Will Alternative Asset Manager Blackstone Continue to Outperform?
Transaction activity
Blackstone (BX) provides advisory services to its clients and third parties with respect to acquisitions, mergers, joint ventures, minority investments, asset swaps, divestitures, takeover defenses, corporate finance advisory, private placements, and distressed sales. The division’s activity and revenues are very much in line with the company’s overall business as a majority of its advisory revenues come from existing clients. However, it also advises external clients and benefits from buy-side as well as sell-side advisory. The division reported a 72% rise in total revenues to $151 million as compared to $87 million in the corresponding quarter last year.
Economic income for the financial advisory division rose by 5.6 times during the third quarter. Blackstone’s division benefited from the merger and acquisition volume and a rise in energy-related restructuring opportunities.
Spin-off of advisory
Blackstone completed the spin-off of its advisory business on October 1, 2015. The new company is called PJT Partners Inc. (PJT) and is trading on the NYSE (New York Stock Exchange) under the PJT ticker. The fundraising environment for alternative assets remained strong as more distributions from legacy investments are reinvested across the fastest-growing segment of asset management.
In the first nine months of 2015, the division’s revenues rose by 14% to $318 million, while economic income rose by 168% to $72 million. The company’s long-term growth plans are steadily progressing, with several important senior hires announced in the first half of 2015. The company will not have the revenues of the financial advisory division clubbed in the fourth quarter after the separation. Overall, it can impact economic net by $0.6 per share. This is expected to be compensated by growth in other divisions.
Blackstone’s revenue rose by 12% in the last fiscal year. Revenue growth for Blackstone’s peers Carlyle (CG), KKR (KKR), and Apollo Global Management (APO) fell by 7.2%, 18.3%, and 59.6%, respectively. Together, these companies form ~1.4% of the Financial Select Sector SPDR Fund (XLF).
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