Blackstone Group (NYSE:BX) reported a GAAP net income of $921 million for the third quarter of 2023 during its investor call. Despite a challenging market environment marked by higher interest rates and varying investor sentiment, the company expressed confidence in its ability to navigate the current situation and capitalize on future opportunities. The firm's distributable earnings were $1.2 billion or $0.94 per common share, and a dividend of $0.80 per share was declared.
Key takeaways from the call include:
- Blackstone's total assets under management (AUM) increased by 6% year-over-year to surpass $1 trillion. The credit and insurance sector saw the highest growth, with a 10% increase in AUM.
- Despite a decline in transaction fees and lower fee-related performance revenues, the firm generated $275 million of fee-related performance revenues, mainly from its real estate credit and BPP platforms.
- The firm's underlying earnings power continues to build, and it remains focused on executing operating plans and driving long-term value.
- Blackstone expects an acceleration in realization activity once markets become more receptive.
- The firm's embedded value includes $16 billion of public stock in its private equity and real estate drawdown funds.
- Blackstone's all-weather business model provides resiliency, and the firm has significant investment firepower with over $200 billion of dry powder.
The company's executives highlighted strong investment performance, particularly in private credit, infrastructure, and life sciences. They also discussed the firm's growth in various business areas, including credit, real estate, and private wealth, and its position as a leader in the alternatives industry.
Blackstone's executives also discussed the potential impact of higher interest rates and a weakening US economy on their private asset returns. However, they expressed confidence in their portfolios' health and performance and identified opportunities for investing in real estate and other asset classes during these uncertain times.
The executives also touched on their secondaries business, stating that while returns have been lower in the past year, they expect activity to pick up in the future as more LP-driven transactions occur. They expressed confidence in their fundraising capabilities, citing the continued interest from clients in increasing their allocations to alternatives.
During the call, the executives also expressed confidence in the private wealth channel, stating that as long as they produce outperformance and offer suitable structures, the opportunity for growth remains significant. They highlighted their strong presence in the market with a quarter of the firm's assets and relationships with financial advisors worldwide.
The company saw $5 billion of inflows in the Insurance channel in the quarter, mainly from the big four accounts in insurance, with an additional $7 billion from other major insurers. Blackstone is focused on increasing credit quality and is discussing opportunities with other investors. The partnership with Resolution Life is progressing well, with a significant amount of capital invested in the company.
Blackstone Group (NYSE:BX) concluded the call by emphasizing its focus on legacy books and closed books, particularly those purchased from insurers looking to reallocate their portfolios. The firm expressed excitement about partnering with major insurers interested in private credit origination capabilities.
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