Business

Wealth Management Expansion as Blackstone Targets New European Markets

LONDON (Reuters) - Blackstone's private wealth management business plans to enter at least two new European markets next year to tap into the growing demand among wealthy individuals, two executives at the company told Reuters. The firm has identified the need to broaden its reach as it seeks to provide comprehensive wealth management services tailored to affluent clients.

New York-based Blackstone has made attracting funds from affluent individuals a key priority amid choppy market conditions and as private equity firms look to diversify their client base away from institutional investors. This strategy is increasingly vital as the global financial landscape continues to evolve. Blackstone's European wealth management business currently operates in major financial hubs, including London, Paris, Zurich, Milan, and Frankfurt, but declined to disclose which new markets it would target for its expansion.

Expanding Wealth Management Offerings

Blackstone's wealth management products have a minimum investment threshold ranging from $10,000 to $25,000, making them accessible to a broader range of high-net-worth individuals. The business has significantly grown its private wealth assets globally to around $250 billion from $103 billion in 2020, representing 23% of Blackstone's total assets of $1.1 trillion. However, the company did not reveal the specific value of its wealth assets in Europe.

Navigating Complex European Markets

Navigating the fragmented European market, with its myriad regulatory regimes, has posed significant challenges for Blackstone. France and Italy have emerged as Blackstone's most substantial growth markets in wealth management, while progress in Britain has been slower, according to the executives. The unique regulatory environments in different countries require a nuanced understanding of local market dynamics, something that Blackstone is working to achieve.

"This is not the United States of Europe. There's much more complexity, and I think Blackstone understands that," said Rashmi Madan, head of Europe, Middle East, and Africa (EMEA) in Blackstone's private wealth solutions group. The firm's ability to navigate these complexities will be crucial as it seeks to solidify its presence in new markets.

Positive Regulatory Changes in Wealth Management

Recent regulatory changes across Europe—including in Britain—aimed at encouraging retail investment in private markets signal a positive shift for wealth management firms. "There's a growing change in Europe that long-term investing is important," Madan stated. This shift indicates a willingness among regulators to support retail investment options, which could benefit firms like Blackstone that are eager to introduce their wealth management products to a wider audience.

Despite a growing number of wealthy individuals relocating since the 2016 Brexit vote, Britain remains a core market for Blackstone's wealth management business. Madan spoke ahead of Britain's recent budget announcement, which included tax increases for the rich, but Blackstone declined to comment on the budget specifics. The firm's commitment to understanding the unique challenges in Britain underscores its long-term strategy for wealth management in the region.

Leadership Expansion to Support Wealth Management

To facilitate its expansion, Blackstone has promoted Sheila Rapple to chief operating officer for EMEA wealth management, who recently relocated to London from New York. "I think there's massive opportunity," Rapple told Reuters, referring to Europe's potential for growth in the wealth management sector. Her leadership will be pivotal as Blackstone seeks to enhance its service offerings and engage effectively with new clients.

Cashing Out of Wealth Management Investments

Blackstone is pinning its wealth management expansion ambitions on a range of semi-liquid "evergreen" funds designed for retail investors, which span private equity, credit, and property. The company plans to launch two new funds in credit and infrastructure early next year, initially targeting the U.S. market.

These wealth management products are typically marketed to affluent individuals through partnerships with local banks or wealth managers, such as French lender BNP Paribas and Italian insurer Generali. Investing in private markets exposes retail investors to illiquid and difficult-to-value assets, which requires careful consideration and management.

Blackstone previously limited client withdrawals from its flagship $55 billion "BREIT" property fund for over a year until February, as investors sought to exit amid a global commercial real estate downturn. Blackstone's retail funds generally feature a one or two-year "soft lock," allowing investors to cash out after paying a penalty fee, after which they can exit monthly or quarterly, subject to fund-level caps. Madan emphasized that this structure signals to investors, "this is an illiquid fund, and you're effectively investing in private markets."

In summary, Blackstone's strategic push into new European markets for wealth management highlights the firm's commitment to diversifying its client base and addressing the evolving needs of affluent investors in a complex regulatory environment.