Aristotle Capital Management, an independent/employee-owned investment management organization, published its “Aristotle Capital Management Value Equity Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Aristotle Capital’s Value Equity Composite posted a total return of -7.19% gross of fees (-7.26% net of fees), underperforming the -0.74% return of the Russell 1000 Value Index and the -4.60% return of the S&P 500 Index. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Aristotle Capital Management Value Equity mentioned Blackstone Inc. (NYSE:BX) and explained its insights for the company. Founded in 1985, Blackstone Inc. (NYSE:BX) is a New York, New York-based alternative investment management company with a $128.9 billion market capitalization. Blackstone Inc. (NYSE:BX) delivered a -16.61% return since the beginning of the year, while its 12-month returns are up by 18.56%. The stock closed at $107.90 per share on May 24, 2022.
Here is what Aristotle Capital Management Value Equity has to say about Blackstone Inc. (NYSE:BX) in its Q1 2022 investor letter:
“Founded by its current CEO Stephen Schwarzman and Pete Peterson in 1985, Blackstone is one of the largest alternative asset managers in the world, with more than $880 billion of assets under management (AUM). The firm creates and manages investment vehicles that span asset classes globally and serve both institutional clients as well as high-net-worth individuals. Its core business segments include Real Estate (34% of fee-earning AUM), Credit and Insurance (31%), Private Equity (24%), and Hedge Fund Solutions (11%).
Blackstone has leveraged its broad product portfolio and enviable investment performance to not only raise substantial amounts of capital but also maintain its reputation as a one-stop shop for investors looking to gain exposure to alternative assets. In contrast to traditional asset managers that rely on investor inaction to keep redemption rates low, the products offered by alternative asset managers typically have lockup periods that prevent redemptions for a substantial amount of time (often 10+ years).
High-Quality Business
Some of the quality characteristics we have identified for Blackstone include:
-Reputable management team that has produced an admirable track record of investment performance and demonstrated its ability to raise capital (the firm is now 9x larger since its 2007 IPO);
-Stable client base and sticky asset base with 73% of its capital locked up for over 10 years; and
-Significant scale and strong brand that provides a myriad of advantages, including for distribution and new product launches.
Attractive Valuation
Based on our estimates of normalized earnings, we believe shares of Blackstone are offered at a discount relative to our estimate of intrinsic value. It is our view that current valuation does not appropriately reflect our estimated future levels of fee-based revenue.
Compelling Catalysts
Catalysts we have identified for Blackstone, which we believe will cause its stock price to appreciate over our three- to five- year investment horizon, include:
-Increased fee-based revenue as dry powder committed capital that has yet to be invested is deployed. As of the fourth quarter of 2021, there was a total of $136 billion in dry powder across the firm;
-Given its scale and sustained investment prowess, Blackstone is uniquely positioned to benefit from the secular shift in investor allocation away from traditional managers and toward less liquid and higher expected return strategies in the alternative asset management sector; and
-Further penetration in the retail and private wealth channel, a segment of investors that has historically been excluded from participating in alternative assets. Blackstone has a first-mover advantage in providing institutional-quality products across its expanding distribution teams that focus on financial advisors.”
Our calculations show that Blackstone Inc. (NYSE:BX) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Blackstone Inc. (NYSE:BX) was in 61 hedge fund portfolios at the end of the first quarter of 2022, compared to 62 funds in the previous quarter. Blackstone Inc. (NYSE:BX) delivered a -11.28% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Blackstone Inc. (NYSE:BX) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
