Blackstone markets $2 billion private fund stake sale amid pressure on exits

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Blackstone $2B private fund sale

Highlights

Blackstone is marketing a collateralised fund obligation, packaging over $2 billion of leveraged buyout fund stakes into bonds, to inject liquidity into its Strategic Partners unit.
The private capital market faces liquidity pressure, with $4 trillion in unsold assets and slowed distributions due to higher rates, weak valuations, and geopolitical turmoil.
CFO issuance surged to a record $25.9 billion in 2023 from $4.8 billion in 2021, with Blackstone's $2 billion deal among the largest recent offerings.

Structured sale tests market demand

As first reported by Financial Times, Blackstone is marketing a collateralised fund obligation that would package more than $2 billion of stakes in leveraged buyout funds into bonds for sale to investors and insurers.

The proposed transaction would inject cash into investors in a Blackstone Strategic Partners fund, the firm's unit that invests in other private equity groups' funds. People familiar with the matter say it remains unclear whether Blackstone will complete the securitisation or instead pursue a secondary sale of the stakes. Blackstone declines to comment, while Jefferies, which is advising on the deal, does not respond to a request for comment.

Blackstone is still early in the marketing and structuring process, and demand for the riskiest slice of the deal, the equity tranche of the CFO, is not yet clear. Recent transactions in the market have taken longer to attract buyers as investors become more selective.

Private capital market faces liquidity strain

The planned sale comes during a prolonged downturn in private markets, where buyout firms are struggling to exit investments made during the low-interest-rate period of 2020 to 2022. The industry is sitting on $4 trillion of unsold assets, limiting distributions back to endowments, pensions and sovereign wealth funds that committed trillions of dollars to private funds.

Higher interest rates, weaker valuations for some portfolio companies, tariff-related market turbulence in 2025 and the war in Iran earlier this year have all weighed on sales and public listings of highly leveraged private equity-backed businesses. In response, large secondary investors including Blackstone, Carlyle's AlpInvest and Franklin Templeton's Lexington Partners are increasingly turning to bond-like structures that appeal to investors seeking credit-rated securities.

That market has expanded rapidly. According to KBRA, issuance of CFOs rises to a record $25.9 billion last year from $4.8 billion in 2021. At $2 billion, Blackstone's offering would rank among the largest in the sector, following Carlyle's $1.25 billion publicly rated CFO last year and Coller Capital's $2.4 billion private structured funding vehicle raised from Barings and Ares Management in April.

In our earlier coverage of U.S. university endowments increasing exposure to technology stocks and crypto-linked ETFs, we explained how weaker private equity returns and tighter federal funding were squeezing campus finances and pushing investment committees toward more volatile public-market assets. We also noted that some institutions were revisiting policy constraints—such as Princeton easing its oil and gas divestment rule—to broaden opportunity sets as they search for liquidity and returns.

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