Blackstone’s private equity realizations exceed deployment by $3.7bn in 2023
‘Acceleration in key forward indicators’ – Stephen Schwarzman
Most listed GPs posted 2023 private equity performance below five-year trend
February 21, 2024 (Preqin News) – Listed alternatives fund managers put a positive spin on their private equity businesses for 2024, citing improved conditions for both deal-making and fundraising, over the recent reporting season.
‘Overall, with the cost of capital moving lower and market confidence returning, we believe we’re entering a supportive environment for our business. While changing market conditions take time to fully translate to our financial results, the fourth quarter reflected an acceleration in key forward indicators, including both fundraising and deployment,’ Stephen Schwarzman, Chairman and Chief Executive Officer (CEO) of Blackstone, said, announcing the results.
Crucially for fundraising prospects, some of the largest managers were able to recycle private equity capital back to investors. At Blackstone, distributions exceeded deployment by $3.7bn in Corporate Private Equity and $717mn in Tactical Opportunities, though the firm’s Private Equity business as a whole deployed $1.2bn more than it realized, mostly because of its Infrastructure unit.
Private equity performance was generally muted, with the two largest – Blackstone and KKR – generating gross returns of 12% and 16%, respectively, from their corporate private equity businesses. Most managers underperformed the MSCI World Index, which was up 19.5% over the year as it rebounded from a 13.1% fall in 2022. Performances were also generally below the five-year private equity horizon IRR of 17.9% to June 2023 (the latest for which data is available), according to Preqin data.
Here are the highlights, in private equity assets under management (AUM) order:
Blackstone
Blackstone announced a gross return of 12.1% from Corporate Private Equity, 6.6% from Tactical Opportunities, and 12.1% from Infrastructure for FY 2023. Returns from Secondaries were lower, at 2.3% over the year with a 1.3% loss in the fourth quarter.
Realizations exceeded deployment in both Corporate Private Equity ($13.3bn vs. $9.6bn) and Tactical Opportunities ($3.7bn vs. $2.9bn), but not in Secondaries ($5.3bn vs. $6.7bn) or Infrastructure ($0.9bn vs. $5.3bn).
The firm continued to attract substantial capital to its private equity strategies, with inflows of $9.7bn for Corporate Private Equity, $4.9bn for Tactical Opportunities, and $5.8bn for Secondaries.
Total private equity AUM increased 5% year-on-year to $304bn.
Blackstone had $80bn of dry powder in private equity strategies at the end of 2023, which also includes Infrastructure.
The firm currently has 12 private equity funds in market, including one evergreen fund. According to Preqin data, Blackstone Capital Partners IX, which has the largest target size of any fund currently raising at $30bn, hit $17.5bn at fifth close in November.
‘Blackstone’s flagship strategies generated positive appreciation over this period and meaningfully outperformed the relevant public indices. For example, our corporate private equity funds appreciated 12% over the past two years compared with the S&P up 3%. That’s outperformance of 9%,’ Stephen Schwarzman, Chairman and CEO, said on the firm’s investor call.
KKR
KKR delivered solid private equity performance in 2023, delivering a 16% gross return from its Traditional Private Equity Portfolio.
AUM in private equity was up 7% over the year to $176bn, with organic capital raised of $7bn. More than half (52%) of KKR’s total AUM is now perpetual capital or long-dated strategic investor partnerships.
The firm invested $14bn in 2023, with activity driven by deals in the US.
KKR currently has nine private equity vehicles in market that focus on investing across Asia, North America, and Europe, according to Preqin data. The firm also has one global evergreen fund, KKR Private Equity Fund, which raises capital from Australian investors.
‘We have a pretty healthy pipeline as we’re coming into 2024, from a monetization perspective. But what I’d say is, timing is a little bit less certain, given some regulatory approvals that are required around some of these monetizations,’ Rob Lewin, Chief Financial Officer, told analysts on the earnings call.
Brookfield Asset Management
Brookfield did not report a gross return for 2023, but it’s 2018-vintage Brookfield Capital Partners Fund V is showing a 21% gross return (16% net).
Brookfield’s private equity AUM stood at $130bn at the end of 2023.
The firm currently has $18bn of uncalled commitments across its private equity funds: Private Equity Opportunistic, Special Investments, Growth, and Secondaries.
Brookfield Asset Management is currently raising two growth private equity funds, focusing on investment opportunities in Canada.
‘We also expect to be more active on the monetization front as capital markets regain strength in conjunction with the normalization of the economic situation and the stabilization of interest rates. Market participants’ confidence in pricing in risk has increased, which has in turn improved the liquidity in the capital markets,’ CEO Bruce Flatt wrote in his letter to shareholders.
Carlyle Group
Carlyle’s Corporate Private Equity operation reported a gross return of 5% for 2023.
Investment from Corporate Private Equity carry funds was $3.7bn, significantly lower than the $6.5bn of realized proceeds.
Corporate Private Equity AUM was $108bn.
The firm currently has 29 private equity vehicles open to investment (including co-investment), with dedicated buyout funds for North America, Europe, Asia, and Japan, according to Preqin data. Buyout fund Carlyle Europe Partners VI is currently raising capital and has a $7.5bn target.
‘Coming into 2024, the momentum feels good. I feel cautiously optimistic about the environment in 2024, which should provide a tailwind and maybe some upside on these [fundraising] targets,’ Harvey Schwartz, CEO and Director, said on the results call.
Apollo Global Management
Apollo generated a 12.9% gross return from its Flagship Private Equity portfolio, but European Principal Finance was down 2.7%, with a 3.8% loss in the fourth quarter alone.
The private equity business realized $6.7bn of investments.
Equity AUM roll-forward increased from $98.8bn to $107.9bn in 2023, with net inflows of $14.3bn.
The firm reported $29bn of equity dry powder at the end of 2023.
Apollo has nine private equity funds in market (excluding co-investment vehicles), across buyouts, funds of funds, and secondaries, according to Preqin data.
‘In our private equity business, our flagship fund performance remained very solid, with Fund IX generating a gross IRR of 32% and 22% net life-to-date through year-end. Importantly, we’ve been able to generate these attractive returns while prioritizing senior-secured, investment-grade credit quality, and a Purchase Price Matters investment philosophy,’ Scott Kleinman, Co-President & Director, Apollo Asset Management, on the earnings call.
TPG
TPG generated positive returns from both its Growth and Capital private equity platforms, with growth appreciating 5.9% in 2023 and the large-scale private equity Capital portfolio up 8.2%. Impact funds generated a 17.0% gross return.
Private equity AUM increased 10% over 2023, from $89.5bn at the end of 2022 to $97.8bn.
Funds in TPG’s Capital platform raised $9bn, while Growth funds raised $2.7bn.
The firm invested more than it realized across both platforms, with $10bn invested and $6.3bn realized on the Capital platform, and $2.2bn invested against $0.8bn realized from Growth.
The firm currently has 15 private equity vehicles open to investment according to Preqin data, across growth, buyout, secondaries, and funds of funds strategies.
‘During our Q2 2023 earnings call, we discussed several factors that were contributing to a ramp-up in our transaction pipelines, including narrowing bid-ask spreads, greater receptivity among corporates to strategically realign their businesses, and GPs increasingly seeking creative solutions for monetizations. These forces have been accelerating, and TPG has continued to deploy capital by leveraging our long-dated themes and core strengths, such as executing corporate carve-outs and structuring proprietary, creative financing solutions,’ Jon Winkelried, CEO and Director, said on the earnings call.
Ares Management
Ares reported a gross gain of 5.8% from Corporate Private Equity and 18.7% from Special Opportunities, including the performance of funds managed by Crescent Point Capital, an Asia-focused private equity firm it bought last year.
The firm’s private equity AUM increased 13% from $34.7bn at the end of 2023, to $39.1bn a year later, $3.4bn of which came from Crescent Point.
Ares currently has seven private equity funds open for investment, (excluding co-investment) across buyouts, funds of funds, and secondaries, according to Preqin data.
‘We believe that they will bring deep private equity experience, relationships, and a demonstrated track record of investing in markets that will greatly complement our efforts and footprint in the region. The expansion of our local capabilities will also strengthen our position as a creative solutions provider to management teams and sponsors in the market,’ Edwin Wong, Head of Ares Asia said, announcing the Crescent Point acquisition.
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