Susquehanna: Time To Buy Blackstone Group

In a report published Friday, Susquehanna analysts initiated coverage of Blackstone Group LP BX with a Positive rating and a price target of $53. Blackstone is a leading player in the active and alternative investing segment when mutual funds are finding it difficult to outperform other investment vehicles. "We see the investing marketplace continuing to break into two categories: investors who increasingly want low fee market capitalization passive/ruled based (smart beta) strategies or investors who are looking for alpha generation via alternatives," the analysts mentioned. Alternative asset managers like Blackstone benefit from a long-term capital lock up feature plus a broader opportunity set in the wake of the contraction in the global banking industry. Blackstone's real estate segment has outperformed the NCREIF index by 1,100bps annually since 1992 and its private equity funds have outperformed the S&P 500 by 820bps annually since 1987. In the report Susquehanna noted, "…the contraction in bank lending post Dodd-Frank should continue to open up more potential investment opportunities for BX helping to drive higher and less volatile distributions, which should support higher multiples in the future." Blackstone's growth prospects are expected to be driven by the global nature of its operations. "Notable ripe opportunities exist in European real estate and debt markets, emerging markets, retail, and most recently energy. These catalysts supported by the tailwind of increasing alternative allocations, drive our belief that BX will continue to deliver superior growth versus the majority of the AUM industry while also producing significant capital returns," the analysts added.