Blackstone’s infrastructure products led its fund performance in the first three months of 2024, as the strategy continues to pique investor interest.
In Q1 2024, Blackstone’s infrastructure vehicles appreciated 4.8%, the highest gross return rate of any of the firm’s strategies and a product of the asset class’s resilience amid market headwinds.
“This is an area where we’re still seeing investors show a lot of enthusiasm,” said Jon Gray, the firm’s president and chief operating officer, during the earnings call. “We see this growing to be a triple-digit AUM business.”
Last year, the firm closed its Blackstone Green Private Credit Fund III, focused on energy transition infrastructure debt, on $7.1 billion and closed multiple digital infrastructure deals, including a $7 billion joint venture with global data center platform Digital Realty to develop four data center campuses in Germany, France and Northern Virginia.
Blackstone attributes the strategy’s success this quarter to the scale of its $44 billion infrastructure platform, which has generated 15% net returns since its inception about six years ago.
Infrastructure is an attractive play for investors because of its ability to perform amid challenging macroeconomic conditions. In Q1 2023, when traditional private market fund performance in PE and VC suffered from frozen M&A and exit activity and resulted in minimal distributions, real assets including infrastructure outperformed all other private capital strategies.
Real assets had the best one-year performance of the strategies tracked by PitchBook, with a horizon IRR of 11.1%, according to PitchBook’s Q1 2023 Global Fund Performance Report. The asset class also outperformed private debt in its golden era.
The world’s other large public asset managers are also capitalizing on infrastructure’s ability to attract limited partners.
At the end of last year, for example, Brookfield closed the largest-ever infrastructure fund on $28 billion. Earlier this year, in a record-breaking deal in the alternatives space, BlackRock acquired Global Infrastructure Partners for $12.5 billion, growing its infrastructure AUM to a combined $150 billion.
At the same time, KKR‘s infrastructure business has grown from $17 billion to $60 billion in AUM over the course of three years. Add to that Apollo Global Management’s November launch of Apollo Infrastructure Company, an entity that will act as owner and operator of the firm’s infrastructure assets.
Looking ahead, Gray said the firm is hoping to expand its focus beyond the US and into Europe and Asia, and expects to launch new products under the infrastructure umbrella.
Across strategies, fee-related earnings—money generated from recurring fund management fees—increased 12% year-over-year to $1.2 billion, the largest jump in six quarters.
The asset manager grew its management fees to roughly $1.7 billion in Q1, marking the 57th consecutive quarter of year-over-year growth in base management fees.
Still, net realizations—a figure that estimates the value of an asset based on how much money it would make in a sale—continued a multiquarter lag as market headwinds persist and buyers and sellers remain disconnected on valuations.
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