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Blackstone Goes All In on Private Wealth

The alternative manager has been quietly building its private wealth business over the last five years, to the point where 15 to 20 percent of its assets under management now come from retail channels.

Blackstone, the alternative investments manager known for its institutional products, has kept its private wealth solutions under wraps since launching the unit five years ago. But the firm is now raising its visibility among retail financial advisors—not just at the big wirehouses and banks, but, more recently, at large registered investment advisors and independent broker/dealers.

The unit has become quite large—now accounting for 15 to 20 percent of its total assets under management, or about $55 billion to $74 billion. And the firm has demonstrated that it’s fully committed to the retail space, having built out a dedicated sales, service and marketing organization to bring its alternative products to advisors and their clients. Longer term, the firm expects retail channels will make up more than half of Blackstone’s business.

Why the secrecy? The firm didn't want competitors following suit; it now has the first-mover advantage. 

One of the advantages of Blackstone’s scale is its ability to create bespoke products. The firm can take investment vehicles built for institutions, such as hedge funds, private equity, credit and infrastructure, and bring them to high-net-worth investors. The manager can also weave products together for a multi-asset solution.

Many of its products are currently being offered through a feeder fund, which mimics the underlying fund in terms of fees, capital calls and the issuing of K1s. These funds are for qualified purchasers only—those with at least $5 million in investable assets.

The firm is getting more requests to bring alternatives down the wealth spectrum and create products for nonqualified investors, but there are regulatory issues hindering it. That said, Blackstone is currently in the early stages of making this a reality.

Blackstone grew the retail business initially through the big wirehouses and banks, but in the last year, it has made a dedicated effort to reach the RIA and IBD channels. The firm has made some traction so far because of the strength of its brand, and because this is a loyal segment of the industry, with a low velocity of assets.

But it has been a slower ramp-up than the wirehouses and banks because RIAs and IBDs lack a centralized infrastructure.

Still, the firm expects the majority of the growth to come from international private banks, large RIAs, IBDs and family offices.

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