Blackstone closes record fund

With $6.5bn in commitments, the alternative asset manager’s fourth private equity fund has exceeded its initial target by nearly $1.5bn.

The Blackstone Group has closed its fourth private equity fund, having received $6.45 in limited partner commitments. BCP IV is the largest private equity fund raised to date.

The fundraising, in part facilitated by UBS Warburg and Credit Suisse First Boston which acted as placement agents, began in the spring of 2001 with an initial target of $5bn. According to Blackstone, nearly 90 per cent of existing investors in BCP III, a $4bn fund raised in 1997, committed to the new vehicle. But nearly 50 per cent of investors in the fund invested in a Blackstone private equity product for the first time.

Around 190 institutions invested under terms and conditions which were described as “standard”. Investors pay an annual management fee of 1.5 per cent of committed capital.

Blackstone’s success on the fundraising trail is significant not only because private equity fundraising is difficult given the current investment climate, but also because some investors have recently questioned whether multi-billion dollar buyout funds are indeed conducive to generating top quartile returns. Nevertheless a number blue chip private equity houses have been recently able to close on large sums of money. Earlier this year, Blackstone-rival Warburg Pincus closed a $5.3bn global fund.

Stephen Schwarzman, the group’s co-founder, CEO and president, described the prospects for investing the fund as “particularly opportune given the global dislocation of stock markets and the need for corporations to raise capital by selling assets. The new deal pipeline is beginning to flow again, and at significantly more realistic valuations compared to the last several years.”

A source close to Blackstone said the firm was expecting average deal size in the international LBO market to increase. “The new fund enables us to take advantage of this, but we will not change our approach to value investing. We will walk away if a situation isn’t right.”

Up to 30 per cent of the fund’s capital will be invested in Europe, with the majority of the money being earmarked for Blackstone’s US home market.

Total amount of funds raised by Blackstone for corporate private equity investing now stands at over $14bn. Its private equity group comprises some 50 investment professionals, eleven of whom are senior managing directors.

The total capital committed across all of the firm’s alternative asset investing businesses, including private equity, real estate, corporate debt, and marketable alternative asset management, is now around $25bn.