Blackstone is making light work of fundraising for its ninth flagship secondaries fund, according to the firm’s president and chief operating officer.
Strategic Partners Fund IX “is on track to reach approximately $20 billion, which will be the largest secondaries vehicle ever raised”, COO Jonathan Gray said on the firm’s fourth-quarter and full-year 2021 results call on Thursday.
Fund IX gathered $12.8 billion in the fourth quarter, according to earnings materials. The firm is targeting $13.5 billion for BSP IX, Secondaries Investor reported in June.
If successful, BSP IX will be nearly twice as large as its 2019-vintage predecessor. It will also be the biggest secondaries fund in history, replacing Ardian and Lexington Partners’ $14 billion current flagships, according to Secondaries Investor data.
Gray noted that over the next 18 months, Blackstone expects to have launched and substantially completed fundraising for nearly all if its major drawdown funds as part of its latest flagship fundraising cycle.
That’s some 17 funds targeting approximately $150 billion in aggregate, representing a 25 percent increase over the prior cycle. The firm is set to begin raising capital for its largest flagship funds for real estate and private equity this quarter, Gray said.
Other vehicles in the pipeline include real estate and infrastructure secondaries, Strategic Partners’ GP continuation strategy, tactical opportunities, growth equity, life sciences and European credit, among others.
Blackstone’s secondaries holdings appreciated 9.1 percent in the fourth quarter and 49.8 percent for the year.
Gray noted: “Secondaries had a record deployment in the quarter and that’s not a surprise because many institutions have seen extraordinary performance from their PE pools and some are looking to make new allocations and they’re selling older funds – and that’s led to huge deal volume there.”
Demand for the strategy is mainly driven by the overall growth of alternatives, he noted.
“The industry has been growing at double-digit rates for a long-time… at the same time, liquidity – for those that want to exit early from funds – is pretty limited. So, there’s a very small percentage of outstanding net asset value that trades every day. Today it’s between 1 and 2 percent… And so what’s happening is you have an asset class that’s growing very large and liquidity that was already too small for the existing asset class. And that’s creating a huge tailwind.”
“What’s interesting in our secondaries fund, not only did we realise the most, we also deployed the most capital because investors are trying to free up capacity,” Gray added. “It’s a market we like a lot. There seems to be some structural inefficiency because of the lack of liquidity, and it’s growing fast.”
Blackstone’s total assets under management reached $880.9 billion as of end-December, a 42 percent increase on the previous year. New capital commitments reached $270.5 billion as of end-December, up from $95 billion in 2020.