Earnings at Blackstone Group (BX), the world’s largest alternative asset manager, slowed more than expected in the first quarter as falling oil prices and choppy financial markets hit investments.
Difficult market conditions also meant Blackstone was not able to sell some of its investments at a profit. As a result, the amount of cash returned to investors fell sharply.
Shares of Blackstone dropped 3% in morning trading Thursday.
The earnings report resonated with a cooldown in private equity dealmaking this year. Spooked by tumbling oil prices and scuppered financing for a handful of takeovers late last year, the market for high-yield bonds and loans, the lifeblood of private equity, has struggled to recover, putting a dampener on business.
Blackstone said its economic net income (ENI) slumped 77% on a yearly basis to 31 cents per share between January and March. Analysts had expected ENI per share to drop to 37 cents in the quarter from $1.37 a year earlier, according to Thomson Reuters I/B/E/S.
ENI is a key earnings metric for U.S. private equity firms that accounts for unrealized gains or losses in investments, also known as the mark-to-market value.
Distributable earnings, which show the cash that Blackstone has to pay as dividends, dropped 69% to 33 cents compared with a year ago.
The report showed all of Blackstone’s main businesses had cashed in on fewer investments. The asset manager’s highly profitable real estate arm sold $3.5 billion worth of holdings between January and March, less than half of the $9.1 billion worth of investments sold in the same period a year ago.
But even in a challenging market, investors handed Blackstone more cash to manage. Assets under management grew 11% to a record $343.7 billion, ranking the firm comfortably as the world’s largest alternative asset manager.