Blackstone BDC 'expects' a strong November, president Jonathan Gray says

Even cutting the fund’s distributions – akin to dividends – won’t hamper the sales of Blackstone’s juggernaut business development company, the $75 billion Blackstone Private Credit Fund, commonly known as BCRED.

Financial advisors and their clients typically run away from illiquid alternative investments like BCRED when they slice dividends; financial advisors sell such products to clients by focusing on high-yields as a boost to run of the mill stock and bond portfolios. Such alternative investments carry higher risks and often higher fees to clients.

BCRED said in September it was cutting the monthly distribution to investors by 9% to 20 cents per share, reportedly the first distribution cut in the fund’s history. BDCs issue loans to private companies and have seen tremendous growth over the past decade, and the recent Federal Reserve cut in interest rates means floating rate loans issued by BDCs will be kicking off less yield.

“We expect strong flows in BCRED in November,” said Jonathan Gray, president and chief operating officer of Blackstone on October 23 during a conference call with analysts to discuss third quarter earnings. “So that's all we know as of today.”

“I would say the reaction in the wealth channel is a realization that these products and credit are 97% floating rate,” Gray said. “So by definition, when rates come down, that impacts yield, and they want us to be responsible managers in terms of where we set the dividend level.”

Oaktree Strategic Credit Fund and Golub Capital Private Credit Fund have also reduced distribution recently, reducing payouts by 10% and 15% respectively, according to industry news website Private Equity Wire.

A Blackstone spokesperson Tuesday morning declined to comment further.

A decade ago, Blackstone turned away from almost exclusively focusing on managing money for institutions including insurance companies and private offices and began focusing on retail sales through financial advisors. BCRED was launched in 2020 and is the largest nontraded BDC in terms of assets.

There’s no doubt Blackstone is on a roll when selling its funds through the largest broker-dealers in the industry, from Morgan Stanley to LPL Financial.

In Blackstone’s private wealth unit, the company reported assets under management at the end of September of close to $290 billion, an increase of 15% when compared to the same time a year earlier. Blackstone also raised more than $11 billion during the third quarter through its private wealth channel, or more than double year-over-year.