Blackstone records first quarterly loss since 2018

Reflecting the market dislocation and economic conditions caused by COVID-19, Blackstone Group reported $538 billion in assets under management for the first quarter, a 5.8% decline from the previous quarter but a 5.1% increase for the year ended March 31.

The decline was the first for Blackstone since the second quarter of 2018, when assets fell 2.36% from the prior quarter.

Chairman and CEO Stephen A. Schwarzman said during an earnings call that the COVID-19 crisis has been "more formidable" than the prior decade's global financial crisis, but added that Blackstone's financial position is formidable as well.

Blackstone's net inflows were $20.9 billion in the first quarter. Over the past two years, Blackstone raised close to $250 billion and has more than $150 billion in dry powder, more than any other firm in the industry, Mr. Schwarzman said.

He said that Blackstone Group also benefits from long-term fund structures and a "fortress balance sheet" with ample capital reserves.

"We are not immune to the market drop," Mr. Schwarzman said, noting that the GAAP numbers "are just unrealized marks ... they are a point in time valuation."

Jonathan Gray, Blackstone president and chief operating officer, said in the earnings call that executives have been culling through its investments.

Some of the hardest hit investments are in areas such as energy, hospitality and location-based investments like water parks, Mr. Gray said.

He said Blackstone will provide additional capital to existing investments "where we think the risk return is appropriate."

Firm executives are emphasizing deployment of capital in faster-growing sectors such as logistics and online content creation. Logistics makes up about a third of Blackstone's real estate portfolio, which ended the quarter with $160.9 billion, down 1.4% from $163.2 billion in the prior quarter but up 14.7% from $140.3 billion as of March 31, 2019.

Private equity was the largest business as of March 31, with $174.7 billion in AUM, a 4.5% dip from to $182.9 billion from the prior quarter but a 9.9% increase to $159 billion from a year earlier. Credit and insurance assets were $128.7 billion, down 10.8% from $144.3 billion as of Dec. 31, 2019, and down 2.7% from $132.3 billion a year earlier. Hedge fund AUM was $73.7 billion, down 8.7% from $80.7 billion from the previous quarter and down 8.1% to $80.2 billion year-over-year.

Blackstone also saw a revenue loss of $3.1 million for the quarter.

Energy by far was the largest detractor for Blackstone due to the historic dislocation in the energy markets, said Michael Chae, Blackstone senior managing director and chief financial officer in the earnings call. Energy was responsible for about half of negative performance in private equity and private credit, he said.