Blackstone’s private equity portfolio rebounds on tech investments

The firm saw ‘renewed momentum’ on the deal side in the third quarter, and more than $15bn of inflows across asset classes, including $2.3bn for Blackstone Growth.

Blackstone‘s private equity portfolio had its second quarter of double-digit growth as technology and life sciences investments buoyed the portfolio.

Speaking on the firm’s third-quarter earnings call on Wednesday, chief financial officer Michael Chae said the private equity portfolio had “fully retraced” the 21.6 percent decline it experienced in the first quarter, with a 12.2 percent appreciation following an uplift of 12.8 percent in the second quarter.

Chae said gains were driven primarily by technology, consumer finance and renewable energy holdings.

“The firm’s largest, fully invested fund, BCP VII, is weighted toward the technology sector, including investments like Refinitiv and Bumble,” he said, adding that its predecessor, the $15.19 billion BCP VI, has had “broad based appreciation in value” over the last two quarters, particularly in its public holdings.

Private equity assets under management were up 9 percent to $189.2 billion on inflows of $3.9 billion, including $2.3 billion for Blackstone Growth, which officially launched in the quarter and is seeking between $3 billion and $4 billion. The firm also closed Blackstone Core Equity Partners II on $8.2 billion, making it the largest third-party long-term private equity vehicle ever raised.

“This is another element of the firm’s migration towards longer-duration capital,” said president and chief operating officer Jonathan Gray.

Blackstone deployed $4.1 billion in corporate private equity in the third quarter, and committed to deploy a further $4.1 billion, which includes the acquisition of genealogy company Ancestry and the corporate carve-out of Takeda’s consumer healthcare business.

The firm’s Tactical Opportunities business appreciated 10.7 percent in the quarter, invested $275 million in life sciences logistics services company Cryoport and teamed up with Lloyds of London to back digitally-enabled insurance platform Ki.

“We’re experiencing renewed momentum in both capital deployment and realisations,” chairman Stephen Schwarzman said on the call.

Gray emphasised Blackstone’s focus on investing thematically to capture tailwinds in sectors such as technology, digital infrastructure, sustainable energy and life sciences.

“The challenge is, can you buy them at reasonable prices, and one of the ways to do that is to buy things that are sort of one derivative off,” Gray said. “Maybe you can’t buy a media company or tech company, but you can own their real estate. In life sciences, we made an investment in Tactical Opportunities in the cold storage logistics area.”

Ancestry is an example of a business with growth that has been challenged in recent years, and thus Blackstone was able to purchase at a reasonable price, Gray said.

“It’s about buying these on-theme businesses, but finding the right ways to enter at reasonable multiples.”

Blackstone is also looking at businesses in disrupted sectors, such as travel, theme parks and sporting events.

“Those are all trends, we think, that will come back, but there’s an opportunity to invest in them at what could be attractive prices, there could be distress.”

Gray also laid out the firm’s ESG initiatives, including setting a carbon emissions reduction goal of 15 percent across all new control investments within the first three years of ownership; a target of one-third diverse representation on the boards of new control investments; and a programme for portfolio companies to increase employment opportunities and career mobility for employees from underserved communities.

He added  the firm’s work on ESG would initially be confined to its existing strategies, and there is “a possibility” Blackstone could create “something more dedicated because of the huge capital needs in the space, particularly in a different administration”.

Blackstone’s overall assets under management increased 3.6 percent from second quarter end to $584.4 billion. Distributable earnings were up to $772 million from $548 million in Q2.