By Joshua Franklin
Profits have soared at private equity firms such as Blackstone in recent years, as a U.S. stock market rally allowed them to sell assets for top dollar. That rally came to an end in the first quarter, amid a trade dispute between the world's two largest economies, the United States and China.
Blackstone reported a 20 percent drop in economic net income per share on Thursday but still beat Wall Street's expectations.
"We had a solid start to the year," President and Chief Operating Officer Jon Gray said in a call with reporters.
Economic net income per share came in at 65 cents in the quarter, down from 81 cents a year ago. Analysts on average expected 45 cents, according to Thomson Reuters I/B/E/S.
"This backdrop for the first quarter was a bit more challenging than we've seen in some time in terms of just the broader markets, but they've performed pretty well against that," said JMP Securities analyst Devin Ryan, who rates the stock "market outperform".
Blackstone's assets under management swelled to $449.6 billion from $434 billion at year-end 2017, and a 14 percent rise in fee-related earnings that are linked to a management fee on the assets held for investors also supported results.
As a sweetener for investors, Blackstone said it plans to pay a 30 cent special dividend in 2018, returning to shareholders a portion of the proceeds from the conclusion of its partnership with FS Investment Corp.
Shares closed 1 percent higher at $32.12.
Blackstone presented results for the first time since its Gray, formerly its real estate chief, was made president and COO earlier this year, a promotion which set him up as successor to Chief Executive Stephen Schwarzman.
"I start with a Hippocratic oath: to do no harm," Gray said. "But I do have a few key areas of focus."
Gray indicated Blackstone wants to manage more money for retail and insurance investors and bolster growth investments in emerging markets and in areas like life sciences and technology.
Attracting more retail and insurance money is not a new initiative for Blackstone - around 20 percent of its $18 billion inflows in the quarter were from retail investors - but Gray said this is still in "very early days."
"Retail is a $50 trillion market, insurance $30 trillion. Both have low single-digit exposure to alternatives," he said.
Blackstone could broaden its appeal to retail investors by meeting requirements to trade more easily in and out of their investments and to insurers by having more structured products with appropriate ratings, Gray said.
In January, Blackstone agreed to buy a majority stake in the Financial and Risk business of Thomson Reuters Corp
(Reporting by Joshua Franklin in New York; Editing by Steve Orlofsky and Cynthia Osterman)
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