(Bloomberg) — Dentists, surgeons and other suburban millionaires aren’t big on the client roster of buyout funds run by the most elite investment firms.
But Blackstone Inc. plans to develop its first private equity fund targeting such individuals as part of a project called “BXPE.” The goal: to build new war chests that will eventually collect billions of dollars to invest in deals made from various Blackstone teams, according to people familiar with the matter.
The fund will potentially offer multi-millionaire exposure to a group of assets unavailable in public markets, such as Silicon Valley unicorns, closely held corporations and even stakes in other buyout shops, the people said. , who asked not to be named as there is no discussion. public. Contrary to the common practice of holding institutional investors’ money locked away for years, clients will have periodic withdrawal opportunities, people said.
It is the latest effort by President John Gray to raise fundraising beyond pensions, sovereign wealth funds and other sources, capable of pledging hundreds of millions if not billions of dollars at once.
The firm, co-founded by Steve Schwarzman, became an $881 billion financial superstore by helping the largest institutions chase returns higher than those typically achieved with stocks and bonds. Gray has said that individuals are an $80 trillion market. Adding them as customers will move Blackstone closer to its goal of $1 trillion.
The firm is hiring executives for this effort, and employees have been researching for the past year how buyouts can be part of a fund for individual investors.
It is not clear how many million dollars one would need to participate in the fund. Some of Blackstone’s employees had hoped to design a vehicle for accredited investors, with net worth of about $1 million, one of the people said. But it’s not on the table. Going so far downmarket would subject the fund to additional regulations, potentially affecting the collection of interest made and the extent to which it can make private-equity investments.
A company spokesperson declined to comment. Blackstone’s plans could still evolve as internal discussions continue and as the industry pushes to loosen regulations to protect investors from hard-to-sell investments.
Blackstone has developed other funds for smaller investors focusing on credit and real estate. Indeed, the New York-based firm already oversees about $200 billion for individuals through wealth managers, bankhouses and other channels that connect with smaller investors. Some new money over the past year went to a non-commercial real estate investment trust known as Breit. The fund has built a $54 billion force in the US property market over the past half-decade by smashing apartments, industrial parks and shopping centers.
One reason private equity firms pursue smaller investors is because the institutional fundraising circuit has become crowded. One advantage of having a permanent vehicle that individuals can come and go with is that it creates a long-term source of fees.
According to the people, while developing BXPE, Blackstone is considering how it will give customers the option to buy and sell stake in the fund at multiple points in a year. The typical buyout fund locks investor cash for a decade.
Blackstone executives are urging regulators to give people more access to investment vehicles previously reserved for the most sophisticated investors. For example, legal chief John Finlay weighed in before the Securities and Exchange Commission on the rules defining accredited investors in 2020.
As companies delay selling shares to the public, the number of companies listed on the public markets is declining, he said in January of that year.
“This is a fundamental change that regulators and the industry will have to deal with,” he said.