Blackstone is not new to raising capital from wealthy individuals through its private wealth solutions business, which accounts for roughly 20% of its $731 billion in assets under management.
“If you go back 10 years, we were offering drawdown funds to individuals but there are restrictions around who can own those; one has to be qualified purchaser, with $5 million or more in investible assets,” said Joan Solotar, Blackstone’s global head of private wealth solutions. “This limits the universe of investors.”
During Blackstone’s Oct. 21 earnings call, Stephen A. Schwarzman, chairman, CEO and co-founder, said that the third quarter was “the most consequential quarter” in the firm’s history and “represented a defining moment in terms of our expansion into the vast retail and insurance markets.”
For example, of the $10 billion raised in the third quarter for Blackstone’s core-plus real estate business, the largest driver of its perpetual capital, Blackstone raised $7.5 billion from its retail investors in its U.S. real estate investment trust, Blackstone Real Estate Income Trust, Mr. Schwarzman said. In October, Blackstone launched a European real estate vehicle also designed for retail investors. And also in the third quarter, Blackstone’s non-traded business development company, Blackstone Private Credit Fund, raised $3.5 billion from retail investors.
During the same earnings call, Jonathan D. Gray, Blackstone’s president and chief operating officer, noted that Blackstone had a head start on the competition.
“And so, others will come into this space. Like everything, there’s competition,” Mr. Gray said. However, Blackstone’s edge especially in the retail space is the “power of the brand,” he said.
KKR & Co. Inc. has also identified raising capital from retail investors as one of three main areas of focus, along with growing its insurance business and expanding perpetual capital, said co-CEO Scott C. Nuttall during the firm’s Nov. 2 earnings call. He said KKR executives expect capital raised from individual investors will grow to 30% to 50% of the total capital raised “over the next several years,” compared to 10% to 20% of the capital raised over the last few years. KKR had $459 billion in assets under management as of Sept. 30.
“We are investing in sales, marketing, data and digital talent, and we are creating more democratized products that are relevant for a wide number of individual investors,” he said. “This is a big opportunity for us, and we think we’re incredibly well positioned.”
However, he added that “we’re early days on the retail journey.”
“We think around the world, particularly Asia, there’s a lot of savings looking for alternatives and exposure to the type of things we do,” Mr. Gray said. Globally, there’s $70 trillion of wealth “with people with more than $1 million of investible assets, which is the target traditionally,” he said. And their average allocation is low, about 1% or so, he added.
“And so, when we think about where this can go … the potential is significant,” Mr. Gray said.