Blackstone expects widening credit spreads on AI infrastructure debt to create opportunities for higher investment returns, even as its third-quarter realisations fell 34% amid weaker dealmaking activity, according to a report by Reuters.
President and chief operating officer Jon Gray reportedly said rising borrowing costs could allow investors to secure more attractive yields on new AI infrastructure projects, particularly assets that have yet to secure tenants.
The comments follow a selloff in AI-related debt triggered by concerns over CoreWeave, one of the sector’s largest borrowers and a significant recipient of Blackstone financing. Investors have become increasingly cautious about the sustainability of AI infrastructure spending and the leverage supporting its expansion.
Blackstone’s net realisations fell 34% to approximately $332m in the third quarter, including a nearly 50% decline in its private equity business, as higher interest rates and market volatility constrained investment exits.
Despite the slowdown, the alternative asset manager exceeded Wall Street’s earnings expectations, with assets under management reaching $1.37tn following strong investor inflows.
Fee-related earnings increased 6%, while fee-related earnings from private equity rose 26% to $619m. The firm’s credit and insurance division attracted nearly $36bn in new capital, followed by $12.6bn in private equity inflows.
Blackstone executives reportedly said they expected a significant increase in net realisations during the fourth quarter, despite continued market uncertainty.
Global M&A activity declined 41% quarter-on-quarter in the third quarter, according to LSEG, as higher borrowing costs and geopolitical volatility weighed on transactions.
Blackstone has also faced elevated redemption requests at its flagship private credit vehicle, BCRED, although the firm maintains that the portfolio’s underlying fundamentals remain healthy.
Its shares had fallen nearly 30% year-to-date through Wednesday, compared with a 13% gain in the broader US equity market.
