BLACKSTONE INC. The following discussion and analysis should be read in conjunction withBlackstone Inc.'s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q.
Effective
Effective
Our Business
Blackstone is one of the world's leading investment firms. Our business is organized into four segments:
Real Estate
Our real estate business is a global leader in real estate investing. Our Real Estate segment operates as one globally integrated business, with investments in theAmericas ,Europe andAsia . Our real estate investment teams seek to utilize our global expertise and presence to generate attractive risk-adjusted returns for our investors. OurBlackstone Real Estate Partners ("BREP") business is geographically diversified and targets a broad range of opportunistic real estate and real estate-related investments. The BREP funds include global funds as well as funds focused specifically onEurope orAsia investments. BREP seeks to invest thematically in high-quality assets, focusing where we see outsized growth potential driven by global economic and demographic trends. BREP has made significant investments in logistics, office, rental housing, hospitality and retail properties around the world, as well as in a variety of real estate operating companies. Our Core+ strategy invests in substantially stabilized real estate globally with long-term growth potential. Our institutionalNorth America ,Europe andAsia Core+ strategies,Blackstone Property Partners ("BPP"), focus on logistics, residential, office, life science office and retail assets in global gateway cities. The Core+ Real Estate business also comprises strategies tailored for income-focused individual investors including,Blackstone Real Estate Income Trust, Inc. ("BREIT"), aU.S. non-listed REIT, and Blackstone European Property Income ("BEPIF") funds.
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Our Blackstone Real Estate Debt Strategies ("BREDS") vehicles primarily target
real estate-related debt investment opportunities. BREDS invests in both public
and private markets, primarily in the U.S. and Europe . BREDS' scale and
investment mandates enable it to provide a variety of lending options for our
borrowers and investment options for our investors, including commercial real
estate and mezzanine loans, residential mortgage loan pools and liquid real
estate-related debt securities. The BREDS platform includes high-yield real
estate debt funds, liquid real estate debt funds and Blackstone Mortgage
Trust, Inc. ("BXMT"), a NYSE-listed real estate investment trust ("REIT").
Private Equity
Our Private Equity segment includes our corporate private equity business, which consists of (a) our global private equity funds,Blackstone Capital Partners ("BCP"), (b) our sector-focused funds, including our energy-focused funds,Blackstone Energy Partners ("BEP"), (c) ourAsia -focused private equity funds, Blackstone Capital Partners Asia and (d) our core private equity funds,Blackstone Core Equity Partners ("BCEP"). Our Private Equity segment also includes (a) our opportunistic investment platform that invests globally across asset classes, industries and geographies, Blackstone Tactical Opportunities ("Tactical Opportunities"), (b) our secondary fund of funds business, Strategic Partners Fund Solutions ("Strategic Partners "), (c) our infrastructure-focused funds,Blackstone Infrastructure Partners ("BIP"), (d) our life sciences investment platform, Blackstone Life Sciences ("BXLS"), (e) our growth equity investment platform, Blackstone Growth ("BXG"), (f) our multi-asset investment program for eligible high net worth investors offering exposure to certain of Blackstone's key illiquid investment strategies through a single commitment, Blackstone Total Alternatives Solution ("BTAS") and (g) our capital markets services business,Blackstone Capital Markets ("BXCM"). We are a global leader in private equity investing. Our corporate private equity business pursues transactions across industries on a global basis. It strives to create value by investing in great businesses where our capital, strategic insight, global relationships and operational support can drive transformation. Our corporate private equity business's investment strategies and core themes continually evolve in anticipation of, or in response to, changes in the global economy, local markets, regulation, capital flows and geopolitical trends. We seek to construct a differentiated portfolio of investments with a well-defined, post-acquisition value creation strategy. Similarly, we seek investments that can generate strong unlevered returns regardless of entry or exit cycle timing.Blackstone Core Equity Partners pursues control-oriented investments in high-quality companies with durable businesses and seeks to offer a lower level of risk and a longer hold period than traditional private equity. Tactical Opportunities pursues a thematically driven, opportunistic investment strategy. Our flexible, global mandate enables us to find differentiated opportunities across asset classes, industries, and geographies and invest behind them with the frequent use of structure to generate attractive risk-adjusted returns. With a focus on businesses and/or asset-backed investments in market sectors that are benefitting from long-term transformational tailwinds, Tactical Opportunities seeks to leverage the full power of Blackstone to help those businesses grow and improve. Tactical Opportunities' ability to dynamically shift focus to the most compelling opportunities in any market environment, combined with the business' expertise in structuring complex transactions, enables Tactical Opportunities to invest behind attractive market areas often with securities that provide downside protection and maintain upside return.Strategic Partners , our secondary fund of funds business, is a total fund solutions provider. As a secondary investor it acquires interests in high-quality private funds from original holders seeking liquidity.Strategic Partners focuses on a range of opportunities in underlying funds such as private equity, real estate, infrastructure, venture and growth capital, credit and other types of funds, as well as general partner-led transactions and primary investments and co-investments with financial sponsors.Strategic Partners also provides investment advisory services to separately managed account clients investing in primary and secondary investments in private funds and co-investments. 62
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BIP targets a diversified mix of core+, core and public-private partnership investments across all infrastructure sectors, including energy infrastructure, transportation, digital infrastructure, and water and waste with a primary focus in theU.S. BIP applies a disciplined, operationally intensive investment approach to investments, seeking to apply a long-term buy-and-hold strategy to large-scale infrastructure assets with a focus on delivering stable, long-term capital appreciation together with a predictable annual cash flow yield.
BXLS is our investment platform with capabilities to invest across the life cycle of companies and products within the life sciences sector. BXLS primarily focuses on investments in life sciences products in late stage clinical development within the pharmaceutical and biotechnology sectors.
BXG is our growth equity platform that seeks to deliver attractive risk-adjusted returns by investing in dynamic, growth-stage businesses, with a focus on the consumer, enterprise solutions, financial services and healthcare sectors.
Hedge Fund Solutions
The principal component of our Hedge Fund Solutions segment isBlackstone Alternative Asset Management ("BAAM"). BAAM is the world's largest discretionary allocator to hedge funds, managing a broad range of commingled and customized fund solutions since its inception in 1990. The Hedge Fund Solutions segment also includes (a) our GP Stakes business ("GP Stakes"), which targets minority investments in the general partners of private equity and other private-market alternative asset management firms globally, with a focus on delivering a combination of recurring annual cash flow yield and long-term capital appreciation, (b) investment platforms that invest directly, including ourBlackstone Strategic Opportunity Fund , which seeks to produce attractive long term, risk-adjusted returns by investing in a wide variety of securities, assets and instruments, often sourced and/or managed by third party subadvisors or affiliated Blackstone managers, (c) our hedge fund seeding business and (d) registered funds that provide alternative asset solutions through daily liquidity products. Hedge Fund Solutions' overall investment philosophy is to grow investors' assets through both commingled and custom-tailored investment strategies designed to deliver compelling risk-adjusted returns. Diversification, risk management and due diligence are key tenets of our approach.
Credit & Insurance
Our Credit & Insurance segment includesBlackstone Credit ("BXC"). BXC is one of the largest credit-oriented managers in the world. The investment portfolios of the funds BXC manages or sub-advises consist of loans and securities of non-investment and investment grade companies spread across the capital structure including senior debt, subordinated debt, preferred stock and common equity. BXC is organized into two overarching strategies: private credit and liquid credit. BXC's private credit strategies include mezzanine and direct lending funds, private placement strategies, stressed/distressed strategies and energy strategies (including our sustainable resources platform). BXC's direct lending funds includeBlackstone Private Credit Fund ("BCRED") and Blackstone Secured Lending Fund ("BXSL"), both of which are business development companies ("BDCs"). BXC's liquid credit strategies consist of collateralized loan obligations ("CLOs"), closed-ended funds, open-ended funds, systematic strategies and separately managed accounts. Our Credit & Insurance segment also includes our insurer-focused platform,Blackstone Insurance Solutions ("BIS"). BIS focuses on providing full investment management services for insurers' general accounts, seeking to deliver customized and diversified portfolios that include allocations to Blackstone managed products and strategies across asset classes and Blackstone's private credit origination capabilities. BIS provides its clients tailored portfolio construction and strategic asset allocation, seeking to generate risk-managed, capital-efficient returns, diversification and capital preservation that meets clients' objectives. BIS also provides similar services to clients through separately managed accounts or by sub-managing assets for certain insurance-dedicated funds and special purpose vehicles.
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In addition, our Credit & Insurance segment includes our asset-based finance
platform and our publicly traded midstream energy infrastructure, listed
infrastructure and master limited partnership ("MLP") investment platform, which
is managed by Harvest Fund Advisors LLC ("Harvest"). Harvest primarily invests
capital raised from institutional investors in separately managed accounts and
pooled vehicles, investing in publicly traded energy infrastructure, listed
infrastructure, renewables and MLPs holding primarily midstream energy assets in
North America .
Revenue
We generate revenue from fees earned pursuant to contractual arrangements with
funds, fund investors and fund portfolio companies (including management,
transaction and monitoring fees), and from capital markets services. We also
invest in the funds we manage and we are entitled to a
pro-rata
share of the results of the fund
(a "pro-rata
allocation"). In addition to a
pro-rata
allocation, and assuming certain investment returns are achieved, we are
entitled to a disproportionate allocation of the income otherwise allocable to
the limited partners, commonly referred to as carried interest ("Performance
Allocations"). In certain structures, we receive a contractual incentive fee
from an investment fund in the event that specified cumulative investment
returns are achieved (an "Incentive Fee," and together with Performance
Allocations, "Performance Revenues"). The composition of our revenues will vary
based on market conditions and the cyclicality of the different businesses in
which we operate. Net investment gains and investment income generated by the
Blackstone Funds are driven by value created by our operating and strategic
initiatives as well as overall market conditions. Fair values are affected by
changes in the fundamentals of our portfolio company and other investments, the
industries in which they operate, the overall economy and other market
conditions.
Our Response to
COVID-19
Our primary focus during the
COVID-19
pandemic has been the safety and wellbeing of our employees and their families,
as well as the seamless functioning of the firm in serving our investors who
have entrusted us with their capital, and our shareholders. Where remote work
has been appropriate or recommended under local government guidelines, our
technology infrastructure has proven to be robust and capable of supporting a
remote work model and we have implemented rigorous protocols for remote work
across the firm, including increased cadence of group calls and updates, and
frequent communication across leadership and working levels. We have also
leveraged technology to ensure our teams stay connected and productive, and that
our culture remains strong. To the extent we have not been meeting with our
clients in person, we have continued to actively communicate with them through
videoconference, teleconference and email. Our investment committees convene as
needed, and the firm continues to operate across investment, asset management
and corporate support functions. Our return to office protocols have been
developed and implemented consistent with local government guidelines, with
testing, contact-tracing and other safety protocols in place, and we continue to
closely monitor applicable public health and government guidance.
Business Environment
Blackstone's businesses are materially affected by conditions in the financial
markets and economic conditions in the
The first quarter of 2022 was characterized by continued economic growth despite heightened geopolitical uncertainty, competition for labor and rising wages and rising inflation. Global supply chains have also continued to be disrupted, particularly givenChina's recurrent COVID-19 restrictions. Such disruption has contributed to growing inflationary pressure. In theU.S. , annual inflation increased to 8.5% in March, the highest level in 40 years and up from 7.9% in February. In response, theFederal Reserve has begun its cycle of policy tightening, raising its benchmark interest rate for the first time sinceDecember 2018 .
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TheFederal Reserve increased the fed funds target range by 25 basis points to 0.25%-0.50% onMarch 17, 2022 and by an additional 50 basis points to 0.75%-1.00% onMay 4, 2022 in response to rising inflation. TheFederal Reserve has also reiterated its expectation for further increases going forward. The yield on the ten-yearTreasury increased 83 basis points to 2.34% in the first quarter and has since increased to 2.93% as ofMay 4, 2022 . Three-month LIBOR increased 75 basis points in the first quarter to 0.96% and has since climbed to 1.41% as ofMay 4, 2022 . The S&P 500 declined 4.6% in the quarter on a total return basis, with declines across most sectors. The S&P 500 energy sector was an outlier, increasing 39.0%, due in large part to higher energy prices as a result of pent-up demand as the COVID-19 pandemic recedes and decreased global supply as a result of the war betweenRussia andUkraine . The price of West Texas Intermediate crude oil increased 33.3% to$100 per barrel in the first quarter. Volatility increased in the first quarter of 2022, with the CBOE Volatility Index rising 19%. That volatility contributed to lower equity issuance, withU.S. IPO volumes down 91% compared to the first quarter of 2021. Merger and acquisition activity also softened, withU.S. announced deal volumes down 25% year-over-year. In credit markets, the S&P leveraged loan index declined by 0.1% and the Credit Suisse high yield bond index declined by 4.2% in the first quarter. High yield spreads expanded 19 basis points in the quarter, while issuance decreased 68% year-over-year. TheU.S. unemployment rate decreased to a post-pandemic low of 3.6% as ofMarch 2022 . Wages rose by 6.7% year-over-year inMarch 2022 , tying withJune 2020 as the highest wage growth since 1982. Retail sales increased 6.4% inMarch 2022 compared toDecember 2021 on a seasonally adjusted basis and increased 6.9% sinceMarch 2021 .The Institute for Supply Management Purchasing Managers' Index decreased to 57.1 in the first quarter from 58.8 at the end of 2021, still signaling expansion in theU.S. manufacturing sector but the lowest reading sinceSeptember 2020 . Although economic activity remains generally healthy, high interest rates and energy prices could dampen consumer spending over time, which may negatively impact equity values. Further, the high rate of inflation and expected interest rate increases, supply chain issues and increasing wage and input costs, combined with geopolitical uncertainty as a result of the war betweenRussia andUkraine , have increased the risk of recession. This risk will be particularly acute if inflation is higher than the market currently anticipates.
Notable Transactions
OnJanuary 10, 2022 , Blackstone issued$500 million aggregate principal amount of 2.550% senior notes dueMarch 30, 2032 and$1.0 billion aggregate principal amount of 3.200% senior notes dueJanuary 30, 2052 . For additional information see Note 12. "Borrowings" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements." For additional information on Blackstone's senior notes see Note 12. "Borrowings" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements." Organizational Structure EffectiveFebruary 26, 2021 , Blackstone effectuated changes to rename its Class A common stock as "common stock," and to reclassify its Class B and Class C common stock into a new "Series I preferred stock" and "Series II preferred stock," respectively. Each new stock has the same rights and powers of its predecessor. For additional information, see Note 1. "Organization" and Note 14. "Earnings Per Share and Stockholders' Equity - Stockholders' Equity" in the "Notes to Condensed Consolidated Financial Statements" in "- Item 1. Financial Statements" of this filing.
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EffectiveAugust 6, 2021 ,The Blackstone Group Inc. changed its name toBlackstone Inc. For additional information, see Note 1. "Organization" in the "Notes to Condensed Consolidated Financial Statements" in "- Item 1. Financial Statements." The simplified diagram below depicts our current organizational structure. The diagram does not depict all of our subsidiaries, including intermediate holding companies through which certain of the subsidiaries depicted are held. [[Image Removed]]
Key Financial Measures and Indicators
We manage our business using certain financial measures and key operating metrics since we believe these metrics measure the productivity of our investment activities. We prepare our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). See Note 2. "Summary of Significant Accounting Policies" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements" and "- Critical Accounting Policies." Our key non-GAAP financial measures and operating indicators and metrics are discussed below.
Distributable Earnings
Distributable Earnings is derived from Blackstone's segment reported results.
Distributable Earnings is used to assess performance and amounts available for
dividends to Blackstone shareholders, including Blackstone personnel and others
who are limited partners of the Blackstone Holdings Partnerships. Distributable
Earnings is the sum of Segment Distributable Earnings plus Net Interest and
Dividend Income (Loss) less Taxes and Related Payables. Distributable Earnings
excludes unrealized activity and is derived from and reconciled to, but not
equivalent to, its most directly comparable GAAP measure of Income Before
Provision (Benefit) for Taxes. See "-
Non-GAAP
Financial Measures" for our reconciliation of Distributable Earnings.
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Net Interest and Dividend Income (Loss) is presented on a segment basis and is equal to Interest and Dividend Revenue less Interest Expense, adjusted for the impact of consolidation of Blackstone Funds, and interest expense associated with the Tax Receivable Agreement. Taxes and Related Payables represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income Before Provision (Benefit) for Taxes and including the Payable under the Tax Receivable Agreement. Further, the current tax provision utilized when calculating Taxes and Related Payables and Distributable Earnings reflects the benefit of deductions available to the company on certain expense items that are excluded from the underlying calculation of Segment Distributable Earnings and Total Segment Distributable Earnings, such as equity-based compensation charges and certain Transaction-Related Charges where there is a current tax provision or benefit. The economic assumptions and methodologies that impact the implied income tax provision are the same as those methodologies and assumptions used in calculating the current income tax provision for Blackstone's Condensed Consolidated Statements of Operations under GAAP, excluding the impact of divestitures and accrued tax contingencies and refunds which are reflected when paid or received. Management believes that including the amount payable under the tax receivable agreement and utilizing the current income tax provision adjusted as described above when calculating Distributable Earnings is meaningful as it increases comparability between periods and more accurately reflects earnings that are available for distribution to shareholders.
Segment Distributable Earnings
Segment Distributable Earnings is Blackstone's segment profitability measure used to make operating decisions and assess performance across Blackstone's four segments. Segment Distributable Earnings represents the net realized earnings of Blackstone's segments and is the sum of Fee Related Earnings and Net Realizations for each segment. Blackstone's segments are presented on a basis that deconsolidates Blackstone Funds, eliminates non-controlling ownership interests in Blackstone's consolidated operating partnerships, removes the amortization of intangible assets and removes Transaction-Related Charges. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures and Blackstone's initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions. Segment Distributable Earnings excludes unrealized activity and is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income Before Provision (Benefit) for Taxes. See "- Non-GAAP Financial Measures" for our reconciliation of Segment Distributable Earnings. Net Realizations is presented on a segment basis and is the sum of Realized Principal Investment Income and Realized Performance Revenues (which refers to Realized Performance Revenues excluding Fee Related Performance Revenues), less Realized Performance Compensation (which refers to Realized Performance Compensation excluding Fee Related Performance Compensation and Equity-Based Performance Compensation). Realized Performance Compensation reflects an increase in the aggregate Realized Performance Compensation paid to certain of our professionals above the amounts allocable to them based upon the percentage participation in the relevant performance plans previously awarded to them as a result of a new compensation program that commenced during the three months endedJune 30, 2021 . The expectation is that for the full year 2022, Fee Related Compensation will be decreased by the total amount of additional Performance Compensation awarded for the year. In the three months endedMarch 31, 2022 the increase to Realized Performance Compensation of$15.0 million was less than the decrease to Fee Related Compensation of$20.0 million . These changes to Realized Performance Compensation and Fee Related Compensation reduced Net Realizations, increased Fee Related Earnings and had a favorable impact to Income Before Provision (Benefit) for Taxes and Distributable Earnings in the three months endedMarch 31, 2022 . These changes are not expected to impact Income Before Provision (Benefit) for Taxes and Distributable Earnings for the full year.
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Fee Related Earnings
Fee Related Earnings is a performance measure used to assess Blackstone's ability to generate profits from revenues that are measured and received on a recurring basis and not subject to future realization events. Fee Related Earnings equals management and advisory fees (net of management fee reductions and offsets) plus Fee Related Performance Revenues, less (a) Fee Related Compensation on a segment basis, and (b) Other Operating Expenses. Fee Related Earnings is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income Before Provision (Benefit) for Taxes. See "- Non-GAAP Financial Measures" for our reconciliation of Fee Related Earnings. Fee Related Compensation is presented on a segment basis and refers to the compensation expense, excluding Equity-Based Compensation, directly related to (a) Management and Advisory Fees, Net and (b) Fee Related Performance Revenues, referred to as Fee Related Performance Compensation. Fee Related Performance Revenues refers to the realized portion of Performance Revenues fromPerpetual Capital that are (a) measured and received on a recurring basis, and (b) not dependent on realization events from the underlying investments. Other Operating Expenses is presented on a segment basis and is equal to General, Administrative and Other Expenses, adjusted to (a) remove the amortization of transaction-related intangibles, (b) remove certain expenses reimbursed by the Blackstone Funds which are netted against Management and Advisory Fees, Net in Blackstone's segment presentation, and (c) give effect to an administrative fee collected on a quarterly basis from certain holders of Blackstone Holdings Partnership Units. The administrative fee is accounted for as a capital contribution under GAAP, but is reflected as a reduction of Other Operating Expenses in Blackstone's segment presentation.
Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization
Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization
("Adjusted EBITDA"), is a supplemental measure used to assess performance
derived from Blackstone's segment results and may be used to assess its ability
to service its borrowings. Adjusted EBITDA represents Distributable Earnings
plus the addition of (a) Interest Expense on a segment basis, (b) Taxes and
Related Payables, and (c) Depreciation and Amortization. Adjusted EBITDA is
derived from and reconciled to, but not equivalent to, its most directly
comparable GAAP measure of Income Before Provision (Benefit) for Taxes. See "-
Non-GAAP
Financial Measures" for our reconciliation of Adjusted EBITDA.
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Net Accrued Performance Revenues
Net Accrued Performance Revenues is a financial measure used as an indicator of potential future realized performance revenues based on the current investment portfolio of the funds and vehicles we manage. Net Accrued Performance Revenues represents the accrued performance revenues receivable by Blackstone, net of the related accrued performance compensation payable by Blackstone, excluding Performance Revenues that have been realized but not yet distributed as of the reporting date and clawback amounts, if any. Net Accrued Performance Revenues is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Investments. See "- Non-GAAP Financial Measures" for our reconciliation of Net Accrued Performance Revenues and Note 2. "Summary of Significant Accounting Policies - Equity Method Investments" in the "Notes to Condensed Consolidated Financial Statements" in "- Item 1. Financial Statements" for additional information on the calculation of Investments - Accrued Performance Allocations.
Operating Metrics
The alternative asset management business is primarily based on managing third party capital and does not require substantial capital investment to support rapid growth. Since our inception, we have developed and used various key operating metrics to assess and monitor the operating performance of our various alternative asset management businesses in order to monitor the effectiveness of our value creating strategies. Total and Fee-Earning Assets Under Management
Total Assets Under Management refers to the assets we manage. Our Total Assets Under Management equals the sum of:
(a) the fair value of the investments held by our carry funds and our
side-by-side
and
co-investmententities managed by us plus the capital that we are entitled to call from
investors in those funds and entities pursuant to the terms of their
respective capital commitments, including capital commitments to funds that
have yet to commence their investment periods,
(b) the net asset value of (1) our hedge funds, real estate debt carry funds,
BPP, certain
co-investments
managed by us, certain credit-focused funds, and our Hedge Fund Solutions
drawdown funds (plus, in each case, the capital that we are entitled to
call from investors in those funds, including commitments yet to commence
their investment periods), and (2) our funds of hedge funds, our
Solutions registered investment companies, BREIT, and BEPIF,
(c) the invested capital, fair value or net asset value of assets we manage
pursuant to separately managed accounts,
(d) the amount of debt and equity outstanding for our CLOs during the
reinvestment period,
(e) the aggregate par amount of collateral assets, including principal cash,
for our CLOs after the reinvestment period,
(f) the gross or net amount of assets (including leverage where applicable) for
our credit-focused registered investment companies,
(g) the fair value of common stock, preferred stock, convertible debt, term
loans or similar instruments issued by BXMT, and
(h) borrowings under and any amounts available to be borrowed under certain
credit facilities of our funds.
Our carry funds are commitment-based drawdown structured funds that do not
permit investors to redeem their interests at their election. Our funds of hedge
funds, hedge funds, funds structured like hedge funds and other open-ended funds
in our Real Estate, Hedge Fund Solutions and Credit & Insurance segments
generally have structures that afford an investor the right to withdraw or
redeem their interests on a periodic basis (for example,
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annually or quarterly), typically with 30 to 95 days' notice, depending on the fund and the liquidity profile of the underlying assets. In ourPerpetual Capital vehicles where redemption rights exist, Blackstone has the ability to fulfill redemption requests only (a) in Blackstone's or the vehicles' board's discretion, as applicable, or (b) to the extent there is sufficient new capital. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit & Insurance segments, excluding our BIS separately managed accounts, may generally be terminated by an investor on 30 to 90 days' notice. Our BIS separately managed accounts can generally only be terminated for long-term underperformance, cause and certain other limited circumstances, in each case subject to Blackstone's right to cure.
Fee-Earning
Assets Under Management refers to the assets we manage on which we derive management fees and/or performance revenues. Our Fee-Earning Assets Under Management equals the sum of:
(a) for our Private Equity segment funds and Real Estate segment carry funds,
including certain BREDS and Hedge Fund Solutions funds, the amount of
capital commitments, remaining invested capital, fair value, net asset
value or par value of assets held, depending on the fee terms of the fund,
(b) for our credit-focused carry funds, the amount of remaining invested
capital (which may include leverage) or net asset value, depending on the
fee terms of the fund,
(c) the remaining invested capital or fair value of assets held in
co-investment
vehicles managed by us on which we receive fees,
(d) the net asset value of our funds of hedge funds, hedge funds, BPP, certain
co-investments
managed by us, certain registered investment companies, BREIT, BEPIF, and
certain of our Hedge Fund Solutions drawdown funds,
(e) the invested capital, fair value of assets or the net asset value we manage
pursuant to separately managed accounts,
(f) the net proceeds received from equity offerings and accumulated
distributable earnings of BXMT, subject to certain adjustments,
(g) the aggregate par amount of collateral assets, including principal cash, of
our CLOs, and
(h) the gross amount of assets (including leverage) or the net assets (plus
leverage where applicable) for certain of our credit-focused registered
investment companies.
Each of our segments may include certain
Fee-Earning
Assets Under Management on which we earn performance revenues but not management
fees.
Our calculations of Total Assets Under Management and
Fee-Earning
Assets Under Management may differ from the calculations of other asset
managers, and as a result this measure may not be comparable to similar measures
presented by other asset managers. In addition, our calculation of Total Assets
Under Management includes commitments to, and the fair value of, invested
capital in our funds from Blackstone and our personnel, regardless of whether
such commitments or invested capital are subject to fees. Our definitions of
Total Assets Under Management and
Fee-Earning
Assets Under Management are not based on any definition of total assets under
management and
fee-earning
assets under management that is set forth in the agreements governing the
investment funds that we manage.
For our carry funds, Total Assets Under Management includes the fair value of
the investments held and uncalled capital commitments, whereas
Fee-Earning
Assets Under Management may include the total amount of capital commitments or
the remaining amount of invested capital at cost, depending on whether the
investment period has expired or as specified by the fee terms of the fund. As
such, in certain carry funds
Fee-Earning
Assets Under Management may be greater than Total Assets Under Management when
the aggregate fair value of the remaining investments is less than the cost of
those investments.
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Perpetual Capital refers to the component of assets under management with an indefinite term, that is not in liquidation, and for which there is no requirement to return capital to investors through redemption requests in the ordinary course of business, except where funded by new capital inflows.Perpetual Capital includes co-investment capital with an investor right to convert intoPerpetual Capital .
Dry Powder
Dry Powder represents the amount of capital available for investment or reinvestment, including general partner and employee capital, and is an indicator of the capital we have available for future investments.
Performance Eligible Assets Under Management
Performance Eligible Assets Under Management represents invested and to be invested capital at fair value, including capital closed for funds whose investment period has not yet commenced, on which performance revenues could be earned if certain hurdles are met.
Consolidated Results of Operations
Following is a discussion of our consolidated results of operations. For a more
detailed discussion of the factors that affected the results of our four
business segments (which are presented on a basis that deconsolidates the
investment funds, eliminates
non-controlling
ownership interests in Blackstone's consolidated operating partnerships and
removes the amortization of intangibles assets and Transaction-Related Charges)
in these periods, see "- Segment Analysis" below.
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The following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the three months endedMarch 31, 2022 and 2021: Three Months Ended March 31, 2022 vs. 2021 2022 2021 $ % (Dollars in Thousands) Revenues Management and Advisory Fees, Net$ 1,475,936 $ 1,177,815 $ 298,121 25 % Incentive Fees 104,489 36,124 68,365 189 % Investment Income Performance Allocations Realized 1,766,386 534,367 1,232,019 231 % Unrealized 1,293,050 2,464,497 (1,171,447 ) -48 % Principal Investments Realized 285,104 355,038 (69,934 ) -20 % Unrealized 73,961 639,315 (565,354 ) -88 % Total Investment Income 3,418,501
3,993,217 (574,716 ) -14 %
Interest and Dividend Revenue 54,485 31,412 23,073 73 % Other 72,869 60,304 12,565 21 % Total Revenues 5,126,280 5,298,872 (172,592 ) -3 % Expenses Compensation and Benefits Compensation 656,505 542,638 113,867 21 % Incentive Fee Compensation 41,019 13,325 27,694 208 % Performance Allocations Compensation Realized 717,601 213,027 504,574 237 % Unrealized 472,284 1,049,969 (577,685 ) -55 % Total Compensation and Benefits 1,887,409 1,818,959 68,450 4 % General, Administrative and Other 240,674 185,122 55,552 30 % Interest Expense 66,747 44,983 21,764 48 % Fund Expenses 2,192 2,383 (191 ) -8 % Total Expenses 2,197,022 2,051,447 145,575 7 % Other Income Change in Tax Receivable Agreement Liability 761 2,910 (2,149 ) -74 % Net Gains from Fund Investment Activities 50,876 120,353 (69,477 ) -58 % Total Other Income 51,637 123,263 (71,626 ) -58 % Income Before Provision (Benefit) for Taxes 2,980,895 3,370,688 (389,793 ) -12 % Provision (Benefit) for Taxes 483,281 (447 ) 483,728 n/m Net Income 2,497,614 3,371,135 (873,521 ) -26 % Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities 5,052 629 4,423 703 % Net Income Attributable to Non-Controlling Interests in Consolidated Entities 216,375 386,850 (170,475 ) -44 % Net Income Attributable to Non-Controlling Interests in Blackstone Holdings 1,059,313
1,235,784 (176,471 ) -14 %
Net Income Attributable to Blackstone Inc.$ 1,216,874 $ 1,747,872 $ (530,998 ) -30 % n/m Not meaningful. 72
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Three Months Ended
Revenues
Revenues were$5.1 billion for the three months endedMarch 31, 2022 , a decrease of$172.6 million compared to$5.3 billion for the three months endedMarch 31, 2021 . The decrease in Revenues was primarily attributable to a decrease of$574.7 million in Investment Income, which is composed of a decrease of$1.7 billion in Unrealized Investment Income and an increase of$1.2 billion in Realized Investment Income, partially offset by an increase of$298.1 million in Management and Advisory Fees, Net.
The
• The decrease of
attributable to lower net unrealized appreciation of investment holdings in
corporate private equity and Tactical Opportunities in the three months
ended
Corporate private equity and Tactical Opportunities carrying value increased
2.8% and 1.8%, respectively, in the three months ended March 31, 2022
compared to 15.3% and 15.1%, respectively, in the three months ended
March 31, 2021 .
• The decrease of
primarily attributable to lower net unrealized appreciation of investment
holdings in individual investor and specialized solutions, customized
solutions and commingled products in the three months ended
compared to the three months ended March 31, 2021 .
• The decrease of
primarily attributable to lower net unrealized appreciation of investments
in our private credit strategies in the three months ended March 31, 2022
compared to the three months ended March 31, 2021 .
• Partially offset by the increase of
segment which was primarily attributable to higher net unrealized
appreciation of investment holdings in our Core+ real estate funds and BREP
in the three months ended
and 10.3%, respectively, in the three months ended
to 3.2% and 5.3%, respectively, in the three months ended
The$1.2 billion increase in Realized Investment Income was primarily attributable to higher realized gains in our Real Estate and Private Equity segments, partially offset by the gain recognized in connection with the PátriaInvestments Limited and Pátria Investimentos Ltda. (collectively, "Pátria") sale transaction in the first quarter of 2021. OnJanuary 26, 2021 , Pátria completed its IPO, pursuant to which Blackstone sold a portion of its interests and no longer has representatives or the right to designate representatives on Pátria's board of directors. As a result of Pátria's pre-IPO reorganization transactions (which included Blackstone's sale of 10% of Pátria's pre-IPO shares to Pátria's controlling shareholder) and the consummation of the IPO, Blackstone was deemed to no longer have significant influence over Pátria due to Blackstone's decreased ownership and lack of board representation. The$298.1 million increase in Management and Advisory Fees, Net was primarily due to increases in our Real Estate and Credit & Insurance segments of$168.1 million and$134.9 million , respectively. The increase in our Real Estate segment was primarily due to Fee-Earning Assets Under Management growth in Core+ real estate and BREDS. The increase in our Credit & Insurance segment was primarily due to an increase in capital deployed in our most recently launched credit vehicles, Fee-Earning Assets Under Management growth in BXSL, and inflows in BCRED and our liquid credit business. 73
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Expenses
Expenses were$2.2 billion for the three months endedMarch 31, 2022 , an increase of$145.6 million compared to$2.1 billion for the three months endedMarch 31, 2021 . The increase was primarily attributable to increases of$68.5 million in Total Compensation and Benefits, which is composed of an increase of$113.9 million in Compensation and a decrease of$73.1 million in Performance Allocations Compensation, and$55.6 million in General, Administrative and Other. The increase in Compensation was primarily due to the increase in Management and Advisory Fees, Net, on which a portion of compensation is based. The decrease in Performance Allocations Compensation was primarily due to the decrease in Investment Income, on which a portion of compensation is based. The increase in General, Administrative and Other was primarily due to occupancy and technology related expenses and professional fees.
Other Income
Other Income was$51.6 million for the three months endedMarch 31, 2022 , a decrease of$71.6 million compared to$123.3 million for the three months endedMarch 31, 2021 . The decrease in Other Income was primarily due to a decrease of$69.5 million inNet Gains from Fund Investment Activities. The decrease in Other Income -Net Gains from Fund Investment Activities was principally driven by decreases of$70.0 million ,$15.8 million and$12.4 million in our Private Equity, Hedge Fund Solutions and Credit & Insurance segments, respectively, partially offset by an increase of$28.8 million in our Real Estate segment. The decreases in ourPrivate Equity and Hedge Fund Solutions segments were primarily due to unrealized depreciation of investments in our consolidated private equity and hedge fund solutions funds, as applicable. The decrease in our Credit & Insurance segment was primarily due to realized net losses and unrealized depreciation of investments in our consolidated credit funds. The increase in our Real Estate segment was primarily due to unrealized appreciation of investments, partially offset by realized net losses of investments in our consolidated real estate funds.
Provision (Benefit) for Taxes
Blackstone's Provision (Benefit) for Taxes for the three months endedMarch 31, 2022 and 2021 was$483.3 million and$(0.4) million , respectively. This resulted in an effective tax rate of 16.2% and 0.0%, respectively, based on our Income Before Provision (Benefit) for Taxes of$3.0 billion and$3.4 billion . The increase in Blackstone's effective tax rate for the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 , resulted primarily from the reduction of valuation allowances previously recorded against deferred tax assets during 2021, and an increase in state tax provision due to recent developments affecting the allocation of income among multiple tax jurisdictions.
Additional information regarding our income taxes can be found in Note 13. "Income Taxes" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements" of this filing.
Non-Controlling
Interests in Consolidated Entities
The Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities and Net Income Attributable to Non-Controlling Interests in Consolidated Entities is attributable to the consolidated Blackstone Funds. The amounts of these items vary directly with the performance of the consolidated Blackstone Funds and largely eliminate the amount of Other Income (Loss) -Net Gains (Losses) from Fund Investment Activities from the Net Income (Loss) Attributable toBlackstone Inc.
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Net Income Attributable to Non-Controlling Interests inBlackstone Holdings is derived from the Income Before Provision (Benefit) for Taxes at theBlackstone Holdings level, excluding the Net Gains (Losses) from Fund Investment Activities and the percentage allocation of the income between Blackstone personnel and others who are limited partners ofBlackstone Holdings and Blackstone after considering any contractual arrangements that govern the allocation of income such as fees allocable to Blackstone. For the three months endedMarch 31, 2022 and 2021, the Net Income Before Taxes allocated to Blackstone personnel and others who are limited partners ofBlackstone Holdings was 39.8% and 41.8%, respectively. The decrease of 2.0% was primarily due to the conversion of Blackstone Holdings Partnership Units to shares of common stock and the vesting of shares of common stock.
The Other Income (Loss) - Change in Tax Receivable Agreement Liability was
entirely allocated to
75
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Table of Contents Operating Metrics Total and Fee-Earning Assets Under Management The following graphs and tables summarize the Fee-Earning Assets Under Management by Segment and Total Assets Under Management by Segment, followed by a rollforward of activity for the three months endedMarch 31, 2022 and 2021. For a description of how Assets Under Management and Fee-Earning Assets Under Management are determined, please see "- Key Financial Measures and Indicators - Operating Metrics - Total and Fee-Earning Assets Under Management." [[Image Removed]]
Note: Totals may not add due to rounding.
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Three Months Ended
March 31, 2022 March 31, 2021
Private Hedge Fund Credit & Private Hedge Fund Credit &
Real Estate Equity Solutions Insurance Total Real Estate Equity Solutions Insurance Total
(Dollars in Thousands)
Fee-Earning
Assets Under Management
Balance, Beginning of Period $ 221,476,699 $ 156,556,959 $ 74,034,568 $ 197,900,832 $ 649,969,058 $ 149,121,461 $ 129,539,630 $ 74,126,610 $ 116,645,413 $ 469,433,114
Inflows (a) 22,791,041 5,449,946 4,170,080 12,949,112 45,360,179 8,561,177 4,468,621 2,005,986 8,186,651 23,222,435
Outflows (b) (4,289,575 ) (872,597 ) (2,582,444 ) (3,072,247 ) (10,816,863 ) (843,560 ) (608,021 ) (1,346,251 ) (5,115,877 ) (7,913,709 )
Net Inflows 18,501,466 4,577,349 1,587,636 9,876,865 34,543,316 7,717,617 3,860,600 659,735 3,070,774 15,308,726
Realizations (c) (5,292,057 ) (2,688,240 ) (362,867 ) (3,495,939 ) (11,839,103 ) (1,855,302 ) (3,071,179 ) (188,436 ) (3,247,204 ) (8,362,121 ) Market Activity (d)(g)
5,935,345 2,500,128 426,491 (3,591,933 ) 5,270,031 868,018 1,574,296 2,016,297 387,077 4,845,688
Balance, End of Period (e)$ 240,621,453 $ 160,946,196 $ 75,685,828 $ 200,689,825 $ 677,943,302 $ 155,851,794 $ 131,903,347 $ 76,614,206 $ 116,856,060 $ 481,225,407 Increase$ 19,144,754 $ 4,389,237 $ 1,651,260 $ 2,788,993 $ 27,974,244 $ 6,730,333 $ 2,363,717 $ 2,487,596 $ 210,647 $ 11,792,293 Increase 9 % 3 % 2 % 1 % 4 % 5 % 2 % 3 % - 3 % Annualized Base ManagementFee Rate (f) 1.00 % 1.06 % 0.78 % 0.59 % 0.87 % 1.12 % 1.16 % 0.80 % 0.55 % 0.94 % Three Months EndedMarch 31, 2022 March 31, 2021 PrivateHedge Fund Credit & PrivateHedge Fund Credit & Real Estate Equity Solutions Insurance Total Real Estate Equity Solutions Insurance Total (Dollars in Thousands) Total Assets Under Management Balance, Beginning of Period$ 279,474,105 $ 261,471,007 $ 81,334,141 $ 258,622,467 $ 880,901,720 $ 187,191,247 $ 197,549,222 $ 79,422,869 $ 154,393,590 $ 618,556,928 Inflows (a) 17,043,319 9,233,637 4,015,331 19,582,685 49,874,972 8,581,463 7,831,642 2,066,958 13,124,022 31,604,085 Outflows (b) (2,295,695 ) (1,420,463 ) (2,768,093 ) (3,519,958 ) (10,004,209 ) (1,809,101 ) (750,972 ) (1,623,328 ) (5,791,889 ) (9,975,290 ) Net Inflows 14,747,624 7,813,174 1,247,238 16,062,727 39,870,763 6,772,362 7,080,670 443,630 7,332,133 21,628,795 Realizations (c)
(9,537,783 ) (7,725,833 ) (438,445 ) (5,533,849 ) (23,235,910 ) (1,953,532 ) (8,093,375 ) (194,347 ) (4,626,773 ) (14,868,027 ) Market Activity (d)(h)
13,512,837 6,398,003 753,893 (2,709,564 ) 17,955,169 4,266,955 15,264,568 2,147,068 1,806,720 23,485,311
Balance, End of Period (e)$ 298,196,783 $ 267,956,351 $ 82,896,827 $ 266,441,781 $ 915,491,742 $ 196,277,032 $ 211,801,085 $ 81,819,220 $ 158,905,670 $ 648,803,007 Increase$ 18,722,678 $ 6,485,344 $ 1,562,686 $ 7,819,314 $ 34,590,022 $ 9,085,785 $ 14,251,863 $ 2,396,351 $ 4,512,080 $ 30,246,079 Increase 7 % 2 % 2 % 3 % 4 % 5 % 7 % 3 % 3 % 5 % 77
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(a) Inflows include contributions, capital raised, other increases in available
capital (recallable capital and increased
side-by-side
commitments), purchases, inter-segment allocations and acquisitions.
(b) Outflows represent redemptions, client withdrawals and decreases in available
capital (expired capital, expense drawdowns and decreased
side-by-side
commitments).
(c) Realizations represent realization proceeds from the disposition or other
monetization of assets, current income or capital returned to investors from
CLOs.
(d) Market activity includes realized and unrealized gains (losses) on portfolio
investments and the impact of foreign exchange rate fluctuations.
(e) Total and
Fee-Earning
Assets Under Management are reported in the segment where the assets are
managed.
(f) Annualized Base Management
Management Fee divided by the average of the beginning of year and each
quarter end's
Fee-Earning
Assets Under Management in the reporting period.
(g) For the three months ended
Fee-Earning
Assets Under Management due to foreign exchange rate fluctuations was
Credit & Insurance and Total segments, respectively. For the three months
ended
respectively.
(h) For the three months ended
Management due to foreign exchange rate fluctuations was
Private Equity, Credit & Insurance and Total segments, respectively. For the
three months ended
million,
Equity, Credit & Insurance and Total segments, respectively.
Fee-Earning Assets Under Management Fee-Earning Assets Under Management were$677.9 billion atMarch 31, 2022 , an increase of$28.0 billion , compared to$650.0 billion atDecember 31, 2021 . The net increase was due to: • Inflows of$45.4 billion related to:
o
BREIT, $7.9 billion from BREP and
co-investment,
$3.4 billion from BREDS, $1.2 billion from BPP and
co-investment
and $541.0 million from BEPIF,
o
from direct lending, $1.8 billion from CLOs, $1.3 billion from BIS,
$1.3 billion from certain liquid credit strategies, $880.0 million from
asset-based finance and
o $5.4 billion in our Private Equity segment driven by $2.4 billion from
BIP, $1.2 billion from Tactical Opportunities and $963.9 million from
Strategic Partners , and
o
from individual investor and specialized solutions, $451.4 million from
customized solutions and $197.8 million from commingled products.
Fee-Earning
Assets Under Management inflows in BREP exceeds the Total Assets Under Management inflows due to the commencement of BREP Asia III's investment period inMarch 2022 . Fee-Earning Assets Under Management inflows are reported when a fund's investment period commences, whereas Total Assets Under Management inflows are reported at each fund closing. • Market activity of$5.3 billion primarily attributable to:
o
appreciation of
depreciation of
of $302.8 million from BREP and
co-investment,
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o
by
o Partially offset by
Insurance segment driven by depreciation of
liquid credit strategies,
partially offset by market appreciation of
strategies and
Offsetting these increases were:
• Realizations of$11.8 billion primarily driven by:
o
real estate,
co-investment,
o
from direct lending,
stressed/distressed strategies,
from our energy strategies, and
o
• Outflows of$10.8 billion primarily attributable to: o$4.3 billion in our Real Estate segment driven by$2.1 billion of
uninvested reserves at the end of BREP Asia II's investment period,
$1.3 billion from BREIT and$842.0 million from BPP and co-investment,
o
from certain liquid credit strategies,
strategies,
and $115.9 million from asset-based finance,
o
from customized solutions and
specialized solutions, and
o
from multi-asset products, $159.2 million from Strategic Partners and
$102.8 million from Tactical Opportunities.
Total Assets Under Management
Total Assets Under Management were
• Inflows of$49.9 billion related to:
o
from direct lending, $1.9 billion from CLOs, $1.3 billion from BIS,
$1.3 billion from certain liquid credit strategies, $793.3 million from
asset-based finance, and
o $17.0 billion in our Real Estate segment driven by $9.8 billion from
BREIT, $2.5 billion from BREDS, $2.4 billion from BREP and
co-investment,
$1.9 billion from BPP and
co-investment
and $541.0 million from BEPIF,
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o
private equity and $1.2 billion from Tactical Opportunities, and
o $4.0 billion in our Hedge Fund Solutions segment driven by $3.4 billion
from individual investor and specialized solutions, $403.4 million from
customized solutions and $180.8 million from commingled products.
Total Assets Under Management inflows in our direct lending funds exceed the
Fee-Earning
Assets Under Management because Total Assets Under Management inflows are
reported at their gross value while, for certain funds,
Fee-Earning
Assets Under Management are reported as net assets, which is the basis on which
fees are charged.
• Market activity of $18.0 billion primarily driven by:
o
carrying value increases in Core+ real estate and BREP of 7.9% and 10.3%,
respectively, which included $1.8 billion of foreign exchange
depreciation across the segment,
o
by carrying value increases in
equity, and Tactical Opportunities of 8.5%, 13.8%, 2.8% and 1.8%,
respectively, which included $517.4 million of foreign exchange
depreciation across the segment,
o Partially offset by
Insurance segment driven by depreciation of
liquid credit strategies,
partially offset by market appreciation of
strategies,
and
Total Assets Under Management market activity in our BREP and co-investment funds and our Private Equity segment generally represents the change in fair value of the investments held and typically exceeds the Fee-Earning Assets Under Management market activity.
Offsetting these increases were:
• Realizations of$23.2 billion primarily driven by:
o
co-investment,
$2.8 billion from Core+ real estate and $996.6 million from BREDS,
o $7.7 billion in our Private Equity segment driven by $4.1 billion from
corporate private equity, $2.4 billion from Strategic Partners ,
$869.5 million from Tactical Opportunities and $316.5 million from BIP,
and
o
from direct lending, $1.3 billion from CLOs, $495.2 million from
stressed/distressed strategies and $418.1 million from our energy
strategies.
Total Assets Under Management realizations in our BREP and
co-investment
funds and our Private Equity segment generally represents the total proceeds and
typically exceeds the
Fee-Earning
Assets Under Management realizations which generally represents only the
invested capital.
• Outflows of $10.0 billion primarily attributable to:
o
from certain liquid credit strategies,
$408.2 million from direct lending and$321.2 million from BIS, 80
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o
from customized solutions and
specialized solutions,
o
and $842.1 million from BPP and
co-investment,
and
o
Tactical Opportunities, $370.7 million from Strategic Partners ,
$277.9 million from multi-asset products and $230.6 million from
corporate private equity.
Dry Powder
The following presents our Dry Powder as of quarter end of each period:
[[Image Removed]]Note: Totals may not add due to rounding.
(a) Represents illiquid drawdown funds, a component of
fee-paying
co-investments;
includes
fee-payingthird party capital as well as general partner and employee capital that
does not earn fees. Amounts are reduced by outstanding capital commitments,
for which capital has not yet been invested.
Net Accrued Performance Revenues
The following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as ofMarch 31, 2022 and 2021. Net Accrued Performance Revenues presented do not include clawback amounts, if any, which are disclosed in Note 17. "Commitments and Contingencies - Contingencies - Contingent Obligations (Clawback)" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements" of this filing. See "- Non-GAAP Financial Measures" for our reconciliation of Net Accrued Performance Revenues. 81
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March 31,
2022 2021
(Dollars in Millions)
Real Estate
BREP IV $ 6 $ 18
BREP V 1 18
BREP VI 38 39
BREP VII 527 253
BREP VIII 990 519
BREP IX 1,139 198
BREP Europe IV 93 92
BREP Europe V 548 244
BREP Europe VI 301 -
BREP Asia I 126 179
BREP Asia II 189 78
BPP 734 189
BREIT - 82
BEPIF 6 -
BREDS 37 31
BTAS 83 1
Total Real Estate (a) 4,817 1,941
Private Equity
BCP IV 8 9
BCP V - 37
BCP VI 475 746
BCP VII 1,257 987
BCP VIII 315 41
BCP Asia I 330 105
BEP I 27 52
BEP III 93 34
BCEP I 222 147
Tactical Opportunities 378 320
BXG 12 39
Strategic Partners 570 157
BIP 106 43
BXLS 22 19
BTAS/Other 255 93
Total Private Equity (a) 4,070 2,831
Hedge Fund Solutions 342 214
Credit & Insurance 318 216
Total Blackstone Net Accrued Performance Revenues
5,202
Note: Totals may not add due to rounding.
(a) Real Estate and Private Equity include
co-investments,
as applicable.
For the twelve months endedMarch 31, 2022 , Net Accrued Performance Revenues receivable increased due to Net Performance Revenues of$8.6 billion offset by net realized distributions of$4.3 billion .
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Invested Performance Eligible Assets Under Management
The following presents our Invested Performance Eligible Assets Under Management as of quarter end for each period:
[[Image Removed]]Note: Totals may not add due to rounding.
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The following presents our Perpetual Capital Total Assets Under Management as of quarter end for each period:
[[Image Removed]]
Note: Totals may not add due to rounding.
Perpetual Capital Total Assets Under Management were$338.2 billion as ofMarch 31, 2022 , an increase of$24.8 billion , compared to$313.4 billion as ofDecember 31, 2021 . Perpetual Capital Total Assets Under Management in our Real Estate, Credit & Insurance and Private Equity segments increased$15.5 billion ,$4.8 billion and$4.3 billion , respectively. Principal drivers of these increases were:
• In our Real Estate segment, net Total Assets Under Management growth in
BREIT and BPP and
co-investment
resulted in increases of
• In our Credit & Insurance segment, net Total Assets Under Management growth
in direct lending resulted in an increase of
by a decrease of $4.5 billion related to BIS.
• In our Private Equity segment, net Total Assets Under Management growth in
BIP resulted in an increase of $4.3 billion .
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Investment Records
Fund returns information for our significant funds is included throughout this
discussion and analysis to facilitate an understanding of our results of
operations for the periods presented. The fund returns information reflected in
this discussion and analysis is not indicative of the financial performance of
Blackstone and is also not necessarily indicative of the future performance of
any particular fund. An investment in Blackstone is not an investment in any of
our funds. There can be no assurance that any of our funds or our other existing
and future funds will achieve similar returns.
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The following table presents the investment record of our significant carry/drawdown funds and selected perpetual capital strategies from inception throughMarch 31, 2022 : Unrealized Investments Realized Investments Total Investments Fund (Investment Period Committed Available % Net IRRs (d) Beginning Date / Ending Date) (a) Capital Capital (b) Value MOIC (c) Public Value MOIC (c) Value MOIC (c) Realized Total (Dollars/Euros in Thousands, Except Where Noted) Real Estate Pre-BREP$ 140,714 $ - $ - n/a -$ 345,190 2.5x$ 345,190 2.5x 33 % 33 % BREP I (Sep 1994 /Oct 1996 ) 380,708 - - n/a - 1,327,708 2.8x 1,327,708 2.8x 40 % 40 % BREP II (Oct 1996 /Mar 1999 ) 1,198,339 - - n/a - 2,531,614 2.1x 2,531,614 2.1x 19 % 19 % BREP III (Apr 1999 /Apr 2003 ) 1,522,708 - - n/a - 3,330,406 2.4x 3,330,406 2.4x 21 % 21 % BREP IV (Apr 2003 /Dec 2005 ) 2,198,694 - 23,471 n/a - 4,640,501 1.7x 4,663,972 1.7x 12 % 12 % BREP V (Dec 2005 /Feb 2007 ) 5,539,418 - 8,546 n/a - 13,444,906 2.3x 13,453,452 2.3x 11 % 11 % BREP VI (Feb 2007 /Aug 2011 ) 11,060,444 550,452 408,815 2.2x 80 % 27,407,685 2.5x 27,816,500 2.5x 13 % 13 % BREP VII (Aug 2011 /Apr 2015 )
13,501,376 1,513,361 7,589,097 1.7x 4 %
23,864,256 2.1x 31,453,353 2.0x 22 % 15 % BREP VIII (Apr 2015 /Jun 2019 )
16,591,084 2,281,492 17,009,035 1.8x -
19,609,674 2.5x 36,618,709 2.1x 29 % 19 % *BREP IX (Jun 2019 /Dec 2024 ) 21,321,251 9,461,862 22,133,179 1.9x 2 % 6,024,086 2.1x 28,157,265 1.9x 66 % 47 % Total Global BREP$ 73,454,736 $ 13,807,167 $ 47,172,143 1.8x 2 %$ 102,526,026 2.3x$ 149,698,169 2.1x 18 % 17 % BREP Int'l (Jan 2001 /Sep 2005 ) € € € € € 824,172 - - n/a - 1,373,170 2.1x 1,373,170 2.1x 23 % 23 % BREP Int'l II (Sep 2005 /Jun 2008 ) (e) 1,629,748 - - n/a - 2,583,032 1.8x 2,583,032 1.8x 8 % 8 % BREP Europe III (Jun 2008 /Sep 2013 ) 3,205,167 421,732 280,829 0.5x - 5,792,215 2.4x 6,073,044 2.0x 19 % 14 % BREP Europe IV (Sep 2013 /Dec 2016 )
6,673,049 1,378,153 1,883,356 1.3x -
9,699,087 2.0x 11,582,443 1.8x 20 % 14 % BREP Europe V (Dec 2016 /Oct 2019 )
7,965,079 1,338,957 10,018,509 1.7x -
2,336,451 2.7x 12,354,960 1.8x 39 % 15 % *BREP Europe VI (Oct 2019 /Apr 2025 ) 9,901,655 5,670,276 6,911,549 1.6x - 471,010 2.0x 7,382,559 1.7x 60 % 32 % Total BREP Europe € € € € € 30,198,870 8,809,118 19,094,243 1.6x - 22,254,965 2.1x 41,349,208 1.8x 16 % 13 % continued... 86
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Unrealized Investments Realized Investments Total Investments
Fund (Investment Period Committed Available % Net IRRs (d)
Beginning Date / Ending Date) (a) Capital Capital (b) Value MOIC (c) Public Value MOIC (c) Value MOIC (c) Realized Total
(Dollars/Euros in Thousands, Except Where Noted)
Real Estate (continued)
BREP Asia I (Jun 2013 / Dec 2017) $
4,261,983
7,338,909 2,007,555 7,252,702 1.4x 4 %
761,817 1.8x 8,014,519 1.4x 42 % 13 %
*BREP Asia III (
7,502,256 7,502,256 - n/a - - n/a - n/a n/a n/aBREP
Co-Investment
(f) 7,131,383 37,934 973,293 2.3x - 15,029,656 2.2x 16,002,949 2.2x 16 % 16 % Total BREP$ 135,148,753 $ 34,021,106 $ 79,856,621 1.7x 2 %$ 152,235,747 2.2x$ 232,092,368 2.0x 17 % 16 % *BREDS High-Yield (Various) (g) 19,986,312 5,702,368 5,721,393 1.1x - 15,438,412 1.3x 21,159,805 1.2x 11 % 10 % Private Equity Corporate Private Equity BCP I (Oct 1987 / Oct 1993) $
859,081 $ - $ - n/a -
1,361,100 - - n/a -
3,256,819 2.5x 3,256,819 2.5x 32 % 32 %
BCP III (
3,967,422 - - n/a - 9,184,688 2.3x 9,184,688 2.3x 14 % 14 % BCOM (Jun 2000 /Jun 2006 ) 2,137,330 24,575 15,928 n/a - 2,953,649 1.4x 2,969,577 1.4x 6 % 6 % BCP IV (Nov 2002 /Dec 2005 )
6,773,182 169,884 127,159 1.3x - 21,479,599 2.9x 21,606,758 2.8x 36 % 36 %
BCP V (
21,009,112 1,035,259 110,390 7.5x 92 % 38,427,169 1.9x 38,537,559 1.9x
8 % 8 %
BCP VI (Jan 2011 / May 2016 )
15,202,513 1,378,295 7,754,859 1.8x 43 % 23,846,668 2.3x 31,601,527 2.1x 17 % 13 %
BCP VII (
18,852,880 1,931,935 25,281,125 1.9x 35 % 10,049,608 2.4x 35,330,733 2.0x 35 % 19 %
*BCP VIII (
25,424,279 17,027,500 12,308,856 1.5x 16 %
514,942 2.9x 12,823,798 1.5x 125 % 45 %
Energy I (
2,441,558 174,492 705,759 1.5x 60 % 3,869,928 2.0x 4,575,687 1.9x 15 % 12 %
Energy II (
4,933,284 1,030,529 4,954,452 1.6x 58 % 1,588,019 1.1x 6,542,471 1.4x
2 % 7 %
*Energy III (Feb 2020 / Feb 2026 ) 4,329,863 3,067,781 2,117,059 1.9x 52 %
320,742 2.7x 2,437,801 2.0x 113 % 57 %
BCP Asia I (
2,452,754 869,042 4,636,769 3.0x 64 %
995,878 4.9x 5,632,647 3.2x 115 % 61 %
*BCP Asia II (
6,554,832 6,529,852 9,373 n/a - - n/a 9,373 n/a n/a n/a
Core Private Equity I (Jan 2017 / Mar 2021 ) (h)
4,764,447 1,149,384 8,022,079 2.1x - 2,020,771 3.6x 10,042,850 2.3x 52 % 26 %
*Core Private Equity II (
8,191,582 6,750,467 1,493,095 1.1x - - n/a 1,493,095 1.1x n/a n/m
Total Corporate Private Equity $ 129,255,219 $ 41,138,995 $ 67,536,903 1.8x 32 % $ 120,250,218 2.2x $ 187,787,121 2.0x 16 % 16 %
continued...
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Unrealized Investments Realized Investments Total Investments
Fund (Investment Period Committed Available % Net IRRs (d)
Beginning Date / Ending Date) (a) Capital Capital (b) Value MOIC (c) Public Value MOIC (c) Value MOIC (c) Realized Total
(Dollars/Euros in Thousands, Except Where Noted)
Private Equity (continued)
Tactical Opportunities
*Tactical Opportunities (Various) $ 22,736,825 $ 6,769,836 $ 14,405,782 1.4x 11 % $ 18,216,793 1.9x $ 32,622,575 1.6x 18 % 13 %
*Tactical Opportunities
Co-Investment
and Other (Various) 14,348,123 5,975,749 5,852,894 1.8x 7 % 6,734,373 1.6x 12,587,267 1.7x 19 % 19 %
Total Tactical Opportunities $
37,084,948
*Growth (Jul 2020 /Jul 2025 )$ 5,046,626 $ 1,914,667 $ 3,472,702 1.1x 8 %$ 337,102 3.2x$ 3,809,804 1.2x n/m 17 %Strategic Partners (Secondaries)Strategic Partners I-V (Various) (i)
11,447,898 842,769 460,940 n/a - 16,871,169 n/a 17,332,109 1.7x n/a 13 %
Strategic Partners VI (
4,362,750 1,451,461 1,236,940 n/a - 3,941,301 n/a 5,178,241 1.7x n/a 15 %
Strategic Partners VII (
7,489,970 1,871,515 5,544,959 n/a - 5,089,030 n/a 10,633,989 2.1x n/a 23 %
Strategic Partners Real Assets II (
1,749,807 493,169 999,444 n/a -
968,153 n/a 1,967,597 1.5x n/a 15 %
Strategic Partners VIII (
10,763,600 5,085,423 10,069,319 n/a - 3,956,714 n/a 14,026,033 1.9x n/a 57 %
*Strategic Partners Real Estate , SMA and Other (Various) (i) 7,878,498 2,346,047 3,389,313 n/a - 2,875,142 n/a 6,264,455 1.6x n/a 20 %
*Strategic Partners Infra III (Jun 2020 / Jul 2024 ) (i) 3,250,100 2,084,092 565,067 n/a - 124,956 n/a 690,023 1.6x n/a 67 %
*Strategic Partners IX (Oct 2021 / Jul 2026) (i) 13,536,771 10,111,164 2,502,428 n/a - - n/a 2,502,428 1.3x n/a n/m
Total Strategic Partners (Secondaries)$ 60,479,394 $ 24,285,640 $ 24,768,410 n/a -$ 33,826,465 n/a$ 58,594,875 1.8x n/a 16 % Life Sciences Clarus IV (Jan 2018 /Jan 2020 )
910,000 13,755 815,050 1.5x 3 % 232,776 1.9x 1,047,826 1.6x 25 % 15 %
*BXLS V (
4,775,203 1,952,326 1,137,803 1.2x 6 % - n/a 1,137,803 1.2x n/a -2 %
continued...
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Unrealized Investments Realized Investments Total Investments
Fund (Investment Period Committed Available % Net IRRs (d)
Beginning Date / Ending Date) (a) Capital Capital (b) Value MOIC (c) Public Value MOIC (c) Value MOIC (c) Realized Total
(Dollars/Euros in Thousands, Except Where Noted)
Credit
Mezzanine / Opportunistic I (Jul 2007 / Oct 2011) $
2,000,000
n/a 17 %
Mezzanine / Opportunistic II (Nov 2011 / Nov 2016 ) 4,120,000 1,007,436 436,872 0.5x - 6,338,457 1.6x 6,775,329 1.4x
n/a 10 %
Mezzanine / Opportunistic III (Sep 2016 / Jan 2021 ) 6,639,133 915,252 4,321,060 1.1x 1 % 5,013,903 1.6x 9,334,963 1.3x
n/a 11 %
*Mezzanine / Opportunistic IV (Jan 2021 / Jan 2026 ) 5,016,771 3,904,772 1,248,665 1.0x - 31,378 n/m 1,280,043 1.1x n/a 11 %
Stressed / Distressed I (Sep 2009 / May 2013 ) 3,253,143 76,000 - n/a - 5,776,181 1.3x 5,776,181 1.3x n/a 9 %
Stressed / Distressed II (Jun 2013 / Jun 2018 ) 5,125,000 547,430 430,963 0.5x - 5,213,790 1.2x 5,644,753 1.1x
n/a 2 %
*Stressed / Distressed III (Dec 2017 / Dec 2022 ) 7,356,380 3,477,014 2,066,718 0.9x - 2,382,486 1.4x 4,449,204 1.1x
n/a 8 %
Energy I (Nov 2015 / Nov 2018 ) 2,856,867 1,057,174 959,388 1.0x - 2,307,898 1.6x 3,267,286 1.4x
n/a 9 %
*Energy II (Feb 2019 / Feb 2024 ) 3,616,081 2,193,068 1,672,130 1.2x - 745,850 1.5x 2,417,980 1.3x n/a 27 %
European Senior Debt I (
€ € € € €
1,964,689 341,823 1,002,526 0.9x - 2,262,946 1.4x 3,265,472 1.2x n/a 5 %
*European Senior Debt II (
€ € € € €
4,088,344 2,037,066 3,203,147 1.0x - 1,009,298 1.4x 4,212,445 1.1x n/a 16 %
Total Credit Drawdown Funds (j) $ 46,889,033 $ 15,922,149 $ 15,835,479 1.0x - $ 36,351,249 1.4x $ 52,186,728 1.3x n/a 10 %
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Selected Perpetual Capital Strategies (k)
Total
Investment Total Net
Fund (Inception Year) (a) Strategy AUM Return (l)
(Dollars in Thousands, Except Where Noted)
Real Estate
BPP - Blackstone Property Partners
(2013) (m) Core+ Real Estate $ 66,264,521 13 %
BREIT - Blackstone Real Estate
Income Trust (2017) (n) Core+ Real Estate 63,312,062 13 %
BXMT - Blackstone Mortgage Trust
(2013) (o) Real Estate Debt 7,982,810 11 %
Private Equity
BIP - Blackstone Infrastructure
Partners (2019) (p) Infrastructure 23,363,335 25 %
Hedge Fund Solutions
BSCH - Blackstone Strategic Capital
Holdings (2014) (q) GP Stakes 10,641,112 18 %
Credit
BXSL - Blackstone Secured Lending Fund (2018) (r) U.S. Direct Lending 10,708,046 10 % BCRED - Blackstone Private Credit Fund (2021) (s) U.S. Direct Lending 44,569,626 11 %
The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.
n/m Not meaningful generally due to the limited time since initial investment.
n/a Not applicable.
SMA Separately managed account.
* Represents funds that are currently in their investment period.
(a) Excludes investment vehicles where Blackstone does not earn fees.
(b)Available Capital represents total investable capital commitments, including side-by-side, adjusted for certain expenses and expired or recallable capital and may include leverage, less invested capital. This amount is not reduced by outstanding commitments to investments.
(c) Multiple of
management fees, expenses and Performance Revenues, divided by invested
capital.
(d) Unless otherwise indicated, Net Internal Rate of Return ("IRR") represents
the annualized inception to
based on realized proceeds and unrealized value, as applicable, after
management fees, expenses and Performance Revenues. IRRs are calculated
using actual timing of limited partner cash flows. Initial inception date
of cash flows may differ from the Investment Period Beginning Date.(e) The 8% Realized Net IRR and 8% Total Net IRR exclude investors that opted
out of the Hilton investment opportunity. Overall BREP International II
performance reflects a 7% Realized Net IRR and a 7% Total Net IRR.
(f) BREP
Co-Investment
represents
co-investment
capital raised for various BREP investments. The Net IRR reflected is
calculated by aggregating each
co-investment'srealized proceeds and unrealized value, as applicable, after management
fees, expenses and Performance Revenues.
(g) BREDS High-Yield represents the flagship real estate debt drawdown funds
only.
(h)
invests with a more modest risk profile and longer hold period than
traditional private equity.
(i) Realizations are treated as return of capital until fully recovered and
therefore unrealized and realized MOICs are not applicable. Returns are
calculated from results that are reported on a three month lag fromthe impact of economic and market activities in the current quarter.
Effective
I-V
Investment Value and Total Investment Value were updated to exclude funds
not managed by Strategic Partners .
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(j) Funds presented represent the flagship credit drawdown funds only. The
Total Credit Net IRR is the combined IRR of the credit drawdown funds
presented.
(k) Represents the performance for select Perpetual Capital Strategies;
strategies excluded consist primarily of (1) investment strategies thathave been investing for less than one year, (2) most perpetual capital
assets managed for insurance clients, and (3) investment vehicles where
Blackstone does not earn fees.
(l) Unless otherwise indicated, Total Net Return represents the annualized
inception to
proceeds and unrealized value, as applicable, after management fees,
expenses and Performance Revenues. IRRs are calculated using actual timing
of investor cash flows. Initial inception date of cash flows occurred
during the Inception Year.
(m) BPP includes certain vehicles managed as part of the BPP Platform but not
classified as Perpetual Capital . As of March 31, 2022 , these vehicles
represented $3.3 billion of Total Assets Under Management.
(n) The BREIT Total Net Return reflects a per share blended return, assuming
BREIT had a single share class, reinvestment of all dividends received
during the period, and no upfront selling commission, net of all fees and
expenses incurred by BREIT. These returns are not representative of the
returns experienced by any particular investor or share class. Total Net
Returns are presented on an annualized basis and are from
(o) The BXMT return reflects annualized market return of a shareholder invested
in BXMT since inception through
all dividends received during the period. Return incorporates the closing
NYSE stock price as of March 31, 2022 . Total Net Return is from May 22,
2013 .
(p) Including
co-investment
vehicles that do not pay fees, BIP Total Assets Under Management is
$27.3 billion .
(q) BSCH represents the aggregate Total Assets Under Management and Total NetReturn of BSCH I and BSCH II funds that invest as part of the GP Stakes
strategy, which targets minority investments in the general partners of
private equity and other private-market alternative asset management firms
globally. Including
co-investment
vehicles that do not pay fees, BSCH Total Assets Under Management is
$11.5 billion .
(r) The BXSL Total Assets Under Management and Total Net Return are presented
as of December 31, 2021 . BXSL Total Net Return reflects the change in NAV
per share, plus distributions per share (assuming dividends and
distributions are reinvested in accordance with BXSL's dividend
reinvestment plan) divided by the beginning NAV per share. Total Net
Returns are presented on an annualized basis and are from November 20,
2018 .
(s) The BCRED Total Net Return reflects a per share blended return, assuming
BCRED had a single share class, reinvestment of all dividends received
during the period, and no upfront selling commission, net of all fees and
expenses incurred by BCRED. These returns are not representative of the
returns experienced by any particular investor or share class. Total Net
Returns are presented on an annualized basis and are from
Total Assets Under Management reflects gross asset value plus amounts
borrowed or available to be borrowed under certain credit facilities. BCRED
net asset value as of
Segment Analysis
Discussed below is our Segment Distributable Earnings for each of our segments.
This information is reflected in the manner utilized by our senior management to
make operating decisions, assess performance and allocate resources. References
to "our" sectors or investments may also refer to portfolio companies and
investments of the underlying funds that we manage.
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Real Estate
The following table presents the results of operations for our Real Estate
segment:
Three Months Ended
March 31, 2022 vs. 2021
2022 2021 $ %
(Dollars in Thousands)
Management Fees, Net
Base Management Fees $ 580,186 $ 427,186 $ 153,000 36%
Transaction and Other Fees, Net 40,485 26,019 14,466 56%
Management Fee Offsets (960 ) (1,623 ) 663 -41%
Total Management Fees, Net 619,711 451,582 168,129 37%
Fee Related Performance Revenues 491,517 155,392 336,125 216%
Fee Related Compensation (344,842 ) (188,492 ) (156,350 ) 83%
Other Operating Expenses (66,003 ) (44,362 ) (21,641 ) 49%
Fee Related Earnings 700,383 374,120 326,263 87%
Realized Performance Revenues 802,916 88,638 714,278 806%
Realized Performance Compensation (290,031 ) (22,762 ) (267,269 ) n/m
Realized Principal Investment Income 53,975 100,820 (46,845 ) -46%
Net Realizations 566,860 166,696 400,164 240%
Segment Distributable Earnings $ 1,267,243 $ 540,816 $ 726,427 134%
n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were
Segment Distributable Earnings in our Real Estate segment in the first quarter of 2022 were higher compared to the first quarter of 2021. This was primarily driven by increased Fee Related Earnings due to the quarterly crystallization of BREIT performance revenues and growth in Fee-Earning Assets Under Management in Core+ real estate and BREDS, as well as increased Net Realizations due to higher Realized Performance Revenues in BREP. In the first quarter, the Real Estate segment benefited from meaningful fundraising momentum in our perpetual capital strategies, which represent an increasing percentage of our Total Assets Under Management. Our real estate business is demonstrating fundamental strength although selected areas are to some extent seeing challenges from macroeconomic factors. In particular, in theU.S. , the economic environment has been characterized by a high rate of inflation and increasing interest rates. Our real estate strategies have, however, generally oriented their portfolios in sectors and markets that are better insulated from inflation pressure because of opportunities for stronger relative cash flow growth. Moreover, our real estate strategies have focused on assets with shorter duration leases, which provide more opportunity to capture growth in an inflationary environment, and as a result, such investments have largely been able to offset the pressure of rising inflation and interest rates. Nonetheless, portions of our real estate portfolio have exposure to long-term leases which may be more exposed to rising inflation and interest rates. The hospitality sector, while benefitting from recovery in travel and the inflationary environment with increased revenues, has also experienced material growth in expenses, including
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wage increases. There is a risk that inflation in 2022 and beyond could be higher than generally anticipated. This, in combination with potentially more severe interest rate hikes to rein in such inflation, could lead to downward pressure on the value of our real estate portfolio and make it more difficult to realize value from our real estate investments. See "Part I. Item 1A. Risk Factors - Risks Related to Our Business - Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition" and "- A period of economic slowdown, which may be across one or more industries, sectors or geographies, has contributed and could in the future contribute to adverse operating performance for certain of our funds' investments, which would adversely affect our operating results and cash flows" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Fee Related Earnings
Fee Related Earnings were$700.4 million for the three months endedMarch 31, 2022 , an increase of$326.3 million , or 87%, compared to$374.1 million for the three months endedMarch 31, 2021 . The increase in Fee Related Earnings was primarily attributable to increases of$336.1 million in Fee Related Performance Revenues and$168.1 million in Management Fees, Net, partially offset by increases of$156.4 million in Fee Related Compensation and$21.6 million in Other Operating Expenses. Effective during the three months endedMarch 31, 2022 , BREIT performance revenues crystallized and were paid quarterly instead of annually, although still subject to the same annual hurdle. The change decreases unrealized performance allocations and unrealized performance allocations compensation, which is offset by increases in realized fee related performance revenues and realized fee related performance compensation. If quarterly crystallizations had been in effect for the three months endedMarch 31, 2021 , Real Estate segment Fee Related Earnings for the quarter endedMarch 31, 2021 would have been$455.8 million and there would have been no impact to Income Before Provision (Benefit) for Taxes. Fee Related Performance Revenues were$491.5 million for the three months endedMarch 31, 2022 , an increase of$336.1 million , compared to$155.4 million for the three months endedMarch 31, 2021 . The increase was primarily due to the crystallization of BREIT performance revenues, as noted in the paragraph above. Management Fees, Net were$619.7 million for the three months endedMarch 31, 2022 , an increase of$168.1 million , compared to$451.6 million for the three months endedMarch 31, 2021 , primarily driven by an increase in Base Management Fees. Base Management Fees increased$153.0 million primarily due to Fee-Earning Assets Under Management growth in Core+ real estate and BREDS. The annualized Base ManagementFee Rate decreased from 1.12% atMarch 31, 2021 to 1.00% atMarch 31, 2022 . The decrease was primarily due to growth in BREDS insurance vehicles, which have a lower management fee rate. Fee Related Compensation was$344.8 million for the three months endedMarch 31, 2022 , an increase of$156.4 million , compared to$188.5 million for the three months endedMarch 31, 2021 . The increase was primarily due to an increase in Fee Related Performance Revenues and Management Fees, Net, on which a portion of Fee Related Compensation is based.
Other Operating Expenses were
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Net Realizations
Net Realizations were$566.9 million for the three months endedMarch 31, 2022 , an increase of$400.2 million , or 240%, compared to$166.7 million for the three months endedMarch 31, 2021 . The increase in Net Realizations was primarily attributable to an increase of$714.3 million in Realized Performance Revenues, partially offset by an increase of$267.3 million in Realized Performance Compensation and a decrease of$46.8 million inRealized Principal Investment Income. Realized Performance Revenues were$802.9 million for the three months endedMarch 31, 2022 , an increase of$714.3 million , compared to$88.6 million for the three months endedMarch 31, 2021 . The increase was primarily due to higher Realized Performance Revenues in BREP. Realized Performance Compensation was$290.0 million for the three months endedMarch 31, 2022 , an increase of$267.3 million , compared to$22.8 million for the three months endedMarch 31, 2021 . The increase was primarily due to the increase in Realized Performance Revenues. Realized Principal Investment Income was$54.0 million for the three months endedMarch 31, 2022 , a decrease of$46.8 million , compared to$100.8 million for the three months endedMarch 31, 2021 . The decrease was primarily due to the segment's allocation of the gain recognized in connection with the Pátria Sale Transaction in the first quarter of 2021. For additional information, see "- Consolidated Results of Operations - Three Months EndedMarch 31, 2022 Compared to Three Months EndedMarch 31, 2021 - Revenues."
Fund Returns
Fund return information for our significant funds is included throughout this
discussion and analysis to facilitate an understanding of our results of
operations for the periods presented. The fund returns information reflected in
this discussion and analysis is not indicative of the financial performance of
Blackstone and is also not necessarily indicative of the future performance of
any particular fund. An investment in Blackstone is not an investment in any of
our funds. There can be no assurance that any of our funds or our other existing
and future funds will achieve similar returns.
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The following table presents the internal rates of return, except where noted, of our significant real estate funds:
Three Months Ended March 31, 2022
March 31, Inception to Date
2022 2021 Realized Total
Fund (a) Gross Net Gross Net Gross Net Gross Net
BREP VII 7% 6% 3% 2% 30% 22% 22% 15%
BREP VIII 13% 11% 4% 3% 36% 29% 25% 19%
BREP IX 18% 15% 8% 6% 100% 66% 65% 47%
BREP Europe IV (b) 3% 2% - - 28% 20% 20% 14%
BREP Europe V (b) 5% 4% 4% 3% 48% 39% 20% 15%
BREP Europe VI (b) 8% 7% 6% 5% 100% 60% 47% 32%
BREP Asia I 3% 2% 7% 6% 27% 20% 19% 13%
BREP Asia II 4% 3% 8% 8% 61% 42% 21% 13%
BREP
Co-Investment
(c) 22% 22% 4% 3% 18% 16% 18% 16%
BPP (d) 10% 9% 2% 2% n/a n/a 15% 13%
BREIT (e) n/a 5% n/a 4% n/a n/a n/a 13%
BREDS High-Yield (f) 1% - 5% 4% 15% 11% 14% 10%
BXMT (g) n/a 6% n/a 15% n/a n/a n/a 11%
The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.
n/m Not meaningful generally due to the limited time since initial investment.
n/a Not applicable.
(a) Net returns are based on the change in carrying value (realized and
unrealized) after management fees, expenses and Performance Revenues.
(b) Euro-based internal rates of return.
(c) BREP
Co-Investment
represents
co-investment
capital raised for various BREP investments. The Net IRR reflected is
calculated by aggregating each
co-investment'srealized proceeds and unrealized value, as applicable, after management
fees, expenses and Performance Revenues.
(d) BPP represents the Core+ real estate funds which invest with a more modest
risk profile and lower leverage.
(e) Reflects a per share blended return for each respective period, assuming
BREIT had a single share class, reinvestment of all dividends received
during the period, and no upfront selling commission, net of all fees and
expenses incurred by BREIT. These returns are not representative of thereturns experienced by any particular investor or share class. Inception to
date returns are presented on an annualized basis and are from
2017.
(f) BREDS High-Yield represents the flagship real estate debt drawdown funds
only. Inception to date returns are from July 1, 2009 .
(g) Reflects annualized return of a shareholder invested in BXMT as of thebeginning of each period presented, assuming reinvestment of all dividends
received during the period, and net of all fees and expenses incurred by
BXMT. Return incorporates the closing NYSE stock price as of each period
end. Inception to date returns are from
Funds With Closed Investment Periods
The Real Estate segment has eleven funds with closed investment periods as ofMarch 31, 2022 : BREP VIII, BREP VII, BREP VI, BREP V, BREP IV, BREP Europe V, BREP Europe IV, BREP Europe III, BREP Asia II, BREP Asia I and BREDS III. As ofMarch 31, 2022 , BREP VII, BREP VI, BREP V, BREP IV, BREP Europe IV and BREP Europe III were 95
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above their carried interest thresholds (i.e., the preferred return payable to its limited partners before the general partner is eligible to receive carried interest) and would have been above their carried interest thresholds even if all remaining investments were valued at zero. BREP VIII, BREP Europe V, BREP Asia II, BREP Asia I and BREDS III were above their carried interest thresholds.
Private Equity
The following table presents the results of operations for our Private Equity
segment:
Three Months Ended
March 31, 2022 vs. 2021
2022 2021 $ %
(Dollars in Thousands)
Management and Advisory Fees, Net
Base Management Fees $ 421,472 $ 377,660 $ 43,812 12%
Transaction, Advisory and Other Fees, Net 12,658 42,707 (30,049 ) -70%
Management Fee Offsets (27,142 ) (13,919 ) (13,223 ) 95%
Total Management and Advisory Fees, Net 406,988 406,448
540 -
Fee Related Performance Revenues (648 ) - (648 ) n/m
Fee Related Compensation (151,050 ) (140,597 ) (10,453 ) 7%
Other Operating Expenses (67,744 ) (51,055 ) (16,689 ) 33%
Fee Related Earnings 187,546 214,796 (27,250 ) -13%
Realized Performance Revenues 450,238 255,845 194,393 76%
Realized Performance Compensation (206,703 ) (111,209 ) (95,494 ) 86%
Realized Principal Investment Income 65,438 115,403 (49,965 ) -43%
Net Realizations 308,973 260,039 48,934 19%
Segment Distributable Earnings $ 496,519 $ 474,835 $ 21,684 5%
n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$496.5 million for the three months endedMarch 31, 2022 , an increase of$21.7 million , compared to$474.8 million for the three months endedMarch 31, 2021 . The increase in Segment Distributable Earnings was attributable to an increase in$48.9 million in Net Realizations, partially offset by a decrease of$27.3 million in Fee Related Earnings.
Segment Distributable Earnings in our Private Equity segment in the first quarter of 2022 were higher compared to the first quarter of 2021. This was primarily driven by an increase in Net Realizations, partially offset by a decrease in Fee Related Earnings.
The impact to our private equity portfolio of the high rate of inflation, supply chain issues and heightened energy prices and input costs, including wages and materials, has been mitigated by its concentration in sectors that have been less impacted by rising input costs or benefit from pricing power. In some of our companies, however, rising costs are creating profit margin pressure, with the manufacturing and industrial sectors particularly vulnerable to these trends. In addition, the expectation of significant interest rate increases in 2022, combined with geopolitical uncertainty, including as a result of the war betweenRussia andUkraine , have contributed to declines in valuation multiples in the equity markets. Such factors, particularly if not stabilized, may make it more difficult to realize value from our investments and negatively impact Segment Distributable Earnings in our Private Equity segment. In addition, in private equity, we are facing an increasingly competitive fundraising environment, as well as certain limited partners being subject to allocation constraints due to private equity's strong performance.
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In energy, oil and gas prices increased meaningfully in the first quarter of 2022, in large part due to decreased supply as a result of the ongoing war betweenRussia andUkraine and heightened global demand as the COVID-19 pandemic recedes. This short-term trend has had a positive impact on our energy portfolio. However, increased scrutiny from regulators, investors and other market participants on the climate impact of oil and gas energy investments has weakened long term market fundamentals for traditional energy. The persistence of these weakened market fundamentals could negatively impact the performance of certain investments in our energy and corporate private equity funds. See "Part I. Item 1A. Risk Factors - Risks Related to Our Business -An increase in interest rates and other changes in the financial markets could negatively impact the values of certain assets or investments and the ability of our funds and their portfolio companies to access the capital markets on attractive terms, which could adversely affect investment and realization opportunities, lead to lower-yielding investments and potentially decrease our net income," "- Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition" and "- A period of economic slowdown, which may be across one or more industries, sectors or geographies, has contributed and could in the future contribute to adverse operating performance for certain of our funds' investments, which would adversely affect our operating results and cash flows" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Fee Related Earnings
Fee Related Earnings were$187.5 million for the three months endedMarch 31, 2022 , a decrease of$27.3 million , compared to$214.8 million for the three months endedMarch 31, 2021 . The decrease in Fee Related Earnings was primarily attributable to increases of$16.7 million in Other Operating Expenses and$10.5 million in Fee Related Compensation, partially offset by an increase of$0.5 million in Management and Advisory Fees, Net. Other Operating Expenses were$67.7 million for the three months endedMarch 31, 2022 , an increase of$16.7 million , compared to$51.1 million for the three months endedMarch 31, 2021 . The increase was primarily due to technology related expenses and professional fees. Fee Related Compensation was$151.1 million for the three months endedMarch 31, 2022 , an increase of$10.5 million , compared to$140.6 million for the three months endedMarch 31, 2021 . The increase was primarily due to an increase in Base Management Fees on which a portion of Fee Related Compensation is based. Management and Advisory Fees, Net were$407.0 million for the three months endedMarch 31, 2022 , an increase of$0.5 million , compared to$406.4 million for the three months endedMarch 31, 2021 , primarily driven by an increase in Base Management Fees, partially offset by a decrease in Transaction, Advisory and Other Fees, Net. Base Management Fees increased$43.8 million primarily due to (a) the commencement ofStrategic Partners GP Solutions and Strategic Partners IX's investment periods in the second and fourth quarter of 2021, respectively, and (b) Fee-Earning Assets Under Management Growth in BIP, partially offset by (c) the end of BXG's fee holiday during the first quarter of 2021. Transaction, Advisory and Other Fees, Net decreased$30.0 million primarily due to deal activity in BXCM.
The annualized Base Management
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Net Realizations
Net Realizations were$309.0 million for the three months endedMarch 31, 2022 , an increase of$48.9 million , or 19%, compared to$260.0 million for the three months endedMarch 31, 2021 . The increase in Net Realizations was primarily attributable to an increase of$194.4 million in Realized Performance Revenues, partially offset by an increase of$95.5 million in Realized Performance Compensation and a decrease of$50.0 million inRealized Principal Investment Income. Realized Performance Revenues were$450.2 million for the three months endedMarch 31, 2022 , an increase of$194.4 million , compared to$255.8 million for the three months endedMarch 31, 2021 . The increase was primarily due to higher Realized Performance Revenues in corporate private equity andStrategic Partners , partially offset by lower Realized Performance Revenues in Tactical Opportunities. Realized Performance Compensation was$206.7 million for the three months endedMarch 31, 2022 , an increase of$95.5 million , compared to$111.2 million for the three months endedMarch 31, 2021 . The increase was primarily due to the increase in Realized Performance Revenues. Realized Principal Investment Income was$65.4 million for the three months endedMarch 31, 2022 , a decrease of$50.0 million , compared to$115.4 million for the three months endedMarch 31, 2021 . The decrease was primarily due to the segment's allocation of the gain recognized in connection with the Pátria Sale Transaction in the first quarter of 2021. For additional information, see "- Consolidated Results of Operations - Three Months EndedMarch 31, 2022 Compared to Three Months EndedMarch 31, 2021 - Revenues."
Fund Returns
Fund returns information for our significant funds is included throughout this
discussion and analysis to facilitate an understanding of our results of
operations for the periods presented. The fund returns information reflected in
this discussion and analysis is not indicative of the financial performance of
Blackstone and is also not necessarily indicative of the future performance of
any particular fund. An investment in Blackstone is not an investment in any of
our funds. There can be no assurance that any of our funds or our other existing
and future funds will achieve similar returns.
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The following table presents the internal rates of return of our significant
private equity funds:
Three Months Ended March 31, 2022
March 31, Inception to Date
2022 2021 Realized Total
Fund (a) Gross Net Gross Net Gross Net Gross Net
BCP V 10% 9% 118% 54% 10% 8% 10% 8%
BCP VI 3% 3% 10% 9% 21% 17% 17% 13%
BCP VII 1% - 13% 10% 44% 35% 27% 19%
BCP VIII 4% 3% n/m n/m 292% 125% 79% 45%
BEP I 24% 19% 32% 28% 18% 15% 15% 12%
BEP II 17% 16% 21% 21% 4% 2% 10% 7%
BEP III 10% 7% 28% 23% 165% 113% 94% 57%
BCP Asia I -9% -9% 17% 15% 150% 115% 82% 61%
BCEP I (b) 4% 4% 16% 15% 58% 52% 30% 26%
Tactical Opportunities 2% 2% 17% 14% 22% 18% 17% 13%
Tactical Opportunities
Co-Investment
and Other 1% 3% 13% 11% 20% 19% 22% 19%
BXG -6% -5% n/m n/m n/m n/m 34% 17%
Strategic Partners VI (c) 5% 5% 9% 8% n/a n/a 20% 15%
Strategic Partners VII (c) 4% 4% 12% 11% n/a n/a 27% 23% Strategic Partners Real Assets II (c)
3% 2% 2% 2% n/a n/a 19% 15% Strategic Partners VIII (c)
7% 5%
19% 15% n/a n/a 70% 57%
17% 6% n/m n/m n/a n/a 151% 67%
BIP 15% 12% 25% 19% n/a n/a 32% 25%
Clarus IV - -1% 12% 10% 30% 25% 25% 15%
BXLS V -4% -6% n/m n/m n/a n/a 16% -2%
The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.
n/m Not meaningful generally due to the limited time since initial investment.
n/a Not applicable.
SMA Separately managed account.
(a) Net returns are based on the change in carrying value (realized and
unrealized) after management fees, expenses and Performance Revenues.
(b) BCEP is a core private equity strategy which invests with a more modest
risk profile and longer hold period than traditional private equity.
(c) Realizations are treated as return of capital until fully recovered andtherefore inception to date realized returns are not applicable. Returns
are calculated from results that are reported on a three month lag from
the impact of economic and market activities in the current quarter.
Funds With Closed Investment Periods
The corporate private equity funds within the Private Equity segment have nine funds with closed investment periods: BCP IV, BCP V, BCP VI, BCP VII, BCOM, BEP I,BEP II , BCEP I and BCP Asia I. As ofMarch 31, 2022 , BCP IV was above its carried interest threshold (i.e., the preferred return payable to its limited partners before the general partner is eligible to receive carried interest) and would still be above its carried interest threshold even if all remaining investments were valued at zero. BCP V is comprised of two fund classes, the BCP V "main fund" and 99
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BCP V-AC fund. Within these fund classes, the general partner is subject to equalization such that (a) the general partner accrues carried interest when the respective carried interest for either fund class is positive and (b) the general partner realizes carried interest so long as clawback obligations, if any, for either of the respective fund classes are fully satisfied. BCP V, BCP VI, BCP VII, BCOM, BEP I, BCEP I and BCP Asia I were above their respective carried interest thresholds. We are entitled to retain previously realized carried interest up to 20% of BCOM's net gains. As a result, Performance Revenues are recognized from BCOM on current period gains and losses.BEP II was below its carried interest threshold. Hedge Fund Solutions The following table presents the results of operations for ourHedge Fund Solutions segment: Three Months Ended March 31, 2022 vs. 2021 2022 2021 $ % (Dollars in Thousands) Management Fees, Net Base Management Fees$ 145,046 $ 150,533 $ (5,487 ) -4% Transaction and Other Fees, Net 1,469 4,346 (2,877 ) -66% Management Fee Offsets (69 ) (58 ) (11 ) 19% Total Management Fees, Net 146,446 154,821 (8,375 ) -5% Fee Related Compensation (47,235 ) (38,850 ) (8,385 ) 22% Other Operating Expenses (23,184 ) (19,172 ) (4,012 ) 21% Fee Related Earnings 76,027 96,799 (20,772 ) -21% Realized Performance Revenues 28,913 31,573 (2,660 ) -8% Realized Performance Compensation (9,000 ) (6,908 ) (2,092 ) 30% Realized Principal Investment Income 14,901 35,550 (20,649 ) -58% Net Realizations 34,814 60,215 (25,401 ) -42% Segment Distributable Earnings$ 110,841 $ 157,014 $ (46,173 ) -29% n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$110.8 million for the three months endedMarch 31, 2022 , a decrease of$46.2 million , compared to$157.0 million for the three months endedMarch 31, 2021 . The decrease in Segment Distributable Earnings was attributable to decreases of$20.8 million in Fee Related Earnings and$25.4 million in Net Realizations. Segment Distributable Earnings in our Hedge Fund Solutions segment in the first quarter of 2022 were lower compared to the first quarter of 2021. This decrease was primarily driven by decreases in Fee Related Earnings and Net Realizations. Equity market volatility in theU.S. and globally, including as a result of the war betweenRussia andUkraine , adversely impacted the performance of some of the underlying managers in our Hedge Fund Solutions segment despite positive performance across a variety of strategies. Nonetheless, ourHedge Fund Solutions segment has successfully navigated the current environment with significantly less volatility than the broader markets and in line with its capital preservation focus. Segment Distributable Earnings in theHedge Fund Solutions segment would likely be negatively impacted by a significant or sustained weak market environment or decline in asset prices, including as a result of concerns over macroeconomic and geopolitical factors such as the war betweenRussia andUkraine , or by withdrawal of assets by investors as a result of liquidity needs, performance or other reasons.
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Despite volatility early in 2022, the equity market environment has in recent years generally been characterized by relatively low volatility, which could result in investors continuing to seek to reallocate capital away from traditional hedge fund strategies. Our Hedge Fund Solutions segment operates multiple business lines, manages strategies that are both long and short asset classes and generates a majority of its revenue through management fees. In that regard, the segment's revenues depend in part on our ability to successfully grow such existing diverse business lines and strategies and to identify and scale new ones to meet evolving investor appetites. In recent years we have shifted the mix of our product offerings to include more products whose performance-based fees represent a more significant proportion of the fees earned from such products than has historically been the case. See "Part I. Item 1A. Risk Factors - Risks Related to Our Business - Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition" and "- A period of economic slowdown, which may be across one or more industries, sectors or geographies, has contributed and could in the future contribute to adverse operating performance for certain of our funds' investments, which would adversely affect our operating results and cash flows" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Fee Related Earnings
Fee Related Earnings were
Fee Related Compensation was$47.2 million for the three months endedMarch 31, 2022 , an increase of$8.4 million , compared to$38.9 million for the three months endedMarch 31, 2021 . The increase was primarily due to changes in compensation accruals. Management Fees, Net were$146.4 million for the three months endedMarch 31, 2022 , a decrease of$8.4 million , compared to$154.8 million for the three months endedMarch 31, 2021 , primarily due to a decrease in Base Management Fees. Base Management Fees decreased$5.5 million primarily driven by a decrease in Fee-Earning Assets Under Management in customized solutions and commingled products.
Net Realizations
Net Realizations were$34.8 million for the three months endedMarch 31, 2022 , a decrease of$25.4 million , compared to$60.2 million for the three months endedMarch 31, 2021 . The decrease in Net Realizations was primarily attributable to a decrease of$20.6 million in Realized Principal Investment Income. Realized Principal Investment Income was$14.9 million for the three months endedMarch 31, 2022 , a decrease of$20.6 million , compared to$35.6 million for the three months endedMarch 31, 2021 . The decrease was primarily due to the segment's allocation of the gain recognized in connection with the Pátria Sale Transaction in the first quarter of 2021. For additional information, see "- Consolidated Results of Operations - Three Months EndedMarch 31, 2022 Compared to Three Months EndedMarch 31, 2021 - Revenues."
Composite Returns
Composite returns information is included throughout this discussion and
analysis to facilitate an understanding of our results of operations for the
periods presented. The composite returns information reflected in this
discussion and analysis is not indicative of the financial performance of
Blackstone and is also not necessarily indicative of the future results of any
particular fund or composite. An investment in Blackstone is not an investment
in any of our funds or composites. There can be no assurance that any of our
funds or composites or our other existing and future funds or composites will
achieve similar returns.
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The following table presents the return information of the BAAM Principal
Solutions Composite:
Three Average Annual Returns (a)
Months Ended Periods Ended
March 31, March 31, 2022
2022 2021 One Year Three Year Five Year Historical
Composite Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net BAAM Principal Solutions Composite (b) 1 % 1 % 2 % 2 %
7 % 6 % 7 % 6 % 6 % 5 % 7 % 6 %
The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.
(a) Composite returns present a summarized asset-weighted return measure to
evaluate the overall performance of the applicable class of Blackstone Funds.
(b) BAAM's Principal Solutions ("BPS") Composite covers the period from January
2000 to present, although BAAM's inception date is
Composite includes only BAAM-managed commingled and customized multi-manager
funds and accounts and does not include BAAM's individual investor solutions
(liquid alternatives), strategic capital (seeding and GP minority stakes),
strategic opportunities
(co-invests),
and advisory
(non-discretionary)platforms, except for investments by BPS funds directly into those platforms.
BAAM-managed funds in liquidation and, in the case of net returns,
non-fee-paying
assets are also excluded. The funds/accounts that comprise the BPS Composite
are not managed within a single fund or account and are managed with
different mandates. There is no guarantee that BAAM would have made the same
mix of investments in a stand-alone fund/account. The BPS Composite is not an
investible product and, as such, the performance of the BPS Composite does
not represent the performance of an actual fund or account. The historical
return is from
Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance Estimated % Above
Eligible Assets Under High Water Mark/
Management Benchmark (a)
As of March 31, As of March 31,
2022 2021 2022 2021
(Dollars in Thousands)
Hedge Fund Solutions Managed Funds (b) $ 50,175,772 $ 49,017,154 77 % 91 %
(a) Estimated % Above High Water Mark/Benchmark represents the percentage of
Invested Performance Eligible Assets Under Management that as of the dates
presented would earn performance fees when the applicable Hedge Fund
Solutions managed fund has positive investment performance relative to a
benchmark, where applicable. Incremental positive performance in the
applicable Blackstone Funds may cause additional assets to reach theirrespective High Water Mark or clear a benchmark return, thereby resulting in
an increase in Estimated % Above High Water Mark/Benchmark.
(b) For the Hedge Fund Solutions managed funds, at
incremental appreciation needed for the 23% of Invested Performance Eligible
Assets Under Management below their respective High Water Marks/Benchmarks to
reach their respective High Water Marks/Benchmarks was
increase of
the Invested Performance Eligible Assets Under Management below their
respective High Water Marks/Benchmarks as of
5% of reaching their respective High Water Mark.
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Credit & Insurance
The following table presents the results of operations for our Credit &
Insurance segment:
Three Months Ended
March 31, 2022 vs. 2021
2022 2021 $ %
(Dollars in Thousands)
Management Fees, Net
Base Management Fees $ 292,445 $ 161,911 $ 130,534 81%
Transaction and Other Fees, Net 9,397 5,568 3,829 69%
Management Fee Offsets (1,619 ) (2,125 ) 506 -24%
Total Management Fees, Net 300,223 165,354 134,869 82%
Fee Related Performance Revenues 67,196 13,776 53,420 388%
Fee Related Compensation (127,344 ) (77,171 ) (50,173 ) 65%
Other Operating Expenses (57,167 ) (46,835 ) (10,332 ) 22%
Fee Related Earnings 182,908 55,124 127,784 232%
Realized Performance Revenues 30,743 25,267 5,476 22%
Realized Performance Compensation (13,386 ) (10,045 ) (3,341 ) 33%
Realized Principal Investment Income 22,781 46,383 (23,602 ) -51%
Net Realizations 40,138 61,605 (21,467 ) -35%
Segment Distributable Earnings $ 223,046 $ 116,729 $ 106,317 91%
n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$223.0 million for the three months endedMarch 31, 2022 , an increase of$106.3 million , or 91%, compared to$116.7 million for the three months endedMarch 31, 2021 . The increase in Segment Distributable Earnings was attributable to an increase of$127.8 million in Fee Related Earnings, partially offset by a decrease of$21.5 million in Net Realizations. Segment Distributable Earnings in our Credit & Insurance segment in the first quarter of 2022 were higher compared to the first quarter of 2021, driven by an increase in Fee Related Earnings, partially offset by a decrease in Net Realizations. While public spreads widened amid market volatility and heightened uncertainty in early 2022, generally healthy economic activity and solid underlying company performance positively impacted returns in our private credit strategies. In theU.S. , while to date inflation has not been a material negative factor in our Credit & Insurance segment, certain investments in our Credit & Insurance segment would potentially be negatively impacted by a high rate of inflation if such companies are unable to mitigate margin pressures, especially if concurrent with an increase in their debt service costs. In addition, if expected significant interest rate increases in 2022 occur concurrently with a period of economic weakness or a slowdown in growth, capital deployment in our Credit & Insurance segment may be negatively impacted. Although rising interest rates have the potential to negatively impact the financial performance of certain borrowers, we believe our current debt portfolio is more insulated from increased interest rates because a substantial majority of the portfolio is floating rate and/or short duration. In the first quarter, we also benefitted from strong fundraising momentum in our perpetual capital strategies, which represent an increasing percentage of our Total Assets Under Management.
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In energy, oil and gas prices increased meaningfully in the first quarter of 2022, in large part due to decreased supply as a result of the ongoing war betweenRussia andUkraine and heightened global demand as the COVID-19 pandemic recedes. This short-term trend has had a positive impact on our energy portfolio. However, increased scrutiny from regulators, investors and other market participants on the climate impact of oil and gas energy investments has weakened long-term market fundamentals for traditional energy. The persistence of these weakened market fundamentals could negatively impact the performance of certain investments in our credit funds, although our funds actively managed exposure to upstream energy through exits of certain investments in 2021. See "Part I. Item 1A. Risk Factors - Risks Related to Our Business- Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition" and "- A period of economic slowdown, which may be across one or more industries, sectors or geographies, has contributed and could in the future contribute to adverse operating performance for certain of our funds' investments, which would adversely affect our operating results and cash flows." in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Fee Related Earnings
Fee Related Earnings were$182.9 million for the three months endedMarch 31, 2022 , an increase of$127.8 million , or 232%, compared to$55.1 million for the three months endedMarch 31, 2021 . The increase in Fee Related Earnings was primarily attributable to increases of$134.9 million in Management Fees, Net and$53.4 million in Fee Related Performance Revenues, partially offset by increases of$50.2 million in Fee Related Compensation and$10.3 million in Other Operating Expenses. Management Fees, Net were$300.2 million for the three months endedMarch 31, 2022 , an increase of$134.9 million , compared to$165.4 million for the three months endedMarch 31, 2021 , primarily driven by an increase in Base Management Fees. Base Management Fees increased$130.5 million primarily due to an increase in capital deployed in our most recently launched credit vehicles, Fee-Earning Assets Under Management growth in BXSL, and inflows in BCRED and our liquid credit business. Fee Related Performance Revenues were$67.2 million for the three months endedMarch 31, 2022 , an increase of$53.4 million , compared to$13.8 million for the three months endedMarch 31, 2021 . The increase was primarily due to performance and growth in assets in BXSL and the end of BCRED's fee holiday in the third quarter of 2021. Fee Related Compensation was$127.3 million for the three months endedMarch 31, 2022 , an increase of$50.2 million , compared to$77.2 million for the three months endedMarch 31, 2021 . The increase was primarily due to increases in Management Fees, Net and Fee Related Performance Revenues, on which a portion of Fee Related Compensation is based. Other Operating Expenses were$57.2 million for the three months endedMarch 31, 2022 , an increase of$10.3 million , compared to$46.8 million for the three months endedMarch 31, 2021 . The increase was primarily due to technology related expenses and professional fees.
Net Realizations
Net Realizations were$40.1 million for the three months endedMarch 31, 2022 , a decrease of$21.5 million , compared to$61.6 million for the three months endedMarch 31, 2021 . The decrease in Net Realizations was primarily attributable to a decrease of$23.6 million in Realized Principal Investment Income.
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Realized Principal Investment Income was$22.8 million for the three months endedMarch 31, 2022 , a decrease of$23.6 million , compared to$46.4 million for the three months endedMarch 31, 2021 . The decrease was primarily due to the segment's allocation of the gain recognized in connection with the Pátria Sale Transaction in the first quarter of 2021. For additional information, see "- Consolidated Results of Operations - Three Months EndedMarch 31, 2022 Compared to Three Months EndedMarch 31, 2021 - Revenues."
Composite Returns
Composite returns information is included throughout this discussion and
analysis to facilitate an understanding of our results of operations for the
periods presented. The composite returns information reflected in this
discussion and analysis is not indicative of the financial performance of
Blackstone and is also not necessarily indicative of the future results of any
particular fund or composite. An investment in Blackstone is not an investment
in any of our funds or composites. There can be no assurance that any of our
funds or composites or our other existing and future funds or composites will
achieve similar returns.
The following table presents the return information for the Private Credit and
Liquid Credit composites:
Three Months Ended
March 31, March 31, 2022
2022 2021 Inception to Date
Composite (a) Gross Net Gross Net Gross Net
Private Credit (b) 2 % 1 % 7 % 6 % 12 % 7 %
Liquid Credit (b) -1 % -1 % 2 % 2 % 5 % 4 %
The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.
(a) Net returns are based on the change in carrying value (realized and
unrealized) after management fees, expenses and Performance Allocations, net
of tax advances.
(b) Private Credit returns include mezzanine lending funds and middle market
direct lending funds (including BXSL and BCRED), stressed/distressed
strategies (including stressed/distressed funds and credit alpha strategies)
and energy strategies. Liquid Credit returns include CLOs, closed-ended
funds, open-ended funds and separately managed accounts. Only
fee-earning
funds exceeding $100 million of fair value at the beginning of each
respective
quarter-endare included. Funds in liquidation, funds investing primarily in investment
grade corporate credit and asset-based finance are excluded. Blackstone Funds
that were contributed to BXC as part of Blackstone's acquisition of BXC in
March 2008 and the
pre-acquisitiondate performance for funds and vehicles acquired by BXC subsequent to March
2008, are also excluded. Private Credit and Liquid Credit's inception to date
returns are from
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Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance Estimated % Above
Eligible Assets Under High Water Mark/
Management Hurdle (a)
As of March 31, As of March 31,
2022 2021 2022 2021
(Dollars in Thousands)
Credit & Insurance (b) $ 71,336,513 $ 34,794,664 93 % 66 %
(a) Estimated % Above High Water Mark/Hurdle represents the percentage of
Invested Performance Eligible Assets Under Management that as of the dates
presented would earn performance fees when the applicable Credit & Insurance
managed fund has positive investment performance relative to a hurdle, where
applicable. Incremental positive performance in the applicable Blackstone
Funds may cause additional assets to reach their respective High Water Mark
or clear a hurdle return, thereby resulting in an increase in Estimated %
Above High Water Mark/Hurdle.
(b) For the Credit & Insurance managed funds, at
appreciation needed for the 7% of Invested Performance Eligible Assets Under
Management below their respective High Water Marks/Hurdles to reach their
respective High Water Marks/Hurdles was
million, compared to
Performance Eligible Assets Under Management below their respective High
Water Marks/Hurdles as of
their respective High Water Mark.
Non-GAAP
Financial Measures
These
non-GAAP
financial measures are presented without the consolidation of any Blackstone
Funds that are consolidated into the Condensed Consolidated Financial
Statements. Consequently, all
non-GAAP
financial measures exclude the assets, liabilities and operating results related
to the Blackstone Funds. See "- Key Financial Measures and Indicators" for our
definitions of Distributable Earnings, Segment Distributable Earnings, Fee
Related Earnings and Adjusted EBITDA.
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The following table is a reconciliation of Net Income Attributable to
Three Months Ended
March 31,
2022 2021
(Dollars in Thousands)
Net Income Attributable to Blackstone Inc. $ 1,216,874 $ 1,747,872
Net Income Attributable to
Non-Controlling
Interests in Blackstone Holdings 1,059,313 1,235,784
Net Income Attributable to Non-Controlling Interests in Consolidated Entities 216,375
386,850
Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities 5,052 629 Net Income 2,497,614 3,371,135 Provision (Benefit) for Taxes 483,281 (447 ) Net Income Before Provision (Benefit) for Taxes 2,980,895
3,370,688
Transaction-Related Charges (a) 25,333
27,888
Amortization of Intangibles (b) 17,044
17,124
Impact of Consolidation (c) (221,427 ) (387,479 ) Unrealized Performance Revenues (d) (1,293,050 ) (2,464,497 ) Unrealized Performance Allocations Compensation (e) 472,284
1,049,969
Unrealized Principal Investment Income (f) (26,758 ) (423,934 ) Other Revenues (g) (72,819 ) (60,273 ) Equity-Based Compensation (h) 201,545
144,272
Administrative Fee Adjustment (i) 2,485 2,708 Taxes and Related Payables (j) (147,652 )
(84,222 )
Distributable Earnings 1,937,880
1,192,244
Taxes and Related Payables (j) 147,652
84,222
Net Interest and Dividend Loss (k) 12,117
12,928
Total Segment Distributable Earnings 2,097,649
1,289,394
Realized Performance Revenues (l) (1,312,810 ) (401,323 ) Realized Performance Compensation (m) 519,120
150,924
Realized Principal Investment Income (n) (157,095 ) (298,156 ) Fee Related Earnings$ 1,146,864 $ 740,839 Adjusted EBITDA Reconciliation Distributable Earnings$ 1,937,880 $ 1,192,244 Interest Expense (o) 66,602
44,340
Taxes and Related Payables (j) 147,652
84,222
Depreciation and Amortization (p) 14,316 12,293 Adjusted EBITDA$ 2,166,450 $ 1,333,099
(a) This adjustment removes Transaction-Related Charges, which are excluded from
Blackstone's segment presentation. Transaction-Related Charges arise from
corporate actions including acquisitions, divestitures, and Blackstone's
initial public offering. They consist primarily of equity-based compensation
charges, gains and losses on contingent consideration arrangements, changes
in the balance of the Tax Receivable Agreement resulting from a change in tax
law or similar event, transaction costs and any gains or losses associated
with these corporate actions.
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(b) This adjustment removes the amortization of transaction-related intangibles,
which are excluded from Blackstone's segment presentation.
(c) This adjustment reverses the effect of consolidating Blackstone Funds, which
are excluded from Blackstone's segment presentation. This adjustment includes
the elimination of Blackstone's interest in these funds and the removal of
amounts associated with the ownership of Blackstone consolidated operating
partnerships held by
non-controlling
interests.
(d) This adjustment removes Unrealized Performance Allocations.
(e) This adjustment removes Unrealized Performance Allocations Compensation.
(f) This adjustment removes Unrealized Principal Investment Income (Loss) on a
segment basis. The Segment Adjustment represents (1) the add back of
Principal Investment Income, including general partner income, earned from
consolidated Blackstone Funds which have been eliminated in consolidation,
and (2) the removal of amounts associated with the ownership of Blackstone
consolidated operating partnerships held by
non-controlling
interests.
Three Months Ended
March 31,
2022 2021
(Dollars in Thousands)
GAAP Unrealized Principal Investment Income
(47,203 ) (215,381 )
Unrealized Principal Investment Income
(g) This adjustment removes Other Revenues on a segment basis. The Segment
Adjustment represents (1) the add back of Other Revenues earned from
consolidated Blackstone Funds which have been eliminated in consolidation,
and (2) the removal of certain Transaction-Related Charges.
Three Months Ended
March 31,
2022 2021
(Dollars in Thousands)
GAAP Other Revenue $ 72,869 $ 60,304
Segment Adjustment (50 ) (31 )
Other Revenues $ 72,819 $ 60,273 (h) This adjustment removes Equity-Based Compensation on a segment basis.
(i) This adjustment adds an amount equal to an administrative fee collected on a
quarterly basis from certain holders of
Units. The administrative fee is accounted for as a capital contribution
under GAAP, but is reflected as a reduction of Other Operating Expenses in
Blackstone's segment presentation.
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(j) Taxes represent the total GAAP tax provision adjusted to include only the
current tax provision (benefit) calculated on Income Before Provision
(Benefit) for Taxes and adjusted to exclude the tax impact of any
divestitures. Related Payables represent
tax-relatedpayables including the amount payable under the Tax Receivable Agreement. See
"- Key Financial Measures and Indicators - Distributable Earnings" for the
full definition of Taxes and Related Payables.
Three Months Ended
March 31,
2022 2021
(Dollars in Thousands)
Taxes $ 124,645 $ 69,609
Related Payables 23,007 14,613
Taxes and Related Payables
(k) This adjustment removes Interest and Dividend Revenue less Interest Expense
on a segment basis. The Segment Adjustment represents the removal of interest
expense associated with the Tax Receivable Agreement.
Three Months Ended
March 31,
2022 2021
(Dollars in Thousands)
GAAP Interest and Dividend Revenue
GAAP Interest Expense 66,747 44,983 Segment Adjustment (145 ) (643 ) Interest Expense 66,602 44,340
Net Interest and Dividend Loss
(l) This adjustment removes the total segment amount of Realized Performance
Revenues.
(m) This adjustment removes the total segment amount of Realized Performance
Compensation.
(n) This adjustment removes the total segment amount of Realized Principal
Investment Income.
(o) This adjustment adds back Interest Expense on a segment basis, excluding
interest expense related to the Tax Receivable Agreement.
(p) This adjustment adds back Depreciation and Amortization on a segment basis.
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The following tables are a reconciliation of Total GAAP Investments to Net Accrued Performance Revenues. Total GAAP Investments and Net Accrued Performance Revenues consist of the following:
March 31,
2022 2021
(Dollars in Thousands)
Investments of Consolidated Blackstone Funds $ 2,045,156 $ 1,459,804
Equity Method Investments
Partnership Investments 5,858,926 4,676,341
Accrued Performance Allocations 17,661,244
9,367,251
Corporate Treasury Investments 916,510 1,726,285 Other Investments 3,586,638 713,628 Total GAAP Investments$ 30,068,474 $ 17,943,309 Accrued Performance Allocations - GAAP$ 17,661,244 $ 9,367,251 Impact of Consolidation (a) 1 1 Due from Affiliates - GAAP (b) 112,194
56,274
Less: Net Realized Performance Revenues (c) (743,772 ) (269,426 ) Less: Accrued Performance Compensation - GAAP (d) (7,483,337 )
(3,952,253 )
Net Accrued Performance Revenues$ 9,546,330 $ 5,201,847
(a) This adjustment adds back investments in consolidated Blackstone Funds which
have been eliminated in consolidation.
(b) Represents GAAP accrued performance revenue recorded within Due from
Affiliates.
(c) Represents Performance Revenues realized but not yet distributed as of the
reporting date and are included in Distributable Earnings in the period they
are realized.
(d) Represents GAAP accrued performance compensation associated with Accrued
Performance Allocations and is recorded within Accrued Compensation and
Benefits and Due to Affiliates.
Liquidity and Capital Resources
General
Blackstone's business model derives revenue primarily from third party assets
under management. Blackstone is not a capital or balance sheet intensive
business and targets operating expense levels such that total management and
advisory fees exceed total operating expenses each period. As a result, we
require limited capital resources to support the working capital or operating
needs of our businesses. We draw primarily on the long-term committed capital of
our limited partner investors to fund the investment requirements of the
Blackstone Funds and use our own realizations and cash flows to invest in growth
initiatives, make commitments to our own funds, where our minimum general
partner commitments are generally less than 5% of the limited partner
commitments of a fund, and pay dividends to shareholders.
Fluctuations in our statement of financial condition result primarily from
activities of the Blackstone Funds that are consolidated as well as business
transactions, such as the issuance of senior notes described below. The majority
economic ownership interests of the Blackstone Funds are reflected as Redeemable
Non-Controlling
Interests in Consolidated Entities and
Non-Controlling
Interests in Consolidated Entities in the Condensed Consolidated Financial
Statements. The consolidation of these Blackstone Funds has no net effect on
Blackstone's Net Income or Partners' Capital. Additionally, fluctuations in our
statement of financial condition also include appreciation or depreciation in
Blackstone investments in the Blackstone Funds, additional investments and
redemptions of such interests in the Blackstone Funds and the collection of
receivables related to management and advisory fees.
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Total Assets were$43.3 billion as ofMarch 31, 2022 , an increase of$2.1 billion , fromDecember 31, 2021 . The increase in Total Assets was principally due to an increase of$2.1 billion in total assets attributable to consolidated operating partnerships. The increase in total assets attributable to consolidated operating partnerships was primarily due to increases of$1.7 billion in Cash and Cash Equivalents and$1.4 billion in Investments, partially offset by a decrease of$665.4 million in Due from Affiliates. The increase in Cash and Cash Equivalents was primarily due to the issuance of$1.5 billion of notes onJanuary 10, 2022 . The increase in Investments was primarily due to appreciation in the value of Blackstone's interests in its real estate investments. The decrease in Due from Affiliates was primarily due to a decrease in the receivable due from non-consolidated entities and portfolio companies. The other net variances of the assets attributable to the consolidated operating partnerships were relatively unchanged. Total Liabilities were$21.1 billion as ofMarch 31, 2022 , an increase of$1.6 billion , fromDecember 31, 2021 . The increase in Total Liabilities was principally due to an increase of$1.6 billion in total liabilities attributable to consolidated operating partnerships. The increase in total liabilities attributable to the consolidated operating partnerships was primarily due to increases of$1.2 billion in Loans Payable and$235.7 million in Accrued Compensation and Benefits. The increase in Loans Payable was primarily due to the issuance of$1.5 billion of notes onJanuary 10, 2022 . The increase in Accrued Compensation and Benefits was primarily due to an increase in performance compensation. The other net variances of the liabilities attributable to the consolidated operating partnerships were relatively unchanged.
We have multiple sources of liquidity to meet our capital needs as described in "- Sources and Uses of Liquidity."
Sources and Uses of Liquidity
We have multiple sources of liquidity to meet our capital needs, including annual cash flows, accumulated earnings in our businesses, the proceeds from our issuances of senior notes, liquid investments we hold on our balance sheet and access to our$2.25 billion committed revolving credit facility. As ofMarch 31, 2022 , Blackstone had$3.9 billion in Cash and Cash Equivalents,$916.5 million invested in Corporate Treasury Investments and$3.6 billion in Other Investments (which included$1.1 billion of liquid investments), against$9.1 billion in borrowings from our bond issuances, and no borrowings outstanding under our revolving credit facility. OnJanuary 10, 2022 , Blackstone issued$500 million aggregate principal amount of 2.550% senior notes dueMarch 30, 2032 and$1.0 billion aggregate principal amount of 3.200% senior notes dueJanuary 30, 2052 . For additional information on Blackstone's senior notes see Note 12. "Borrowings" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements" of this filing and "- Notable Transactions." In addition to the cash we received from our notes offerings and availability under our revolving credit facility, we expect to receive (a) cash generated from operating activities, (b) Performance Allocations and Incentive Fee realizations, and (c) realizations on the fund investments that we make. The amounts received from these three sources in particular may vary substantially from year to year and quarter to quarter depending on the frequency and size of realization events or net returns experienced by our investment funds. Our available capital could be adversely affected if there are prolonged periods of few substantial realizations from our investment funds accompanied by substantial capital calls for new investments from those investment funds. Therefore, Blackstone's commitments to our funds are taken into consideration when managing our overall liquidity and cash position.
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We expect that our primary liquidity needs will be cash to (a) provide capital to facilitate the growth of our existing businesses, which principally includes funding our general partner and co-investment commitments to our funds, (b) provide capital for business expansion, (c) pay operating expenses, including cash compensation to our employees and other obligations as they arise, (d) fund modest capital expenditures, (e) repay borrowings and related interest costs, (f) pay income taxes, (g) repurchase shares of our common stock and Blackstone Holdings Partnership Units pursuant to our repurchase program and (h) pay dividends to our shareholders and distributions to the holders of Blackstone Holdings Partnership Units. For a tabular presentation of Blackstone's contractual obligations and the expected timing of such see "- Contractual Obligations."
Capital Commitments
Our own capital commitments to our funds, the funds we invest in and our
investment strategies as of
Senior Managing Directors
Blackstone and and Certain Other
General Partner Professionals (a)
Original Remaining Original Remaining
Fund Commitment Commitment Commitment Commitment
(Dollars in Thousands)
Real Estate
BREP VI $ 750,000 $ 36,809 $ 150,000 $ 12,270
BREP VII 300,000 33,394 100,000 11,131
BREP VIII 300,000 42,743 100,000 14,248
BREP IX 300,000 132,894 100,000 44,298
BREP Europe III 100,000 11,989 35,000 3,996
BREP Europe IV 130,000 24,074 43,333 8,025
BREP Europe V 150,000 26,480 43,333 7,650
BREP Europe VI 130,000 74,740 43,333 24,913
BREP Asia I 50,000 10,141 16,667 3,380
BREP Asia II 70,707 19,771 23,569 6,590
BREP Asia III 74,185 74,185 24,728 24,728
BREDS II 50,000 623 16,667 208
BREDS III 50,000 13,499 16,667 4,500
BREDS IV 50,000 26,474 - -
BPP 181,527 31,038 - -
Other (b) 25,747 7,022 - -
Total Real Estate 2,712,166 565,876 713,297 165,937
continued...
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Senior Managing Directors
Blackstone and and Certain Other
General Partner Professionals (a)
Original Remaining Original Remaining
Fund Commitment Commitment Commitment Commitment
(Dollars in Thousands)
Private Equity
BCP V $ 629,356 $ 30,642 $ - $ -
BCP VI 719,718 82,829 250,000 28,771
BCP VII 500,000 42,579 225,000 19,161
BCP VIII 500,000 334,207 225,000 150,393
BEP I 50,000 4,728 - -
BEP II 80,000 14,620 26,667 4,873
BEP III 80,000 58,553 26,667 19,518
BCEP I 120,000 27,202 18,992 4,305
BCEP II 160,000 132,048 32,640 26,938
BCP Asia I 40,000 13,132 13,333 4,377
BCP Asia II 100,000 100,000 33,333 33,333
Tactical Opportunities 450,487 206,993 150,162 68,998
Strategic Partners 918,542 547,467 148,447 89,043
BIP 244,605 87,355 - -
BXLS 142,057 103,225 37,353 31,543
BXG 81,006 31,231 26,667 10,227
Other (b) 290,209 32,563 - -
Total Private Equity 5,105,980 1,849,374 1,214,261 491,480
Hedge Fund Solutions
Strategic Alliance I 50,000 2,033 - -
Strategic Alliance II 50,000 1,482 - -
Strategic Alliance III 22,000 6,376 - -
Strategic Alliance IV 15,000 15,000 - -
Strategic Holdings I 154,610 33,378 - -
Strategic Holdings II 50,000 30,992 - -
Horizon 100,000 44,358 - -
Other (b) 17,206 8,280 - -
Total Hedge Fund Solutions 458,816 141,899 - -
continued...
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Senior Managing Directors
Blackstone and and Certain Other
General Partner Professionals (a)
Original Remaining Original Remaining
Fund Commitment Commitment Commitment Commitment
(Dollars in Thousands)
Credit & Insurance
Mezzanine / Opportunistic II $ 120,000 $ 29,470 $ 110,101 $ 27,039
Mezzanine / Opportunistic III 130,783 40,489 31,546 9,766
Mezzanine / Opportunistic IV 122,000 104,316 33,640 28,764
European Senior Debt I 63,000 16,508 56,882 14,905
European Senior Debt II 92,714 61,700 25,262 16,812
Stressed / Distressed I 50,000 4,869 27,666 2,694
Stressed / Distressed II 125,000 51,695 119,878 49,576
Stressed / Distressed III 151,000 110,417 32,489 23,757
Energy I 80,000 37,630 75,445 35,487
Energy II 150,000 113,961 26,469 20,110
Credit Alpha Fund 52,102 19,752 50,670 19,209
Credit Alpha Fund II 25,500 14,119 6,289 3,482
Other (b) 146,792 52,512 20,262 3,911
Total Credit & Insurance 1,308,891 657,438 616,599 255,512
Other
Treasury (c) 356,530 231,386 - -
$ 9,942,383 $ 3,445,973 $ 2,544,157 $ 912,929 (a) For some of the general partner commitments shown in the table above, we
require our senior managing directors and certain other professionals to fund
a portion of the commitment even though the ultimate obligation to fund the
aggregate commitment is ours pursuant to the governing agreements of the
respective funds. The amounts of the aggregate applicable general partner
original and remaining commitment are shown in the table above. In addition,
certain senior managing directors and other professionals may be required to
fund a de minimis amount of the commitment in certain carry funds. We expect
our commitments to be drawn down over time and to be funded by available cash
and cash generated from operations and realizations. Taking into account
prevailing market conditions and both the liquidity and cash or liquid
investment balances, we believe that the sources of liquidity described above
will be more than sufficient to fund our working capital requirements.
(b) Represents capital commitments to a number of other funds in each respective
segment.
(c) Represents loan origination commitments, revolver commitments and capital
market commitments.
For a tabular presentation of the timing of Blackstone's remaining capital commitments to our funds, the funds we invest in and our investment strategies see "- Contractual Obligations."
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Borrowings
As of
Aggregate
Principal
Amount
(Dollars/Euros
Senior Notes (a) in Thousands)
4.750%, Due 2/15/2023 $ 400,000
2.000%, Due 5/19/2025 € 300,000
1.000%, Due 10/5/2026 € 600,000
3.150%, Due 10/2/2027 $ 300,000
1.625%, Due 8/5/2028 $ 650,000
1.500%, Due 4/10/2029 € 600,000
2.500%, Due 1/10/2030 $ 500,000
1.600%, Due 3/30/2031 $ 500,000
2.000%, Due 1/30/2032 $ 800,000
2.550%, Due 3/30/2032 $ 500,000
6.250%, Due 8/15/2042 $ 250,000
5.000%, Due 6/15/2044 $ 500,000
4.450%, Due 7/15/2045 $ 350,000
4.000%, Due 10/2/2047 $ 300,000
3.500%, Due 9/10/2049 $ 400,000
2.800%, Due 9/30/2050 $ 400,000
2.850%, Due 8/5/2051 $ 550,000
3.200%, Due 1/30/2052 $ 1,000,000
$ 9,060,050 (a) The Notes are unsecured and unsubordinated obligations of the Issuer and are
fully and unconditionally guaranteed, jointly and severally, by Blackstone
Inc. and each of the Blackstone Holdings Partnerships. The Notes contain
customary covenants and financial restrictions that, among other things,
limit the Issuer and the guarantors' ability, subject to certain exceptions,
to incur indebtedness secured by liens on voting stock or profit
participating equity interests of their subsidiaries or merge, consolidate or
sell, transfer or lease assets. The Notes also contain customary events of
default. All or a portion of the Notes may be redeemed at our option, inwhole or in part, at any time and from time to time, prior to their stated
maturity, at the make-whole redemption price set forth in the Notes. If a
change of control repurchase event occurs, the Notes are subject to
repurchase at the repurchase price as set forth in the Notes.
Blackstone, through its indirect subsidiary Blackstone Holdings Finance
Co. L.L.C. , has a $2.25 billion unsecured revolving credit facility (the "Credit
Facility") with Citibank, N.A ., as administrative agent with a maturity date of
November 24, 2025 . Borrowings may also be made in U.K. sterling, euros, Swiss
francs, Japanese yen or Canadian dollars, in each case subject to certain
sub-limits.
The Credit Facility contains customary representations, covenants and events of
default. Financial covenants consist of a maximum net leverage ratio and a
requirement to keep a minimum amount of
fee-earning
assets under management, each tested quarterly.
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For a tabular presentation of the payment timing of principal and interest due on Blackstone's issued notes and revolving credit facility see "- Contractual Obligations." Contractual Obligations
The following table sets forth information relating to our contractual
obligations as of
April 1, 2022 to
Contractual Obligations December 31, 2022 2023-2024 2025-2026 Thereafter Total
(Dollars in Thousands)
Operating Lease Obligations (a) $ 100,676 $ 293,563 $ 301,531 $ 328,067 $ 1,023,837
Purchase Obligations 88,139 66,803 8,219 - 163,161Blackstone Issued Notes and Revolving Credit Facility (b)
- 400,000 996,030 7,664,020 9,060,050
Interest on Blackstone Issued Notes and Revolving Credit Facility (c) 164,021 479,398 462,091 3,332,431
4,437,941
Blackstone Funds Capital Commitments to Investee Funds (d) 261,002 - - - 261,002 Due to Certain Non-Controlling Interest Holders in Connection with Tax Receivable Agreements (e) - 155,432 212,705 1,172,971
1,541,108
Unrecognized Tax Benefits, Including Interest and Penalties (f) - - - -
-
Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (g)
3,445,973 - - - 3,445,973
Consolidated Contractual Obligations 4,059,811 1,395,196 1,980,576 12,497,489
19,933,072
Blackstone Funds Capital Commitments to Investee Funds (d) (261,002 ) - - -
(261,002 )
Blackstone Operating Entities Contractual Obligations
$ 1,395,196 $ 1,980,576 $ 12,497,489 $ 19,672,070
(a) We lease our primary office space and certain office equipment under
agreements that expire through 2032. Occupancy lease agreements, in addition
to contractual rent payments, generally include additional payments for
certain costs incurred by the landlord, such as building expenses, and
utilities. To the extent these are fixed or determinable they are included in
the table above. The table above includes operating leases that are
recognized as Operating Lease Liabilities, short-term leases that are not
recorded as Operating Lease Liabilities and leases that have been signed but
not yet commenced which are not recorded as Operating Lease Liabilities. The
amounts in this table are presented net of contractual sublease commitments
and tenant improvement allowances.
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(b) Represents the principal amount due on the senior notes we issued assuming no
pre-payments
are made and the notes are held until their final maturity. As of
2022, we had no outstanding borrowings under our revolver.
(c) Represents interest to be paid over the maturity of our senior notes which
has been calculated assuming no
pre-payments
are made and debt is held until its final maturity date. These amounts
include commitment fees for unutilized borrowings under our revolver.
(d) These obligations represent commitments of the consolidated Blackstone Funds
to make capital contributions to investee funds and portfolio companies.
These amounts are generally due on demand and are therefore presented in the
less than one year category.
(e) Represents obligations by Blackstone's corporate subsidiary to make payments
under the Tax Receivable Agreements to certain
non-controlling
interest holders for the tax savings realized from the taxable purchases of
their interests in connection with the reorganization at the time of
Blackstone's IPO in 2007 and subsequent purchases. The obligation represents
the amount of the payments currently expected to be made, which are dependent
on the tax savings actually realized as determined annually without
discounting for the timing of the payments. As required by GAAP, the amount
of the obligation included in the Condensed Consolidated Financial Statements
and shown in Note 16. "Related Party Transactions" (see "Part I. Item 1.
Financial Statements") differs to reflect the net present value of the
payments due to certain
non-controlling
interest holders.
(f) As of
Interest and Penalties. In addition, Blackstone is not able to make a
reasonably reliable estimate of the timing of payments in individual years in
connection with gross unrecognized benefits of
contractual obligations table.
(g) These obligations represent commitments by us to provide general partner
capital funding to the Blackstone Funds, limited partner capital funding to
other funds and Blackstone principal investment commitments. These amounts
are generally due on demand and are therefore presented in the less than one
year category; however, a substantial amount of the capital commitments are
expected to be called over the next three years. We expect to continue to
make these general partner capital commitments as we raise additional amounts
for our investment funds over time.
Guarantees
Blackstone and certain of its consolidated funds provide financial guarantees. The amounts and nature of these guarantees are described in Note 17. "Commitments and Contingencies - Contingencies - Guarantees" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements" of this filing.
Indemnifications
In many of its service contracts, Blackstone agrees to indemnify the third party service provider under certain circumstances. The terms of the indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined and has not been included in the above contractual obligations table or recorded in our Condensed Consolidated Financial Statements as ofMarch 31, 2022 . Clawback Obligations Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The amounts and nature of Blackstone's clawback obligations are described in Note 17. "Commitments and Contingencies - Contingencies - Contingent Obligations (Clawback)" in the "Notes to Condensed Consolidated Financial Statements" in "Part I. Item 1. Financial Statements" of this filing.
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Share Repurchase Program
OnDecember 7, 2021 , Blackstone's board of directors authorized the repurchase of up to$2.0 billion of common stock and Blackstone Holdings Partnership Units. Under the repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.
During the three months ended
Dividends
Our intention is to pay to holders of common stock a quarterly dividend representing approximately 85% ofBlackstone Inc.'s share of Distributable Earnings, subject to adjustment by amounts determined by our board of directors to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our business and funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future cash requirements such as tax-related payments, clawback obligations and dividends to shareholders for any ensuing quarter. The dividend amount could also be adjusted upward in any one quarter.
For Blackstone's definition of Distributable Earnings, see "- Key Financial Measures and Indicators."
All of the foregoing is subject to the qualification that the declaration and payment of any dividends are at the sole discretion of our board of directors, and our board of directors may change our dividend policy at any time, including, without limitation, to reduce such quarterly dividends or even to eliminate such dividends entirely. Because the publicly traded entity and/or its wholly owned subsidiaries must pay taxes and make payments under the tax receivable agreements, the amounts ultimately paid as dividends by Blackstone to common shareholders in respect of each fiscal year are generally expected to be less, on a per share or per unit basis, than the amounts distributed by the Blackstone Holdings Partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships in respect of their Blackstone Holdings Partnership Units. Following Blackstone's conversion from a limited partnership to a corporation, we expect to pay more corporate income taxes than we would have as a limited partnership, which will increase this difference between the per share dividend and per unit distribution amounts.
Dividends are treated as qualified dividends to the extent of Blackstone's current and accumulated earnings and profits, with any excess dividends treated as a return of capital to the extent of the shareholder's basis.
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The following graph shows fiscal quarterly and annual per common shareholder dividends for 2022 and 2021. Dividends are declared and paid in the quarter subsequent to the quarter in which they are earned.
[[Image Removed]]
With respect to the first quarter of fiscal year 2022, we paid to shareholders
of our common stock a dividend of $1.32 per share. With respect to fiscal year
2021, we paid shareholders aggregate dividends of $4.06 per share.
Leverage
We may under certain circumstances use leverage opportunistically and over time
to create the most efficient capital structure for Blackstone and our
shareholders. In addition to the borrowings from our notes issuances and our
revolving credit facility, we may use reverse repurchase agreements, repurchase
agreements and securities sold, not yet purchased. Reverse repurchase agreements
are entered into primarily to take advantage of opportunistic yields otherwise
absent in the overnight markets and also to use the collateral received to cover
securities sold, not yet purchased. Repurchase agreements are entered into
primarily to opportunistically yield higher spreads on purchased securities. The
balances held in these financial instruments fluctuate based on Blackstone's
liquidity needs, market conditions and investment risk profiles.
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The following table presents information regarding these financial instruments in our Condensed Consolidated Statements of Financial Condition:
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