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Blackstone assets rise 12% in quarter to end record-setting year

Blackstone Group reported a record $434 billion in assets under management as of Dec. 31, a 12% increase from the quarter ended Sept. 30 and up 18% year-over-year, according to the alternative investments firm's earnings report Thursday.

Blackstone executives attributed the firm's growth in AUM, in part, to the firm recording $108 billion of capital inflows in 2017. Inflows in the quarter were $62.2 billion. By comparison, inflows were $19.7 billion for the third quarter and $62.4 billion for the year ended Sept. 30.

"We ended a great year with a great quarter," said Hamilton "Tony" E. James, president and chief operating officer, during the earnings call. Capital inflows for the quarter included $22 billion from Fidelity & Guaranty Life and $11 billion from the acquisition of master limited partnership manager Harvest Fund Advisors. Mr. James noted that the firm's capital inflows, investments and more than $55 billion in distributions to limited partners in 2017 were all new records for the firm.

"Obviously, we will not be able to sustain the growth but for now, we are firing on all cylinders," he said. "Long-term secular growth continues unabated."

During the call, Mr. James said that the firm had not decided yet whether it would switch to a corporate structure in response to the passage of the federal tax law.

"We have looked at it and we will continue to look at it," he said. Mr. James added that factors firm executives are considering is whether there will be "tax leakage," whether the change in structure will increase the firm's market value and earnings, and whether any increases would be sustainable.

The AUM of Blackstone's largest business, real estate, grew to $115.3 billion, up 3.6% from Sept. 30 and up 13% year-over-year.

Credit is now Blackstone's second largest business, with $138.1 billion in AUM, up 39% from the end of the third quarter and up 48% from a year earlier. Private equity AUM totaled $105.6 billion, up 3% from Sept. 30 and a 5% increase from Dec. 31, 2016.

Hedge funds AUM was $75.1 billion, up 1% from Sept. 30 and a 20% increase from a year earlier.

Blackstone earned $732.4 million in management and advisory fees in the fourth quarter, compared to $680.6 million in the third quarter. Performance fees were $992.8 million in the fourth quarter, compared to $893.8 million for the quarter ended Sept. 30. Investment income accounted for $55.7 million, compared to $170.9 million for the three months ended Sept. 30.

GAAP net income totaled $763 million for the quarter and $3.4 billion for the year. By comparison, GAAP net income was $691.6 million in the third quarter and $770 million for the fourth quarter of 2016. Net income was $2.2 billion for the year ended Dec. 31, 2016.