(Reuters) - Blackstone Group LP, the world largest alternative asset manager, has raised over $22 billion for its latest buyout fund, setting it on course to be the private equity industry’s biggest ever, a person familiar with the matter said on Wednesday.
The strong fundraising underscores how investors are brushing aside concerns over the private equity sector overheating, as they search for returns that beat the stock market by a wide margin. The industry has raised some $3 trillion from investors since 2012, according to industry tracker Preqin.
New York-based Blackstone, led by co-founder Stephen Schwarzman, expects to conclude the fundraising for what will be its eighth buyout fund later this year, said the source, requesting anonymity as the details are confidential.
Blackstone has not set a fundraising target, but it anticipates the buyout fund will overtake Apollo Global Management’s $24.6 billion fund as the largest ever, the source added.
This is a departure from the traditional fundraising model, whereby managers set caps on the size of the fund targeted to allay investor concerns over amassing more capital than they can prudently invest.
Blackstone President Jon Gray had said in January the firm expected the fund to exceed $20 billion in size. A Blackstone spokeswoman declined to comment on the progress of the fundraising, which was reported earlier by Bloomberg News.
Blackstone has a target of reaching $1 trillion in assets under management by 2026. At the end of 2018, it had $472.2 billion in total assets under management.
Blackstone, which had $44.4 billion in private equity funds it had raised but yet to invest at the end of 2018, has been pursuing several large leveraged buyouts in recent years.
Last year, it purchased a majority stake in the Financial and Risk business of Thomson Reuters Corp, the parent company of Reuters News, in a $20 billion deal.
Acquisition prices in leveraged buyouts are rising on the back of increased competition for deals, setting off alarm bells among private equity backers.
According to Cambridge Associates, a private equity investment adviser, the U.S. industry’s average internal rate of return (IRR), a key benchmark for private equity returns, was just under 10 percent in 2015, the most recent year for which it compiled data.
Blackstone’s seventh flagship buyout fund, which raised $18.6 billion in 2016, has so far posted a net IRR of 21 percent. Its sixth fund, raised in 2011, has a total net IRR of 13 percent.
Reporting by Joshua Franklin in New York; Additional reporting by Bharath Manjesh in Bengaluru; Editing by Maju Samuel and Nick Zieminski