Private equity and real estate giant the Blackstone Group launched fundraising a year ago for Blackstone Capital Partners IX, its next flagship buyout fund, seeking to raise as much as $30 billion.
Yet Blackstone’s most recent quarterly earnings released last week revealed the fund raised just $360.6 million during the first quarter of 2023 and $1.14 billion over the six months through March 2023, a 92% decline from the fund’s first six months of fundraising.
While private equity firms have faced a broad slowdown in fundraising in recent months, the dramatic drop in Blackstone Capital Partners IX fundraising also comes at a time when Blackstone has faced scrutiny from investors over child labor at portfolio company PSSI.
The US Department of Labor (DOL) in November 2022 sought an injunction against Blackstone-owned slaughterhouse cleaning company Packers Sanitation Services Inc. (PSSI) to stop the company from illegally employing dozens of children in hazardous occupations on overnight shifts in conditions of “oppressive child labor.” When Blackstone-owned Packers ultimately settled the charges and paid a $1.5 million fine in February 2023, the DOL noted, “These findings represent a systemic failure across PSSI’s entire organization to ensure that children were not working in violation of the law.” Several Blackstone executives serve or recently served on PSSI’s board.
Blackstone has lowered expectations for the new fund, reporting in January that the firm would, “raise roughly a similar amount as the prior fund.” The predecessor fund (BCP VIII) closed in 2019 with $25.6 billion.
Yet even that could take time. If Blackstone Capital Partners IX continues fundraising at the same pace it did during the first quarter of 2023 (i.e. $360.6 million per quarter), it will take the fund until 2030 to match its predecessor.
Meanwhile, Blackstone has continued to face scrutiny from some of its largest investors.
In a March 2023 letter to Blackstone about PSSI, New York State Comptroller Thomas DiNapoli, sole trustee of the $240 billion New York State Common Retirement Fund, called the alleged child labor “abhorrent” and asked “how PSSI plans to eliminate illegal child labor practices.”
“How are we going to align with our partners, our fund managers around private equity, because we all heard the sad story about children…being used to clean slaughterhouses at night,” asked California Public Employees’ Retirement System (CalPERS) board member Ramón Rubalcava during a March investment committee meeting.
California State Teachers Retirement System (CalSTRS) Investment Committee Chair William Prezant said at a March investment meeting that fund staff “is pursuing this issue vigorously.”
While New York Common, CalPERS, and CalSTRS committed a combined total of more than $1.5 billion to Blackstone’s last buyout fund, none of the three appears to have committed to Blackstone Capital Partners IX thus far, based on publicly available information.
A list of Blackstone Capital Partners VIII or VII investors that do not appear to have committed to Blackstone Capital Partners IX is below.
Investors’ overallocation to private equity and concerns about child labor may not be the only reasons for investors to hold off on committing to Blackstone Capital Partners IX.
Blackstone’s last three flagship buyout funds – Blackstone Capital Partners VIII, VII, and VI – have all underperformed peers, ranking in the third and fourth quartile according to data provider Pitchbook:
|Name||Fund Size||Vintage||IRR||IRR Quartile||TVPI||DPI||RVPI|
|Blackstone Capital Partners VIII||$26.00B||2020||16.22%||3 (Lower-Mid)||1.19x||0.07x||1.15x|
|Blackstone Capital Partners VII||$18.86B||2016||13.57%||4 (Bottom)||1.51x||0.54x||1.03x|
|Blackstone Capital Partners VI||$15.20B||2011||12.61%||3 (Lower-Mid)||1.80x||1.42x||0.38x|
(Source: Pitchbook, accessed April 22, 2023)
Given a crowded fundraising market, charges of “oppressive child labor” at Blackstone portfolio company Packers Sanitation, and poor performance relative to peers, investors may choose to skip Blackstone Capital Partners IX.
** After publication of this blog post, Blackstone’s Managing Director of Global Public Affairs contacted PESP to state that the BCP IX’s negative fundraising trends “reflect broader industry factors.” Blackstone further asserted that “the fundraising for BCP Capital Partners IX during the 60-day period after the November 9, 2022 announced injunction [against PSSI] – with significant associated press — was multiples more than the 60-day period prior to November 9, 2022.” Because Blackstone does not publish data on fundraising trends on 60-day intervals, PESP is unable to corroborate Blackstone’s assertion.
Blackstone Capital Partners VIII or VII investors that do not appear to have committed to Blackstone Capital Partners IX so far (based on publicly available information):
1199SEIU Health Care Employees Pension Fund
Alaska Permanent Fund
American Electric Power System Retirement Plan
American Federation of Musicians and Employers’ Pension Fund And Subsidiary
Arizona State Retirement System
Boston City Retirement System
BP Master Trust For Employee Pension Plans
Brighthouse Life Insurance Company
California Public Employees’ Retirement System
California State Teachers’ Retirement System
Colorado Public Employees’ Retirement Association
Dakota Cement Trust Fund
Employees’ Retirement System of the State of Hawaii
Essex County Council Pension Fund
Exelon Corporation Pension Fund
Farmers Insurance Group of Companies
Florida State Board of Administration
Fubon Life Insurance
Houston Firefighters’ Relief and Retirement Fund
Houston Police Officers’ Pension System
IAM National Pension Fund
Illinois State Board of Investment
Ilmarinen Mutual Pension Insurance Company
Lexington Insurance Company
Liberty Mutual Retirement Benefit Plan
Los Angeles County Employees’ Retirement Association
Maine Public Employees’ Retirement System
Maryland State Retirement and Pension System
Massachusetts Pension Reserves Investment Trust
Michigan Department of Treasury
National Grid Pension Plan
New Jersey State Investment Council
New York City Public Pension Funds
New York State Common Retirement Fund
Niagara Mohawk Pension Plan
Ohio Police & Fire Pension Fund
Oregon Public Employees Retirement System
Oregon State Treasury
Pennsylvania State Employees’ Retirement System
Raytheon Technologies Corp Ret Plan
Retirement Plan of Carilion Clinic
San Diego County Employees Retirement Association
San Francisco Employees’ Retirement System
Santa Barbara County Employees’ Retirement System
Screen Actors Guild – Producers Pension Plan
Shell Pension Plan
Sound Retirement Trust
South Dakota Investment Council
State of Wisconsin Investment Board
State Teachers’ Retirement System of Ohio
Teacher Retirement System of Texas
Teachers Retirement System of the State of Illinois
Texas Permanent School Fund
Textron Master Trust
The Travelers Pension Plan
Transamerica Pension Plan
United Food & Commercial Workers International Union – Industry Pension Fund
Varma Mutual Pension Insurance Company
Washington State Investment Board
(Note: This list of investors in Blackstone Capital Partners VII and/or VIII is drawn from Pitchbook. We then searched investors’ websites for references to “Blackstone Capital Partners IX” to determine whether any were invested in the new buyout fund.)
 “Blackstone Is Coming Up Short in Its Push for a Record $30 Billion Buyout Fund,” Bloomberg, Jan 27, 2023. https://www.bloomberg.com/news/articles/2023-01-27/blackstone-coming-up-short-in-its-push-for-a-record-buyout-fund
 Blackstone Senior Managing Directors Peter Wallace, David Kestnbaum, and Vikram Suresh and Blackstone Operating Partner Jeffrey Overly serve or recently served on Packers Sanitation’s board.
 $10.1 billion / $360.6 million = 28 quarters or 7 years
 CalSTRS: $750 million commitment to Blackstone Capital Partners VIII, https://www.calstrs.com/files/dde3f45f7/PrivateEquityPerformance-06302022.pdf NY Common: $500 million, https://www.osc.state.ny.us/files/retirement/resources/pdf/asset-listing-2022.pdf, CalPERS: $262.5 million, https://www.calpers.ca.gov/page/investments/about-investment-office/investment-organization/pep-fund-performance.
 CalSTRS Semi-Annual Private Equity Performance Review, Mar 2, 2023. https://calstrs-pensionx-web.specialdistrict.org/files/3c09f7555/INV032%7E3.PDF NY Common Monthly Disclosure of Investments & Transactions, accessed Apr 22, 2023. https://www.osc.state.ny.us/common-retirement-fund/resources/financial-reporting-and-asset-allocation CalPERS Private Equity Program Fund Performance Review, accessed Apr 22, 2023. https://www.calpers.ca.gov/page/investments/about-investment-office/investment-organization/pep-fund-performance