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Blackstone Group has raised $1.3bn for a private equity fund tailored to wealthy individual clients, signalling a revival of momentum in its efforts to reach investors beyond its base of institutions such as pension funds.
The initial sum raised by the fund, called Blackstone Private Equity Strategies Fund, or BXPE, is Blackstone’s largest ever for a retail vehicle. The inflows came even after Blackstone was forced to limit withdrawals from a similar $67bn property fund just over a year ago.
Blackstone, with $1tn in assets under management, is the world’s largest alternative asset manager. The BXPE fund will bring corporate buyouts, the foundation of Blackstone’s business, to wealthy individual investors in the culmination of a decade-long effort by leaders Stephen Schwarzman and Jonathan Gray to find new sources of investment cash.
Competitors such as Apollo Global, KKR, Carlyle Group and Brookfield have all designed similar funds for rich individual investors. The market has grown in importance to large private equity groups as institutions that have excess exposure to unlisted investments refrain from committing to new funds.
BXPE will be Blackstone’s first new fund targeting individuals since its property fund Breit faced heavy redemptions in a move that cast doubt on efforts to attract new cash from the wealthy. Blackstone began taking commitments for BXPE in November and received subscriptions of about $1.3bn by early January, according to a filing on Monday. The fundraising will continue.
Blackstone has attracted more than $100bn in investment to its retail property and credit funds it sold to individual investors and built a staff of hundreds of sales and marketing employees to handle their tens of thousands of individual investors. It created a so-called “Blackstone University” to provide educational materials to investors and their financial advisers.
Cash from wealthy investors has bolstered Blackstone’s overall profits and asset growth in recent years. But the retail funds proved a headache for the New York-based firm in late 2022, when it was forced to limit withdrawals from the Breit fund as fears over commercial property valuations triggered widespread redemption requests.
The FT reported late in 2022 that Blackstone had delayed plans to launch the BXPE fund owing to the redemptions requests at Breit. In November, Blackstone revived its BXPE fundraising effort, believing that the redemptions had stabilised and investor demand was high.
BXPE will charge a management fee of 1.25 per cent of assets and a 12.5 per cent performance fee above a 5 per cent annual return.
To avoid the risk of asset fire sales, investors must accept limited liquidity rights. In aggregate, BXPE investors will be allowed to pull up to 3 per cent of the fund’s assets in any given quarter before limits kick in, less than the 5 per cent allowed by Breit. Blackstone declined to comment.
The fund is poised to be Blackstone’s most complex product yet, blending the group’s private equity strategies including traditional buyouts and those targeting biotechnology companies to preferred equity investments. Unlike Breit, which generates a significant portion of its returns from regular distributions to investors, BXPE has not set a dividend.
“The valuations of BXPE’s assets may differ from liquidation values that could be realised in the event that BXPE were forced to sell assets,” its prospectus warns.