Blackstone sees the future in retail investors

Retail investors already represent 18% of total AUM, according to the firm’s latest earnings call.

Blackstone has been working on growing its retail platform, which represented 18 percent of the firm’s total $387.4 billion assets under management at the end of the third quarter.

In an earnings call, chief executive Steve Schwarzman said that the world’s largest private equity firm has been working with family offices, wire houses, private banks, brokers-dealers and independent registered advisors to reach individual investors with net worth of $5 million and under.

“These channel investors by and large have been underallocated to alternatives in their portfolios, some dramatically,” he said. “We’re helping them access institutional-quality products, in many cases for the first time.”

Blackstone has put together the infrastructure to support these new channels.

“We have a sales desk, we have full operating support, marketing, finance etc,” added Joan Solotar, senior managing director and head of private wealth solutions and external relations at the firm. “That has really taken the last several years of building and putting into place so we can now expand the distribution.”

The firm is also developing liquid and semi-liquid products for the retail market. Solotar said it is still early days in the growth of the retail market, adding the average target for alternatives in retail investors’ portfolios is 10 percent to 20 percent, while their actual allocation is between 2 percent and 3 percent.

She noted that working with advisors and retirement accounts like IRAs is a long-term project.

“It’s not just ‘you go to a distributor and tell them here’s our product, put it on your platform and it sells itself’,” she said. “It’s really creating a partnership with the advisor, which will then improve their business, taking time to educate them, provide great service, reporting etc. It will be a continuous build.”​

Blackstone reported a record $387.4 billion in assets under management – including $102.5 billion in private equity AUM – as of 30 September, a 7 percent year-on-year increase.

In private equity, the firm had $2.4 billion of realisations and invested $4.3 billion in the third quarter. Throughout the business, it deployed $10.9 billion.