BREIT Posts Best Net Flows in Four Years as BCRED Outflows Persist
Blackstone’s private wealth business grew assets under management 16% year over year to $324 billion in the second quarter, with results across its nontraded and perpetual capital vehicles diverging sharply by strategy, executives said on the company’s July 23 earnings call.
Total sales in the wealth channel were $8.6 billion for the quarter. President and chief operating officer Jon Gray said sales slowed in April and May amid negative sentiment tied to the Iran conflict before recovering in June, with the momentum continuing into the third quarter.
BREIT Posts Best Net Flows in Four Years
Blackstone Real Estate Income Trust, commonly known as BREIT, raised $1.2 billion in the second quarter. Repurchase requests fell 42% year over year and 33% sequentially from the first quarter, producing the fund’s best net flows in nearly four years, according to the company.
BREIT’s turnaround has been building for a while; AltsWire reported the fund’s highest capital raise in three years back in May as repurchases first started falling sharply.
BREIT has generated a 9.4% net return for its largest share class since its January 2017 inception, a figure the company said is approximately 40% above the public REIT index, including a 10.3% net return during the last 12 months. Net asset value rose 7% year over year to $57 billion.
Data centers now make up 27% of the portfolio, which Gray and chief financial officer Michael Chae both credited as a driver of the fund’s improved performance.
BCRED Redemption Pressure Eases
Blackstone Private Credit Fund, or BCRED, reported gross sales of $1 billion in the quarter. Repurchase requests exceeded the fund’s 5% quarterly limit, with approximately 50% fulfilled, resulting in net outflows of $1.2 billion. Gray said redemption requests are down materially so far in the third quarter, attributing the improvement in part to reduced negative media coverage of private credit and continued investor outreach.
Gray drew a direct parallel to BREIT’s own redemption crisis when asked about the improvement. “We went through this with BREIT in the past – we’re obviously today in a very different place – we’re going to go through this with BCRED,” he said. “I’m sure at some point here we’re going to be in a very different place.”
BCRED is certainly not alone in bumping against its quarterly repurchase ceiling. AltsWire reported in May that Golub Capital’s private credit fund, GCRED, received repurchase requests equal to 8.5% of shares outstanding – well above its own 5% quarterly cap – forcing a prorated fulfillment. Apollo Debt Solutions BDC held its second-quarter repurchases to its 5% cap after withdrawal requests reached 16.8%, and Ares Strategic Income Fund fielded second-quarter demand equal to 14.4% of NAV, nearly triple its cap. The pattern has become a recurring feature across nontraded business development companies as redemption demand has grown faster than some funds’ liquidity structures can absorb.
BCRED’s NAV stood at $42.8 billion as of June 30, and the fund has generated a 9% net return since its January 2021 inception for its largest share class.
BXPE and BX Infra Continue Rapid Scaling
Blackstone’s Private Equity Strategies Fund Program, known as BXPE, raised $2.4 billion in the quarter, bringing its NAV to more than $25 billion after 10 quarters, which Gray said marked a twofold increase year over year. BXPE has produced a 20% net annualized return since inception for its largest share class, including approximately 8% net in the second quarter alone, with June representing its best month of sales since launch at $1.2 billion.
Blackstone’s infrastructure vehicle for private wealth investors, BX Infra, raised approximately $900 million in the quarter, bringing its NAV to $6 billion after six quarters. The fund has produced a 16% annualized net return in its largest share class.
New Product Launches
Two new funds formed through Blackstone’s alliance with Wellington and Vanguard, WVB All Markets and WVB Blackstone All Privates, launched the day before the earnings call, with inflows expected to begin later in the third quarter. Gray said the products are designed to give individual investors simplified access to strategies across all three firms, including a broader universe of eligible buyers than some existing Blackstone vehicles, which are limited to qualified purchasers.
Chae said the firm continues to expect year-end crystallizations at BXMA, Blackstone’s multi-asset investing business, to contribute to fourth-quarter realizations across the platform.
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