Blackstone Group's (BX) - Get Reportfinancial performance fell sharply for a second consecutive quarter as declining year-end market performance hurt the value of its remaining stakes in companies it brought public.
Its economic net income -- the preferred metric for asset managers, which accounts for unrealized gains or losses in investments -- came in at 37 cents for the fourth quarter of 2015, missing analysts' estimates of 45 cents, and down 70% from the year-earlier performance of $1.25 in the last quarter of the year.
The headwinds figure to persist in the current quarter, as Stephen Schwarzman, Blackstone's chairman and chief executive, noted in a conference call when he said, "The public markets have had a challenging start to the year."
He cited the factors familiar to everybody who has tracked public market performance: declining global growth, especially in China, energy price weakness, credit market volatility, notably in high yield, the uptick in borrowing costs after the Federal Reserve'srecent rate increase, and the uncertainty heading into the November U.S. presidential elections.
On the conference call, firm management canted optimism. "We've seen versions of this movie many times before," Schwarzman said. "The outcome has always been outsized returns for someone."
The company's publicly traded shares, which closed Thursday at $25.11, are down 14% for the year to date and down from the May 19 high of $44.43. "Right now, you're getting Blackstone on sale," Schwarzman said, adding that, according to the firm, the implied valuation of Blackstone's public share would be $100 to $125.
Blackstone's investment in Hilton Worldwide Holdings (H) - Get Report , its single biggest stake in a public company, has declined 34% in the last 12 months, stripping $2.3 billion in value from Blackstone's holdings in the hotel chain.
As the first -- and, by far, the largest -- of private equity firms to report results, Blackstone's performance can be regarded as a bellwether for the firms slated to report shortly, including Apollo Global Management (APO) - Get Report , out Tuesday, and Carlyle Group (CG) - Get Report on Feb. 10.
Distributable earnings at Blackstone -- essentially the cash gains on sales of assets -- amounted to $878 million, versus $1.13 billion in the year-earlier period; on a per unit basis, the most-recent quarter's distributable earnings amounted to 72 cents a share.
The firm will pay a dividend of 61 cents a share on Feb. 8, giving the stock an 11% yield.
On the conference call, Schwarzman downplayed the volatility in the capital markets, noting that, with investors effectively locked into their investments for eight years or more, long-term investors such as Blackstone can ride out hiccups in the market, and even take advantage of the price dislocations to purchase some assets at discounts.
He also noted that, despite the challenging backdrop, investors continued to pour money into the firm's coffers, having raised $94 billion - as he noted, more than the sums raised by its four largest peers, collectively - and has $80 billion in dry powder, or the funds available to make new investments.
In times of turbulence, Schwarzman said, "our limited partners look to a franchise they trust, and our LPs continue to allocate more capital to us."
Schwarzman vouched his personal confidence in the prospects for the firm. "I'm personally not selling BX units," he said.