Blackstone Acquisition Fund is Late, Below Early Target

(Bloomberg) – Blackstone’s protracted event finally runs into cash from flagship buying funds, exceeding the timeline and exceeding expectations of billions of dollars.

The company began seeking capital in 2022, telling investors that the company will end its fundraising campaign around the end of March with more than $21 billion, according to people familiar with the matter. The acquisition funds closed in the past year took about half the time on average.

Blackstone declined to comment.

The high borrowing costs have eroded pension funds’ confidence and other big investors in the traditional script of private equity: companies that buy debt and cash out in profits. Industry fundraising activity declined for the third consecutive year in 2024, according to a February report from McKinsey, the world’s largest alternative asset manager.

It began preparing for fundraising as the Fed began raising interest rates to combat inflation. When the institution has less cash on hand, the company faces a crowded area. After telling investors that they plan to complete fundraising in the first half of 2023, Blackstone told them that it would take more time and delayed the schedule until the second half of the year before opening the fund to Stragglers.

The company also eased expectations for how much planned to raise. Bloomberg initially reported at the end of 2021 that the company could seek up to $30 billion. In 2023, Blackstone proposed to charge it about $25 billion, comparable to previous funds. By early last year, Blackstone said its target was at least $20 billion.

Blackstone-led CEO Steve Schwarzman and his heir Jon Gray now face another challenge: showing that big acquisitions can still be as interest rates rise, President Donald Trump’s trade war threatens a renaissance of a deal. Private equity is Hastone’s second largest business after credit and insurance after the end of last year.

In the latest changes to the acquisition team leadership, Joe Baratta ceded the day-to-day management of flagship vehicles to oversee all private equity strategies. This paved the way for Martin Brand to take over as the new head of the fund.

Buyout companies have been working to return capital to investors, providing pensions and donated funds even less to restore new funds. Investors become more picky, whether it is because of skills, financial engineering or stupid luck, they will work harder to study the company’s analysis.

Blackstone’s last buyout fund began investing in 2020, ranking the lowest quartile among peers’ lowest digits at internal rate of return, according to MSCI’s acquisition of the fund. The earlier funds that started trading in 2016 landed in the third quarter.

Both funds are in the second quartile through different amounts of return.

As the fundraising campaign is extended, some investors are also bargaining on fees and payments. In response to some of the concerns of some customers, Blackstone executives said the company does not want any deals in the patient-oriented healthcare business in the U.S.. Large private equity firms are hurt by underperforming in the field and are invited to pay attention to profits for the well-being of patients.

Blackstone also changed the way it distributes transactions between funds. The early years of its global acquisition fund invested with each deal from the Asian Fund and another energy fund. The latest flagship car will only be invested with the largest energy and Asian deals. This move creates a clearer description of the risks and benefits of funds.

Combined, these three private equity strategies are expected to bring more money than they raised in the previous year. Blackstone plans to raise more than $10 billion for its next Asian fund. Its $5.6 billion energy fund has the biggest gains than its predecessor.

The company told investors that having funds would help it take advantage of the market rebound. In 2024, Blackstone made its first investment in flagship purchasing funds through the acquisition of tropical smoothie cafe. It also supports sandwich chain jersey Mike.

Grey said during a revenue call in Blackstone in January that the tenor who discussed traditional funding with clients “feels better than years.”

(Updated with the Asian Fundraising Program in paragraph 3 to paragraph.)

More stories like this are available Bloomberg.com