Blackstone May Double Assets to $800 Billion in Five Years

Blackstone Group LP’s Steve Schwarzman said his firm may double assets under management to $800 billion over the next five years as it expands into new investing areas.

“We have internal targets, plans, aspirations to basically double where we are, which would take us to $800 billion,” Schwarzman, the firm’s co-founder and chief executive officer, said in a Bloomberg TV interview in Riyadh on Wednesday. Asked whether the New York-based asset manager could be a trillion-dollar firm, he said: “That’s possible.”

Demand for alternative assets such as private equity and real estate has surged. Firms have raised record amounts of money as a seven-year rally in stock markets makes public equities expensive while bond yields continue to hover near historic lows.

Blackstone, the world’s largest manager of alternative assets, has more than doubled the amount overseen for clients since the middle of 2012, to $387 billion at the end of September. New business lines it’s pursued in recent years include private equity secondaries, tactical opportunities, core-plus property and real estate investment trusts.

Assets under management at Blackstone rose 4.4 percent in the third quarter, its fastest quarter-over-quarter growth since the start of 2015, as clients poured into strategies including tactical opportunities, Asian real estate, hedge funds and distressed debt, the firm said last week. Schwarzman has said he expects Blackstone’s assets to continue rising in the fourth quarter. The firm is raising money for its new infrastructure fund, and it’s making a foray into early-stage growth investing.

“Part of what we do is start new businesses, new investing areas,” Schwarzman, 70, said in the interview. “We’re not in the asset-gathering business. We’re in the return-providing business.”

Shares of Blackstone dipped 0.8 percent to $34.32 as of 10:27 a.m. in New York, giving the asset manager a market value of about $41 billion.

The firm has been among the beneficiaries of Saudi Arabia’s plan to become an investing powerhouse and reduce its reliance on oil. In May, Blackstone received a commitment of as much as $20 billion for infrastructure deals from the kingdom’s Public Investment Fund. The firm added an additional $10 billion this month with the acquisition of energy investor Harvest Fund Advisors.

“When you have pension funds, sovereign wealth funds that have an allocation to private assets of low single digits, if they decide to increase it even by 10 to 20 percent, it’s having a huge impact on the sector growth,” said Tomasz Grzelak, an analyst at Baader Helvea AG in Zurich.

Schwarzman said he’s a “great believer in scale” because it allows his company to operate globally and attract talent. His firm gave birth to the world’s largest asset manager when it sold a mortgage-securities unit run by Laurence D. Fink in 1994. Fink turned that business into BlackRock Inc., which now oversees about $6 trillion for clients. Schwarzman said in 2013 that his decision to let Fink go was a “heroic mistake.”

Still, Blackstone manages more than $100 billion more than its next largest U.S.-based rival, Apollo Global Management LLC, which had $232 billion in assets as of June 30. Carlyle Group LP oversaw $170 billion at the end of June.

Peter Grauer, chairman of Bloomberg LP, is a non-executive director at Blackstone.
Source: Bloomberg