Blackstone is doubling down on its efforts to woo the wealthy with 2 new funds, flying in the face of BREIT critics

Blackstone's Jon Gray said the private-equity giant plans to launch two new funds for wealthy individual investors starting next year.

• Blackstone is launching two new funds for wealthy individual investors in credit and infrastructure.
• Blackstone's largest fund for individual investors, BREIT, has come under fire from critics.
• The 2 funds suggest Blackstone remains bullish on fundraising from individual investors.

Blackstone is doubling down on its offerings for individual investors, despite criticisms over its handling of a real-estate fund known as BREIT.

In an earnings call on Thursday, Steve Schwarzman, Blackstone's chairman and CEO, said the private-equity giant known for investing on behalf of pensions and other large investors plans to launch "several new products in the private wealth channel" focused on wealthy individuals.

Later in the call, Jon Gray, Blackstone's COO and president, provided more details, saying the firm plans to launch the two new funds early next year. First up, he said, will be "an infrastructure vehicle that will provide investors access to the full breadth of the firm's strategies in this area, including equity, secondaries, and credit."

The second will be "a vehicle that will invest across our expansive credit platform," according to Gray.

Those two new funds will join the three funds (BREIT, BXPE, and BCRED) for wealthy individual investors that Blackstone already offers, starting with its launch of BREIT in 2017. Those three funds, together with Blackstone's other offerings for wealthy individuals, now represent $240 billion in assets, according to Gray.

"Our commitment to the $85 trillion private wealth market is stronger than ever," Gray said.

The launches represent a vote of confidence for the firm's private wealth division after more than a year of prorated redemptions raised criticisms of BREIT.

Gray said Blackstone has raised nearly $13 billion for BREIT, BCRED, and BXPE in the first two quarters of the year, more than the firm raised from wealthy individuals in 2023.

New Funds

The two new funds represent investment areas that have so far paid off for the firm's investors.

This quarter, Blackstone surpassed $100 billion in its infrastructure platform, which invests both debt and equity into infrastructure projects like renewable energy, data centers, and supply chain and transportation companies.

Blackstone launched its infrastructure fund for institutional investors in 2017. Since then, Blackstone Infrastructure Partners has generated 16% net returns annually, beating the public infrastructure index by nearly 11%, Gray said.

"As we've been saying for some time, we believe flows in the wealth channel ultimately follow performance," Gray said.

Private credit has also been a top performer for the firm, generating a gross return of 4.2% for the quarter. In the first half of 2024, the firm issued $24 billion in A-rated credits, up almost 70% year over year, according to Gray.

BCRED, the firm's first credit fund for individual investors, raised $3.4 billion in this quarter, more than the $1.4 billion raised by BXPE and the $990 million raised by BREIT. This fevered fundraising pitch showcases demand for credit products and may explain why the company is planning to launch a second credit product for individual investors.

BREIT criticism and response

Blackstone's private wealth business has not been without its challenges. BREIT's woes started at the end of 2022 when the fund began prorating redemptions from investors amid a slowdown in the real estate market before a $4 billion investment from the UC pension fund bolstered its books.

By February of this year, it was able to fulfill all redemption requests, but some critics continued to question the company's valuation methods, including in an article by Business Insider. Blackstone disputed many of the claims in the article, which cited criticisms of short sellers and other researchers.

On Thursday, Schwarzman said that BREIT is three times bigger than the next five largest non-traded REITs combined, an indication that investors want a chance to invest in real estate alongside the world's largest landlord.

Schwarzman combined his analysis of BREIT's success with a rosier picture of the larger macro environment in real estate. Since calling the bottom of the real estate market at the beginning of the year, Blackstone's confidence that inflation is receding has continued to increase, leading to more deployment of capital into real estate.

It's also providing more possibilities to exit and realize returns on its real estate assets. Gray said that the firm is now seeing two to three times more bidders on its logistics and rental housing assets than it did during the worst of the credit crunch. The firm, which is deploying nearly $15 billion into real estate this year, according to Gray, sees sunny days ahead.

"Real estate is one of the largest asset classes in the world, and having the largest business when the cycle is turning should be very advantageous for our shareholders," Schwarzman said.