Seven years after selling shares to the public at the height of the buyout boom and then watching them slump, Stephen Schwarzman’s Blackstone Group LP is rewarding investors with the top gains among money managers.
Blackstone produced the best risk-adjusted return in the past year among 32 publicly traded global firms, according to the Bloomberg Riskless Return Ranking. The stock, which plunged 88 percent within two years of its initial public offering, has surged 81 percent in the 12 months ended March 11 with about-average volatility, beating private-equity peers such as Apollo Global Management LLC and Carlyle Group LP, as well as traditional money managers including BlackRock Inc.
Blackstone ended a six-year drought when the stock rose above the $31 a share IPO price on Dec. 24, after Chief Executive Officer Schwarzman, 67, seized on rallying stock markets to sell companies. Asset managers that invest a portion of client money in bonds, such as Franklin Resources Inc., were held back by an industrywide flight out of fixed income after the Federal Reserve signaled plans to pull back its asset purchase program as the economy strengthened.
“For Blackstone -- and for all the alternative-asset managers -- 2013 was stellar,” said Adam Goldman, the founder of Red Rocks Capital LLC, which manages $1.3 billion invested in publicly listed private-equity vehicles. “They’ve had some very, very strong realizations. Investors are also giving them more money for non-private-equity strategies and hence their assets under management are growing, so you have a double effect propelling their stock prices.”
Largest Profit
Blackstone returned $38 billion to fund investors in 2013, the most among rivals such as Apollo, Carlyle and KKR & Co., and is preparing some of its most lucrative holdings for exit. Hilton Worldwide Holdings Inc., which held its IPO on Dec. 11, has set Blackstone up for its largest-ever profit of more than $10 billion when the firm sells its stake.
The New York-based private-equity firm, which manages $266 billion, has also diversified beyond buyouts into credit, real estate and hedge funds as it seeks to reduce the lumpiness of its earnings. That helped Blackstone produce a risk-adjusted return of 2.7 percent in the past year, with the highest absolute return and volatility of 29.9, compared with 28.2 for the group.
Active Management
Traditional money managers with a large portion of assets in equities also surged in the past 12 months as investors started returning to actively-managed stocks. The Standard & Poor’s 500 Index has advanced 23 percent in the past 12 months, including reinvested dividends.
Waddell & Reed Financial Inc., a manager of mutual funds that has more than 80 percent of assets in stock strategies, ranked second among money managers with a risk-adjusted return of 2.7 percent. The Overland Park, Kansas-based company produced an absolute return of 72 percent with below-average volatility.