Blackstone Investor Day Takeaway
Recently watched Blackstone's Investor Day presentation and am amazed at the Blackstone platform. Some key takeaways:
1) Blackstone is starting a dedicated life-science private equity fund
2) Blackstone's highest performing investment team is not PE, Tactical Opportunities or Real Estate but their secondaries group called Strategic Partners (17% net IRR). On average they close a deal every 3-4 days.
3) Blackstone as a whole is expanding beyond bread and butter institutional investing. The firm is expanding quickly in to insurance solutions and private wealth management, thus calling Blackstone a private equity firm is no longer accurate and misguided.
Anyone else have interesting takeaways?
I'm pretty surprised by #2
Any investments made by Strategic Partners?
Don't be that surprised. Secondaries shops can have much higher IRRs than traditional PE vehicles for quite a few years. They buy stakes in funds cheap and then mark those investments up day 1 to NAV (produces a huge IRR for the first few years). You really can't judge a Secondaries fund until it's later in its life cycle. MOICs can be lowered than traditional PE since the assets might be flipped fast, but still IRRs will be high.
Agreed. From what I have seen, 1.5-1.6x is considered a good MoIC for a secondaries fund. However even though the MoIC is lower, there seems to be extremely low downside risk and distributions happen much quicker than traditional PE. Makes a lot of sense for LPs to allocate there.
Yep. One thing I'd note, is that there is a limited opportunity set (i.e. funds that are struggling and need liquidity). The Secondaries PE space has expanded and so you have more of these GPs chasing deals and so it'll be interesting if the returns trend lower as this side of the market becomes more efficient/saturated.
The Secondaries Head actually addressed that in the investor day and said it's a myth. Less than 5% of funds are distressed and if distress was the driver, they would only be busy in 2009. More opportunities come from strategic sales, FoF reaching end of fund life, LPs wanting to consolidate GP relationships to concentrate their portfolio, GPs wanting to extent investments beyond fund life, etc.
Apologies if it doesn't read this way, but my comment "funds that are struggling and need liquidity" was meant to say "funds that are struggling and funds that need liquidity" as in two different scenarios. 100% agree with you / appreciate you adding that context!
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