Blackstone’s fund management business is growing but its performance slipped a bit over the past year, the firm’s most recent filing with the Securities and Exchange Commission suggests. The revised IPO prospectus filed by Blackstone on Monday said the firm had $35.3 billion in its funds of hedge funds and hedge funds, nearly $6 billion more than it said it had in March. But it also shows modestly lower returns in several categories of funds.
The new prospectus provides a rare glimpse into something like a quarterly earnings statement for Blackstone by revealing changes in the past few months. Until now, only Blackstone the wealthy individual and institutional investors in the firm's funds have received reports on their investments. But the public has not been privy to such detailed information. After the IPO, Blackstone will have to begin filing quarterly reports with the SEC.
The new information came to light because the updated prospectus dates uses different dates to measure the performance of the funds than the earlier prospectus. The original prospectus measured annual returns from January 2006 through December 2006. The new prospectus measures the returns from April 2006 through March 2007. This allows the public to see how the performance of the funds has changed and may even provide a glimpse at their prospects. In most areas, the returns have declined. This suggests that returns in the quarter beginning January 2007 were lower than returns from the first quarter of the prior year.
[Details on the changing returns of Blackstone's funds after the jump.]
The data in the new prospectus suggests, at the very least, that the first quarter of 2007 was not as bountiful for many types of Blackstone’s managed funds as the first quarter of 2006. When the first quarter of 2007 is substituted for the first quarter of 2006, the funds of funds that Blackstone categorizes as “broadly diversified” show a decline in annualized returns before fees from 12.7% to 11.9%. Its other funds of funds categories also indicate a poorer performance for the first quarter of 2007, reducing the annualized returns. Returns on the funds described as "strategy focused" declined from 12.3% to 10.7%. Those on Blackstone's "opportunistic" funds declined from 12.2% to 10.2%. Returns on "client customized" funds declined from 13.5% to 11.5%. (See chart below.)
[Click chart for a larger version.]
The data for the two closed-end mutual funds managed by Blackstone also indicate a that the first quarter of 2007 has been rough. Prior to the inclusion of the latest quarter, the India Fund was showing annualized returns net of fees since inception in 2005 of 43.9%. Including the latest quarter has reduced that figure to 30.1%. Blackstone’s “Asian Tigers” fund has similarly suffered, although the dip has not been as dramatic. It went from annualized returns net of fees of 42.5% to 38.2%.
One of Blackstone’s proprietary hedge funds—the funds the firm trades with for its own account—also indicates a decline in first quarter-to-first quarter performance. The distressed debt fund had annualized returns of 13.3% before fees when measured from January 2006 through the end of the year, and only 11.3% when measured from April 2006.
In contrast, Blackstone’s other proprietary hedge fund, an equity fund launched in October of last year, shows continued strength. Its annualized returns have increased from 11.6% to 26.1% before fees. The annualized return on the S&P 500 has also improved over this period.
Revised Blackstone Prospectus [SEC]
Original Blackstone Prospectus [SEC]
Earlier on DealBreaker:Blackstone IPO: A Bigger Offering But A Smaller Firm? [5.21.07]