NEW YORK - Blackstone’s trillion-dollar goal needs some protection. Boss Steve Schwarzman hopes insurers can help his outfit double its assets by 2026. Its credit funds offer the higher yields the industry is dying for, while steady fees might boost Blackstone’s valuation. The trick is to persuade risk-averse insurers that a buyout firm is a good home.

The alternative-investment giant built a base for expansion by taking an 18 percent stake in Fidelity & Guaranty Life parent FGL as part of the annuity provider’s buyout last year. Blackstone, which reported estimates-beating earnings on Thursday, now manages its $22 billion in assets, and Schwarzman hopes FGL will be an engine for growth just as insurer Athene has been for rival Apollo Global Management. He has tasked Chris Blunt, New York Life’s former investments head, with building insurance into a $100 billion-plus business.

Insurers globally sit on some $30 trillion of assets, much of it conservatively invested in publicly traded debt. Better returns are available in the private credit market, which has exploded since the financial crisis as banks have retrenched. Helped in part by this, credit has become Blackstone’s biggest business, with $131 billion in assets.

Access to those funds, and the ability to structure private debt investments to match insurers’ liabilities, give Blunt an attractive calling card. If he can persuade insurers to boost their negligible private-equity and hedge-fund allocations by even a percentage point or two, that will be gravy for Blackstone as it seeks to raise four multi-billion-dollar funds by the end of next year.

Success isn’t guaranteed. Stock and bond markets are vulnerable to rising trade tensions and the Federal Reserve’s rate hikes. Insurers may blanch at putting money into alternatives in this environment. And the furor over the disappearance of Saudi journalist Jamal Khashoggi has cast a cloud over Blackstone’s infrastructure partnership with Saudi Arabia’s sovereign wealth fund. President Jon Gray on Thursday said the firm remained committed to the infrastructure business even though it was “concerned” by reports alleging Khashoggi was murdered.

Blackstone’s performing credit funds have returned more than 9 percent in the first nine months of this year. What hasn’t grown are fee-related earnings, the steady management fees that investors cherish. If insurers can help Blackstone boost those, Schwarzman might finally get the stock price uplift he has been craving.

CONTEXT NEWS

- Blackstone on Oct. 18 reported revenue rose 11 percent to $1.8 billion in the third quarter from the same period a year earlier. Economic net income, an earnings gauge that includes mark-to-market gains and losses on the firm’s private-equity holdings, also rose 11 percent, to $911 million. At 76 cents a share, earnings exceeded the consensus estimate of sell-side analysts of 74 cents, according to Refinitiv I/B/E/S, which is owned by Blackstone and Breakingviews parent Thomson Reuters.

- Assets under management rose to $457 billion, up 3.9 percent from the previous quarter and 17.9 percent above the level at the end of September last year.

(Editing by Antony Currie and Amanda Gomez)

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