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Blackstone Proves Its Mettle By Keeping The Ball Rolling

May 07, 2018 11:52 AM ETBlackstone Inc. (BX)44 Comments
Value To Success profile picture
Value To Success


  • While Blackstone provided dismal headline numbers for Q1 2018, a deeper dive into the plumbing would provide a different view.
  • Blackstone's business model requires patience as investments are turned around.
  • It is important to keep an eye on the Accrued Performance Revenues as it provides an insight into the health of Blackstone's stable of investments.

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A couple weeks ago, Blackstone (NYSE:BX) released its earnings report for Q1 2018. For me, the important metric within the report was the Accrued Performance Revenues, which increased by 7.68% to $3.6 billion at the end of the quarter. In the simplest terms, the Accrued Performance Revenues tracks the shareholders’ slice of the profits if Blackstone sells off its investments. This was achieved against the backdrop of increased volatility in the equity and real estate markets with the S&P 500 logging a 1.2% quarterly decline, the first since September 2015 and also, the REIT index logging a 8% decline. It is truly remarkable that Blackstone was able to deliver positive growth within its underlying investment strategies despite headwinds in the markets. Unfortunately, many investors focus on the quarterly distribution as the only benchmark to rate Blackstone’s performance. However, by digging a little deeper into the earnings report, investors would be able to unlock the true value of Blackstone’s business model and the timing of the distribution payouts.

As the largest alternative asset manager in the world, Blackstone earns its profits through a two-fee structure: Management and Advisory Fees (“management fees”) and Performance Revenues. The management fees is calculated as a fixed percentage of the total Assets Under Management (“AUM”). Blackstone earns this fee regardless of the returns generated by the investments the capital is deployed in. Therefore, it is nice too see that Blackstone was able to grow AUM by 22% year over year to a record $450 billion. Since there is no guarantee for positive returns and the requirement to pay a standard

This article was written by

Value To Success profile picture
A self-learned active investor on the lookout for value investments for long-term holding. I began my experience investing while in college and have been active for more than a decade. Value investments range from (growth) tech for the future to (safe) dividend paying MLPs.

Analyst’s Disclosure: I am/we are long BX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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