Blackstone reported improved second-quarter profits on Thursday, with the big investment group benefiting from the rallies in the stock market and the market for high yield debt.
But top executives said they did not plan to take advantage of ebullient markets by listing many of their companies any time soon. “I don’t promise a lot of exits. We’re not playing for a little pop,” said Tony James, Blackstone’s president, on the earnings call. “We try to create a lot of value over a long period of time for our investors. We will be disciplined.”
Blackstone’s caution stands in contrast to rival KKR, which plans to list as many as six companies in coming months. KKR, which also plans to list itself soon, is in the midst of an initial offer for Avago Technologies.
For its second quarter, Blackstone reported income of $173m excluding tax benefits and compensation costs tied to its listing, an improvement over both the loss of $93m in the first quarter and the positive $100m reported a year ago.
That reflects improved performance in its private equity, credit and hedge fund of funds as well as the management fees Blackstone receives on assets under management, which now total $93.5bn. Two-thirds of the companies in Blackstone’s private equity portfolio had either flat or improved earnings before interest, depreciation, taxes and amortisation – a feat that only one-third of the companies in the Standard & Poor’s index managed, said Steve Schwarzman, Blackstone’s founder.
Thanks to the rally in the public markets and the fact that most of Blackstone’s corporate investments are in defensive industries, the firm was able to reverse negative marks on the companies it owns.
But the firm’s real estate portfolio was marked down another 19 per cent as pressure on both the commercial market and the hotel business continue, in spite of $60bn of property sales before the market collapsed.
Looking ahead, Mr James said that Blackstone was considering three bank investments, assuming proposed rules by the Federal Deposit Insurance Corp are modified. However, he cautioned that “the opportunity isn’t as big as we once thought”.
Blackstone has bought back or refinanced $12bn of its companies’ debt. It also wrote up the value of the big loan portfolio purchases it did last year. For example, one loan portfolio, which the firm marked at 35 cents on the dollar at year-end, is now worth $1.10, Mr. Schwarzman said.
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