UPDATE 2-Blackstone posts best Q2 earnings as private equity soars

Thu Jul 17, 2014 12:10pm EDT

* Total assets under management $278.9 bln at end-June

* Q2 ENI of $1.15 per share vs Street view of 71 cents

* Q2 distributable earnings more than doubles to $770.8 mln (Adds Blackstone President, analyst comment, shares)

By Greg Roumeliotis

NEW YORK, July 17 (Reuters) - Blackstone Group LP, the world's largest alternative asset manager, said on Thursday its quarterly earnings jumped 89 percent as private equity profits soared, marking its best second quarter ever.

Since 2010, Blackstone's real estate division has dominated its earnings as property assets staged a comeback. Since the start of the year, however, private equity has become a bigger contributor, thanks to strong valuations and asset sales.

Blackstone shares were up 0.6 percent to $34.18 at midday while the S&P 500 Index dipped 0.7 percent.

"Despite a strong run leading into today's print, we expect these results to fuel further upside," Sterne Agee analyst Jason Weyeneth wrote in a note.

Economic net income (ENI), a metric of profitability that takes into account the mark-to-market valuation of its portfolio, totaled $1.33 billion in the quarter, the highest- ever in a second quarter, versus $703 million a year ago.

ENI per share came to $1.15, while analysts, on average, expected 71 cents, according to a Thomson Reuters poll.

The higher result was driven largely by private equity, which reported ENI of $647.7 million, a 278 percent year-on-year increase, while real estate posted ENI of $489.4 million, up 32 percent.

Blackstone's credit investments division reported ENI of $103.8 million, a 27 percent gain, while the unit that invests in hedge funds had a 16 percent advance to $83.1 million.

The $21.7 billion Blackstone Capital Partners (BCP) V private equity fund, which launched in 2006, crossed an 8 percent returns hurdle that allowed Blackstone to receive 20 percent of the fund's profits in so-called carried interest.

Blackstone President Tony James told reporters on a conference call that BCP V should continue to appreciate more than the hurdle rate, assuming that the wider market is static.

Overall, Blackstone's private equity portfolio appreciated 8.4 percent while its real estate portfolio appreciated 6 percent.

Competitor Carlyle Group LP said last week its private equity portfolio appreciated 5 percent and its real estate portfolio rose 4 percent versus a 4 percent gain in the MSCI All Country World Index.

Distributable earnings, which reflect available cash to pay dividends, more than doubled in the quarter to $770.8 million, from $338.5 million a year ago. The latest result was the highest ever in a second quarter.

By this metric, real estate continued to be the biggest contributor, accounting for $417.8 million of carried interest paid out versus $212.4 million from private equity.

Assets under management totaled $278.9 billion at the end of June, up from $272 billion at the end of March. Fee-earning assets under management rose to $209.9 billion from $203.6 billion at the end of March.

Blackstone declared a quarterly distribution of 55 cents per common unit. (Reporting by Greg Roumeliotis in New York; Editing by Chizu Nomiyama and Jeffrey Benkoe)

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