Blackstone closes $21.7bn mega fund(2)

Blackstone has surpassed Goldman’s record for the biggest private equity fund raised to date, with the closing of its fifth fund on $21.7 billion.

The Blackstone Group has closed its fifth fund on $21.7 billion (€15.7 billion), knocking Goldman Sachs from the No. 1 spot in terms of current fund size just months after the investment bank closed its $20 billion private equity fund.

“The record-breaking amount of capital at our disposal allows us to continue our leadership role in private equity investing on a global basis,” Stephen Schwarzman, Blackstone chairman, chief executive and co-founder, said in a statement.

Blackstone Capital Partners V had been fundraising, with help from Blackstone-affiliated placement agent Park Hill Group, for approximately two years. The fund held a first close on $10.3 billion in October 2005, a second close on $12 billion in December 2005, and what was originally thought to be the fund’s final close on $15.6 billion in July 2006. Blackstone re-opened the fund in October, reportedly to reduce the number of club deals in which it is forced to participate.

Two-thirds of the fund’s capital has already been committed to deals including Nielsen Company, Michaels Stores, Alliance Data Systems, Biomet, Freescale Semiconductor, Hilton Hotels and Center Parcs, according to a statement.

The statement said the fund will invest across numerous sectors and regions, much like Blackstone’s previous fund, which closed on $6.5 billion in 2002. Blackstone’s fourth fund made $15 billion in profit for investors, meaning LPs are booking returns of 3.5 times their original investment, one investor recently told PrivateEquityOnline.com.

“This fund has shot the lights out. If anyone doubts the reality of mega funds economics, then they could do worse than to look at BCP IV’s performance. It is sensational,” the investor said.

The New York-based firm said it has raised roughly $67 billion for alternative asset investing since starting its private equity business in 1987.