Blackstone: Beyond Buyouts - [Business Breakdowns, EP. 20]

Today, we will be diving into Blackstone, the world’s largest alternative asset manager. Founded in 1985 as a boutique M&A advisory business with $400,000 of seed capital. The firm now manages over $600 billion across private equity, real estate, credit, and hedge fund strategies. In this breakdown, we will start by discussing Blackstone’s business model and how it has taken advantage of a structural tailwind in the form of low bond yields. Then, we’ll dive into the different ways Blackstone earns money, how that’s changing, and what else management has done to make the business more shareholder-friendly. Finally, we’ll cover Blackstone’s competitive strengths, their brand and scale explaining how they were built and how they’re deployed today.

To break down Blackstone, Zack Fuss is joined by Marc Rubinstein, former hedge fund manager and now the writer of Net Interest.

 

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:35] - [First question] - What is Blackstone, their history, and what their scale is today

[00:04:29] - Their core competencies in the beginning and what it enabled them to do 

[00:05:57] - Examples of their early transactions that allowed them to grow their funds

[00:07:39] - Overview of the first principles of how private equity funds make money

[00:09:49] - What has allowed Blackstone to grow so large over the last thirty-five years

[00:12:30] - Things that make alternative asset management a large and lucrative industry 

[00:14:28] - Overview of revenue streams and returns to shareholders

[00:17:30] - Analysis of their corporate private equity, real estate, hedge funds, and credit

[00:21:00] - Why alternative asset managers have been so attracted to insurance companies 

[00:22:40] - Partners Blackstone might find for funding and financing

[00:24:44] - Reasons why Blackstone would consider an IPO

[00:26:15] - How an investor would evaluate Blackstone versus Berkshire Hathaway

[00:29:17] - Ways Blackstone dispels the ‘barbarians at the gate’ stigma around private equity

[00:31:12] - The importance of Steve Schwarzman and thoughts on new leadership

[00:33:31] - Building a company culture in asset management that creates longevity

[00:35:42] - What makes Blackstone so successful writ large

[00:37:54] - Emergence of neo-banks and potential threats of regulation and oversight

[00:39:05] - The one thing that allows them to always find new opportunities and succeed

[00:41:03] - Lessons for investors when studying Blackstone’s story