Blackstone and BlackRock Master the Art of Moneymaking

Two major events are shaking up the asset-management world. Blackstone Inc. raised $1.3 billion for its first retail private equity fund, targeting those who have at least $5 million to invest. Separately, BlackRock Inc. is buying Global Infrastructure Partners for $12.5 billion, a major foray into alternative investments. The acquisition will make it the second-largest manager of private infrastructure assets.

After blowing past major milestones — the pair now manages over $1 trillion and $10 trillion, respectively — Blackstone and BlackRock need to show investors they still have a good story to tell. The two deals showcase just that.

Not every dollar earned is deemed equal. In private equity, for instance, being able to fund raise and earn management fees has become more valuable than notching superior fund performance.

As private equity groups enter 2024 with record a $2.8 trillion in unsold investments, analysts are brushing away potential gains from asset sales. After all, initial public offering markets remain anemic; so do global M&A activities.

HSBC Holdings Plc, for one, calls realized capital gains on portfolio exits “low quality,” while praising the “sticky and hence high quality” nature of fee-related earnings. In its sum-of-the-parts analysis, earnings from asset sales get a 25% valuation discount, while those from management fees receive a 50% premium.