During last week's first-quarter earnings conference call, Blackstone hinted at plans to explore new areas and strategies where it can expand, while continuing to focus on undervalued sectors.
Several key members of the firm gave updates on Blackstone's work in infrastructure, growth investing and energy. Here are some takeaways from the Thursday earnings call:
Foundations are being laid for an infrastructure push
“We're laying the groundwork for that,” said Tony James, president and chief operating officer at Blackstone. “We're talking to some anchor investors, and putting together a team and some things like that.”
But James also noted that the endeavour will take a while. “It does take a while to build new capabilities,” he said. Blackstone has said at the beginning of the year that it could raise as much as $40 billion for infrastructure.
The firm wants to venture further into growth tech
“Let me say that we've been thinking now for a couple of years about the fact that we don't want to be the ultimate old economy company,” said Michael Chae, chief financial officer at Blackstone.
Blackstone has been investing in growth companies through its Tactical Opportunities fund and added venture capitalist Jim Breyer to its board last summer. Chae also mentioned “an extremely exciting concept” related to the strategy, which he declined to elaborate on.
Energy investment will remain a focus
Blackstone Energy Partners, the energy-focused private equity business of Blackstone, recently acquired EagleClaw Midstream Ventures from EnCap Flatrock Midstream for about $2 billion, including about $1.25 billion in stapled debt financing.
“We frankly feel that energy prices in the low $50s today will be higher out of sometime in the next five to seven years,” James said. “We're making a sector bet on that. We'll get our money back even if prices drop. We think that mix is a very nice risk-reward ratio.”
He explained that the firm may not necessarily buy complete companies, but may pick up competent management teams and pair them with attractive assets. “So a lot of the value is created by marrying those two things.”
GSO Capital Partners, Blackstone's credit arm, also deployed $2.3 billion during the first quarter, its second highest ever, with a focus on European direct lending and energy.
Chae noted that energy exposure at Blackstone represents about 10 percent, while more specifically for its private equity and GSO business, that amounts to about 19 percent to 20 percent, respectively.