The Blackstone Group is making a major push to get its 1,300 limited partners to invest across all its product lines, including private equity, real estate and credit vehicles.
The listed firm, headed by Stephen Schwarzman, has also identified about 1,200 potential LPs “still to be conquered”, according to the firm’s president Tony James, who spoke on an earnings call Thursday. Those potential LPs likely won’t be needed for the firm’s sixth private equity fund, which began investing in January and has reached about $15 billion, James said.
“Three quarters of the last fund, [we consider] a great effort,” James said, referring to the firm’s $21.7 billion fifth fund. “The scale of that fund was unprecedented.”
Blackstone will push its sales force, including professionals at its placement agent affiliate Park Hill Group, to cross-sell to LPs with the goal of getting all investors into all products.
“It’s a fall-short by us,” Schwarzman said during the earnings call. “Our aspirational goal is to get 100 percent of our LPs investing in all our products.”
Our aspirational goal is to get 100 percent of our LPs invested in all our products.
As part of the effort, Blackstone is adding sales and marketing employees to areas of the world where “we haven’t focused as much and aren’t as strong”, Schwarzman said. One of those areas could be Latin America, where GPs are finding more capital these days as changing regulations allow institutions to enter the private equity market.
As a recent example, the firm attracted capital into its sixth fund from a Chilean financial institution called Larrain Vial, which launched a fund targeting $700 million that was to be committed to Blackstone VI. It's not clear how much that fund has raised.
While searching for new investors, the firm will not spend much time courting endowments, according to James.
“That’s not a big target audience because of the scale of capital,” James said, though the firm does count endowments among its LPs.
Blackstone reported first quarter earnings Thursday that revealed an increase in economic net income of 58 percent to $568 million compared to $360 million in the same time period last year. Total assets under management increased to $150 billion and the firm had about $32 billion of uninvested capital across all funds at the end of the first quarter, the firm reported.
Private equity revenues actually decreased in the first quarter to $273.7 million compared to $276.8 million in 2010. The firm had $16.9 billion of unused capital in private equity at the end of the quarter, and used about $653 million for investments during the quarter.
In real estate, the firm had revenues of $555.6 million for the first quarter, a huge increase from the $152.2 million during the same time period last year.