Blackstone Inc. (NYSE:BX) is weighing a transaction that could convert more than $2 billion in private equity fund interests into bond-like securities, a structure designed to return cash to investors as traditional buyout exits remain sluggish.
The proposed deal would be among the larger fund-stake securitizations to hit the market. This puts demand for older private equity exposure in the spotlight.
People familiar with the discussions reported that Blackstone has been sounding out investors about a collateralized fund obligation that would pool stakes in leveraged buyout funds and sell slices of the risk through bonds. The cash raised would flow to investors in a vehicle managed by Blackstone Strategic Partners, the unit that buys positions in other firms' funds.
The firm had not settled on the final route and could still choose a standard secondaries sale instead of issuing the securitized product. The marketing process is early-stage, leaving open questions about whether the transaction ultimately moves forward.
This comes as private equity managers continue to grapple with a slow environment for selling portfolio companies and returning capital. The industry is holding about $4 trillion of assets that have not been sold, much of it bought in the 2020-2022 period when borrowing costs were far lower.
Prolonged Exit Problems
Higher interest rates, weaker valuations, tariff-related market turbulence in 2025, and the war in Iran earlier this year have all made it tougher to complete sales or launch IPOs of buyout-backed companies. With distributions constrained, large secondary buyers have leaned more heavily on securitization to create liquidity.
Blackstone is not alone in using these structures, with Carlyle's AlpInvest and Franklin Templeton's Lexington Partners among the groups that have bundled fund interests into rated or privately assessed securities aimed at credit-focused buyers, Peinsights noted. Those buyers often manage insurance-linked capital, where demand for structured private assets has been a key source of growth for private markets.
The securities are typically split into layers with different risk and return profiles, and issuance has expanded quickly. KBRA data cited by Peinsights showed CFO issuance reached $25.9 billion last year, compared with $4.8 billion in 2021.
Blackstone's transaction would sit near the top end of the market, following Carlyle's $1.25 billion deal last year and Coller Capital's $2.4 billion structured vehicle raised in April. Still, the report cautioned that investor demand is less predictable, especially for the riskiest equity portion. As buyers become more selective, some recent transactions have taken longer to secure commitments.
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