Blackstone Inc. is pursuing a significant divestiture strategy by planning to sell more than $2 billion of its stakes in private investment funds through a structured financing approach. According to reports from the Financial Times, the alternative asset manager is marketing a collateralised fund obligation (CFO) that would bundle the stakes in leveraged buyout funds for investor exposure.
The proposed transaction would represent one of the largest deals to ever come to market, as reported by the Financial Times. The deal structure involves bundling private equity fund stakes into bonds, providing investors with exposure to Blackstone's leveraged buyout fund portfolio while allowing the firm to monetize its investments. This scale positions the transaction ahead of similar transactions from Carlyle Group Inc.'s AlpInvest unit that occurred last year.
The sale reflects broader challenges facing private equity firms in the current market environment. As reported by the Financial Times, many private equity firms have struggled to offload investments made during the low-rate environment of 2020 through 2022, making it difficult to return capital to their investors. This liquidity constraint has prompted firms to explore alternative financing structures, including CFOs, to raise capital without completely divesting their buyout investments.
The CFO market is experiencing significant expansion, with projections indicating the market could reach more than $30 billion of new volume this year, representing a 50% increase from 2025, according to Evercore Inc. as reported by the Financial Times. This growth trajectory reflects the increasing adoption of structured financing solutions among private equity firms seeking liquidity without complete portfolio exits.
