Blackstone draws a rare 'sell' rating from Wall Street as an analyst raises concerns over 2 high-profile funds

  • In a rare move for Blackstone, an analyst downgraded the firm’s stock rating to “underperform.” 
  • A Credit Suisse analyst said contributions are slowing in the firm’s flagship retail products. 
  • Blackstone, which has expanded funds aimed at retail investors, said performance is strong.

Blackstone shares fell on Tuesday after a Wall Street analyst outlined a grim picture for two of the private-equity and real-estate giant’s most prized funds. 

Credit Suisse research analyst Bill Katz assigned an “underperform” rating to Blackstone. It’s a rare negative rating on the firm, which tends to draw cheers from Wall Street analysts who are bullish on Blackstone’s position as the largest private-equity investor. 

Katz’s view centers on what investors know as BREIT and BCRED, Blackstone’s $70 billion real-estate fund and $57 billion private credit fund, respectively. They have been boons for the New York-based firm in recent years as investors and their advisors generally want to make alternative investments like real estate and private credit a piece of their portfolios. 

Though Blackstone’s retail product platform has been successful over the years, its “momentum is rapidly decelerating,” with investors looking to pull money from BREIT and contributions to BCRED slowing, Katz said.

He previously held a neutral rating on the company. Katz said the negative rating is now the only one on Wall Street that held such a view, and Blackstone shares fell 2% while the wider stock market rose. 

The downgrade is the latest sign of headwinds facing its BREIT fund, which has raised money from retail investors to fund the acquisition of data centers, hotels, casinos, and shopping centers. A report in Bloomberg earlier this month highlighted that inflows were slowing and redemptions were up, as wealth advisors became wary of clients keeping their money in illiquid investments.

After analysts questioned executives about the funds on the firm’s third-quarter earnings call last month, Jon Gray, the president of Blackstone, said the firm has delivered strong performance for investors in recent years. 

“It’s not a surprise that you would see a deceleration in flows from individual investors when you’ve had this kind of market decline,” Gray said, referring to BREIT. 

A Blackstone spokesperson said the firm’s business “is built on performance, not fund flows. BREIT’s performance is rock solid.”  

As the largest private-equity firm with $950 billion of assets under management, analysts and investors look to the firm as a bellwether for the industry’s health. Katz said he continues to view Blackstone as a gauge for other alternative money managers, but thinks the stock has more room to fall. 

Shares of Blackstone are down 30% this year, while the S&P 500 has dropped 17%. Rival Apollo Global Management’s stock is down 11% over the same timeframe, while Carlyle Group shares have plunged 45% as investors expressed concern over the firm’s abrupt CEO departure.