Perpetual capital makes up over a quarter of Blackstone's fee-earning AUM

As Blackstone grows, the listed alternatives giant's capital base is shifting toward perpetual capital strategies, such as real estate core-plus, infrastructure, insurance solutions and private credit, Chairman and CEO Stephen Schwarzman said during the firm's fourth-quarter 2020 earnings call.

"These areas are characterized by large-scale investor allocations as well as a much larger universe of potential deployment opportunities than where we focused historically," Schwarzman added.

Over a quarter of The Blackstone Group Inc.'s fee-earning assets under management is now perpetual, CFO Michael Chae told listeners. Fee-earning AUM increased 15% year over year to $469 billion, while total AUM rose 8% to $619 billion.

Perpetual AUM now sits at $135 billion, President and COO Jonathan Gray said.

The firm's Core+ Real Estate platform has grown to $69 billion, "up 50% year over year across five perpetual capital vehicles," Gray said, while BREIT, its largest core-plus vehicle, now has $22 billion of AUM. The firm believes the strategy "could become the single largest earnings driver at Blackstone," Gray said.

'Widen the funnel'

When asked by an analyst how the firm is expanding its capacity to generate new investment activities and put capital to work, Gray said the firm is able to take a "much broader view" as it raises perpetual capital that is "longer-duration, lower-yielding."

The firm is investing in origination capabilities, particularly across its credit strategy, but also over its equity strategy across core private equity and its core-plus real estate business. "We're just hiring more people in these areas; it gives us more dialogue," Gray said.

The launch of these perpetual vehicles also expands Blackstone's universe of potential investors. Permanent capital solutions "do have elements of liquidity to them that are favorable to customers," Gray said.

The firm believes some of its perpetual capital products "will be able to move geographically, where you raise money in different parts of the world," Gray said, adding that it expects to launch a smaller number of very large products it can scale. "We're spending a lot of time in this area. It continues to grow, the perpetual capital, and we expect good things from retail in 2021."