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Maybe the timing wasn’t so hot.
Blackstone may delay its long-planned, soon-to-be-launched private equity fund aimed at attracting wealthy retail investor clientele, a report this weekend said financial timesThe potential move comes as investors pour out of its real estate and credit funds, leaving almost no one wondering if embracing big investor appetites for a new fund isn’t a really bad thing.
Retreat for retail
For Blackstone, fear of future pain is already causing headaches. While the money manager is typically associated with pension funds, university endowments, and other no-frills institutional investor types, it also does some business with wealthy individual investors. Now, this clientele is increasingly concerned about finding a safe place to stash their money, leading a bunch to withdraw from Blackstone’s credit and real estate funds at an alarming rate. The widespread redemptions prompted the company to cap redemption requests from its private real estate investment trust (BREIT), which in turn sparked a sell-off among Blackstone shareholders that sent the stock price down about 10% in the days following the redemption cap.
Slated for early next year, Blackstone Private Equity Strategies Fund (BXPE) would be particularly vulnerable to nervous clients due to its unique structure:
- BXPE will invest in corporate takeovers and equity-driven games such as B. Late-stage venture investments. Unlike similar previous funds, which typically had a 10-year lifecycle with annual fundraising rounds and regular dividend payments to investors, BXPE will be a perpetual vehicle that only pays returns on unpredictable asset sales.
- That means the value of its assets is complex and likely based on subjective mark-ups or write-downs — perhaps a good strategy if its investors can be persuaded to stay for the long-term, but expose them to risk up to and including illiquid fire sales if there are enough Customers decide at the same time for a division.
Christmas is cancelled: Blackstone isn’t the only one on Wall Street fearing the stormy clouds on the horizon. One of the reasons for the headwind is Ernst & Young, which canceled the Christmas bonus this weekend. Meanwhile, Semafor reported late last week that Goldman Sachs would cut its year-end executive bonuses by up to half.
Stay Focused: Thankfully, all is not murky and gloomy on Wall Street. Blackstone’s troubles stem mainly from the wealthy being picky about where they invest their money, while EY’s and Goldman’s dour predictions could just be an excuse for routine cost-cutting. Their gloom contrasts with a growing number of mutual funds and hedge funds that have around $4.8 trillion under management. According to an analysis by none other than Goldman Sachs, their moves signal increased confidence in a soft landing for the Fed. Finally: optimism.