There’s a reason why the top private equity companies have been bent on diversification away from core buyouts.
The conventional wisdom holds that the heyday is over–that the glorious returns of the previous era aren’t coming back. At the Blackstone Group, the biggest chunk of assets under management now belongs to the funds of hedge funds group, an industry that has also been hit hard in recent times. Blackstone Group will always be a bellwether for the core private equity industry, however.
So how’s it doing?
Blackstone reports profit using a nonstandard measure called economic net income, which is regularly described as one that “excludes charges including those related to the company’s 2007 initial public offering.”
If you were to put its economic net income on a GAAP basis, the firm reported a loss of 3 million in the fourth quarter, compared with an million loss in the fourth quarter of 2010. The culprit is the core private equity business, which has slowed down. Blackstone’s private equity unit racked up 8.8 million in revenue for 2011, 30 percent lower than in 2010. The hedge fund, credit and advisory business also experienced declines in revenue. The bright spot was the real estate group, which racked up a 60 percent gain in revenue, to .6 billion.
For all the private equity woes, the company could make a comeback. It raised a .2 billion fund last year amid hope from pensions that it is primed for a return to outsized returns. The firm is already under pressure to put funds to work. It will deploy a lot of capital this year. That’s a given.