Blackstone on finding real value and the Aussie deal that stole the spotlight

The Blackstone 2026 Private Markets Forum was an opportunity for the world's largest alternative asset manager to set out its stall.

And the major recurring theme was scale. This is a US$1.3 trillion asset manager with all the access, influence and impact that brings with it.

In front of a crowd of around 300 attendees, Blackstone luminaries like Joan Solotar, Global Head of Blackstone Private Wealth, and Viral Patel, CEO of BXPE made the case for why private markets have an increasingly significant role to play in investor portfolios as a long-term compounding asset.

Here were some of the key takeaways from the event, touching on many of the big questions and opportunities facing investors right now, and some of the big local deals the firm has closed in Australia.

The huge potential in private equity

For Viral Patel, CEO of BXPE, one of the key advantages of Blackstone's size and scale is the value add it can bring to the companies under its umbrella.

"Unlike passive investors, in private equity, we are very active owners of our portfolio companies," he said. "What we look to do is help transform our businesses. That's really where the magic and frankly all of the work really begins."

Blackstone looks to leverage the diverse data and insights its companies collect, building a synergistic ecosystem through which individual companies can scale, but also help inform Blackstone's investing outlook and approach.

"Every quarter, we get all our CIOs across Blackstone’s investments teams and all of our group heads together, and we look at that data," says Patel. "What are the revenue numbers, what are the growth numbers, what's accelerating, what's decelerating, what are the demand drivers that we see in the economy? What are we seeing from a macro perspective?"

And the data suggests a solid economic backdrop against which private equity activity is blossoming on both acquisitions and exits. According to Blackstone data, there was a 36% increase in private equity deal activity last year, with a 2x increase in the number of deals worth US$1 billion or more. 75% of private equity exits last year were also for more than US$1 billion.

"The exit environment today is actually pretty robust and we feel good about the prospects going forward," says Patel. "We've got a pretty strong economy with good fundamentals. We've got M&A activity increasing and exits increasing."

On top of that is a growing realisation from investors of the value that's potentially on offer in private markets. It's why Blackstone is launching an AUD hedged share class of its private equity strategy for Australian investors looking to get exposure to the opportunity set.

"The private market's average EBITDA multiples today are about 4% above their 15-year averages," says Patel. "If you look at that relative to the public markets, the public market’s forward PE multiples for the S&P 500 is 29% above its long-term average."

Unpacking the AI adoption story

John Stecher, Blackstone’s Chief Technology Officer, has what he describes as the best job at the firm. Arguably more than anyone, he's exposed to the disruptive nature of AI and how it is changing the landscape at both Blackstone itself and the wider market.

He says the reckoning currently seen in the SaaS selloff is as much to do with the prevailing pricing models in the industry as the threat of AI.

"One of the things that has been a truism with software over the past two decades is that price increases are just the rule of the land," says Stecher. "It's really one of the only products that you buy that every single year increases in price in some way, shape or form."

"Most prices come down over time as things get industrialised and basically it's easier to produce. Software has never followed that role. One thing that is happening right now in public markets is there is a little bit of repricing on what are people going to be able to charge for software going forward."

Companies that are going to survive in the brave new world of AI will need to offer certain things, says Stecher. “Knowing a customer, providing a product to them that delights them and makes their life easier is absolutely key for software companies."

The second quality is the companies that have unique, proprietary data or IP that cannot be replicated forms a genuine competitive moat. But ultimately the companies that will succeed are those who can best capitalise on the possibilities AI presents, says Stecher.

"I believe personally it's going to result in more software rather than less software, but existing companies, if they leverage these tools correctly, can actually build better products. We spend a bunch of time talking with the CEOs, CIOs and CTOs of these companies about what is their true strategy for delivering new technology and leveraging all of the AI tools that are available."

That is a concern for companies and industries that trade on data transformation or basic informational services. This includes everything from legal services and video production to marketing and virtual services.

On the other hand, the AI revolution will be good news for data infrastructure companies as well as cybersecurity firms. As the technology develops, the necessity and demand for genuine protection against the threats AI may present will grow.

Driving growth in private credit and real estate

Mark Glengarry, Blackstone’s Head of APAC for Private Credit Strategies, says it can be hard to cut through all the noise surrounding private credit right now. But doing so only reinforces the principles by which Blackstone approaches the asset class.

"In credit, getting your money back is the key," says Glengarry. "And that's the approach not only in our underwriting process, but also the way we structure our funds. No single deal should blow up a credit fund. You need low concentration and diversification. You need to understand how that works and how the portfolio will work as a whole."

"We spend our whole time in credit worrying about the downside because that's what we are paid to do. We've extended more than US$155 billion worth of loans in North American direct lending, with minimal losses when we see defaults for a portfolio of our size. "

As has been the case in equities markets, the threat to software companies from AI has also become a major preoccupation in private credit markets. The software companies in Blackstone’s US Private Credit Fund strategy have an average enterprise value of ~US$4.5B with loans underwritten at a 37% loan-to-value, meaning over 60% of the companies value sits beneath the loans in the form of equity and more junior debt, providing a cushion to absorb potential losses.

"We're first lien, we're senior secured - we want to get our money back," says Glengarry. "So even with the selloff in software across the public markets, there's still a lot of equity value in these companies. But we're being proactive. It's also about finding the companies with legitimate, and defensible, competitive advantages."

"We really focus on software businesses with real moats around them," he says. "Within Blackstone Credit, we have an AI scorecard where we score every software company on risks on a very detailed basis. We look for mission critical software, those with real proprietary data that is more insulated from disruptors."

Blackstone has also backed companies directly in the AI space, and recently helped secure a US$10 billion debt financing deal with local AI infrastructure company Firmus.

"It's a great example of seeing something in the US working and then taking that technology here and applying it locally," said Glengarry. But it's also an example of the prudence Blackstone applies to its private credit deals.

On the real estate side, AI is also a major consideration for Blackstone, says Chris Tynan, Blackstone’s Head of Real Estate Australia. But this reaches beyond the much-vaunted opportunity in data centres and AI infrastructure.

The data centre is one of the most obvious real estate beneficiaries of AI according to Tynan. “We’re the largest owner of data centres in the world. At the same time, as AI capabilities continue to advance across areas such as medicine, law, and accounting, it’s appropriate to consider what that could mean over time for certain types of white-collar work.”

“That perspective informs how we think about long term office demand. We focus on understanding a range of potential outcomes and appropriately reflecting those risks in how we underwrite and price assets.”

It’s a mindset that underpins how Blackstone assesses risk and return across its real estate portfolio, says Tynan.

But there's also plenty of opportunities beyond AI's growing sphere of influence. In December, Blackstone entered an agreement to purchase Hamilton Island, one of Australia's most famous holiday destinations.

"Hamilton Island fits really firmly within one of our key themes on the real estate side, which is purchasing iconic destination hospitality assets, and then really trying to bring the best of Blackstone to these assets," says Tynan.

And the best of Blackstone means more scale, better efficiencies and better access.

"We think that we're going to be able to help procure things better," says Tynan. "We think that we're going to be able to introduce it to our customers globally. For us, it's about incremental improvement."

This was also another investment that speaks to the scale and scope of the alternative asset manager, and testament to the pull it has both here and abroad, says Tynan.

"We know and are aware that we are the custodians of a very heartfelt asset in Australia and we are committed to improving on what the Oatley family has left to us on behalf of our investors, certainly, but also the people of Australia and hopefully more broadly."

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For more insights from the team at Blackstone, please visit their website.