Blackstone said to get US$17 billion in seven months for LBOs

[NEW YORK] Blackstone Group LP, the biggest alternative-asset manager, raised $17 billion in seven months for its latest buyout fund, two people with knowledge of the process said.

The New York-based firm has completed the initial round of fundraising for Blackstone Capital Partners VII and will continue to gather commitments, said the people, who requested anonymity because the details are typically kept private until funds stop accepting money. Blackstone targeted US$16 billion for the pool and set a maximum at US$17.5 billion, President Tony James said last month.

Blackstone executives are meeting with fund investors this week in an annual event in New York, the people said. Peter Rose, a Blackstone spokesman, declined to comment on fundraising.

Shares of Blackstone, which went public in 2007, rose 1.5 per cent to $42.36 at 11:58 am in New York trading, extending gains in the past year to 48 per cent.

The initial close is the biggest in the history of private equity. Blackstone, which manages US$310 billion in assets, took two years to gather US$21.7 billion for Blackstone Capital Partners V, which completed fundraising in 2007 to become the largest private equity fund ever. That pool is valued at 1.9 times cost and returned 9 percent a year after fees.

The new fund is one of the biggest collected since the 2008 financial crisis and comes as private equity clients are flush with cash. Investors in such funds received distributions of more than US$1 trillion during the 18 months ended June 2014, which in turn has helped firms raise more than US$1 trillion globally in the past two years, according to Preqin.

"This vast amount of capital shows that the private equity industry continues to be able to raise funds successfully, as well as demonstrating its ability to collect for larger vehicles," said Matthew Morris, a senior research analyst at Preqin.

Apollo Global Management LLC, the buyout firm run by Leon Black, last year finished gathering US$18.4 billion for the biggest private equity fund raised since the crisis.

Blackstone's private equity unit, run by Joe Baratta, is investing its sixth fund, which completed gathering US$16 billion in 2012. The pool was producing a 14 per cent annualised return after fees and was valued at 1.4 times cost as of March 31.

"I get all kinds of like unsolicited positive things after Joe goes and visits somebody, usually followed up by some large amount of money, which I guess is the best way to express your love and appreciation of someone in the finance business," Steve Schwarzman, Blackstone's co-founder and chief executive officer, said on a conference call last month discussing first- quarter earnings.

Private equity firms recently have struggled to find cheap assets as markets hover near record highs. Leveraged buyouts totaled US$37.1 billion in the first three months of the year, a 3.4 percent decline from a year earlier and down 32 percent from the fourth quarter, according to data compiled by Bloomberg.

Leon Cooperman, the founder of hedge fund firm Omega Advisors, said he'd be cautious investing in buyouts when stock markets are at record highs.

"You're not getting any great bargains," Mr Cooperman said Thursday in a Bloomberg Television interview with Stephanie Ruhle and Erik Schatzker at the SkyBridge Alternatives Conference in Las Vegas. "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."

TPG, Ares Cooperman, 72, called Blackstone a "great organisation" that has delivered returns for its clients.

Blackstone joins TPG Capital and Ares Management LP on the fundraising trail. TPG has gathered more than US$7 billion toward a target of US$10 billion for its first buyout fund in seven years, and Ares is preparing to market its fifth main fund with a target of about US$5.5 billion, people with knowledge of the plans said last month.

In addition to the private equity fund, Blackstone is wrapping up fundraising for its global property fund, Blackstone Real Estate Partners VIII. It had gathered US$14.5 billion as of March and was seeking US$1.3 billion more from individual clients, a person with knowledge of the process said at the time.

BLOOMBERG