Retail Investors Are Pulling Money From Blackstone's Private Credit Fund. Here's What Its Latest Quarter Says.

Concerns about the private credit market have prompted investors to withdraw capital from Blackstone's (NYSE: BX) flagship private credit fund, BCRED (Blackstone Private Credit Fund). They requested to redeem 10% of their money in the second quarter, up from 7.9% in the first quarter, well above Blackstone's quarterly withdraw cap of 5%. These withdraws and concerns about the continued negative impact of private credit have sent Blackstone's stock down more than 30% from its 52-week high.

While the withdrawals are impacting the leading alternative investment manager's stock price, here's a look at what its latest quarter says about their effect on its overall results.

Image source: The Motley Fool.

Zero impact

Given all the headlines and the decline in Blackstone's share price, you'd expect that the financial giant's earnings would be under significant pressure. However, that hasn't been the case. Blackstone recently reported strong second-quarter financial results. Its distributable earnings surged 26% to nearly $2 billion, driven by strong fee-related earnings growth (up 22%) and net realizations (up 27%). Meanwhile, its year-to-date distributable earnings are also up 26% (to $3.7 billion).

While existing clients are pulling some of their funds from BCRED, Blackstone isn't having any trouble raising capital from investors. Total inflows approached $70 billion during the quarter, pushing its assets under management up to $1.35 trillion.

Blackstone's credit and insurance platform led the way with $31 billion of inflows during the quarter, growing its AUM by 15% to $469.3 billion. And, while some investors pulled their money out of BCRED, the fund still raised $1 billion of equity during the quarter.

Forget BCRED, AI is the story

Instead of focusing on BCRED's minimal impact, investors should turn their attention to AI's positive impact on Blackstone's financial results. The company cashed in on several AI-related investments during the quarter, including the sale of data centers to Digital Realty and a majority stake in power infrastructure company Sabre Industries, which bolstered its second-quarter results. Meanwhile, other AI-related investments helped boost the value of its funds. Nine of its 10 best-appreciating assets in the quarter had an AI link.

Blackstone continues to invest heavily in AI. For example, it recently formed a joint venture with Google to create a new company that will offer data center capacity, operations, networking, and Google's Tensor Processing Units as a compute-as-a-service offering. Blackstone also plans to double the size of its data center platform in the next two years. It recently launched Blackstone Digital Infrastructure Trust to acquire and own mission-critical data centers.

Blackstone is a screaming buy

The market is focusing too much on BCRED and not enough attention on Blackstone's AI investments. "We are in the early days of what I believe will be the most consequential transformation of industry and markets in a generation," stated CEO Steve Schwarzman on the earnings conference call. With its share price declining on BCRED worries, Schwarzman thinks, "Our stock is on sale today. We believe it represents one of the most inexpensive ways to participate in this extraordinary megatrend." I couldn't agree more, which is why I plan to add to my position very soon.

Matt DiLallo has positions in Alphabet, Blackstone, and Digital Realty Trust. The Motley Fool has positions in and recommends Alphabet, Blackstone, and Digital Realty Trust. The Motley Fool has a disclosure policy.