October 17, 2024 — Blackstone Inc. has reported a notable rise in third-quarter profits, propelled by a surge of investor capital into its credit division, which has now surpassed real estate to become the firm’s largest business by assets.
Strong Performance Metrics
The company announced that distributable earnings increased by 5.5% year-over-year, reaching $1.28 billion. This profit translated to $1.01 per share, outperforming analysts’ expectations of 91 cents, as reported by Bloomberg. The credit and insurance segment attracted $21.4 billion in capital during the quarter ending September 30, representing more than half of the total inflows across all of Blackstone’s operations.
At the close of the quarter, credit assets totaled $354.7 billion, contributing to Blackstone’s overall assets of $1.1 trillion. This shift in asset distribution was further reinforced by the firm’s decision to classify part of its real estate lending operations under the credit umbrella.
Diversification Amidst Challenges
The credit division’s robust performance has allowed Blackstone to navigate the lackluster results seen in its private equity and real estate segments. Jon Gray, the firm’s president, emphasized the importance of diversification, stating, “We like having a diversified business.”
The growth of the credit sector reflects a broader strategy among leading alternative asset managers to evolve into financial superstores. This transformation helps these firms mitigate risks, particularly during turbulent times for their private equity units.
Stock Market Response
In light of the positive financial news, shares of Blackstone, based in New York, surged 6.3%—the highest increase since December—closing at $169.73. Year-to-date, the stock has risen 30%, although it still lags behind competitors such as Apollo Global Management Inc., KKR & Co., and Ares Management Corp.
Market Dynamics
Despite a cautious return to deal-making by private equity firms, many are facing challenges in achieving expected sale prices. Blackstone reported muted realizations in its key business sectors during the third quarter. Specifically, distributable earnings fell by 11% in private equity and 3% in real estate.
Ongoing struggles in the real estate market, coupled with elevated debt costs, have created a challenging environment. However, the pace of redemptions for Blackstone’s flagship Blackstone Real Estate Income Trust (BREIT) has slowed significantly from earlier peaks, with investments into the fund increasing since October 1. Gray expressed optimism, stating, “If current trends hold, we’re moving toward positive net flows in BREIT.”
Investment Insights
Blackstone has reached a significant milestone, managing $250 billion in assets for individual and bank clients. Corporate private equity and infrastructure sectors reported the most substantial gains, contributing to the firm’s strongest fund appreciation in three years.
As the largest alternative asset manager globally, Blackstone is the first major firm to release its financial results this earnings season. Looking ahead, the upcoming U.S. presidential election presents uncertainties that could affect the investment landscape. Gray noted that the polarized nature of the electorate may lead to “pretty thin margins” in the November election. He advised investors to differentiate between the heated campaign rhetoric and the policy decisions that will emerge post-election.
As Blackstone navigates these dynamics, its credit arm remains a critical component of its overall strategy and profitability.
Related Topic:
Nine Strategies to Leverage Derivative Business Opportunities
Examining America’s Labor Shortage: A Focus on Key Industries
Microsoft Exits Retail Media Business, Promotes Migration to Criteo
