Blackstone Group LP, the world’s largest private-equity firm, is taking aim at the $5.4 trillion of cash on corporate balance sheets in the U.S. and Europe as regulators weigh changes that may reduce the appeal of money- market funds.
The firm has started a money-management unit called Blackstone Treasury Solutions Advisors LLC that will cater exclusively to corporations. Its portfolio managers include Blackstone Chief Financial Officer Laurence Tosi and Treasurer Matthew Skurbe, who help run New York-based Blackstone’s internal cash management strategy.
Blackstone is targeting company treasurers as the U.S. considers requiring money funds to shift from stable share prices to floating valuations. For Blackstone, providing cash management for corporations would help diversify income streams further, after Chief Executive Officer Stephen Schwarzman added real estate, hedge funds and credit vehicles to reduce reliance on leveraged buyouts.
“It could be a highly profitable activity for Blackstone,” said Anthony Carfang, a partner at Treasury Strategies Inc., a Chicago-based treasury consulting firm. “The investment management business is highly scalable.”
Peter Rose, a Blackstone spokesman, declined to comment on Treasury Solutions. The parent company incorporated the money- management unit along with the Blackstone Treasury Solutions Master Fund LP in March and the registration took effect in April, public records show.
Corporate treasurers rely on money-market funds to manage cash because the funds maintain a fixed $1 share price. That could change as U.S. regulators, seeking to avoid a repeat bailout of the $2.56 trillion industry after the 2008 collapse of the Reserve Primary Fund, evaluate requiring managers that invest in corporate debt to let their share prices fluctuate.
“The money-market funds no longer being booked at net asset value would be a significant issue for corporations,” said Michael Gannon, the former treasurer and chief planning officer for Molson Coors Brewing Co. in Denver. “It would certainly be a reason that treasurers might look at alternatives.”
Without a stable share price, treasurers may be spurred to seek alternative ways to invest their cash that provide added yield without a big increase in risk. Tosi and Skurbe, who came to Blackstone from Merrill Lynch & Co., according to the investment advisory registration with the U.S. Securities and Exchange Commission, currently help invest some $1.3 billion Blackstone cash in assets ranging from mortgages to hedge funds to eke out extra yield.