Retail investors and the insurance market offer “an enormous amount of white space” for Blackstone, which is working to create products to suit their specific needs.
Speaking at the Deutsche Bank 2018 Global Financial Services Conference in New York on Wednesday, Jonathan Gray, who took over from Tony James as president and chief operating officer in February, pinpointed three priorities for future growth at Blackstone, one of which is serving these investor groups better.
“We’ve set up our business and set up teams of people to focus on these markets,” he said. “We’ve obviously got to create products that in some cases have different regulatory capital needs or more current income for retail investors. But there are these big spaces where if we innovate and bring the Blackstone quality product, our expertise, our know-how in markets and investing capital, creating value at the companies, in real estate assets we own, I think there’s a lot we can do in these different markets.”
On the insurance side, Gray said the firm’s goal is “to be an asset manager, to not really be on the liability side of the equation”. Blackstone will not, for example, replicate what Apollo Global Management has done with fixed-annuity insurance company Athene, which it created in 2009 and retained a significant stake when Athene went public in 2016.
“We’re not going to have our own insurance company. We have a stake through one of our funds in Fidelity & Guarantee, but that’s inside one of our funds, not a firm investment, and our intention is, as I said, [to serve] a broad range of customers out there.”
In late 2017 Blackstone created Blackstone Insurance Solutions to deliver customised investment grade and alternative investment solutions to insurance companies. The unit is led by Chris Blunt, former president of New York Life’s investment group.
“There are all sorts of insurance companies, some of whom may want to outsource all of their assets, some of whom may want to take structured credit and alternatives, some just alternatives, and we want to serve this customer base better,” Gray said. “We’re building what we think is a first-class operation to serve insurance companies.”
Gray added Blackstone can “do a better job of harnessing the power of our platform”, connecting the dots between different units to improve investment decisions.
“The data we collect is powerful, and I want to find a way to harness that and share it better,” he said.
Gray also expressed a desire to add “even more of a growth orientation to the firm in our investing”, boosting investments in areas including Asia, technology, growth equity and life sciences.
“A firm like ours can do more [in these areas], it will benefit everything we do,” he said, adding “we won’t do any of this overnight, we’re not going to get into things that are overheated”.