Blackstone clawed back some of the investment losses it incurred when the coronavirus hit financial markets earlier in the year, recording a swing in investment income to $1.6bn in the last quarter from a loss of $4.2bn the previous three months.
Chief executive Stephen Schwarzman called the results “a strong quarter for our firm despite the continued market volatility”.
“Investment performance rebounded sharply,” the billionaire financier said, adding that Blackstone “continued to deploy capital in high-conviction sectors” while adding to a war chest that has reached a record $156bn.
But the group’s dulled investment portfolio betrayed the economic damage wrought by the pandemic. Accrued performance revenues, which private equity groups book in anticipation of selling investments at a profit, are one-third lower than at the end of the last year — even after Blackstone added $595m to the inventory of expected spoils between April and June.
The seesawing investment performance of Wall Street’s biggest investment companies mirrors the trajectory of the US economy as the coronavirus affected millions of Americans, shutting large tracts of the economy, and triggered unprecedented action by central banks.
$564bn Assets under management
The huge spike in unemployment was initially reflected in asset markets, that reached a low-point in the penultimate week of March.
Since then, however, trillions of dollars of government stimulus, together with a promise by central banks to buy a widening range of virus-hit assets, have airbrushed some of the damage to asset valuations.
While that has helped shore up the value of Blackstone’s portfolio, asset sales have all but ground to a halt. Blackstone sold just $83m worth of assets in the second quarter, compared with four times that amount a year earlier. “In this kind of environment, it’s not a great time to sell assets,” Blackstone chief operating officer Jon Gray said in April.
Despite the shocks to its investments, Blackstone itself has enjoyed a steady stream of profits, recording net income of $1.4bn in the quarter, up from $647m in the preceding three months.
The group received $967m in management and advisory fees during the period — payments that add stability to quarterly earnings because they are typically fixed in advance and must be paid regardless of whether asset values rise or fall.
Blackstone also continued to garner fresh capital, with inflows of $20bn during the quarter. That continues a decade-long streak during which yield-starved investors have looked to alternatives managers to boost their returns. Total assets under management rose $26bn to $564bn.