Blackstone, Fortress report slight private equity gains

Blackstone’s private equity portfolio appreciated by 5% in the third quarter, while Fortress' private equity portfolio achieved pre-tax distributable earnings of $25m.

The Blackstone Group reported earnings of $275 million in the third quarter, driven in part by increasing revenues in the listed firm’s private equity portfolio.

The firm reported a modest $11 million of realised gains from exits in the third quarter, but repeated expectations voiced in an earlier letter to limited partners that distributions are on the horizon: chief executive Stephen Schwarzman noted the firm was preparing to take up to eight portfolio companies public in the next 12 to 18 months.

Blackstone's increased private equity revenue was driven largely by an increase in performance fees, “attributable to the net appreciation in the fair value of the segment’s underlying portfolio investments, particularly in publicly traded investments and consumer and energy sector investments”.

Its private equity group reported revenues of $226.9 million in the third quarter, up 5 percent from the second quarter. The numbers are far more positive than the same period last year, when the firm's private equity investments recorded losses of $68.3 million, much of which was linked to unrealised write-downs.

Meanwhile, Fortress Investment Group, which also published its third quarter financials Friday, reported revenues of $143.7 million, down more than 22 percent year-over-year. Despite the losses, Fortress marked pre-tax distributable earnings in its private equity investment of $25 million in the third quarter, up from $17 million in the same quarter last year.

The slight increase in private equity earnings occurred as Fortress increased the amount it invested in private equity deals to $1.5 billion for the nine months ending 9 September 2009, nearly double the $772 million invested in the same period in 2008.

The hybrid firm’s investment losses – including in hedge funds and hybrid private equity funds – totaled $408 million in the third quarter, compared to $2.5 billion in the third quarter last year.