blackstone

Blackstone Raised $17 Billion In Seven Months For LBOs

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May 11, 2015

One of the largest private equity firms is rumoured to have raised an impressive $17 billion in the space of seven months. Papers reported on Thursday that the firm has completed the initial round of fundraising but continues to gather further commitments, as investor appetite seems to be strong.

 

Exceeding Expectations
The firm’s president Tony James had told newspapers last month that Blackstone was targeting $16 billion with the Blackstone Capital Partners VII fund. At the time, the firm also announced it has set a maximum of $17.5billion for the fund. Bloomberg’s sources now suggest that firm has managed to have raised $17 billion and will continue pushing further.

 

The sources didn’t want to be named in the article, as the fundraising details are typically secret until the firm stops accepting money. The spokesperson for the private equity firm declined to comment on the fundraising efforts.

Large Funds


The private equity firm is known for its big fundraising efforts. The previous fund, Capital Partners V, managed to raise $21.7 billion in two years. When it completed fundraising in 2007, it became the largest PE fund. According to Bloomberg, the pool is currently valued at 1.9 times cost and it has returned 9% a year to investors (after fees).

 

The most recent fund by Blackstone, the Capital Partners VI, raised $16 billion. The fund, which stopped fundraising in 2012, is creating a 14% annual return to investors (after fees).

 

If the rumours are true, the new fund will become one of the biggest funds since the financial crash in 2008. The current top position is held by Apollo Global Management, which managed to raise $18.4 billion. The fund stopped collecting investments in 2014. Blackstone isn’t just going big with its private equity fund either.

 

The firm is also fundraising for the global property fund, Blackstone Real Estate Partners VIII. In March, the fund had raised $14.5 billion and according to insider sources, the firm was aiming for another $1.3 billion to add to this.

 

Problems in Finding Cheap Assets
Private equity firms will need to have plenty of capital in the bank, as firms are faced with a limited amount of valuable assets. Bloomberg’s data suggest leveraged buyouts amounted to $37.1 billion during the first quarter of 2015. This is a drop of 3.4% to the levels year earlier.

 

The decline is even steeper if you compare it with the levels in the fourth quarter of 2014, as the buyouts totalled 32% more during this time.

 

In a televised interview on Thursday, Leon Cooperman, the founder of hedge fund firm Omega Advisors, the record high stock markets make finding cheaper assets difficult and risky. “Generally speaking, when you do the LBO, you’ve got to pay a premium to get it – a premium over a richly appraised market. I’d be cautious,” he said in the interview.

 

PE Firms Are All Raising Money
Nevertheless, the big players of the industry are all currently running fundraising rounds. TPG Capital and Ares Management LP, for example, are all gathering investments with their latest funds. TPG’s target is set at $10 billion, with over $7 billion already gathered.

 

According to Bloomberg, Ares Management is in the first stages of beginning marketing for its fifth main fund, with target set to around $5.5 billion.

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