After taking more than a year to put the finishing touches on its fifth private equity fund, Blackstone Group President and COO Hamilton James said on Monday’s quarterly earnings conference call that the firm is in fund raising mode again. Again? But the fund, known as Blackstone Capital Partners V, just closed on Aug. 8 at $21.7 billion. How is this possible?

Well, for one, Blackstone closed the fund last summer, and reopened it when it wanted to raise more money. In the meantime they did some huge leveraged buyouts, leading James to reveal on Monday that the fund that they just finished raising, is almost fully invested.
     
“In terms of fundraising, we added 1.1 billion to our assets under management and finalized closing BCP V at $21.7 billion; it is the largest fund in history,” James said on the call. “And it’s already 70 percent invested. It’s our typical practice to start raising a new fund when we get to be about three-quarters invested. So that’s something we anticipate doing shortly.”
     
The long history of BCP V’s opening and closing shows how willing institutional investors have been to shell out money to private equity firms, and just how determined Blackstone CEO Stephen Schwarzman was to holding the title of the world’s largest LBO fund.

Blackstone sent a formal press release on July 11, 2006 titled “Blackstone Private Equity Fund Closes on $15.6 billion.” But the firm quickly re-opened the fund, when it became clear that Texas Pacific Group and Kohlberg Kravis Roberts & Co. were raising buyout funds likely to top Blackstone’s. Blackstone was expected to push its fund total up to $20 billion. 
     
Sure, Blackstone recognized LP demand was there, and opened the fund raising door again while the LBO market was red-hot. But it’s no secret that Blackstone’s founder and CEO is extremely competitive, and very much wanted bragging rights to the world’s largest buyout fund. That title was in jeopardy when Goldman Sachs announced it was raising a $20 billion to $21 billion LBO fund in March. Blackstone’s S-1 filing before its June IPO said its private equity fund was up to $19 billion, still shy of Goldman’s target. 
     
Now Blackstone has officially closed its fund and it’s nearly all invested. Blackstone deals that used some of that money include the $17.6 billion deal for Freescale Semiconductor, the $10.9 billion deal for Biomet and the $26 billion deal for Hilton Hotels.

So if KKR’s fund closes at $22 billion, will Blackstone re-open its fund raising?

(Photo: Hamilton James, Reuters file)