Blackstone collects record $134bn as perpetual capital drives inflows

Perpetual vehicles, which require no mandatory return of capital, are transforming the firm's asset base and earnings, president and COO Jonathan Gray said on a Q4 earnings call Thursday.

Blackstone, the world’s largest private equity firm, has had its best year of fundraising ever as perpetual capital vehicles continue to drive inflows.

The New York-headquartered firm raised $134 billion across all strategies last year, the third year in a row it has collected more than $100 billion of inflows, Jonathan Gray, president and chief operating officer, said on the firm’s fourth quarter earnings call Thursday.

“We’re seeing faster growth in perpetual capital, which is transforming our asset base and earnings into something much steadier than what we’ve generated historically,” Gray said. In the past, Blackstone’s business consisted mainly of episodic drawdown funds and its capital deployment equated to planting the seeds of annuals, he added.

“That continues to be a terrific business, but as our perpetual AUM grows, we are increasingly planting perennials, which have a recurring and compounding contribution to the firm’s financials,” Gray said.

Perpetual AUM increased 43 percent year-on-year to $104 billion. Such vehicles, which include the firm’s $14 billion Blackstone Infrastructure Partners fund, Blackstone Real Estate Income Trust and its credit BDC, have lower return targets. They also have management fees and performance revenues calculated on net asset value, with no mandatory return of capital – something that has helped drive Blackstone’s fee-related earnings to record levels for both the fourth quarter of last year and the full year.

The firm made $1.8 billion in fee-related earnings last year, up 23 percent year-on-year.

Fundraising last year included the final close of the firm’s flagship Blackstone Capital Partners VIII, which Private Equity International reported in October was the largest private equity fund ever raised. The firm also raised $3.2 billion in a first close for its second life sciences fund and expects to hit the $4.5 billion hard-cap, Gray said.

Blackstone expects to start deploying capital from BCP VIII in the coming quarters, following the execution of one or two more deals from its predecessor, chief financial officer Michael Chae said on the call. When activated, BCP VIII will be subject to a four-month fee holiday, he added.

Two-thirds of capital raised last year – $86 billion – was from products outside Blackstone’s four flagship funds, and the majority of this was from perpetual capital vehicles.

This year, the firm will have at least 10 funds that are either in market or newly launched, including a second GP stakes fund, a third infrastructure secondaries fund, a growth equity fund, an impact fund and a second private equity Asia fund, Chae added. Blackstone also expects a “significant first close” in the next few months for its second long-dated fund, he added. “In total, 2020 should be another robust year.”

Blackstone deployed $62.9 billion last year – a record for the firm and a 41 percent rise on 2018’s deployment.

AUM rose to $571 billion as of 31 December, a 21 percent year-on-year rise.