By Chibuike Oguh
(Reuters) -Blackstone Inc said on Thursday its first-quarter distributable earnings jumped 63% as a strong performance from its real estate and credit businesses offset a weak showing from its hedge funds unit.
The world's largest manager of alternative assets saw distributable earnings, which represent the cash used to pay dividends to shareholders, rise to $1.9 billion from $1.2 billion a year earlier.
That resulted in distributable earnings per share of $1.55, which exceeded the average estimate of $1.06 per share of analysts compiled by Refinitiv.
Blackstone (NYSE:BX) said it changed the way it accounts for the fee-related performance revenue at its real estate income trust business, booking such earnings quarterly rather than annually. That helped to boost its overall earnings beyond what analysts had expected.
"This will likely have the effect of making ongoing quarterly fee-related earnings somewhat higher, but also somewhat more volatile," Oppenheimer analysts wrote in a note to investors on Thursday.
Blackstone has been mindful of the prospect of rising inflation and higher interest rates for years, which has informed its decision to concentrate its investments in hard assets such as warehouses, rental housing, enterprise software, and digital and energy infrastructure, President Jonathan Gray said during an analyst earnings call on Thursday.
"We've been mindful of the prospect of rising interest rates and a normalization of market multiples for several years. This informed our investing, and we concentrated our deployment towards hard assets in the businesses where revenue could grow faster than inflationary pressures," Gray said.
Blackstone's shares were down 3.5% at $116.21 per share in late morning trading, in line with other listed private equity firms. The benchmark S&P 500 stock index and Dow Jones Industrial Average index were both trading higher.
EARNINGS BEAT
For its quarterly fund performance, Blackstone said its real estate opportunistic and core plus funds appreciated by 10.3% and 7.9%, respectively. Private credit funds gained 1.7% while its private equity portfolio rose 2.8%. That compares with a decline of nearly 5% for the S&P 500 index.
Blackstone generated $23.2 billion in proceeds from asset divestments across its portfolio. That included the sale of its majority stake in medical services provider Apria Healthcare to Owens & Minor (NYSE:OMI) Inc in a $1.6 billion take-private deal.
During the quarter, Blackstone spent $22.8 billion on new acquisitions, including its $6.4 billion takeover of Australian casino operator Crown Resorts and a $5.8 billion deal to take real estate income trust Preferred Apartment Communities (NYSE:APTS) Inc private.
Blackstone said earnings at its hedge funds unit, the world's largest, fell to $110.8 million, down from $157 million a year earlier, due partly to lower management fees and performance revenues.
Its hedge fund portfolio had a net return of 1% during the quarter compared with a 0.3% decline in the benchmark Fund Weighted Composite Index compiled by hedge fund data provider HFR.
Under generally accepted accounting principles (GAAP), Blackstone reported a net income of $1.22 billion, down 30% from $1.75 billion a year earlier, amid higher compensation expenses and a slowdown in investment income.
Total assets under management rose to a record $915 billion, driven by strong fundraising and bringing Blackstone closer to its goal of managing $1 trillion in assets this year. Unspent capital stood at $139.3 billion.
Blackstone declared a quarterly dividend of $1.32 per share, compared with $0.82 per share in the same quarter last year.