The Blackstone Group L.P. (NYSE:BX) received an Outperform rating with a $32 price target from RBC Capital Markets. RBC’s analysts emphasized that the company is one of the “best run” among alternative asset managers.
RBC Capital Markets analyst Eric N. Berg said, “The Blackstone Group L.P. (NYSE:BX) is attracting capital from investors because it has a pool of talent, global footprint, and it is dedicated to innovation.”
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Since inception, The Blackstone Group L.P. (NYSE:BX) generated net internal returns at a rate north of 15% as noted by Berg. And according to Berg, the private equity, credit, and real estate business of the firm are also performing well. Its strong performance across all business segments enable Blackstone to achieve and promote performance fees consistently and selling down assets from multiple “buckets.”
Blackstone excels at raising capital
Berg believes that the investment manager is entering a prolonged investment cycle. He said, “We believe that there is a backlog of exists as investment cycles have been prolonged due to the financial crisis. The ratio of total assets to fee earning assets has climbed to above pre-crisis levels. This indicates that investments are approaching return objectives that could lead to an extended period of realizations.”
The Blackstone Group L.P. (NYSE:BX) is the best in class in terms of raising capital, according to Berg. He pointed out that the investment manager generated $90 billion in capital over the past two years, which is more than the combined total capital raised by its four closest rivals in the industry.
In terms of footprint, The Blackstone Group L.P. (NYSE:BX) is not only the largest alternative asset manager in the United States but also in major markets globally when it comes to fee earnings assets under management.
Blackstone also has robust hedge fund solutions
Berg added that the investment manager has strong hedge fund business solutions (BAAM), and it is going towards achieving a new stage of growth such as expansion in retail space. He projected that BAAM will deliver an excellent performance as clients are seeking for solutions to resolve their liability problems.
The Blackstone Group L.P. (NYSE:BX) has the highest float ad liquidity among alternative asset managers, which is attractive to investors, according to Berg.
In a note to investors, Berg said his base case scenario for the firm’s economic net income is $2.84 for 2014, which includes $0.75 in management fee based earnings and $2.10 in incentive income based earnings. He also explained that his $32 price target for the shares of The Blackstone Group L.P. (NYSE:BX) was based on a P/E multiple of 18X to management fee based earnings and 9X to incentive earnings.