Posted on Jul 22, 2022 at 6:05 pmUpdated July 23, 2022 at 9:12 am
In the case of private equity, the signals are red, warns the world number one in the industry. At its peak just six months ago with record profits, Blackstone posted a $29.4 million loss in the second quarter versus more than $1.3 billion in profit a year earlier.
“We’re clearly seeing a slowdown,” Jonathan Gray, the CEO of the private heavyweight, said during Thursday’s accounts presentation, warning of “a significant slowdown” in transaction momentum in a more volatile market environment.
“The context is tougher than last year,” he commented, and Blackstone, which is heavily invested in technology and real estate, “is preparing for an environment of rising interest rates and a normalization in market multiples for a while.” Jonathan Gray hasn’t ruled out reversing his plan to increase his workforce by 20% this year. That prospect hasn’t reassured investors as the stock is down nearly 22% year-to-date.
Nearly $1 trillion in assets
Blackstone is certainly a step closer to its goal of $1 trillion in assets by the end of 2022, raising another $88 billion over the past three months. Its “dry powder,” which has yet to be deployed, is also very comfortable, with a mattress priced at just over $170 billion.
This advancement is all the more remarkable given that “other famous actors seem to be on the decline,” Blackstone founder Stephen Schwarzman hasn’t failed to target BlackRock.
However, the global leader in private equity saw the value of its $276 billion portfolio of unlisted companies fall by 6.7% (compared to +2.8% in Q1 2022 and +13.8% in Q2 2021). And this decline affected most of his strategies, such as: B. Loans.
Worries swept away
The Jon Korngold-led “Growth” fund, which warned in January about “blind euphoria” among tech investors, saw its yield fall from 17% to 2% between the first two quarters of this year. Its potential benefits have almost been wiped out.
In fact, the analysts’ topic was mostly focused on funds accessible to wealthy individuals, the company’s key growth driver over the past few quarters. Blackstone withdrew $12 billion net from that fund. “With this kind of volatility, it’s no surprise if you see moderation in inflows,” Jonathan Gray said. At the same time, almost $3 billion was withdrawn.
Blackstone’s invincible founder, Stephen Schwarzman, flatly dismissed these concerns: “We have a vision of the future that the market obviously doesn’t share today, but I’ve been through it many times. In the end we will have the upper hand.”