An economic downturn is an awkward moment for a private capital manager which happens to be publicly listed. On Thursday, Blackstone shared its third-quarter results. All eyes trained on how it had marked the valuations of its private equity and private debt portfolio, at a time when US equities and bonds have sold off sharply.
In Blackstone’s largest business, real estate, returns for the last 12 months remain at 20 per cent. However, the trailing return for its riskiest real estate fund at the end of 2021 registered at 44 per cent. That regression hints at the market chill this year. Notably, its corporate buyout return is flat over the past year. This leveraged buyout business appreciation was 43 per cent, annually, at end of 2021.
Perhaps most interesting is the juxtaposition in Blackstone’s credit business. Its direct lending business to private companies remains 9 per cent up for the year. Its “liquid” credit unit that invests in debt securities that trade easily and frequently, however, lost 5 per cent. One wonders whether the flexibility allowed in marking private assets has led to more charitable valuations.