Blackstone vs. BlackRock vs. Goldman

Chidem Kurdas

It shows how bad the past three months have been that Blackstone and Goldman Sachs, two comparatively strong performers in the 2008-2009 crisis, lost money in third quarter 2011. By contrast BlackRock, another winner in the past crisis, reported positive net income, though down from the second quarter. But the comparison is less clear when you consider other information.

Goldman assets under management went down $23 billion to $821 billion due to market losses. BlackRock assets also fell for the same reason, 9% since the end of the second quarter, to $3.345 trillion.

Blackstone was the outlier with respect to assets. Despite market losses, capital inflows were sufficiently large that Blackstone’s total assets increased across all business segments—-hedge funds, which had a net inflow of $3.6 billion in the third quarter, as well as private equity, real estate and credit. About one-third of the money to hedge funds came from new clients, says chief executive Stephen Schwarzman. That augers well for the future.

While all three firms are asset managers, the composition of their businesses is very different. Blackstone is an alternatives specialist. BlackRock is a fixed income manager that branched out in recent years. Decades ago, BlackRock founder Laurence Fink was the fixed income chief at Blackstone. Then there was the famous falling out between him and Mr. Schwarzman.

Had they remained partners, presumably the entity that is BlackRock would have developed as part of  Blackstone. Given how large BlackRock is, it would have been the  tail wagging the dog and it is hard to imagine Mr. Fink taking a secondary role in that organization.

On the other hand, investors appear to believe that Mr. Schwarzman gets the alpha—they’re putting a lot of money into Blackstone funds. Alpha return is what  investors want, especially in view of the sideways-moving stock market, and it is increasingly clear that they look to alternatives to boost return.

Goldman used to manage substantial alternative assets but its alternatives business is shrinking. BlackRock and especially Blackstone have greater flexibility than Goldman as Dodd-Frank regulations kick in. Goldman’s future does not look golden right now.

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One Response to “Blackstone vs. BlackRock vs. Goldman”

  1. BlackRock vs. Blackstone: Who Did Better? | HedgeFundSmarts Says:

    […] not sufficient by itself to reach any conclusion, Blackstone has earned outsized returns for years. When I compared the two companies with Goldman Sachs back in 2011 – a milestone in the recovery from the financial crisis – it looked like big investors strongly […]

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