LPs vs Shareholders at Blackstone

A Blackstone spokesman is quoted in the WSJ today, saying that the investors in the company’s funds are very happy that Blackstone went public.

"Our LPs are very comfortable with our status as a public company," said a Blackstone spokesman. "They understand the long-term strengths it brings to the firm and that their interests and those of Blackstone and its partners are still precisely aligned."

Except, they aren’t, and they don’t. One of Blackstone’s biggest LPs is Calstrs, which invested $1.7 billion in the last Blackstone fund. This time round, it’s managed to scrounge up just $250 million. And one of the reasons is crystal clear: just ask its CIO, Christopher Ailman.

"Money-management organizations are based around a culture, and being public changes the culture of the organization — the stock price now becomes the focus," said Calstrs Chief Investment Officer Christopher Ailman in an interview.

"I don’t like seeing my GPs on the cover of Vanity Fair or bantered about on CNBC," he said, referring to fund managers, known as general partners. "I liked it when they were private."

So there’s one big LP who’s very vocal about the fact that he doesn’t like the fact that Blackstone went public. Blackstone can continue to say that its LPs are comfortable with Blackstone’s status as a public company, but they would be much more convincing if they could show it. Have any LPs gone on the record to that effect? And if not, why not?

Meanwhile, of course, Blackstone’s shareholders aren’t any happier, with the company trading at $17 a share, down from its $31 IPO price. Seems the only people who are really happy here are the GPs who cashed out in the IPO.

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