Blackstone activates $14.7bn Fund VI

The firm - which reported a 29% increase in its private equity portfolio during the past year - has now fully invested its fifth private equity fund, according to president Tony James.

The Blackstone Group will start investing its latest buyout fund, Blackstone Capital Partners VI, after raising $14.7 billion of equity for the vehicle.

The New York-based firm said it was in the process of “rounding up the last couple” of commitments to the vehicle, with Blackstone president and chief operating officer Tony James saying on an earnings call Thursday BCP VI would close on around $15 billion.

Reporting a 29 percent increase in its private equity portfolio during the past year, Blackstone said it had just opened the investment period on BCP VI, after fully investing the predecessor vehicle, BCP V, which raised $21.7 billion in 2007.

Blackstone invested $10 billion across its asset classes in 2010, including $3.5 billion of equity for private equity deals, James said on the call with journalists. The firm added in a statement its private equity portfolio had $16.5 billion of dry powder, as of the end of December, having called $1.7 billion of equity from LPs.

Tony James

James noted however that much of the deal flow for private equity was targeted at Asia in 2010, with 75 percent of all capital being invested in the region. He cited the unexpected failure of “several large deals” in the US, such as the $604.5 million takeover of independent power producer Dynegy, for the concentration of Asia deals in 2010, something he didn’t expect to continue into 2011.

“My guess is the US will be a much more important component [of the private equity portfolio] this year,” James said, adding the firm had “already signed up and closed two big deals in the US since the end of 2010”.

Blackstone’s 40 percent stake in Sao Paulo asset manager, Patria, was also expected to bear fruit in 2011, while Europe would be another big focus for the firm, particularly in relation to bank deals, where James said Blackstone had made “more progress” than in the US. That situation, however, “may not be the case in a couple of months,” James added.

Blackstone said its private equity portfolio was now valued at 1.5x investors’ original investments, while the firm’s $6.5 billion BCP IV, which closed in 2002, had a net realised IRR of 52 percent since inception. The realisation of assets in BCP IV caused fee-earning private equity assets under management to fall slightly to $24.2 billion in 2010 compared to $24.5 billion in 2009.

James also noted on the call the firm would start fundraising for its next real estate opportunity fund this year, with expectations the global vehicle, Blackstone Real Estate Partners VII, could target a similar equity haul to its predecessor vehicle of more than $10 billion in capital.