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July 18, 2024
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Private Equity

PE firm Blackstone raised $1.3 billion from wealthy individuals

For decades, dentists and used car dealers have had their noses pressed up against the glass of private equity, wistfully watching all the fireworks of Blackstone’s leveraged buyouts and boardroom takeovers without the chance to throw their money into the pot. But no more.

The trillion-dollar investment giant announced in a filing Monday (Jan. 8) that it has raised $1.3 billion for its Private Equity Strategies Fund. Also known as “BXEP,” the fund aims to create an opportunity for the merely rich to gain exposure to some of the same exotic investment action as their wealthier peers.

Normally, private equity firms get their play money from institutional investors: pension funds, insurance companies, and other entities that can toss a few billion into the market with no trouble. Bloomberg reported on the BXEP fund’s genesis in 2022, which included plans to target investors worth as little as $1 million. But those pockets ended up being too light to make it worth the trouble, given that consumer protection laws covering such players get much stricter. The outlet noted that BXPE ended up going after people with $5 million or more to play with.

Plus, those folks spook more easily: When investors in Blackstone’s small investor–focused Real Estate Income Trust got the jitters in late 2022 and tried to get their money back, the line at the exit was months long. To help make everyone whole, the firm had to sell part of its stake in the Bellagio casino and resort in Las Vegas.

Small players, big market

A billion dollars is considered a lot of money by most standards, but it’s not a lot of money for Blackstone, one of whose real estate funds raked in $30 billion last year. That doesn’t mean the firm is ignoring all the individually small, collectively large amounts of cash sloshing around out there. Blackstone and its peers, including Kohlberg Kravis Roberts & Co. (KKR) and Apollo Global Management, have also been courting smaller investors than usual in a bid for growth beyond what they can achieve with big ones alone.

Last year, a Bain & Co. report suggested that these firms, which collectively control trillions of dollars in assets, want to keep expanding at a double-digit annual clip for the next decade. (In 2022, Blackstone increased its assets under management by 11%, notching $226 billion of inflows.) “At the same time, however,” the report said, “it is unclear whether the industry’s traditional sources of fund-raising (large institutions) can continue to support that kind of growth.”

Blackstone is well aware. In an October earnings call with investors—the firm itself is publicly traded—COO Jonathan Gray said that “there’s $80-plus trillion in that market of individuals around the world with more than a million dollars of investable assets.”

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