Blackstone draws level in race for largest-ever secondaries fund

Blackstone’s Strategic Partners has hit a fundraising milestone for its latest vehicle.

The New York-headquartered has raised $14 billion as of this month for Strategic Partners Fund IX, bringing it level with Ardian and Lexington Partners’ most recent flagship funds as the largest secondaries vehicles yet raised.

Blackstone is on track to reach approximately $20 billion later this year, president and chief operating officer Jon Gray said on a call accompanying the firm’s first-quarter 2022 earnings on Thursday.

The firm gathered $12.8 billion in the fourth quarter of 2021. It has a target of $13.5 billion, Secondaries Investor reported in June.

“What we’re seeing is LPs who want to stick with managers, but who may be over their allocation targets because of strong performance in PE, saying, ‘I’m going to sell some of my older-vintage PE fund’. We have seen an acceleration of deal flow in the secondaries market, which is why having a large fund for our team in secondaries is very important,” Gray said.

“We like this space because as alternatives grow, the need for liquidity grows,” he added. “And it’s a difficult business to invest in – you need a lot of knowledge, particularly once you move beyond the 10 or 20 largest funds.”

The firm is also in the market with a $2 billion target for its debut GP-led fund, which will co-invest with BSP IX.  Gray did not disclose how much capital has been gathered thus far for the vehicle.

In an environment where there are some headwinds in PE fundraising, including liquidity constraints among LPs, the firm’s secondaries business is set to benefit because of structural inefficiencies in the market, he noted.

Limited partners’ appetite for GP-led deals also remains high because they want to be invested long-term, Gray added.

“The other positive for these investors is they roll over. In deals we’ve done, the existing investors ended up being the majority investors,” he said.

“It’s an opportunity, but it’s selective,” Gray said of deals involving core and perpetual strategies, such as the €21 billion Mileway transaction. “It’s for very large platforms that are harder to exit from, and also are long-term attractive for new investors who want to deploy capital.”

Blackstone’s secondaries portfolio appreciated 8.5 percent in the quarter and 41.1 percent over the last year, according to earnings materials. Corporate private equity, meanwhile, grew 2.8 percent in Q1 and 30 percent over the last 12 months.

The PE giant is seeking as much as $150 billion of inflows across alternatives strategies over the next 18 months, it revealed during its fourth quarter and full-year 2021 results call in January.

Blackstone has $915.5 billion in assets under management as of end-March, up 41 percent from the previous year. Perpetual capital reached $338.2 billion, accounting for 37 percent of total AUM, increasing 127 percent year-on-year.