BlackRock's private equity push can't save early fund program
Add Axios as your preferred source to
see more of our stories on Google.
Photo: Spencer Platt/Getty Images
BlackRock has spent big this year on expanding its private equity business, whether that be through acquisitions or partnerships.
- But now it's winding down one of its first forays into the asset class.
Driving the news: BlackRock will not raise a second fund under the Long Term Private Capital banner, despite having already been in market and securing at least $300 million in commitments.
- Its 19-person investment team instead will be charged with winding down the $4.3 billion debut fund, with hopes that carried interest and other incentives will convince them to stick around.
Why it matters: This shows that even the biggest brands, such as the $10 trillion ETF king, can be hit hard by LP distribution demands.
Catch up quick: BlackRock launched LTPC in 2018, hiring PSP Investments CEO Andre Bourbonnais to lead a program focused on midmarket companies and long hold periods.
- The original idea was to raise more than $10 billion via an evergreen structure, including from some of BlackRock's institutional clients, but instead it switched to a more conventional GP/LP model and closed on the $4.3 billion in 2019.
- LTPC's initial transaction was a large minority investment in Authentic Brands, but most of its deals were leveraged buyouts of companies like Creed Fragrances, Summit Cos., and Paradigm Oral Surgery. Its most recent was an early 2023 purchase of insurance claims management firm Alacrity Solutions.
Zoom in: Many of the deals have been winners (e.g., Creed selling to Kering for $3.83 billion), but the paper multiples continued to be much more impressive than the actual distributions, according to a public pension report through June 30, 2024:
- Net IRR: 33%
- Net MOIC: 2.4x
- Net DPI: 0.6x
Behind the scenes: When BlackRock went back to market, LPs basically said to focus on returning money rather than raising money.
- The firm declined comment when contacted by Axios.
The bottom line: Scaling sometimes includes shutdowns.
