How Blackstone expects to thrive in an era of rising inflation

Insight Comment With more than 30 years’ experience and a number of economic cycles under his belt, Steve Schwarzman has seen it all. He and the rest of the Blackstone leadership team will be pretty confident they can adapt and succeed in a time of much market uncertainty.

Blackstone has once again demonstrated its ability to navigate the choppy water of economic uncertainty with another record earnings performance.

The company hit new highs across a number of areas including total assets under management and cash inflow for both the quarter and the year.

And while the Covid-19 crisis might be nearing its end point, there are other uncertainties facing the company.

One of the ways Blackstone hopes to mitigate future economic and political uncertainty is to pick thematic winners across various sectors, one of them being travel and leisure.

“We’ve been focused on leisure and all forms of travel. And we’ve done this in real estate, but also in private equity,” Jon Gray, chief operating officer of Blackstone, said on a call with analysts after the release of the firm’s Q4 results.

Late last year Blackstone-owned Hotel Investment Partners signed a strategic agreement with Mangia’s, Resort by the Sea, an Italian resort hotel owner and operator, for the purchase of a portfolio of six beachfront hotels on the islands of Sardinia and Sicily. Blackstone also bought UK holiday park operator Bourne Leisure at the start of 2021.

Blackstone also recently closed on a delal to take a majority stake in via outsourcing firm VFS Global, which Gray said was partly driven by the anticipation of “a big recovery of travel as we come out of Covid.”

Gray added that the company was feeling good about its portfolio mix, ahead of what might be a dicey few months or even years with extra inflationary pressures.

“[The] good news is we haven’t been really big into industrials and areas where exposure to rising input costs, labour and materials, can really squeeze margin,” he said. 

“We’ve tried to focus on businesses with secular tailwinds where we have pricing power. And that’s why we feel quite good about the positioning of our private equity portfolio even as we move into this bit of a different environment.”

The impact of inflation is something that investors are increasingly concerned about with the potential for interest rate rises  and difficulty in raising money.

“I believe the tremendous balance of our firm and the careful design of our portfolio will once again allow us to not only navigate this environment, but to thrive in it as we have for 36 years,” CEO Steve Schwarzman said on the same call.