Blackstone (NYSE: BX) scouts for opportunity in a sea of tariff uncertainty
Blackstone (NYSE: BX)—one of the world’s largest alternative asset managers—is eyeing opportunities in the sea of uncertainty triggered by US tariffs earlier this month, especially with depressed prices for many assets it says have become decoupled from underlying value. The firm has $177 billion available to scoop up deals, but that doesn’t mean it wants the storm to last much longer.
“We believe a fast resolution is critical to mitigate risks and keep the economy on a growth path,” CEO Steve Schwarzman told investors on an earnings call last week. The company just posted what it said was a strong first quarter that saw capital inflows rise 81% from the same period last year to nearly $62 billion. Distributable earnings—profits available for distribution to shareholders—rose 7.7% to $1.4 billion.
Despite the solid results, Schwarzman said that investor sentiment had been “dramatically impacted” by concern about the potential hit economic growth could take from tariffs. Blackstone itself hasn’t been spared from the jitters, with its shares declining 18% over the past month as the broader S&P 500 fell 10%.
“The complexity of the situation means that patience and staying power are key,” Schwarzman continued, noting that the US economy had entered the turbulence from a position of strength buoyed by strong productivity growth and technological innovation. Going forward, he said the most important questions concern how long the period of uncertainty will last and what kind of second-order consequences might emerge.
Strategic investments abound
While it waits for the dust to settle, Blackstone is cognizant of the fact that one of the best times to deploy capital is when the rest of the world is selling, and it’s especially upbeat about sectors including digital infrastructure, energy and life sciences. Additionally, some public companies may be ripe for privatization at current prices, according to COO Jon Gray, who also noted developing opportunities in India and Japan.
Among the firm’s recent acquisitions using funds it manages was the $5.7 billion purchase of Safe Harbor Marinas, the largest superyacht servicing and marina business in the US. Also this year, Blackstone participated in the acquisition of 6 million square feet of industrial real estate in Texas, and it bought stakes in UK airport firm AGS Airports and Japanese research organization CMIC Co. Amid all the macro concerns that have also hit other alternative asset managers like KKR (NYSE: KKR) and Apollo Global Management (NYSE: APO), Blackstone itself might be a deal, and Morningstar analyst Greggory Warren said its shares are trading about 20% below fair value.
“We can do the opposite of what’s happening in markets, and that allows you to generate excess returns,” Blackstone’s Gray told investors. “You want to be able to lean in when the prices come down.” Still, the COO was conscious of the fact that the market only has so much patience, and investors are looking for signs of positive results from ongoing talks with trading partners.
“The faster this tariff diplomacy can play out, the better it would be for the economy and markets,” he continued. “But I’d still say it’s early days, and my hope would be some of this stuff settles and we can sort of get back to Terra Firma.”
Investors on the search for a bottom may find solace in Blackstone’s moves to strategically deploy its cash pile, but there’s a bigger pot of gold out there that could be much more significant. Berkshire Hathaway (NYSE: BRK) has a record $334 billion sitting on the sidelines, even though Warren Buffett earlier this year told shareholders that the company would always prefer to hold “good businesses” over cash. His silence since has been deafening.
