Blackstone Group LP (BX), the world’s largest private-equity firm, said first-quarter profit fell 24 percent as slower gains in the value of its holdings hurt performance fees.
Economic net income, a measure of earnings excluding some costs tied to the firm’s 2007 initial public offering, dropped to $432.3 million, or 39 cents a share, from $571 million, or 51 cents, a year earlier, New York-based Blackstone said today in a statement.
Analysts had expected earnings of 40 cents a share, according to the average of nine estimates in a Bloomberg survey.Performance fees declined 37 percent to $384.8 million as fund holdings appreciated at a slower pace compared with a year earlier, the firm said.
Blackstone, led by Chief Executive Officer Stephen Schwarzman, has led a push among the largest, publicly traded private-equity firms to reduce reliance on buyouts, by expanding its fund-of-hedge-funds businesses as well as its advisory group, which counsels companies on mergers and restructurings.
“The investment thesis for these stocks rests on the firms’ ability to gather assets,” Goldman Sachs analyst Marc Irizarry said in a telephone interview before the results were released.
“We expected to see growth in credit and real estate following strong performance by both during the quarter.”
Blackstone’s profit dropped even as the value of its private equity and real estate holdings rose. Private equity assets increased 4.9 percent in the quarter, while real estate gained 4 percent. In last year’s first quarter, real estate increased 8.7 percent.
Shares Fall
Blackstone fell 1.6 percent at 9:38 a.m. in New York, paring gains this year to 4.2 percent.
The company’s assets under management rose 27 percent from a year earlier to $190 billion. The increase in assets helped boost management and advisory fees to $471.7 million from $412.7 million.
Blackstone’s credit investment arm, GSO Capital Partners LP, finished raising $4 billion during the quarter for its second fund, twice the amount of commitments for its first. Within the credit business that houses GSO, fee-earning assets increased 62 percent.
Blackstone is seen as a bellwether for the buyout industry given its size and reach across markets. KKR & Co. (KKR), the New York firm run by Henry Kravis and cousin George Roberts, is scheduled to report results next week.
Carlyle IPO
Carlyle Group (CG), the Washington-based private-equity firm preparing to go public next month, oversees about $147 billion.
Private-equity firms pool money from investors including pension plans and endowments with a mandate to use it to buy companies within five to six years, overhaul then sell them, and return funds with a profit after about 10 years.
The firms, which use debt to finance the transactions and amplify returns, typically charge an annual management fee equal to 1.5 percent to 2 percent of committed funds and keep 20 percent of profit from investments.
Worldwide, the value of private-equity deals announced in the first quarter fell 41 percent to $53.3 billion from a year earlier, with leveraged buyouts increasing 7 percent to $22.1 billion, according to data compiled by Bloomberg.
Endorsing Romney
Private equity has come under a public spotlight this year by opponents of Republican presidential front-runner Mitt Romney.
The former governor of Massachusetts was also the CEO of Bain Capital LLC, the Boston-based private-equity firm. Romney’s opponents have accused him of enriching himself at the expense of corporations and their employees.
Schwarzman, who co-founded Blackstone in 1985 with Peter G. Peterson, endorsed Romney last year and held a fundraiser for the candidate at his Park Avenue apartment.
Ranked the 66th- richest American by Forbes magazine, Schwarzman has opposed raising the tax on the share of profits given to private-equity managers, known as carried interest, and has endorsed a flat tax as part of comprehensive reform of the U.S. tax code.
Blackstone President Tony James has agreed to hold a fundraiser for President Barack Obama this spring, according to two people familiar with the matter, diversifying the political bets for Blackstone.
bloomberg.com
Economic net income, a measure of earnings excluding some costs tied to the firm’s 2007 initial public offering, dropped to $432.3 million, or 39 cents a share, from $571 million, or 51 cents, a year earlier, New York-based Blackstone said today in a statement.
Analysts had expected earnings of 40 cents a share, according to the average of nine estimates in a Bloomberg survey.Performance fees declined 37 percent to $384.8 million as fund holdings appreciated at a slower pace compared with a year earlier, the firm said.
Blackstone, led by Chief Executive Officer Stephen Schwarzman, has led a push among the largest, publicly traded private-equity firms to reduce reliance on buyouts, by expanding its fund-of-hedge-funds businesses as well as its advisory group, which counsels companies on mergers and restructurings.
“The investment thesis for these stocks rests on the firms’ ability to gather assets,” Goldman Sachs analyst Marc Irizarry said in a telephone interview before the results were released.
“We expected to see growth in credit and real estate following strong performance by both during the quarter.”
Blackstone’s profit dropped even as the value of its private equity and real estate holdings rose. Private equity assets increased 4.9 percent in the quarter, while real estate gained 4 percent. In last year’s first quarter, real estate increased 8.7 percent.
Shares Fall
Blackstone fell 1.6 percent at 9:38 a.m. in New York, paring gains this year to 4.2 percent.
The company’s assets under management rose 27 percent from a year earlier to $190 billion. The increase in assets helped boost management and advisory fees to $471.7 million from $412.7 million.
Blackstone’s credit investment arm, GSO Capital Partners LP, finished raising $4 billion during the quarter for its second fund, twice the amount of commitments for its first. Within the credit business that houses GSO, fee-earning assets increased 62 percent.
Blackstone is seen as a bellwether for the buyout industry given its size and reach across markets. KKR & Co. (KKR), the New York firm run by Henry Kravis and cousin George Roberts, is scheduled to report results next week.
Carlyle IPO
Carlyle Group (CG), the Washington-based private-equity firm preparing to go public next month, oversees about $147 billion.
Private-equity firms pool money from investors including pension plans and endowments with a mandate to use it to buy companies within five to six years, overhaul then sell them, and return funds with a profit after about 10 years.
The firms, which use debt to finance the transactions and amplify returns, typically charge an annual management fee equal to 1.5 percent to 2 percent of committed funds and keep 20 percent of profit from investments.
Worldwide, the value of private-equity deals announced in the first quarter fell 41 percent to $53.3 billion from a year earlier, with leveraged buyouts increasing 7 percent to $22.1 billion, according to data compiled by Bloomberg.
Endorsing Romney
Private equity has come under a public spotlight this year by opponents of Republican presidential front-runner Mitt Romney.
The former governor of Massachusetts was also the CEO of Bain Capital LLC, the Boston-based private-equity firm. Romney’s opponents have accused him of enriching himself at the expense of corporations and their employees.
Schwarzman, who co-founded Blackstone in 1985 with Peter G. Peterson, endorsed Romney last year and held a fundraiser for the candidate at his Park Avenue apartment.
Ranked the 66th- richest American by Forbes magazine, Schwarzman has opposed raising the tax on the share of profits given to private-equity managers, known as carried interest, and has endorsed a flat tax as part of comprehensive reform of the U.S. tax code.
Blackstone President Tony James has agreed to hold a fundraiser for President Barack Obama this spring, according to two people familiar with the matter, diversifying the political bets for Blackstone.
bloomberg.com
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