Blackstone’s $18 bn fund may cut back each commitment: report

Blackstone Group is on track to raise above-target 20 trillion won ($18 billion) for its new global real estate fund and may cut back commitment from each limited partner because of a huge number of participants, according to a local media report.

The latest fund-raising, expected to close by year’s end, drew even stronger interest than its prior funds as investors are turning their eyes to opportunistic investments away from low-yielding core assets.

Blackstone Real Estate Partners IX has received tentative commitments of 20 trillion won in aggregate from the first close, surpassing the $15.8 billion its prior fund gathered in 2015, online news provider edaily reported on Nov. 22.

Among South Korean institutional investors, National Pension Service (NPS), Korea Investment Corporation (KIC) and Korean Teachers’ Credit Union will commit capital to the biggest fund of Blackstone to invest in distressed properties.

The three South Korean institutions had also participated in seventh and eighth funds of Blackstone Real Estate Partners.

According to the report, South Korean investors fret about a possible cutback on their commitments because of a large pool of limited partners in the fund. It did not elaborate further.

“It is likely (for Blackstone) to impose a hard cap, given the difficulty of managing a fund of over 20 trillion won,” an unnamed source of Hanwha Asset Management Co. Ltd., a domestic sales manager of Blackstone Real Estate Partners IX, was quoted as saying.

“The exact fund size will be disclosed after the fund closes within the year.”

A series of Blackstone’s opportunistic funds have generated an annualized internal rate of return of between 25% and 30%, according to the report.

“Local institutions, which had taken conservative strategy and invested mainly in core assets, are turning their eyes to high-risk distressed assets, too,” an unnamed source told the edaily.

“This will be a preemptive investment by institutional investors, bracing for a real estate market slowdown.”

South Korean institutions had committed about 2 trillion won to Blackstone Real Estate Partners VIII which raised $15.8 billion.

In June, Blackstone raised $7.1 billion for an Asia-focused opportunistic real estate fund.

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