Blackstone earnings sink 42% on lower fees

New York — Blackstone Group, the world’s largest manager of alternative assets, said on Thursday fourth-quarter earnings slumped 42% from a year earlier to $722m, hurt by lower performance fees.

Distributable earnings — the cash available for paying dividends — were 57c per unit in the fourth quarter, compared with $1 per unit a year earlier, when earnings were boosted by a windfall from the sale of European warehouse firm Logicor.

Fee-related earnings, the amount Blackstone earns from management fees and a component of distributable earnings, were up 23% year on year at $433m. Assets managed by Blackstone hit a record $472bn at the end of 2018.

Despite the earnings drop, the results were described as “modestly positive” by Credit Suisse analyst Craig Siegenthaler, who rates the stock “outperform”. At midday, Blackstone shares were up 1.7% at $33.70 in New York.

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

The firm’s private equity portfolio was down 2.9% in the quarter as the benchmark S&P 500 stock index dropped about 14%, its worst three months in more than 7 years. Its private equity portfolio surged 19.1% for 2018.

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

Blackstone said its dry powder — the amount it has raised from investors but yet to invest — hit $112.9bn, and firm president and COO Jonathan Gray said the recent market volatility has created a buying opportunity.

“With pricing for risk assets down meaningfully over the past 6 months, it’s a more interesting time to deploy capital globally,” Gray said in an earnings call.

Blackstone said last week it would focus on distributable earnings as its primary performance metric, instead of economic net income, or ENI, a non-GAAP measure that 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, Blackstone posted a net loss attributable to the firm of $10.9m for the quarter.

Rival Apollo reported an ENI per share loss for the last quarter of 2018.

Reuters