Blackstone Group LP (BX.N), the world’s largest alternative asset manager, reported weaker-than-expected fourth-quarter earnings on Thursday as falling oil prices and a choppy credit market dragged on its investments.
Economic net income, which accounts for unrealized gains or losses in investments, dropped 70 percent to $435.7 million, or 37 cents per share, from $1.4 billion, or $1.25 a share, a year earlier.
On that basis, analysts on average had expected 45.5 cents per share for this key metric for private equity firms, according to Thomson Reuters I/B/E/S.
It has been a tough few months for private equity firms. Besides smarting from energy investments as oil prices tanked, dealmaking has also suffered since November due to the toughest financing conditions since the 2008 global financial crisis.
The market for high-yield bonds, the lifeblood of buyout deals, has frozen as banks struggle to sell them in syndicated sales. Banks are also lending fewer of the riskiest junk-rated loans that fund buyouts, further tightening financing conditions.
Blackstone’s income based on the performance of its investments slid across the board. The private equity, real estate, hedge fund and credit divisions all suffered, but the credit arm took the biggest hit as losses doubled to $90.5 million from a year earlier.
But even as investments weakened, investors handed Blackstone more cash to manage. Assets under management increased 16 percent to $336.4 billion, with growth in each of its investment arms.
Distributable earnings, which show the actual cash that Blackstone has available to pay dividends, slumped 23 percent to $878 million, or 72 cents per share.
Founded in 1985 with just $400,000, Blackstone is a leading buyout firm due to the sheer amount of cash that it manages. It was the first of its peers to report fourth-quarter results.