Blackstone Group LP, the world’s largest private-equity firm, said fourth-quarter profit fell 12 percent as performance fees and investment income declined.
Economic net income, a measure of earnings excluding some costs tied to the firm’s 2007 initial public offering, dropped to $449.9 million, or 40 cents a share, from $512.7 million, or 46 cents a share, a year earlier, New York-based Blackstone said today in a statement. The result matched the 40-cent average estimate of 13 analysts surveyed by Bloomberg.
Blackstone, led by chief executive officer Stephen Schwarzman, has been ahead of rivals in raising new funds and last month closed on $16 billion for the sixth-biggest private- equity fund ever, according to London-based researcher Preqin Ltd. The firm over the past years expanded the fund of hedge funds business as well as its advisory group, which counsels companies on mergers and restructurings, to reduce reliance on private-equity.
Blackstone also secured more than $6 billion of pledged capital for a real-estate fund that will buy mainly distressed- property assets, according to people with knowledge of the fundraising. It is seeking at least $10 billion for the fund, known as Blackstone Real Estate Partners VII, the people said.
Buyout Surge
Blackstone is seen as a bellwether for the buyout industry given its size and reach across markets. KKR & Co. and Apollo Global Management LLC are scheduled to report results next week.
Worldwide, the value of leveraged buyouts rose 30 percent to $31.5 billion in the fourth quarter from the third, according to data compiled by Bloomberg.
In December, Blackstone won as much as $1.8 billion in state pension money from New Jersey, the most an investor has committed to the firm at one time since it closed its first buyout fund in 1987. The state will put up to $1.5 billion into four new custom funds called separately managed accounts.
Private-equity firms pool money from investors including pension plans and endowments with a mandate to use it to buy companies within five to six years, overhaul then sell them, and return funds with a profit after about 10 years. The firms, which use debt to finance the transactions and amplify returns, typically charge an annual management fee equal to 1.5 percent to 2 percent of committed funds and keep 20 percent of profit from investments.
Spotlight on Practices
Private equity’s practices of increasing the value of companies they own, along with the way the industry’s managers are compensated and taxed, have been put under a public spotlight this year by opponents of Republican presidential front-runner Mitt Romney. A former governor of Massachusetts, Romney was the CEO of Bain Capital LLC, the Boston-based private-equity firm. His opponents accuse Romney of enriching himself at the expense of corporations and their employees.
Schwarzman, who co-founded Blackstone in 1985 with Peter G. Peterson, endorsed Romney last year and held a fundraiser for the candidate at his Park Avenue apartment on Dec. 14. Ranked the 66th-richest American by Forbes Magazine, Schwarzman has opposed raising the tax on the share of profits given to private-equity managers, known as carried interest, and has endorsed a flat tax as part of comprehensive reform of the U.S. tax code.
Blackstone was involved in 53 deals last year valued at a combined $27.1 billion. That tops the 36 deals valued at $16.5 billion the firm participated in the year before, according to data compiled by Bloomberg.