Blackstone chases ‘core’ private equity plan

Blackstone Group has reached out to its biggest fund investors about investing in a new investment vehicle with a longer investment horizon than the typical 10-year private equity fund, according to sources familiar with the matter.

Dubbed "core" private equity, this vehicle would invest in slower-growing but safer companies, use less debt in buyouts and charge investors lower fees than most private equity funds, the sources said. Blackstone was seeking up to US$2 billion apiece from five to six of its biggest public pension fund and sovereign wealth fund investors for the strategy, they said.

Aspects of the strategy, including the exact fees and holding periods for investments, are still being worked out. They added that the idea was still at an exploratory stage and might not take off.

A Blackstone spokesman declined to comment. The biggest investors in Blackstone's funds include the California Public Employees' Retirement System, the New Jersey State Investment Council and China Investment Corp.

The move underscores how Blackstone is looking to boost its valuation as a publicly listed company by managing more permanent capital and further diversifying its model of buying and selling companies. Blackstone is already the world's largest alternative asset manager, with US$284.4 billion in assets under management at the end of September spanning private equity, real estate, credit and funds of hedge funds.

A higher stock valuation would benefit Blackstone shareholders, of whom the company's employees form the largest group. Chief executive Stephen Schwarzman is the biggest holder, owning about a fifth of the firm. In 2013, Schwarzman collected US$352.5 million from dividends from his Blackstone shares.