Blackstone earnings sink 42 percent on lower fees; managed assets hit record

Blackstone earnings sink 42 percent on lower fees; managed assets hit record

NEW YORK (Reuters) – Blackstone Group LP, the world’s largest manager of alternative assets, said on Thursday fourth-quarter distributable earnings slumped 42 percent from a year earlier to $722 million, hurt by lower performance fees.

FILE PHOTO – The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid

Distributable earnings — the actual cash available for paying dividends — were 57 cents per unit in the fourth quarter, compared to $1 per unit a year earlier when earnings were boosted by a windfall from performance fees.

Performance fees fell amid a rout in the U.S. stock market at the end of the year, which impacted Blackstone’s investments. The benchmark S&P 500 stock index dropped about 14 percent in the fourth quarter, its worst three months in more than 7 years.

Blackstone, which manages assets like private equity and real estate, said it would pay a quarterly distribution of 58 cents per common unit, slightly ahead of analysts’ estimates for 57 cents, according to Refinitiv data.

Blackstone’s corporate private equity portfolio was down 2.9 percent in the quarter but surged 19.1 percent for 2018.

Peer Apollo Global Management on Thursday reported its private equity fund depreciated 10.9 percent in the quarter and was down 9.8 percent for 2018.

Stock market swings impact private equity firms because they often have large public market holdings of investments they may be in the process of exiting. Public markets are also used as a comparative measure when valuing private investments.

Despite the earnings drop, assets managed by Blackstone hit a record high at the end of 2018.

“Inflows of more than $100 billion last year coupled with positive performance drove assets under management to a record $472 billion” by the end of the year, Blackstone Chairman and Chief Executive Stephen Schwarzman said in a statement.

Blackstone’s assets under management were $456.7 billion three months earlier. Blackstone said last year it could be overseeing $1 trillion in assets by 2026.

Blackstone said last week it would focus going forward on distributable earnings as its primary performance metric, instead of economic net income, a non-GAAP measure which reflects the mark-to-market valuation gains or losses on its portfolio.

The move follows those of peers KKR & Co and Carlyle Group in dropping the esoteric ENI metric, as they try to make their businesses easier for investors to understand.

Under generally accepted accounting principles (GAAP), Blackstone posted a net loss attributable to the firm of $10.9 million for the quarter.

Rival Apollo reported an ENI per share loss for the last quarter of 2018, contributing to the firm’s first year in the red since 2011.

Reporting by Joshua Franklin in New York; Editing by Bernadette Baum

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