- Blackstone’s private wealth arm has quadrupled to $220 billion in assets in fewer than five years.
- Asset managers are bumping elbows to compete for wealthy clients with few alternative investments.
- Blackstone’s Joan Solotar explains how she grew the unit and shares which funds are hot.
Four years ago on investor’s day at Blackstone, senior managing director Joan Solotar declared that she could grow the asset manager’s private wealth business from $58 billion under management to $250 billion within a decade.
Now she is running well-ahead of schedule with the private wealth solutions arm overseeing $220 billion in assets, about a quarter of Blackstone’s total. When Blackstone went public in 2007 with some $88 billion in assets, less than 5% belonged to private wealth and it came from friends and family, according to Solotar.
Now the division brings the world’s wealthy to its funds through wealth managers, private banks, and family offices. The unit has just under 300 employees, up from 160 in the fall of 2021, and has a presence in Asia and Europe.
The growth in recent years can be credited to several factors, she told Insider in an interview before speaking at this week’s Future Proof conference in Huntington Beach, California. The biggest driver is the creation of so-called perpetual funds that allow advisors to allocate every month and deploy investors’ money immediately instead of traditional structures that tightly restrict when investors can participate and get out, she said. Private market investing has also gotten more accessible to retail investors as funds such as non-traded REITs have shed some fees.
“Firms were collecting acquisition fees, disposition fees, and the experience for individuals was not great,” said Solotar, global head of private wealth solutions. “The industry has really transformed itself to be much more investor-centric.”
Technology has also made it much easier for individual investors to participate in Blackstone funds. Even the advent of the e-signature was a “game-changer,” she said, for advisors to allocate from multiple client portfolios.
Advisors have historically under-allocated to alternatives, with Cerulli Associates estimating that 55% of private wealth advisors don’t use them at all. But the economic uncertainty stemming from the pandemic also drew many advisors to Blackstone’s online courses on alternative investing. More than 11,000 advisors have enrolled.
The current bear market has only sustained strong interest in learning more about alternatives.
“I certainly think it’s an opportunity because we’ve had the worst start to the year in both stocks and fixed income that many advisors have seen in their entire careers, and alternatives, over time, have provided better returns and are less volatile,” said Solotar in an interview at the conference. “Figuring out where they can fit alongside stocks and bonds is important and we’ve seen alternatives migrate from a sideshow to the main stage.”
Blackstone’s hottest funds for retail investors bet on private credit and rental housing
The private wealth solutions division has four flagship funds, including BGFLX, a floating rate credit fund, and BXMIX, a multi-strategy mutual fund.
The two most popular funds currently are BCRED, a private credit fund that launched in January 2021, and BREIT, a non-traded real estate investment trust, according to Solotar. Investors can buy into BCRED and BREIT with $2,500 whereas most of Blackstone’s funds are limited to qualified purchasers investing at least $5 million, said Solotar. Both pay dividends, and investors can redeem liquidity periodically – as soon as monthly with BREIT.
Blackstone is one of the biggest owners of rental housing in the US, and more than half of the BREIT portfolio comprises rental housing in the South and West. Data and logistics centers near urban areas also rank high, Solotar said.
New products are on the way as asset managers bump embows chasing wealthy clients
A few new funds are in the works for private wealth solutions, Solotar said. For instance, Blackstone filed a registration statement for BXPE, a private equity strategies fund, to the SEC in May.
Many asset managers are making plays for private wealth clients. Just two weeks ago, Ares Management hired a managing director from Solotar’s unit to helm the EMEA unit of its year-old wealth management arm, per Bloomberg.
Solotar told Insider that Blackstone was first to the chase, and that plenty of white space doesn’t mean that all competitors have an equal shot.
“When I was an equity research analyst and covered the industry, when firm management would tell me that they had a lot more growth prospects because they had all this white space, internally I thought, ‘White space just means what you don’t have,'” said Solotar, who was head of equity research at Bank of America before joining Blackstone in 2007.
“Just because you say you’re going to be like Blackstone doesn’t mean that you can.”