The world’s biggest alternative asset manager Blackstone Group expects less dealmaking this year because of high inflation, rising interest rates and geopolitical uncertainty.
“It’s hard to predict deal activity, although I would expect it to be lower than last year,” Blackstone’s president Jonathan Gray told the Financial Times.
A record $5.8tn in mergers were agreed globally last year, including more than $1tn in private equity buyouts — by far the most on record. Gray forecasts slowing activity as financial markets move out of a period of low interest rates and inflation.
Gray said he was still optimistic about the US economy and reiterated his belief that some of the technology companies that have fallen sharply over the past six months look like good buying opportunities.
“There’s been a lot of recession talk about the US economy. It feels a little premature,” said Gray. “What we’re seeing are really strong fundamentals and high levels of revenue growth in most of our businesses.”
In results published on Thursday, Blackstone disclosed continued growth in assets across its investment businesses in the first quarter, including $50bn in new assets, led by inflows to credit, insurance and real estate.
Distributable earnings — a metric favoured by analysts as a proxy for cash flow — were up 63 per cent to $1.9bn since the same time last year, which equates to $1.55 a share. Analyst forecasts were $1.07 a share.
“The first quarter represented one of the best in Blackstone’s 36-year history despite an extremely challenging market backdrop,” chief executive Stephen Schwarzman said in a statement.
The group increased its quarterly dividend to $1.32 a share, a 61 per cent rise on the previous year.
Inflows of new money from wealthy investors continued to propel Blackstone’s overall assets, which rose 41 per cent year on year to end the quarter at $915bn.
Perpetual funds — funds without a maturity or end date — that Blackstone has designed for retail investors in real estate and credit investments both drew in between $4bn and $5bn a month during the first quarter.
“We actually raised more money in retail in the first quarter than in the fourth quarter despite inflation, interest rates, war and Covid,” said Gray.
Perpetual funds now account for 43 per cent of the group’s assets.
Despite a volatile first quarter in financial markets, Blackstone was able to sell assets and book large profits. It sold assets worth $23.2bn during the quarter, including the €21bn recapitalisation of its Mileway logistics business in Europe.
Blackstone remained active in new investments, deploying $22.8bn in the quarter. However, that was just a third of the record $66bn the group invested in the final quarter of 2021.
It also has a large backlog of $16bn in deals that are due to close in the coming months.
This month it agreed the $13bn takeover of student housing real estate investment trust American Campus Communities and agreed to buy Italian infrastructure group Atlantia alongside the Benetton family for €54bn.