Blackstone exceeds $4bn for separate accounts

The firm received $703m in commitments to its tactical opportunities fund during the third quarter, while growing its private equity assets under management 25% to $62.6bn

The Blackstone Group has raised more than $4 billion for its tactical opportunities fund that primarily includes the firm’s separately managed accounts, Tony James, Blackstone’s president, announced on the firm’s second quarter earnings call Thursday.

Blackstone collected about $703 million in new commitments for its tactical opportunities fund during the third quarter, compared to $324 million in the second quarter. The fund includes Blackstone’s separate accounts it manages on behalf of The New Jersey Division of Investment, the California Public Employees’ Retirement System and the Oregon State Treasury. James said the firm will cap the fund at $4.5 billion. 

Blackstone's James

“We could raise a lot more but that’s all we’re going to take,” he said. “Our first responsibility is investing it well and investing it properly.” The investment period for tactical opportunities is three years. 

Blackstone launched its tactical opportunities strategy in 2011 in connection with the formation of a separate account with the New Jersey state pension system, which invested $750 million to the business. A year later Blackstone added $500 million to the fund from CalPERS and in June the Oregon State Treasury committed $250 million through a separate account. 

The tactical opportunities fund also includes a fund where smaller limited partners can make commitments. Blackstone has the liberty to use the tactical opportunities capital quickly for various credit and real asset investments. The fund is able to “take advantage of all the anomalies in the world”, James has said previously.  The fund had completed 11 deals as of July. 

Blackstone posted strong overall earnings during the third quarter, bringing its total assets under management to a record high of $248 billion, up from $230 billion last quarter and $205 billion a year ago.

In private equity, assets under management grew 25 percent to $62.6 billion, including a $9.1 billion addition from the completed acquisition of Strategic partners—Credit Suisse’s secondary alternatives business, which was announced during the second quarter.

We could raise a lot more but that's all we're going to take.

Tony James, Blackstone president

Blackstone’s overall carrying value of portfolio assets appreciated 4.2 percent during the quarter. Realisations generated proceeds of $2.5 billion. 

Blackstone’s private equity business has more than $18 billion in dry powder, including about $2 billion from Blackstone Capital Partners VI, which closed on $16.27 billion in 2012.

“We are not feeling pressured to put money out,” James said.  

James added the firm isn’t feeling any pressure from the slowdown in Washington either. Blackstone is “pretty well positioned all the way around” and is poised for investment opportunities in the event of a short-term crisis. 

The chief executive officers of Blackstone’s portfolio companies are also optimistic. “They always thought Washington would muddle through and they think they’ll muddle through again,” James said. “They’re seeing economic forces pick up and that is greater than any drag in Washington.” 

At the end of the third quarter, Blackstone’s economic net income, a measure that includes both realised and unrealised, remained relatively flat year-over-year at $640 million, though ENI has risen 49 percent year-to-date. Blackstone said the increase is a reflection of strong fee revenues and favourable performance fees across all of its businesses.