Blackstone’s income plunges in Q1

The firm’s economic net income decreased by 77% compared to a year ago, driven by market volatility and lower carried interest.

The Blackstone Group's economic net income fell to $371 million in the first quarter from $1.6 billion a year ago, with the firm attributing the drop to market volatility.

“The first quarter was a roller coaster for equity and credit markets,” Stephen Schwarzman, chief executive officer and co-founder of Blackstone, said in an investor earnings conference call on Thursday. “The market tantrum at the beginning of the year resulted in many dislocations. We're not immune to market movements in terms of marks to the portfolio.”

Total revenue decreased to $929 million in the first three months of the year, from $2.5 billion a year ago. Management fees and advisory fees remained stable at $613 million, compared to $619 million the year before, but performance fees fell due to lower carried interest.

Realised carried interest in the first quarter was $231 million, down from $1.2 billion for the same quarter a year ago, pushing down total performance fees to $314 million from $1.7 billion a year ago.

The bulk of realised carried interest in the first quarter, or nearly 97 percent, came from Blackstone's real estate division, posting $200 million in realised carry. Private equity brought in only $30 million in realised carry, compared with $383 million a year ago.

Total assets under management reached a record $343.7 billion, up 11 percent from a year ago, despite returning $48.2 billion of capital to investors. In private equity only, total assets under management increased 25 percent to $95.5 billion. Real estate ended the quarter with $101.1 billion in total assets under management, making it the Blackstone's first segment to surpass the $100 billion threshold.

In private equity, the firm deployed $2 billion during the quarter, including new investments and add-on investments.

On the fundraising side, it raised $3.5 billion in new private equity funds, including an initial close for Strategic Partners Fund VII on $1.8 billion. The fund is seeking to raise $5.75 billion. Blackstone also continued to raise its Blackstone Core Equity Partners, or BCEP, which is a longer-term fund targeting slower-growing companies, holding a close on $670 million.

The firm also raised $327 million during the first quarter for the latest vintage of its Tactical Opportunities fund, which as a strategy is now more than $15 billion total.

“We have the trust of our LPs to build new businesses with significant scale,” said Schwarzman. “We're raising so much capital from our LPs because we're simultaneously able to find opportunities to deploy it. That's the virtuous circle that drives our business.”