Blackstone is a giant in the financial world. The only thing that we can say is that Blackstone is everything but an ordinary investment company. Their area of interest is wide, and while its focus is on private equity, it also encompasses real estate and other alternative asset classes. Is Blackstone a hedge fund is not a black or white answer, because among others it manages a hedge fund division.
Blackstone operates as a significant player in the hedge fund industry from two angles. They manage a hedge fund sector of the company called Blackstone Multi-Asset Investing (BXMA) and at the same time work as allocators.
So, the short answer would be that Blackstone is not a hedge fund, but manages one. Did that help? If you are still confused, stay with us, while we dissect the complex structure that includes real estate, private equity, lending, and hedge fund activities.
Key Takeaways
- Blackstone is an alternative asset management firm.
- They are trading with different assets that are not on everyone's list, like private equity, credits, and a blend of different public equity holdings.
- The company works as a credit lender offering financial assistance to companies to reach their full potential.
- Blackstone has a wide geographic reach, investing in companies and real estate all over the world.
What Is Blackstone
Blackstone was founded in 1985 by Peter Peterson and Stephen Schwarzman as a mergers and acquisition firm. Since then the company evolved into a money-making machine. They operate on several fronts, having trillions of dollars in assets under management.
Blackstone Investment Strategies
- Private Equity
Blackstone's primary sector of operations is private equity. Those include companies that are not traded on public markets. Their common approach to companies they acquire or invest in is to improve them and resell them at a higher price.
The focus on private investments is quite diverse and includes sectors like healthcare, technology, industrials, consumer & retail, and financials. Blackstone searches for companies all over the globe, often finding investment opportunities in markets that are undervalued.
When talking about investment approaches Blackstone utilizes several - buyouts, growth equity, and special situations. Depending on the case they will invest in a controlling stake of the company with borrowed capital. Also, they are on the lookout for firms that show high potential for growth, helping them reach their maximum.
- Real Estate
Besides investing in private equity, Blackstone is a major player in the real estate market. Their focus is on high-quality office space, warehouses and distribution centers, hotels, and shopping centers.
Regarding real estate, Blackstone is also keen on diversifying their approach. It is hard to tell which element of real estate is their primary, between investment in developing new properties, managing existing portfolio properties, or buying existing properties.
One factor glues them together - the potential for long-term high-growth generation. Like with private equity, they have real estate investments all over the world.
- Credit Lender
While investing in private equity and real estate may seem as the most important segments of the Blackstone Group, credit lending is another lucrative segment in their operations.
As a credit lender, they primarily deal with firms offering them various credit solutions. Blackstone Group this way helps them to maximize their performance or to increase their operating capacity.
They deal with a wide range of credit products including senior loans, high-yield bonds, mezzanine financing, and distressed debt investing.
- Hedge Fund
Blackstone's dedicated hedge fund division is called Blackstone Multi Asset Investing Fund. The main strategy of the fund is absolute return, meaning that the managers are aiming to generate profit no matter the market's direction.
While most hedge funds are sticking with stocks and bonds investing, Blackstone's hedge fund invests in a spectrum of asset classes. Besides stocks and bonds, they also allocate capital into fixed income, commodities, real estate, and credit.
Regarding favorite strategies, among them are long/short equity, event-driven, and distressed debt investing. Blackstone often uses leverage to amplify their investments potentially resulting in higher returns. This comes with increased risk chances.
Blackstone - A Hedge Fund Or An Asset Management Company
Blackstone cannot be simply categorized as a hedge fund or an asset management company. The best way to describe Blackstone is as a much broader financial institution dealing with alternative asset classes.
Hedge fund's investor base focuses on wealthy institutional investors due to the high minimum level of initial investments. On the other hand, other parts of the company draw different types of investors, ranging from individual, institutional, and in some cases retail investors.
Perception Of Blackstone Among The Competition And Clients
Competition
Competition always held Blackstone in high regard. It is known as a leader in the alternative asset management industry. By its size, structure, experience, and track record, they are in the top of their league.
Blackstone always pushed for the innovations in the industry. This combined with their deep expertise in a wide array of industry sectors and asset classes was often an inspiration for competing companies to up the ante.
Besides competing with Blackstone, companies from the field also frequently cooperate with them. If there is a big alternative investment opportunity on the horizon they tend to join forces and make a joint investment.
Clients
Blackstone due to their solid track record have the utmost confidence from their clients. Fund access to a variety of strategies offering diversification to clients is another plus. It is difficult to gain access to that array of assets and trading strategies from other companies.
On the downside, Blackstone has limited transparency which can be a turn-off for many investors. That combined with typically higher fees, provides a ground only for a selected group of investors that have high trust in the company.
The fund aims to attract new investors by their impressive track record, and unique approach to investing. The only thing that investors have to agree to is that they will be in some manner kept in the dark.
