Blackstone unfazed by impact of LP cashflow constraints on fundraising

The issue is most relevant to private equity and the community of US pension plans, president and COO Jonathan Gray says.

Blackstone, which set a $150 billion target for a next round of flagship fundraising, does not expect cash-strapped limited partners to impede its progress.

“Our fundraising momentum has never been stronger,” president and COO Jonathan Gray said on the firm’s first-quarter 2022 earnings call. He was replying to a question about LP cashflow constraints, prompted by fewer exits in the wake of record dealmaking, and whether this may reduce capital raising or extend timelines.

Gray acknowledged the issue, adding that another factor is LPs that are now above their private equity allocation limits. Some 23 percent of respondents to Private Equity International’s LP Perspectives 2022 Study said they are over-allocated for this year, up from 13 percent in 2021.

Blackstone’s confidence about meeting its fundraising goal owes to the “continued movement into alternatives”, he said. Even in a period of market uncertainty, “it has not stopped”.

It also owes to the broad-based nature of Blackstone’s capital raising, which spans multiple strategies, such as infrastructure, life sciences, private credit, PE, real estate and secondaries, Gray said. In addition, the firm is engaging on a global basis an array of LPs – including institutional and retail clients – via draw-down and perpetual vehicles.

Many of Blackstone’s fund products are “really well-positioned for the environment we’re going into”, he said. “If you think about owning hard assets like infrastructure and real estate, owning floating-rate debt like we do in our direct lending platform, that’s really attractive.”

Mostly about PE

The issue of LP cashflow constraints is most relevant to private equity and the community of US pension plans, Gray said.

Of course, this is meaningful to Blackstone’s ninth buyout offering and second growth equity offering, launched this year. Gray, however, is sanguine about the prospects for both.

“Even in the most challenged sectors, like corporate private equity and growth, the goodwill that we have from our customers is very strong,” he said. “That is why we believe the vintages of both our next private equity fund and our next growth fund will be larger than the previous, despite this challenging environment.”

Blackstone has yet to announce a target for Blackstone Capital Partners IX, which Gray said is expected to hold a first closing in a few months. It could seek as much as $30 billion, Bloomberg reported, which if reached would make it 15 percent larger than its predecessor, closed in 2019.

Blackstone Growth II is targeting $7 billion to $8 billion, affiliate title Buyouts reported. The strategy’s inaugural fund was wrapped up last year at $4.5 billion.

The firm’s ninth secondaries vehicle secured nearly $14 billion as of the end of March, according to first-quarter 2022 documents, above an original target of $13.5 billion. Blackstone Strategic Partners IX is on track to raise about $20 billion, Gray said.

In the months ahead, it is possible the secondaries market will play a crucial role in helping cashflow and allocation-pressed LPs generate more liquidity. This is one of the reasons why “having a large fund for our team in secondaries is very important”, he said.

Blackstone’s assets managed totalled $915 billion-plus as of the end of March, up 41 percent year-on-year. Assets managed are projected to hit the $1 trillion-dollar mark later in 2022.


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