Blackstone is to become a corporation in July after tax cuts implemented by US President Donald Trump’s administration made its complex partnership status redundant.
The company’s chief executive, Stephen Schwarzman, told CNBC that becoming a corporation would double the number of people able to own Blackstone stock. He added that the publicly traded partnership model it has used since its 2007 IPO had become “irksome”.
Blackstone shares rose 9.5 percent in premarket trading following the news and the publication of its Q1 earnings statement. The latter showed the firm’s Q1 revenues to have risen to more than $2 billion, a 14 percent increase on the first quarter of 2018.
In a statement released alongside its earnings, Schwarzman said: “I am pleased to announce the compelling next step in Blackstone’s evolution as a public company: the firm’s conversion to a corporation.
“We believe the decision to convert will make it significantly easier for both domestic and international investors to own our stock and should drive greater value for all of our shareholders over time.”
Blackstone’s partnership structure was designed to reduce its tax bills. However, following significant tax cuts for corporates introduced by President Donald Trump last year, the arrangement is seen as being unnecessarily cumbersome. KKR took similar steps in 2018.
Blackstone’s net income in Q1 reached $1.1 billion, up from $842 million in the first quarter of 2018. Annual net income reached $3.5 billion during the 12 months to 31 March. This was below the figure posted a year ago, when earnings for the previous 12 months hit $3.8 billion.
Blackstone’s assets under management increased by 14 percent year-on-year to $511.8 billion at the end of Q1. The firm also had record inflows of $42.9 billion during the quarter, bringing inflows for the year to $125.7 billion.
The firm’s corporate private equity strategy had the best investment performance over the 12 months, up 17.7 percent on the previous year. Its performing credit division’s investment performance was 10.2 percent. However, its distressed debt operation had a more difficult year with investment appreciation of just 0.7 percent.
Real estate accounted for the bulk of its earnings, bringing in $660 million during the 12-month period. Private equity accounted for $361 million, hedge funds earned $289 million and fees on credit brought in $184 million.
During Q1, Blackstone announced the firm’s first two investments from its open-ended infrastructure fund, a $3.3 billion investment in US midstream company Tallgrass Energy and an investment in marine terminal operator Carrix. Blackstone launched its $40 billion infrastructure vehicle in May 2017 alongside PIF, Saudi Arabia’s sovereign wealth fund, which committed to match dollar-for-dollar up to half the amount the firm raises.
Blackstone has historically been the largest asset manager in private markets by assets under management. However, it now faces a significant challenge from the combined might of Brookfield and Oaktree, which announced a tie-up in March. At the time of the deal, Brookfield’s and Oaktree’s combined assets were worth $475 billion.