyout funds failed to hit fundraising targets in 2022, up from 14 per cent two years earlier, according to a Preqin analysis of hundreds of global funds. To reach those goals, firms had to spend seven more months on average persuading investors to write checks than in 2020.
Institutions’ overexposure to private equity caused Blackstone’s fundraising to slow toward the end of last year. It has collected $15.2 billion for its flagship fund so far, according to a filing last week. That’s up only slightly from October 20, when Gray told analysts that the firm had raised $14 billion.
The firm’s corporate private equity portfolio declined 0.6 per cent last year, outperforming the S&P 500, which tumbled 19 per cent.
Blackstone ended the year with $975 billion of assets under management, falling short of its goal to reach $1 trillion. Still, Gray said the firm is making progress in its effort to raise $150 billion across its various flagship funds.
“The good news is we’re at $100 billion,” he said, “so we’re two-thirds of the way through this.”