BLACKSTONE’S shares plunged over four per cent yesterday wiping out most of their gains for the year after the private equity giant revealed a near 25 per cent drop in profit for the first quarter.
Economic net income (ENI), a measure of profitability which includes changes in its portfolio value, fell by $138.7m to $432.3m in January to March this year. The 24.3 per cent drop, compared to the same quarter last year, came as a slower rate of increase in the value of its assets led to lower performance fees.
Overall performance fees for January to March fell 36 per cent to $385.8m driven largely by decreases in the value of assets in its real estate and private equity divisions.
Despite the drop, the firm managed to boost assets under management to a record $190bn for the quarter – a 27 per cent increase on the same period last year – and a figure analysts said indicated its long-term fundamentals remain strong.
“Ultimately this business is a fund raising machine. If it can put the capital to work then that is what drives its potential,” said Sandler O’Neill analyst Michael Kim.
Kim blamed yesterday’s share price fall on Blackstone’s less optimistic stance on the near-term market outlook, with a meaningful pick up now not expected until year-end.
“As markets continue to heal, we are well positioned to take advantage of more opportunities to convert value creation to both returns for our limited partners and cash earnings for our public unit holders,” said chairman and chief executive officer Stephen Schwarzman yesterday.
Blackstone’s results, seen as a bellwether for the buyout industry due to its sheer size, come ahead of rival KKR which is due to report next week.
Its shares closed down 4.72 per cent at $14.14 yesterday.