When you think of customers for Blackstone (NYSE: BX), the world’s biggest alternative investment manager, you probably think of huge institutional investors like insurance companies.
But now individuals too are getting into alternative assets, which include private equity, hedge funds and real estate. They are drawn by mouth-watering returns and marketing hype from financial advisers and fund management firms eager for fees.
Nowhere is the trend more evident than at Blackstone. Its private wealth channel had $279 billion of assets under management as of June 30, or 25.4% of its total assets. Those numbers represent a hefty climb from $240 billion and 18.2% five years earlier.
And the flow will likely continue. President Trump issued an order Thursday that makes it easier for individuals to invest their retirement savings, such as 401(k) accounts, in privately-traded assets. Surely, Blackstone and its competitors will do all they can to get their alternative-asset funds included in 401(k) and other pension plans.
Further expansion of individual investing in alternative assets may be particularly important to Blackstone and other managers if their asset flow from institutional investors slows down.
Blackstone’s offerings
So what are Blackstone’s offerings to individual investors? They include:
• Blackstone Real Estate Income Trust (BREIT), with assets of $53 billion. Total return: 10.4% annualized over the last five years.
• Blackstone Private Equity Strategies Fund (BXPE), with assets of $13 billion. Total return: 17% annualized since its January 2024 inception.
• Blackstone Private Credit Fund (BCRED), with assets of $84 billion. Total return: 10.2% annualized since its January 2021 inception.
• Blackstone Private Multi-Asset Credit and Income Fund (BMACX), just began in May.
(The funds don’t trade on exchanges, and there are restrictions on withdrawals.)
One interesting issue is whether individual investors will be willing to stay invested in alternatives for the long haul. When they realize that the investments can go down as well as up, will they be willing to ride out declines? And might they get scared away by restrictions on withdrawals?
To get a sense of what can happen to alternative investments, look no further than Blackstone’s own stock, which represents a proxy for those investments. It has returned an impressive 21% annualized over the past 15 years. However, that includes four annual drops of more than 5%, including a plunge of 43% in 2022.
Still, on a side note, investors who are able to withstand the fluctuation of private investments might actually do better buying Blackstone’s stock than its funds, given the stock’s superior long-term returns. Buying the stock also means investors wouldn’t have to worry about the funds’ fees and limited liquidity.
In any case, individual investing in alternative assets is rising for now, and Blackstone will likely benefit.
The author owns shares of Blackstone.
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