The Blackstone Group L.P. BX reported third-quarter 2015 economic net loss of 35 cents per share, which was significantly wider than the Zacks Consensus Estimate of a loss of 4 cents. Further, the figure compared unfavorably with the prior-year quarter economic net income (ENI) of 66 cents.
Results were adversely affected mainly due to volatile markets, which led to a steep decline in revenues. However, lower expenses were an upside during the quarter. Moreover, growth in assets under management (AUM) continued to be impressive.
Blackstone reported economic net loss of $415.9 million, compared with ENI of $758.4 million in the year-ago quarter.
Behind the Headlines
Total revenue (GAAP basis) plunged 99% year over year to $11.6 million. The substantial decline was mainly owing to negative total performance fees and total investment loss. These were, however, partly offset by higher interest and dividend revenue (up 45%) and net management and advisory fees (up 10%).
Total expenses (GAAP basis) declined 55% year over year to $477.0 million. The reduction was primarily driven by a huge cut in total compensation and benefits costs, partly offset by a rise in fund expenses, interest expenses as well as general, administrative and other costs.
Fee-earnings AUM grew 12% year over year to $240.9 billion. Total AUM amounted to $333.9 billion as of Sep 30, 2015, up 17% year over year. The rise in total AUM was largely driven by $12.3 billion of strong fund appreciation and $96.9 billion of gross inflows.
As of Sep 30, 2015, Blackstone had $4.2 billion in cash, corporate treasury and liquid investments.
Our Viewpoint
Though decline in public investment values across funds resulted in the disappointing performance by Blackstone, we believe that the improved economic conditions with the support of the company’s robust balance sheet will augment its fund-raising ability.
We remain apprehensive owing to the rising costs, volatile capital markets and stringent regulations weighing on profitability. However, the company seems well positioned to capitalize on the changing investor preference for alternative asset classes and other risk management strategies.
Currently, Blackstone carries a Zacks Rank #5 (Strong Sell).
Among other investment managers, Ameriprise Financial, Inc. AMP, Waddell & Reed Financial, Inc. WDR and Invesco Ltd. IVZ are scheduled to release their third-quarter earnings results on Oct 21, Oct 27 and Oct 29, respectively.
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