The world’s largest alternative asset manager, Blackstone Group, expects fewer deals this year due to high inflation, rising interest rates and geopolitical uncertainty.
“Deal activity is difficult to predict, although I expect it to be lower than last year,” Blackstone Chairman Jonathan Gray told the Financial Times.
A record $5.8 billion in mergers were agreed globally last year, including more than $1 billion in private equity buyouts, by far the highest on record. Gray predicts a slowdown in activity as financial markets emerge from a period of low interest rates and inflation.
Gray said he was still bullish on the U.S. economy and reiterated his belief that some of the tech companies that have fallen sharply over the past six months look like good buying opportunities.
“There’s been a lot of recession talk about the US economy. It seems a bit premature,” Gray said. “What we’re seeing are really strong fundamentals and high levels of revenue growth across most of our businesses.”
In results released Thursday, Blackstone showed continued asset growth in its investment business in the first quarter, including $50 billion in new assets, driven by inflows into credit, insurance and real estate.
Distributable earnings — a metric favored by analysts as an indicator of cash flow — rose 63% to $1.9 billion from the same period last year, which equates to $1.55 per share. Analysts forecast was $1.07 per share.
“The first quarter was one of the best in Blackstone’s 36-year history despite an extremely challenging market environment,” chief executive Stephen Schwarzman said in a statement.
The group increased its quarterly dividend to $1.32 per share, a 61% increase over the previous year.
Fresh money inflows from wealthy investors continued to propel Blackstone’s overall assets, which rose 41% year-on-year to end the quarter at $915 billion.
Perpetual funds — funds with no maturity or end date — that Blackstone designed for retail investors in real estate and credit investments both attracted between $4 billion and $5 billion a month in the first quarter.
“We actually raised more money in retail in Q1 than Q4 despite inflation, interest rates, war and Covid,” Gray said.
Perpetual funds now represent 43% of the group’s assets.
Despite a volatile first quarter in financial markets, Blackstone was able to sell assets and make significant profits. It sold assets worth $23.2 billion in the quarter, including the €21 billion recapitalization of its Mileway logistics business in Europe.
Blackstone remained active in new investments, deploying $22.8 billion in the quarter. However, this was only a third of the record $66 billion invested by the group in the last quarter of 2021.
It also has a large backlog of $16 billion worth of deals that are due to close in the coming months.
This month it agreed to the $13 billion takeover of student housing investment trust American Campus Communities and agreed to buy Italian infrastructure group Atlantia alongside the Benetton family for $54 billion euros.