Blackstone revives retail buyout fund launch after redemption turmoil

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Blackstone Group is making plans to launch a private equity fund for wealthy individuals after a months-long delay, resuming a push to expand by reaching beyond its base of institutional clients such as pension funds.

The $1tn-in-assets private capital group will late this year begin taking subscriptions for the Blackstone Private Equity Strategies Fund, or BXPE, according to two people with direct knowledge of the matter.

Blackstone shelved the launch late last year after its flagship $67bn property fund, called Breit, was forced to limit redemptions. The manoeuvre underscored the risks of private funds with limited ability to quickly exit investments.

Breit led Blackstone’s effort to bolster asset growth by diversifying its investor roster beyond pensions and endowments and into private wealth. BXPE will bring corporate buyouts, the foundation of Blackstone’s business, to wealthy individuals after a decade-long effort by Blackstone leaders Stephen Schwarzman and Jonathan Gray.

After its 2017 launch, Breit drew in tens of billions of dollars in investment from hundreds of thousands of individual investors. Blackstone then created a sister fund called Bcred aimed at making debt investments in 2020, which has grown to $48bn in assets.

Last year, fears over commercial property valuations and a rush to cash caused a surge in redemption requests from Breit. Blackstone announced limits on withdrawals from the fund and Wall Street began to question the firm’s growth prospects.

It also delayed raising money for BXPE, the Financial Times previously reported. That Blackstone is reviving efforts to sell the fund signals its optimism the worst of the crisis has passed and demand remains.

Blackstone would begin taking investor commitments for BXPE in the fourth quarter and planned to launch the fund in January, said the people familiar with the matter. To bolster demand, Blackstone is offering investors a six-month fee holiday. Afterwards, the fund will charge a management fee of 1.25 per cent of assets and a 12.5 per cent performance fee above a 5 per cent annual hurdle rate.

The fund is poised to be Blackstone’s most complex product yet. Unlike Breit and Bcred, which both generate a significant portion of their returns from regular distributions to investors, BXPE has not announced a regular dividend. Returns from private equity funds are episodic, being tied to when portfolio companies are bought and sold. Marking the quarterly net asset value of holdings is complex and often subjective.

“The valuations of BXPE’s assets may differ from liquidation values that could be realised in the event that BXPE were forced to sell assets,” its prospectus warns. Blackstone declined to comment.

Like the other retail funds, BXPE is perpetual in nature, meaning Blackstone is under no obligation to sell assets and return cash to investors. To avoid the risk of asset fire sales, investors must accept limited liquidity rights. They are allowed to pull up to 5 per cent of the fund’s assets in any given quarter before limits kick in.

BXPE will also not have a dedicated private equity investment team. It would instead be led by Christopher James and Todd Hirsch, two executives in Blackstone’s tactical opportunities business, according to securities filings.