Blackstone is first alts investment firm to hit $1 trillion in assets

Blackstone is the first alternative investment firm to reach $1 trillion in assets under management, a 1% increase from the prior quarter, and up 6% year over year, despite slow fundraising and exit activity, according to the firm's second quarter earnings announcement on Thursday.

Jonathan Gray, Blackstone's president and chief operating officer, said during the earnings call Thursday that $1 trillion in AUM is a "mile marker on a much longer journey."

Blackstone had inflows of $30 billion in the quarter ended June 30, continuing a downward trend from inflows of $40.4 billion in the first quarter and $88 billion of inflows at the end of the year-earlier quarter.

Realizations at the end of the second quarter hit $17.2 billion, down from $18 billion in the first quarter and realizations of $29.3 billion in the quarter ended June 30, 2022.

However, Blackstone executives are optimistic about the future.

Mr. Gray said that said firm executives see strong signs of inflation slowing across its portfolio, which would benefit valuations and its real estate holdings.

Real estate remains Blackstone's largest business with $333.2 billion in assets under management as of June 30, ticking up 1% from $331.8 billion at the end of the first quarter and up 4% from $320 billion year-over-year.

Even though less than 2% of Blackstone's real estate portfolio is in the troubled office sector, Mr. Gray said he expects continued challenges in real estate going forward, with more foreclosures and write downs in the office sector.

Michael Chae, Blackstone's chief financial officer, said during the earnings call that its private and liquid strategies appreciated despite an uptick in default rates, which Blackstone executives expect to rise further.

So far, there hasn't been as much distress as industry executives expected, Mr. Gray said.

Defaults in Blackstone's credit portfolio are less than 1%, which is due to interest rate hedges as well as the strength of portfolio company earnings. He said he sees strong earnings growth across Blackstone's borrowers, including technology companies that are more focused on growth.

However, if interest rates stay elevated, Mr. Gray said he expects more defaults going forward.