At the end of Q2 2023, Blackstone revealed it had reached $1 trillion in assets under management, marking a major milestone for both the alternatives giant and private markets generally.
The pace of this growth was remarkable: Blackstone more than doubled its AUM across a five-year span. In its full-year 2018 results, the firm posted $472 billion of AUM – a record at the time.
At the IPEM private markets conference in Paris in September, a few months after the firm revealed its second-half results, CEO Stephen Schwarzman was asked how significant reaching $1 trillion was for him personally. “The adventure that I started on 38 years ago continues exactly the same the day after we got to a trillion, and we’ve got plans to just keep going,” he replied. “It’s really not about a number.”
The real goal, he said, was continuing to create products that people want to buy. With this in mind, the one piece of advice he gave for firms in this instance was to centralize approval to launch such new products.
“You can’t take risk by doing anything that won’t be successful,” he explained, “which means you can’t trust somebody else to make that decision. You need your senior group of people… at that table saying, ‘Is this going to work out?’ And [it] better work, or you should never sell it.”
How does a firm of Blackstone’s size continue to innovate and expand in the ways Schwarzman desires? One example came in January, when the firm said it had elevated two veterans of the business to the newly created role of co-CIO. Lionel Assant, European head of private equity, and Kenneth Caplan, the former global co-head of real estate, would take on the role to “enhance the co-ordination and oversight of the firm’s already rigorous investment process,” according to a press release.
In a joint interview conducted shortly after the pair took up the co-CIO mantle, Assant and Caplan tell affiliate title Private Equity International how the new role will help the firm reach these ambitions.
The big picture
London-based Assant joined Blackstone in 2003 when the firm was investing out of its $6.45 billion Blackstone Capital Partners IV fund. He arrived from Goldman Sachs, where he was an executive director in its M&A, asset management and private equity divisions.
“I remember, I called my father [and] I said, ‘I’m leaving Goldman Sachs [after seven years].’ He was surprised, and said, ‘Where are you going?’ I said, ‘Blackstone.’ He asked me to repeat it three times.”
Having explained that he would be leaving the world-renowned investment bank to join the three or four team members starting off Blackstone’s private equity operations in London, Assant’s father “thought I was crazy,” he says. However, the risk paid off. “Today he doesn’t think I’m crazy. Twenty-one years later, I’m still here, and it’s the best professional decision I have ever made.”
“The firm has been very good at innovating since inception, and I’d love Ken and I to be able to play a part in continuing to do this”
Lionel Assant
Caplan had joined the firm six years earlier. Having previously worked in the real estate investment banking group at Lazard, he moved to Blackstone in 1997 and today works from its New York headquarters.
“People had not really heard as much about Blackstone [when I joined], but I was really enamored with the people that I met,” Caplan says. “It felt like we all had the same passion and drive.”
In 2009, Caplan moved over to London to run the firm’s European real estate business – a move he calls a milestone in his career – before moving back to New York in 2015 to take on the role of CIO of real estate. Later, he was named co-head of real estate alongside Kathleen McCarthy.
In the new co-CIO role, Assant – who took up the post of head of European private equity in 2012 and continues to operate in that role – will work alongside Blackstone’s business unit CIOs and group heads across its private equity business, including its corporate private equity, infrastructure, tactical opportunities, growth and life sciences businesses. Caplan will hold the same role overseeing its real estate and credit and insurance strategies.
While the CIOs of each business will continue to report to their respective business units, both Assant and Caplan will sit on the relevant investment committees under their remit, some of which they already sat on before taking up the new role. Alongside reviewing transactions, the pair will work alongside business unit CIOs, advise deal teams and leverage their experience and expertise to improve co-ordination, Assant says.
The firm now has more than 230 portfolio companies between its private equity and real estate strategies, he adds. “These companies give us real-time insights, which inform our judgement… Having [this] information on the portfolio companies gives you the ability to share that intellectual capital – and I think that is the difference between a role that was quite siloed, if you will, to a role which is more global in nature.”
Thematic investing
During their conversation with PEI, Caplan and Assant consistently focus on one notion: key investment themes. Caplan and Assant have a quarterly sit down with a number of Blackstone’s senior executives, including president and COO Jonathan Gray and Blackstone’s group CIOs to go over portfolio company KPIs, leading indicators and feedback from CEOs.
“These sessions enable to us derive key themes and trends, often ahead of the market,” Assant says.
Blackstone’s new co-CIOs, Caplan says, will analyze “what’s working, what’s not working, where we want to lean in more [and] where we have the highest conviction. [We will be] partnering with the CIOs and the different business units and have that global coordination.”
The evolution to a co-CIO model makes a lot of sense for Blackstone, according to an LP with a large institutional investor that backs Blackstone’s private equity business. The new roles will help the firm to “manage an increasingly complex global business and ensure continuity of decision-making across regions and asset classes.”
“[We will analyze] what’s working, what’s not working, where we want to lean in more [and] where we have the highest conviction”
Kenneth Caplan
For anyone who has spent some time listening to Blackstone earnings calls or has kept an ear to the ground on C-suite interviews with business media, these themes or subsector specialties will be familiar – the energy transition, travel, leisure and entertainment, digital consumer, logistics, digital infrastructure and life sciences, for example, were all mentioned multiple times by Caplan and Assant during the interview.
Assant points to the firm’s publicly articulated views on inflation as a prime example of how its approach to data analytics has led it to more informed business decisions.
In an October 2022 interview on CNBC’s Squawk Box, Gray said, “The Fed, I believe, is beginning to have success on its goal to slow the economy and slow inflation.” He then pointed to examples Blackstone had seen in its own portfolio. That same month, Blackstone’s PR machine posted a video of Gray’s media appearances over the course of 2021. The video starts with media snippets and headlines suggesting inflation will be transitory, followed by a variety of clips from Gray issuing warnings along the lines of “higher inflation than people expect.”
“At Blackstone,” text within the video states, “we saw inflation would be higher than expected and moved to protect and grow our investors’ capital.”
Assant notes that in early 2021, before the central banks were doing so, Blackstone called the rise of inflation. “And why did we do that? Not because… we threw a coin in the air and said, ‘If it falls on that side, inflation will go up.’ It’s because of the over 200 portfolio companies that were telling us something.”
He adds that Blackstone also made its call on inflation’s peak in 2022 because the firm could, again, see it in the data coming from its portfolio companies. “One of the advantages is that it enabled us to swap our interest rates early in 2021 at favorable conditions.”
While the firm is a thematic investor, Assant is quick to point out that valuation matters as well – and it’s a point the co-CIOs will monitor closely. “This is where discipline comes in,” he says. “Ideally, you’re overweight or you’re underweight a bit when you feel the time is right”.
Assant points to the firm’s pending take-private of Norway-headquartered online marketplace Adevinta for around €12 billion – which it will complete alongside Permira – as a prime example of this intersection. While Adevinta’s board at the time of the bid said it had unanimously agreed that the company could generate more value than that offered by the consortium, it added that the cash consideration was “within the range of what is fair,” affiliate title PE Hub Europe reported in November.
“You need to pick the winning themes at the right point in time,” Assant says.
European real estate as well is “one of the most attractive asset classes [right now],” Assant says. While there are challenges in this segment, Caplan says there are opportunities in areas like European logistics – another area the firm has been bullish on in recent years.
Europe-based real estate M&A transaction value declined more than 50 percent year-over-year in 2023, reaching a 13-year low of $10.4 billion, according to data from S&P Global Market Intelligence. For Blackstone, however, Europe made up more than half of its real estate business’s invested capital last year. There were motivated sellers, and Blackstone had the capital, confidence and was ready to transact, Caplan adds.
“Everyone’s so negative about it,” Assant says, “that if you pick the right verticals within European real estate, you have a shot to get it at a very attractive entry point.”
Broad thinking
While Assant and Caplan will have different remits within their co-CIO roles, the pair are keen to stress that Blackstone has a history of different business units investing alongside one another.
The thematic approach of investing in leisure, for example, is not exclusive to just one asset class, Assant notes. The firm’s $26 billion investment in Hilton Hotels in 2007, for example, was backed by its real estate and corporate private equity funds. Those same business lines invested in woodland holiday park operator Center Parcs UK in 2006. More recently, Blackstone’s private equity and real estate units invested in UK holiday company Bourne Leisure.
Streaming is another area where the firm’s various business lines have intertwined. Alongside investments in physical studios made by its real estate business, the firm has also backed media company Candle Media, run by former Disney executives Kevin Mayer and Tom Staggs.
By introducing the co-CIO roles, Assant says, the firm is “[making] sure that when these themes are identified, we’re not just thinking in silos – we’re thinking more broadly.”
When it comes to goals that the pair hope to achieve in their first year, the top priority is reaching the right conclusion on deals that come their way. Furthermore, they hope to accelerate and discover new themes in which the firm can invest. This, in turn, could naturally lead to new strategies.
“The firm has been very good at innovating since inception, and I’d love Ken and I to be able to play a part in continuing to do this,” Assant says.
Trillion-dollar giant
Caplan and Assant’s new remit will be no small task, as Blackstone’s platform boasts around 70 different products offered to both institutional and individual investor bases, up by 25 products from year-end 2018.
However, since the firm reached its $1 trillion AUM goal, it hasn’t recorded ambitions for its next trillion dollars. Instead, it’s focusing on the finer details.
Assant tells PEI that the growth of Blackstone’s managed assets – what he calls its “output” – should automatically increase if it hits its range of primary goals, or “input.” As with all alternative asset managers, Blackstone is first and foremost looking to deliver strong returns to its customers.
Blackstone also seeks to innovate and deliver new products “whether it’s on the institutional or the retail [side]” – input number two for the firm, he says.
Lastly, the firm is seeking to deliver returns in “a responsible way,” Assant says. “We pride ourselves on being responsible owners. You can’t invest in just any business and cut costs.”
By having those three inputs at front of mind, “I don’t worry about the output, which is the AUM… It will continue to grow as it has since the start,” Assant explains.
Blackstone’s growth story is not just about the scale of its AUM expansion: it’s about the scope of the capital it has available to invest. “If you want to look at real estate… [Blackstone] started as a monoline US opportunistic investor, then we expanded to Europe, Asia, the debt business, and then into the core-plus business in the US and Europe and Asia, initially with institutional capital and now with a focus on individual investors as well,” says Caplan.
Each step has been intentional. The firm also strives to do this with a “continued spirit of innovation, never being complacent and always acting in a responsible way,” Caplan adds.
Caplan and Assant’s ascension to the role of co-CIOs is the next step in that highly intentional journey. While upholding the role – one that will no doubt be critical to the firm achieving its next milestones – will be no easy feat, the two veterans are well equipped for the task.
Blackstone veterans
The new co-CIOs are highly regarded by their peers, as Private Equity International discovered
During Kenneth Caplan’s previous stint as head of European real estate, he and Lionel Assant worked in the same city for an extended period of time. There was “an enormous amount of respect” between Caplan and Assant while working together in London, according to someone familiar with the pair. Any interactions they had were “always very positive,” partly because “they’re both great professionals as well as nice people.”
“Rigorous,” “intelligent” and “responsive” were some of the words used to describe Assant by other people Private Equity International spoke with. He is a “natural choice” for the co-CIO role, according to an LP that is a longstanding backer of the firm’s private equity business. “He’s a long-tenured partner who knows the Blackstone investment DNA, is a good steward of the business, and [is] well respected by investors.”
Assant is “very intellectually honest” and engages with people in a very clear way – something he applies to both the investment committees he sits on and the meetings he has with Blackstone clients – says Pilar Junco, managing partner and chief client officer at AltamarCAM, who previously worked with Assant at Blackstone.
Kishore Moorjani – CEO of LXA, a Singapore-based mortgage asset management technology business, and Blackstone’s former head of tactical opportunities in Asia – sat alongside Assant on the unit’s investment committee. According to Moorjani, Assant always took the time to get involved in processes before committee meetings. “I don’t know where he’d find the time, but he was always well read – he was always prepared.”
Those on investment committees tend to form strong views and judgements on scenarios, as is important, Moorjani explains. It is impossible, however, to be an expert on every transaction. “You’re dealing with people who spent the last three months or six months of their life getting really excited about and diligencing an investment opportunity.”
Assant was “disarming” in his style, letting teams’ voices be heard in committee meetings and giving them the benefit of the doubt, Moorjani adds. If Assant disagreed with a deal team, he gave them the time – either on the call or after the meeting – to convince him otherwise.
Caplan, meanwhile, is credited with helping to shape Blackstone’s “compassionate meritocracy” alongside Jonathan Gray, says Roy March, chief executive of real estate investment bank Eastdil Secured. “He’s very clear and very transparent as to what can and can’t be done. There’s not a lot of theatrics… It’s just direct. And that’s the way the firm is – without arrogance, without puffery, they deliver what they can do. If that doesn’t work, then peace, but we’re going to leave this in a very amicable way no matter what.”
Caplan has been Gray’s “trusted partner” at Blackstone, March adds. He has also been central to some of Blackstone’s largest real estate deals, including Equity Office Properties and Hilton.
Both Assant and one of the sources PEI spoke with say it is no small achievement that one of Blackstone’s two co-CIOs is based in London.
Gray likes to run Blackstone in a centralized fashion out of its New York headquarters, something he makes no secret about, according to a source who previously worked at Blackstone. Over time, the firm has grown and encompassed more business lines, client types and geographies. The new roles will help Blackstone improve the co-ordination of its decision marking.
“It makes complete sense that the co-CIO roles were created and entrusted to two individuals who know the firm inside out, have a more-than-proven business judgement and at the same time embody the Blackstone culture,” the source added.
The firm has 700 people in Europe representing around 15 percent of Blackstone’s workforce. Giving the co-CIO role to someone in Europe sends an important signal, Assant says. “It shows our European colleagues that the firm views Europe as key to our overall business.”
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