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2021-11-10

Blackstone Turns Sluggish Credit Business Into a Winner

Blackstone Inc.towers over most of its private-equity peers with $731 billion in assets, but the fir

Blackstone Turns Sluggish Credit Business Into a Winner

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Now, credit has become one of the firm’s fastest-growing segments, part of a broad shift under the leadership of President Jonathan Gray.</p>\n<p>Assets under management in the unit, which makes corporate loans backing leveraged buyouts for other private-equity firms, jumped 22% to $188 billion this year through Sept. 30. Private-equity assets under management rose 17% to $231.5 billion over the same period.</p>\n<p>Blackstone is expanding in the space by launching low-fee funds and selling them to wealthy individuals who might not qualify for products tailored to institutions like pension plans. The strategy replicated a move that Mr. Grayused to turbocharge the growthof the firm’s real-estate investment trust, called BREIT.</p>\n<p>It also marks a culture shift, as the hedge-fund operations that once lent Blackstone its Wall Street cachet fall out of favor. And large money managers that traditionally focused on private equity see a bigger opportunity in debt, where the addressable market could be as large as $40 trillion.</p>\n<p>The resurgent credit business should help Blackstone in the race for investor dollars against its principal competitors, includingApollo Global ManagementInc.,Ares ManagementCorp.and KKR &amp; Co.</p>\n<p>Debt specialists Apollo and Ares have pledged to boost assets to $1 trillion and $500 billion, respectively, in coming years, while KKR more than doubled its credit business this year, primarily by purchasing insurer Global Atlantic Financial Group Ltd. Only Ares grew its own credit business as fast as Blackstone this year.</p>\n<p>Several large credit firms vied to win the lead role providing $2.6 billion of loans this year for private-equity firm Thoma Bravo LP’s leveraged buyout of Stamps.com Inc. Blackstone walked away with the top spot by offering to backstop the entire amount, Dwight Scott, head of Blackstone Credit, said.</p>\n<p>The firm historically operated in debt markets through GSO Capital Partners, a hedge-fund manager it acquired in 2008 that was known for large, aggressive and lucrative trades. GSO’s founders— Bennett Goodman, Tripp Smith and Doug Ostrover —all left Blackstone in recent years. The credit business jettisoned the GSO name last year and has shut its hedge funds.</p>\n<p>Blackstone’s separate hedge-fund solutions business has shrunk in importance to 11% of total assets, down from 19.4% five years ago, according to earnings reports. John McCormick, co-head of Blackstone’s funds-of-hedge-funds business, told colleagues last month thathe plans to resign.</p>\n<p>The hedge-fund solutions unit’s “revenues and earnings have doubled in the last three years and the business will continue to expand through new offerings and senior hires,” a Blackstone spokeswoman said.</p>\n<p>The rebranded Blackstone Credit is aggressively marketing less-risky, cheaper funds to individual investors.</p>\n<p>“It’s all about de-risking the portfolio,” said Mr. Scott. Blackstone believes the lower-fee products allow it to deliver attractive returns to investors without reaching for yield by purchasing debt with a higher chance of default, he said.</p>\n<p>The credit revamp is part of Blackstone’s aim to achieve $1 trillion in assets by 2026. To get there, Mr. Gray has encouraged Blackstone’s business headsto embrace a thematic investing approachfocused on fast-growing industries. In credit, this translates into more loans to sectors such as technology and life sciences.</p>\n<p>Blackstone earlier this year launched BCRED, a business development company, or BDC, which makes direct loans to medium-size companies. BCRED raised $9.4 billion through share sales this year, primarily to individual investors.</p>\n<p>Blackstone made its first big foray into credit whenit bought GSOfor about $1 billion. GSO hedge funds excelled at big risky bets on distressed debt thatreturned as much as $100 million each.</p>\n<p>The firm also joined with Franklin Square Holdings LP, which launched a BDC in 2009. GSO made the loans and split management fees with Franklin Square, which raised money from individual investors. Upfront broker and management fees averaged 9.4% in the BDC’s early days, high enough toattract scrutiny from regulators.</p>\n<p>Credit assets jumped about fivefold to $128 billion in the decade after the GSO acquisition as the business built a mixture of BDCs, hedge funds and securitized bundles of low-rated debt known as collateralized loan obligations.</p>\n<p>The growth stalled out in mid-2018 when the venture with Franklin Square dissolved over the profit-sharing split and differing growth strategies. Blackstoneexited from the businessin exchange for a $640 million breakup fee. The last of the GSO founders resigned shortly afterward.</p>\n<p>Credit assets under management rose by 3.1% to $144.3 billion from April 2018 to the end of 2019 even as Blackstone’s overall assets swelled by 27%, according to company earnings reports. Apollo’s credit assets grew 30.4% over the same period to $215.5 billion and Ares’s surged 43% to $110.5 billion.</p>\n<p>Blackstone spent that time designing the terms and sales engine for its new BDC, from which it earns all of the management fees, said Brad Marshall, co-head of performing credit at the firm. BCRED uses the same brokers that sell BREIT for marketing and charges a 1.25% management fee and a 12.5% performance fee. Most big competitors charge 1.5% and 17.5%-20%, respectively, according to Securities and Exchange Commission filings.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Blackstone Turns Sluggish Credit Business Into a Winner</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBlackstone Turns Sluggish Credit Business Into a Winner\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-11-10 18:40 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.wsj.com/articles/blackstone-turns-sluggish-credit-business-into-a-winner-11636540201?siteid=yhoof2><strong>Wall Street Journal</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Blackstone Inc.towers over most of its private-equity peers with $731 billion in assets, but the firm has had a soft underbelly for years: its sluggish lending business. Now, credit has become one of ...</p>\n\n<a href=\"https://www.wsj.com/articles/blackstone-turns-sluggish-credit-business-into-a-winner-11636540201?siteid=yhoof2\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{},"source_url":"https://www.wsj.com/articles/blackstone-turns-sluggish-credit-business-into-a-winner-11636540201?siteid=yhoof2","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1151092697","content_text":"Blackstone Inc.towers over most of its private-equity peers with $731 billion in assets, but the firm has had a soft underbelly for years: its sluggish lending business. Now, credit has become one of the firm’s fastest-growing segments, part of a broad shift under the leadership of President Jonathan Gray.\nAssets under management in the unit, which makes corporate loans backing leveraged buyouts for other private-equity firms, jumped 22% to $188 billion this year through Sept. 30. Private-equity assets under management rose 17% to $231.5 billion over the same period.\nBlackstone is expanding in the space by launching low-fee funds and selling them to wealthy individuals who might not qualify for products tailored to institutions like pension plans. The strategy replicated a move that Mr. Grayused to turbocharge the growthof the firm’s real-estate investment trust, called BREIT.\nIt also marks a culture shift, as the hedge-fund operations that once lent Blackstone its Wall Street cachet fall out of favor. And large money managers that traditionally focused on private equity see a bigger opportunity in debt, where the addressable market could be as large as $40 trillion.\nThe resurgent credit business should help Blackstone in the race for investor dollars against its principal competitors, includingApollo Global ManagementInc.,Ares ManagementCorp.and KKR & Co.\nDebt specialists Apollo and Ares have pledged to boost assets to $1 trillion and $500 billion, respectively, in coming years, while KKR more than doubled its credit business this year, primarily by purchasing insurer Global Atlantic Financial Group Ltd. Only Ares grew its own credit business as fast as Blackstone this year.\nSeveral large credit firms vied to win the lead role providing $2.6 billion of loans this year for private-equity firm Thoma Bravo LP’s leveraged buyout of Stamps.com Inc. Blackstone walked away with the top spot by offering to backstop the entire amount, Dwight Scott, head of Blackstone Credit, said.\nThe firm historically operated in debt markets through GSO Capital Partners, a hedge-fund manager it acquired in 2008 that was known for large, aggressive and lucrative trades. GSO’s founders— Bennett Goodman, Tripp Smith and Doug Ostrover —all left Blackstone in recent years. The credit business jettisoned the GSO name last year and has shut its hedge funds.\nBlackstone’s separate hedge-fund solutions business has shrunk in importance to 11% of total assets, down from 19.4% five years ago, according to earnings reports. John McCormick, co-head of Blackstone’s funds-of-hedge-funds business, told colleagues last month thathe plans to resign.\nThe hedge-fund solutions unit’s “revenues and earnings have doubled in the last three years and the business will continue to expand through new offerings and senior hires,” a Blackstone spokeswoman said.\nThe rebranded Blackstone Credit is aggressively marketing less-risky, cheaper funds to individual investors.\n“It’s all about de-risking the portfolio,” said Mr. Scott. Blackstone believes the lower-fee products allow it to deliver attractive returns to investors without reaching for yield by purchasing debt with a higher chance of default, he said.\nThe credit revamp is part of Blackstone’s aim to achieve $1 trillion in assets by 2026. To get there, Mr. Gray has encouraged Blackstone’s business headsto embrace a thematic investing approachfocused on fast-growing industries. In credit, this translates into more loans to sectors such as technology and life sciences.\nBlackstone earlier this year launched BCRED, a business development company, or BDC, which makes direct loans to medium-size companies. BCRED raised $9.4 billion through share sales this year, primarily to individual investors.\nBlackstone made its first big foray into credit whenit bought GSOfor about $1 billion. GSO hedge funds excelled at big risky bets on distressed debt thatreturned as much as $100 million each.\nThe firm also joined with Franklin Square Holdings LP, which launched a BDC in 2009. GSO made the loans and split management fees with Franklin Square, which raised money from individual investors. Upfront broker and management fees averaged 9.4% in the BDC’s early days, high enough toattract scrutiny from regulators.\nCredit assets jumped about fivefold to $128 billion in the decade after the GSO acquisition as the business built a mixture of BDCs, hedge funds and securitized bundles of low-rated debt known as collateralized loan obligations.\nThe growth stalled out in mid-2018 when the venture with Franklin Square dissolved over the profit-sharing split and differing growth strategies. Blackstoneexited from the businessin exchange for a $640 million breakup fee. The last of the GSO founders resigned shortly afterward.\nCredit assets under management rose by 3.1% to $144.3 billion from April 2018 to the end of 2019 even as Blackstone’s overall assets swelled by 27%, according to company earnings reports. Apollo’s credit assets grew 30.4% over the same period to $215.5 billion and Ares’s surged 43% to $110.5 billion.\nBlackstone spent that time designing the terms and sales engine for its new BDC, from which it earns all of the management fees, said Brad Marshall, co-head of performing credit at the firm. BCRED uses the same brokers that sell BREIT for marketing and charges a 1.25% management fee and a 12.5% performance fee. Most big competitors charge 1.5% and 17.5%-20%, respectively, according to Securities and Exchange Commission filings.","news_type":1},"isVote":1,"tweetType":1,"viewCount":508,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":1,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"hasMoreComment":false,"orderType":2}