Matt Krantz, a financial markets reporter at USATODAY, has two advice for you if you decide to buy Blackstone shares.
If you do decide to buy Blackstone shares, be aware of two things. First, if you buy the shares, you’re not an investor in one of Blackstone’s investment funds. You own a piece of the parent company. It’s similar to buying shares in a publicly traded mutual fund company, like Franklin Resources; you own shares in the parent, not the funds Franklin runs.
That’s an important distinction. You shouldn’t necessarily expect the kind of returns that large institutional investors have gotten by investing in Blackstone funds. The Blackstone company collects 1% to 1.5% of the money its customers give it each year, plus 20% of any profits from the funds.
The other thing you need to pay attention to is the valuation. Investment pros I talk to think the stock should have a similar valuation to mutual fund companies and Fortress Investment Group (FIG), a hedge fund that went public earlier in the year. If the price-to-earnings ratio (P-E) goes above 20, which is typical in the asset management industry, beware. And remember that Fortress Investment Group has been a poor investment so far and is trading below the price on its first day of trading.
If that’s not enough to think about, last week, some key members of Congress, both Democrat and Republican, said they would consider raising taxes on profits at private-equity firms that go public. That could affect profits for a lot of people.