Blackstone redemption block signals sector stressors

The firm posted a letter to shareholders on Thursday stating that October redemption requests had exceeded limits, and it had approved only 43% of requests for November. Shares in the firm fell by as much as 8%.

The BREIT vehicle - which has a firepower of $125 bn including debt - owns casinos, logistics schemes, multifamily and life sciences properties.

The day after posting the notice, Blackstone reported that the vehicle had divested its 50% stake in the MGM Grand Las Vegas and Mandalay Bay Resort casinos for $127 bn in a move seen to appease the liquidity crisis.

Analysts at JP Morgan told the FT that part of the fund's allure was 'the availability of monthly liquidity' but with a block on redemptions, 'advisors (might) think twice before allocating new capital to the fund'. They added: 'What may be a bit more concerning is that performance does not appear to be directly driving outflows given returns are up roughly 9% through October'.

It is understood that the majority of redemption requests - some 70% - have come from Asia. The curbs are likely to increase investor appetite to withdraw funds.

Blackstone president and chief operating officer, Jon Gray, appeared to be trying to calm the markets after he reminded investors that periods of dislocation were typically when Blackstone 'does best' in a video posted to the company's site last week.

'If you think about hard assets, like real estate, that have short-duration income, like short-term leases, in an inflationary environment those assets become harder to build. There’s less new competition and because of the strong fundamentals, they can earn more,' Gray reported.

However, market watchers said that Blackstone's 'liquidity mismatch' could be a sign of stressors to come for the industry.

'The BREIT outflow bear case is playing out,' confirmed Keefe Bruyette & Woods analyst Michael Brown in an investor briefing.