Key Takeaways
- • Blackstone CEO Stephen Schwarzman said on Thursday, October 22, that widening credit spreads on AI-related debt tied to certain assets could let the firm lock in higher returns, with new unleased assets able to command a higher yield.
- • Blackstone beat Wall Street expectations for third-quarter profit, with assets under management reaching $1.37 trillion and fee-related earnings rising 6%; shares rose nearly 6%.
- • Credit and insurance drew the largest new inflows at nearly $36 billion, followed by private equity at $12.6 billion, while net realizations fell 34% to about $332 million.
- • Blackstone is among the most significant lenders to CoreWeave, whose shares slumped last week and triggered a global selloff in AI stocks.
- • Blackstone shares have fallen nearly 30% year to date through Wednesday's close, in line with alternative asset managers and well behind the broader market's 13% gain.
Summary
Blackstone CEO Stephen Schwarzman said on Thursday that widening credit spreads on AI-related debt tied to certain assets could present an opportunity to lock in higher returns, according to Reuters. Speaking to analysts in response to a question on spreads, Schwarzman said: "On the new assets that you haven't yet leased, I think you'll be able to command a higher yield to absorb this," adding, "You may end up actually in a better spot." His remarks come as investors demand higher premiums to fund the highly leveraged AI boom amid surging borrowing costs and growing doubts about the long-term sustainability of massive AI infrastructure spending. Blackstone, one of the industry's top financial backers, is directing significant capital into the infrastructure build-out supporting AI.
AI-linked debt has drawn heightened scrutiny since shares of Nvidia-backed CoreWeave slumped last week, triggering a crisis of confidence that led to a global selloff in AI stocks. Blackstone is among CoreWeave's most significant lenders.
Blackstone beat Wall Street expectations for third-quarter profit, helped by strong inflows into its fee-generating businesses despite elevated market turbulence. Assets under management rose to $1.37 trillion, and fee-related earnings increased 6%. Credit and insurance accounted for the largest share of new inflows at nearly $36 billion, followed by private equity at $12.6 billion. A slowdown in dealmaking weighed on realizations, which fell 34% to about $332 million, driven by a nearly 50% drop in the private equity business. Fee-related earnings from managing investments in private equity funds rose 26% to $619 million. Global M&A activity fell 41% sequentially in the third quarter, according to LSEG data. On a post-earnings call, executives said net realizations were expected to show a "significant" step-up in the current quarter.
Alternative asset managers have faced a sharp share price decline this year, as investors grow cautious about slower future growth and potential AI-driven disruption to portfolio companies. Private credit has drawn particular investor concern, with large managers reporting surging redemption requests. Blackstone said last month that requests in its BCRED fund remained elevated in the third quarter, though it maintains that portfolio fundamentals remain healthy. Blackstone shares have slumped nearly 30% this year through Wednesday's close, compared with a 13% gain in the broader market and about 2% for the S&P 500 Financials index.
AI-linked debt has drawn heightened scrutiny since shares of Nvidia-backed CoreWeave slumped last week, triggering a crisis of confidence that led to a global selloff in AI stocks. Blackstone is among CoreWeave's most significant lenders.
Blackstone beat Wall Street expectations for third-quarter profit, helped by strong inflows into its fee-generating businesses despite elevated market turbulence. Assets under management rose to $1.37 trillion, and fee-related earnings increased 6%. Credit and insurance accounted for the largest share of new inflows at nearly $36 billion, followed by private equity at $12.6 billion. A slowdown in dealmaking weighed on realizations, which fell 34% to about $332 million, driven by a nearly 50% drop in the private equity business. Fee-related earnings from managing investments in private equity funds rose 26% to $619 million. Global M&A activity fell 41% sequentially in the third quarter, according to LSEG data. On a post-earnings call, executives said net realizations were expected to show a "significant" step-up in the current quarter.
Alternative asset managers have faced a sharp share price decline this year, as investors grow cautious about slower future growth and potential AI-driven disruption to portfolio companies. Private credit has drawn particular investor concern, with large managers reporting surging redemption requests. Blackstone said last month that requests in its BCRED fund remained elevated in the third quarter, though it maintains that portfolio fundamentals remain healthy. Blackstone shares have slumped nearly 30% this year through Wednesday's close, compared with a 13% gain in the broader market and about 2% for the S&P 500 Financials index.
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