Blackstone’s hedge fund investments tumble 8 per cent during “unprecedented” Q1 sell-off

Blackstone office in Manhattan

Blackstone saw its hedge fund performance fall more than 8 per cent during a torrid first quarter – but the world’s largest alternative investment manager has grown its overall assets over the past year, and now has USD150 billion in “dry powder” assets to put to work.

The group, which runs a range of hedge fund, private equity, credit, real estate, and alternative products, saw overall assets under management grow to USD538 billion in the 12-month period to the end of March, a 5 per cent year-on-year increase. 

Hedge fund assets stood at USD73.7 billion in Q1 - having attracted some USD3.25 billion in inflows in the first three months of the year – though overall hedge fund AUM is down year-on-year from the USD80.1 billion in Q1 2019.

Blackstone’s hedge fund solutions division, BAAM, provides access to a wide range of alternative investment strategies through portfolios of hedge funds, registered liquid funds, direct investing, manager seeding and general partner ownership.

Its 8.6 per cent negative return ultimately stemmed from market and economic impacts of COVID-19, the group said.

Over the past 12 months, overall hedge fund inflows at the group have reached almost USD14 billion, but hedge fund performance fell 4.3 per cent over the same period.

Elsewhere, Blackstone’s private equity group saw assets reach USD174.7 billion in Q1, but investment performance was hit by both the economic impact from Covid-19 and dislocation in energy markets.

Corporate private equity performance lost more than 21 per cent in the three-month period, while its tactical opportunities unit lost almost 16 per cent in performance. Secondaries performance gained 1.8 per cent.

Despite the hit to performance across products, Blackstone has more than USD150 billion in dry powder capital to put to work - “more than anyone in our industry” - chairman and CEO Stephen Schwarzman said in a statement. 

Commenting on the results, Schwarzman said the first quarter numbers reflect the “unprecedented” market and global economic conditions created by the spread of the Covid-19 pandemic.

But he stressed that the firm has weathered several difficult periods during its 35-year history - particularly the global financial crisis - “only to emerge stronger than before.”

“We entered this crisis in a position of great strength, having recently completed a two-year fundraising cycle of nearly USD250 billion,” he said. “Our experience has shown that although asset values may be temporarily marked down, strong assets ultimately recover.”

Overall, Blackstone drew of inflows during the USD27.3 billion in the first quarter, and USD118.8 billion for the last 12 months, according to its quarterly results report. Fee-related earnings rose 25 per cent year-on-year, with distributable earnings up some 4 per cent.

“Despite the extremely challenging environment, we continued to generate significant cash flow for our shareholders, distributing over USD700 million through dividends and share repurchases in the quarter, and USD3.2 billion over the last twelve months.”