Blackstone Group Inc, the world's largest alternative asset manager, said on Thursday its distributable earnings fell 23% year-on-year in the second quarter, as the coronavirus outbreak made it more difficult to divest assets.
Blackstone said distributable earnings, which includes cash it generates by selling assets, fell to $548 million from $709 million a year earlier. This translated into distributable earnings per share of 43 cents, matching analysts' estimate, according to data compiled by Refinitiv.
Distributable earnings is a metric that Blackstone and other private equity firms focus on to describe their business. Using generally accepted accounting principles, Blackstone reported an 86% rise in net income to $568.3 million, as a rally in the markets in the second quarter, driven by central bank intervention and government stimulus, boosted the value of its assets.
The buyout firm said its private equity portfolio grew 12.8% in the second quarter, compared with a 20% rise in the benchmark S&P 500 stock index over the same period.
"It was a strong quarter for our firm despite the continued market volatility. We are very well positioned to navigate the road ahead with our long-term committed capital model and an industry-record $156 billion of dry powder," Blackstone Chief Executive Steve Schwarzman said in a statement, referring to unspent capital.
Total assets under management, which include real estate, private equity corporate credit and investments in hedge funds, rose to $564.3 billion from $538 billion reported in March, supported by strong fundraising. Many of these assets generated management fees that boosted Blackstone's fee-related earnings by 28% year-on-year to $541 million. Revenue from performance fees that rely on asset sales, on the other hand, dropped 70% to $102 million.
"Performance fees missed what the street expected, but that's understandable given the current environment," said Morgan Stanley analyst Michael Cyprys. "This was partly offset by their beat on fee-related earnings driven by better management fees and lower compensation expenses."
In June, the U.S. Department of Labor issued guidance allowing private equity funds to be offered as an investment option to defined contribution retirement plans, including 401 (k) plans. Blackstone said it expects to gain a significant share of the capital that will flow into the 401 (k) industry.
"We think this decision by the DOL was a step in the right direction for sure," Blackstone President Jonathan Gray said in an analyst earnings call on Thursday. "And the size, it could be in the multiple hundred billions dollars for the industry in terms of additional assets."
Blackstone declared a quarterly dividend of 37 cents per share.