Blackstone prepares to ramp up growth investing

The firm expects to launch its debut dedicated life sciences fund this year and is racing toward a large first close on its latest private equity flagship fund.

Blackstone will launch its first dedicated life sciences fund this year as the firm pushes further into growth investing.

In October the private equity giant announced it had acquired global life sciences investment firm Clarus and launched Blackstone Life Sciences, which will invest across the life-cycle of companies and products within the key life sciences sectors.

On the firm’s fourth-quarter earnings call on Thursday, president and chief operating officer Jonathan Gray said Blackstone is expanding the Clarus team, and the launch of the fund will depend on the deployment pace for the funds the team is already managing.

“Since the announcement of affiliating with Blackstone, the dealflow they’re seeing has gone up significantly,” Gray said, adding this is “reaffirming our instinct” on the scale of the market.

“Traditionally, there hasn’t been a lot of private capital for things like phase three trials. So our optimism about that business and the prospects for [it] keeps going up.”

In January Blackstone announced it had hired Jon Korngold from General Atlantic to launch a growth equity platform. Gray said investor response has been positive.

“What they’re hoping to see – and I think expect to see – is the kind of disciplined investing we bring, downside orientation, even in these high-growth areas.”

Blackstone held a $3.4 billion initial close for its Strategic Partners Fund VIII secondaries vehicle, during the quarter. The firm is targeting $8 billion for that fund, according to sister title Secondaries Investor.

Blackstone’s next flagship private equity fund is expected to “exceed $20 billion”, Gray said, and the firm is anticipating a first close “with the vast majority raised” in the next few months.

Between these two funds and two real estate funds, the $20 billion global opportunistic real estate fund BREP IX and an opportunistic European real estate fund, the firm expects to raise more than $60 billion.

“Our confidence in hitting our targets for those strategies is even greater today than it was in September, despite the market volatility,” Gray said.

The two real estate funds and the flagship private equity fund are subject to four-month fee holidays for investors committing prior to the first close. The secondaries vehicle does not have a fee holiday.

Gray said while the funds are all larger than their predecessors, the firm remains “disciplined’ in increasing fund sizes.

“We think size is an advantage. On the other hand, we don’t want to raise too much capital, which we can’t deploy prudently.”

Blackstone was not immune to the roiling stock markets in the fourth quarter; the firm posted a net loss of $11 million for the period.

Its corporate private equity portfolio was down 2.9 percent for the quarter. It appreciated 19 percent for the year.

Both co-founder Stephen Schwarzman and Gray pointed to the firm’s $113 billion of dry powder and the opportunity to find “interesting” investments in a dislocated market.

“Reduced valuations in the public markets could lead to more large privatisations,” Gray said, referencing the firm’s recent acquisition of, among others, Thomson Reuters Corp’s Financial and Risk unit, which Blackstone renamed Refinitiv.

“With pricing for risk assets down meaningfully over the past six months, it’s a more interesting time to deploy capital, globally.”

AUM in the firm’s private equity platform rose 24 percent to $130.7 billion. The firm deployed $6.8 billion in the quarter and realised $3.3 billion.

Assets under management were up 9 percent year-on-year to $472 billion.