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Buyout Firms Will Increase in Value, Blackstone CFO Says

Alternative-asset managers, which invest in private-equity buyouts, real estate and hedge funds, still aren’t fully understood by investors and will increase in value over time, said Laurence Tosi, Blackstone Group LP (BX)’s chief financial officer.

“The story hasn’t been fully told and there’s a long way to go,” Tosi said today at the inaugural Bloomberg CFO Conference in New York. The discount in value “is just not sustainable,” he said.

Blackstone was one of the first alternatives managers to go public, selling shares at $31 apiece in June 2007. The stock closed at $30.01 today in New York after slipping 4.7 percent so far this year. Adena Friedman, the CFO at Carlyle Group LP (CG), Blackstone’s largest peer, said public investors don’t assign enough value to the carried-interest income earned by private-equity firms.

“I still think that the value of carry is undervalued in the market,” Friedman said today at the conference, which is sponsored by Bloomberg Link, a division of Bloomberg LP. Carry is the share of investment profits collected by buyout firms, which also earn annual management fees.

Tosi, 46, joined New York-based Blackstone in 2008 from Merrill Lynch & Co., where he was a managing partner. Blackstone earned a record $3.5 billion in economic net income, a measure of realized and unrealized profits that excludes some costs, in 2013 while its stock more than doubled.

The firm oversees $272 billion in private-equity investments, real estate, credit assets and hedge funds, the most among peers. It was founded in 1985 by Steve Schwarzman, the chief executive officer, and Peter G. Peterson, who retired in 2008.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Pierre Paulden, Josh Friedman

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