Blackstone chairman predicts deal drought will end when US inflation pain eases

Get Free Blackstone Group LP Updates

we will send you one myFT Daily Digest Latest Email Rounding Blackstone Group LP News every morning.

The chairman of Blackstone, the world’s largest alternative asset manager, has predicted that inflationary pain has peaked and the year-long deal drought could soon end.

Jonathan Gray said he believes markets have weathered the “blow” of higher interest rates, signaling a possible return to deal activity now that US inflation has declined sharply in recent months.

“The market will return to normal and transaction activity will pick up again,” he told the Financial Times. “It is possible that you may have another drop in the markets as the economy slows, but we have largely overcome this through the inflationary shock and the interest rate shock.”

“I feel better about the way the market looks today than it did 12 months ago,” he said.

Financial conditions are finally starting to ease after months of sluggish activity, which has forced companies across the sector to cut jobs.

US inflation fell to 3 percent and jobs growth slowed more than expected in June, a sign that the labor market is starting to cool off from the Federal Reserve’s aggressive interest rate hikes. The benchmark S&P 500 index is up 13.6 percent this year.

Gray’s comments come as Blackstone’s assets under management exceeded $1 trillion for the first time in its second-quarter earnings results released on Thursday.

The group also earned $1.2 billion in distributable earnings, a proxy analysts prefer as a gauge for a firm’s cash flow, slightly better than consensus expectations.

However, it was down about 40 percent from the same period last year as Blackstone sold less of its investments for a profit amid volatile financial conditions.

When Gray was asked about the significance of Blackstone surpassing $1 trillion in assets, he called it “an important milestone” and “a marker” on investor pressure in the private markets.

“We believe the options are likely far greater than most people imagine,” he added.

Founded in 1985 with just $400,000 in capital by chief executive Stephen Schwarzman and investment banker Peter Peterson, Blackstone has transformed in recent decades from a small deal-making organization with a handful of partners into a mainstream financial institution.

Since listing on the New York Stock Exchange 15 years ago, Blackstone’s assets under management have grown more than tenfold and have a market capitalization of more than $130 billion, larger than investment bank Goldman Sachs.

Its roughly 5,000 employees manage a portfolio of hundreds of companies that generated a combined $200 billion in annual revenue last year, according to Morgan Stanley estimates.

Under Schwarzman’s supervision, Blackstone was the first major buyout group to diversify into investment areas such as real estate, which is now its largest business, and managed hedge funds and credit-oriented investments.

In recent years, it has attracted hundreds of billions of dollars in additional wealth after creating new real estate and debt vehicles designed for wealthy individuals and other investors. Blackstone has also begun managing the loan portfolios of large insurance companies including AIG and Allstate.

Blackstone’s target market has expanded beyond large investors such as sovereign wealth funds, pensions and endowments to the hundreds of thousands of individual investors and a growing number of financial institutions seeking exposure to unlisted investments.

Gray is excited about the company’s continued progress.

“I don’t necessarily agree with the fact that as you reach a certain size, your growth spurts,” he said.