Blackstone looks to shed $2bn of stakes in private investment funds
Blackstone is looking to offload over $2bn of stakes held in private investment funds, presenting a test of investors’ appetite for ageing private equity vehicles.
The firm is promoting a so-called collateralised fund obligation (CFO), which will bundle more than $2bn (£1.5bn) of stakes in leveraged buyout funds into bonds to sell to investors and insurers, according to people familiar with the matter.
First reported in the Financial Times, the deal, which is one of the biggest of its kind, would give an injection of cash to investors in a Blackstone Strategic Partners fund, the firm’s unit that invests in other private equity groups.
But it is unclear if Blackstone will go ahead with the deal or sell the stakes in a secondary transaction, according to one person briefed on the matter.
The potential sales comes as the industry continues to be embroiled in a downturn, with buyout groups struggling to exit investments and return cash to endowments, pensions and sovereign wealth funds.
In particular, private equity groups are struggling to offload investment made between 2020 and 2022 when interest rates were cut to zero, leaving the buyout industry burdened with $4 trillion of unsold assets.
Widespread market turbulence caused by Trump’s tariffs last year, coupled with the conflict in the Middle East, have also dampened sales.
This has left large secondary stake investors, including Blackstone, to package their stakes up into bonds to sell on to investors who prefer to own securities.
The deal would be one of the largest in the market, coming just one year after Carlyle closed on a $1.2bn transaction that it said was the largest publicly rated CFO on record.
Meanwhile, the private credit industry is continuing to suffer from investors scrambling to withdraw capital, causing many to cap redemption requests.
Retail investors became spooked by souring sentiment over software firms, which make up a large portion of portfolios, with many fearing that it will become disrupted by AI advancements.
Blackstone was forced to lift its usual five per cent redemption limit on its $82bn BCRED fund earlier this year.