Blackstone expects widening credit spreads on AI infrastructure debt to create opportunities for higher investment returns, even as its third-quarter realisations fell 34% amid weaker dealmaking activity, according to Private Equity Wire. Blackstone’s net realisations fell 34% to approximately $332m in the third quarter, including a nearly 50% decline in its private equity business, as higher interest rates and market volatility constrained investment exits.
Focus on wider AI infrastructure debt spreads
Blackstone president and chief operating officer Jon Gray said rising borrowing costs could allow investors to secure more attractive yields on new AI infrastructure projects, particularly assets that have yet to secure tenants, according to Private Equity Wire. The comments followed a selloff in AI-related debt triggered by concerns over CoreWeave, described as one of the sector’s largest borrowers and a significant recipient of Blackstone financing.
Investors have become increasingly cautious about the sustainability of AI infrastructure spending and the leverage supporting its expansion, according to the report.
Realisations down as exits constrained
Blackstone’s third-quarter net realisations fell 34% to approximately $332m, with the firm citing weaker dealmaking activity in the period, according to Private Equity Wire. The same report said the decline included a nearly 50% drop in its private equity business.
Blackstone executives said they expected a significant increase in net realisations during the fourth quarter, despite continued market uncertainty.
Global M&A activity declined 41% quarter-on-quarter in the third quarter, according to LSEG, as higher borrowing costs and geopolitical volatility weighed on transactions.
Earnings, AUM, and inflows cited alongside market volatility
Despite the slowdown in realisations, Blackstone exceeded Wall Street’s earnings expectations, and assets under management reached $1.37tn following strong investor inflows, according to Private Equity Wire. Fee-related earnings increased 6%, while fee-related earnings from private equity rose 26% to $619m.
The report said the firm’s credit and insurance division attracted nearly $36bn in new capital, followed by $12.6bn in private equity inflows.
Blackstone has faced elevated redemption requests at its flagship private credit vehicle, BCRED, although the firm said the portfolio’s underlying fundamentals remain healthy.
The report also noted Blackstone shares had fallen nearly 30% year-to-date through Wednesday, compared with a 13% gain in the broader US equity market.
