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.
In this report, references to "Blackstone," the "Company," "we," "us" or "our"
refer to
Our Business
Blackstone is one of the world's leading investment firms. 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 income 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 based on achieving certain investment returns (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 the performance of the underlying investments 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 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. 67
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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. 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 theU.S. andEurope . 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
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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. 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.
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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. 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 byHarvest 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 inNorth America . Business Environment
Blackstone's businesses are materially affected by conditions in the financial
markets and economic conditions in the
In the third quarter of 2022, global markets continued to experience significant volatility, driven by concerns over persistent inflation, rising interest rates, slowing economic growth and geopolitical uncertainty. Inflation persisted at multi-decade highs in many major economies around the world, prompting central banks to pursue monetary policy tightening actions that are likely to continue to create headwinds to economic growth. In theU.S. , annual inflation was 8.2% in September, down from 9.1% in June but still well above theFederal Reserve's long-run target of 2%. InEurozone economies, inflation increased to a record 9.9% in September, up from 9.1% in August. TheU.S. Federal Reserve raised the federal funds target range to 3.00-3.25% in the third quarter of 2022 and further to 3.75-4.00% in November, while theEuropean Central Bank raised its deposit facility rate to 0.75%. Both central banks reiterated expectations for further increases in the coming months. Nonetheless, several key economic indicators in theU.S. , including employment, wage growth and consumer health measures, have demonstrated resilience. TheU.S. unemployment rate declined to the pre-pandemic level of 3.5% as ofSeptember 2022 , signaling a strong labor market. Wages increased 5.0% year-over-year in September and exceeded the 15-year average of 2.9%. Retail sales increased 8.2% year-over-year in September, driven in part by higher prices. In manufacturing, however, theInstitute for Supply Management Purchasing Managers' Index decreased to 50.9 in the third quarter from 61.1 inSeptember 2021 , signaling a slowing expansion in theU.S. manufacturing sector. While theU.S. economy has demonstrated resilience, global economies are facing less robust fundamentals. InChina , 2022 economic growth is expected to be the second lowest since 1976. In theEurozone andU.K. , many economists are predicting modest economic contraction in 2023.
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For the first nine months of 2022, the S&P 500 declined 24% - with declines in every sector except energy. The telecom sector experienced the largest decline, down 39% year to date. Energy was the best performing sector, up 34% year to date. The price of West Texas Intermediate crude oil decreased 25% from the second quarter to$79 per barrel, but has since climbed 9% as ofOctober 31, 2022 following production cuts amid tight supply. Volatility increased in the third quarter, with the CBOE Volatility Index rising 10% from the second quarter. Capital markets activity experienced a dramatic slowdown.U.S. initial public offering volumes decreased 95% compared to the third quarter of 2021 whileU.S. announced merger and acquisition deal volumes declined 62% over the same period.
The
ten-year
Treasury yield increased 82 basis points to 3.83% during the third quarter and has since climbed to 4.05% as ofOctober 31, 2022 . Three month LIBOR increased 147 basis points to 3.75% during the third quarter and has since increased to 4.46% as ofOctober 31, 2022 . In credit markets, the S&P leveraged loan index increased by 1.4% and the Credit Suisse high yield bond index declined by 0.4% in the third quarter. High yield spreads contracted by 45 basis points sequentially, while issuance decreased 81% compared to the third quarter of 2021. While overall headline economic measures remained generally resilient in the third quarter, pervasive inflation is likely to lead to continued central bank tightening. The prospect of slower economic growth, coupled with continued uncertainty regarding the potential for a recession in theU.S. , could contribute to prolonged market volatility.
Notable Transactions
OnNovember 3, 2022 , Blackstone issued$600 million aggregate principal amount of 5.900% senior notes dueNovember 3, 2027 (the "2027 Notes") and$900 million aggregate principal amount of 6.200% senior notes dueApril 22, 2033 (the "2033 Notes"). Blackstone intends to use the net proceeds from the sale of the 2027 Notes and the 2033 Notes for general corporate purposes. For additional information 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. 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." 71
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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.
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.
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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 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 endedSeptember 30, 2022 the increase to Realized Performance Compensation of$15.0 million was less than the decrease to Fee Related Compensation of$20.0 million , while in the nine months endedSeptember 30, 2022 the increase to Realized Performance Compensation of$80.0 million was greater than the decrease to Fee Related Compensation of$60.0 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 endedSeptember 30, 2022 and a negative impact to Income Before Provision (Benefit) for Taxes and Distributable Earnings in the nine months endedSeptember 30, 2022 . These changes are not expected to impact Income Before Provision (Benefit) for Taxes and Distributable Earnings for the full year. In the three months and nine months endedSeptember 30, 2021 Realized Performance Compensation was increased, and Fee Related Compensation was decreased, by$5.0 million and$20.0 million , respectively. This reduced Net Realizations, increased Fee Related Earnings, was neutral to Income Before Provision (Benefit) for Taxes and had no impact to Distributable Earnings for such period.
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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.
Recent Tax Developments
The Presidential administration and theU.S. Congress may introduce new or enforce existing policies and regulations that may create uncertainty for our business and investment strategies and could have an adverse impact on us. For example, a top legislative priority of the Presidential administration is significant changes toU.S. tax regulations. The administration has recently signed into law the Inflation Reduction Act which, among other things, imposes a minimum "book" tax on certain large corporations and creates a new excise tax on net stock repurchases made by certain publicly traded corporations afterDecember 31, 2022 . While the application of this new law is uncertain and we continue to evaluate its potential impact, these changes could materially change the amount and/or timing of taxBlackstone Inc. may be required to pay. For further discussion of potential consequences of changes in tax regulations, please see "Part I. Item 1A. Risk Factors - Risks Related to Our Business - Changes inU.S. and foreign taxation of businesses and other tax laws, regulations or treaties or an adverse interpretation of these items by tax authorities could adversely affect us, including by adversely impacting our effective tax rate and tax liability" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
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 and nine months endedSeptember 30, 2022 and 2021: Three Months Ended Nine Months Ended September 30, 2022 vs. 2021 September 30, 2022 vs. 2021 2022 2021 $ % 2022 2021 $ % (Dollars in Thousands) Revenues Management and Advisory Fees, Net$ 1,617,754 $ 1,320,795 $ 296,959 22 %$ 4,654,877 $ 3,711,159 $ 943,718 25 % Incentive Fees 110,776 48,206 62,570 130 % 314,863 117,537 197,326 168 % Investment Income (Loss) Performance Allocations Realized 725,888 1,522,495 (796,607 ) -52 % 4,946,043 2,865,482 2,080,561 73 % Unrealized (771,637 ) 2,724,366 (3,496,003 ) n/m (2,946,255 ) 7,886,033 (10,832,288 ) n/m Principal Investments Realized 193,228 325,414 (132,186 ) -41 % 743,493 832,512 (89,019 ) -11 % Unrealized (1,069,697 ) 183,754 (1,253,451 ) n/m (1,496,226 ) 1,151,904 (2,648,130 ) n/m Total Investment Income (Loss) (922,218 )
4,756,029 (5,678,247 ) n/m 1,247,055 12,735,931 (11,488,876 ) -90 %
Interest and Dividend Revenue 52,420 35,048 17,372 50 % 168,980 97,477 71,503 73 % Other 199,382 64,187 135,195 211 % 427,839 152,387 275,452 181 % Total Revenues 1,058,114 6,224,265 (5,166,151 ) -83 % 6,813,614 16,814,491 (10,000,877 ) -59 % Expenses Compensation and Benefits Compensation 600,273 536,199 64,074 12 % 1,942,790 1,585,941 356,849 23 % Incentive Fee Compensation 50,355 21,007 29,348 140 % 136,737 48,763 87,974 180 % Performance Allocations Compensation Realized 313,930 631,632 (317,702 ) -50 % 2,067,447 1,192,082 875,365 73 % Unrealized (359,590 ) 1,193,853 (1,553,443 ) n/m (1,273,849 ) 3,394,041 (4,667,890 ) n/m Total Compensation and Benefits 604,968
2,382,691 (1,777,723 ) -75 % 2,873,125 6,220,827 (3,347,702 ) -54 % General, Administrative and Other
270,369 217,995 52,374 24 % 800,331 608,174 192,157 32 %
Interest Expense 80,507 52,413 28,094 54 % 216,896 141,718 75,178 53 %
Fund Expenses 5,517 1,260 4,257 338 % 12,144 7,417 4,727 64 %
Total Expenses 961,361 2,654,359 (1,692,998 ) -64 % 3,902,496 6,978,136 (3,075,640 ) -44 %
Other Income (Loss)
Change in Tax Receivable Agreement Liability - (37,321 ) 37,321 -100 % 748 (34,803 ) 35,551 n/m
Net Gains (Losses) from Fund Investment Activities 1,178 132,312 (131,134 ) -99 % (52,272 ) 379,781 (432,053 ) n/m
Total Other Income (Loss) 1,178 94,991 (93,813 ) -99 % (51,524 ) 344,978 (396,502 ) n/m
Income Before Provision for Taxes 97,931 3,664,897 (3,566,966 ) -97 % 2,859,594 10,181,333 (7,321,739 ) -72 % Provision for Taxes
94,231 458,904 (364,673 ) -79 % 614,026 746,707 (132,681 ) -18 %
Net Income 3,700 3,205,993 (3,202,293 ) -100 % 2,245,568 9,434,626 (7,189,058 ) -76 %
Net Income Attributable to Redeemable
Non-Controlling
Interests in Consolidated Entities 25,773 1,550 24,223 n/m 56,700 2,816 53,884 n/m
Net Income (Loss) Attributable to
Non-Controlling
Interests in Consolidated Entities (62,093 ) 486,907 (549,000 ) n/m (62,425 ) 1,305,273 (1,367,698 ) n/m
Net Income Attributable to
Non-Controlling
Interests in Blackstone Holdings 37,724 1,315,641 (1,277,917 ) -97 % 1,061,516 3,667,618 (2,606,102 ) -71 %
Net Income Attributable to Blackstone Inc.$ 2,296 $ 1,401,895 $ (1,399,599 ) -100 %$ 1,189,777 $ 4,458,919 $ (3,269,142 ) -73 % n/m Not meaningful. 78
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Three Months Ended
Revenues
Revenues were$1.1 billion for the three months endedSeptember 30, 2022 , a decrease of$5.2 billion , compared to$6.2 billion for the three months endedSeptember 30, 2021 . The decrease in Revenues was primarily attributable to a decrease of$5.7 billion in Investment Income (Loss), which is composed of decreases of$4.7 billion and$928.8 million in Unrealized Investment Income (Loss) and Realized Investment Income (Loss), respectively. The$4.7 billion decrease in Unrealized Investment Income (Loss) was primarily attributable to net unrealized depreciation of investments in the three months endedSeptember 30, 2022 compared to net unrealized appreciation of investments in the three months endedSeptember 30, 2021 . Principal drivers of the decrease were:
• The decrease of
attributable to net unrealized depreciation of investments in BREP and lower
net unrealized appreciation of investments in Core+ real estate during the
three months ended
value decreased 0.6% and increased 2.3%, respectively, in the three months
ended September 30, 2022 compared to increases of 16.2% and 7.6%,
respectively, in the three months ended September 30, 2021 .
• The decrease of
attributable to net unrealized depreciation of investments in corporate
private equity and
the three months ended
the three months ended
24.6%, respectively, in the three months ended September 30, 2021 .
• The decrease of
primarily attributable to an unrealized loss on the ownership of Corebridge
common stock based on the publicly traded price as of
The
Expenses
Expenses were$961.4 million for the three months endedSeptember 30, 2022 , a decrease of$1.7 billion , compared to$2.7 billion for the three months endedSeptember 30, 2021 . The decrease was primarily attributable to a decrease of$1.8 billion in Total Compensation and Benefits, which is composed of a decrease of$1.9 billion in Performance Allocations Compensation and an increase of$64.1 million in Compensation. The decrease in Performance Allocations Compensation was primarily due to the decrease in Investment Income (Loss), on which a portion of compensation is based. The increase in Compensation was primarily due to the increase in Management and Advisory Fees, Net, on which a portion of compensation is based.
Other Income (Loss)
Other Income (Loss) was$1.2 million for the three months endedSeptember 30, 2022 , a decrease of$93.8 million , compared to$95.0 million for the three months endedSeptember 30, 2021 . The decrease in Other Income was primarily due to a decrease of$131.1 million inNet Gains (Losses) from Fund Investment Activities. 79
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The decrease inNet Gains (Losses) from Fund Investment Activities was principally driven by decreases of$71.1 million ,$40.5 million ,$14.0 million and$5.5 million in our Private Equity, Real Estate, Hedge Fund Solutions and Credit & Insurance segments, respectively. The decrease in our Private Equity segment was primarily due to unrealized depreciation of investments and lower realized gains of investments in our consolidated private equity funds. The decrease in our Real Estate segment was primarily due to unrealized depreciation of investments, partially offset by higher realized gains of investments in our consolidated real estate funds. The decrease in our Hedge Fund Solutions segment was primarily due to unrealized depreciation of investments in our consolidated hedge fund solutions funds. The decrease in our Credit & Insurance segment was primarily due to unrealized depreciation of investments and realized losses of investments in our consolidated credit funds.
Nine Months Ended
Revenues
Revenues were$6.8 billion for the nine months endedSeptember 30, 2022 , a decrease of$10.0 billion , compared to$16.8 billion for the nine months endedSeptember 30, 2021 . The decrease in Revenues was primarily attributable to a net decrease of$11.5 billion in Investment Income (Loss), which is composed of a decrease of$13.5 billion in Unrealized Investment Income (Loss) and an increase of$2.0 billion in Realized Investment Income (Loss), partially offset by an increase of$943.7 million in Management and Advisory Fees, Net. The$13.5 billion decrease in Unrealized Investment Income (Loss) was primarily attributable to net unrealized depreciation of investments in the nine months endedSeptember 30, 2022 compared to net unrealized appreciation of investments in the nine months endedSeptember 30, 2021 . Principal drivers of the decrease were:
• The decrease of
attributable to net unrealized depreciation of investments in corporate
private equity and lower net unrealized appreciation in
in the nine months ended
appreciation of investments in the nine months ended
Corporate private equity and
4.3% and increased 10.3%, respectively, in the nine months ended
in the nine months ended September 30, 2021 .
• The decrease of
attributable to lower net unrealized appreciation of investments in BREP
during the nine months ended
unrealized appreciation of investments in the nine months ended
BREP's carrying value increased 8.8% in the nine months ended
September 30, 2022 compared to 31.6% in the nine months ended
September 30, 2021 .
• The decrease of
attributable to an unrealized loss on the ownership of Corebridge common
stock based on the publicly traded price as of
net returns in our private credit strategies in the nine months ended
September 30, 2022 compared to September 30, 2021 .
The
The$943.7 million increase in Management and Advisory Fees, Net was primarily due to increases in our Real Estate and Credit & Insurance segments of$459.3 million and$393.9 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 inflows in BCRED and BIS. 80
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Expenses
Expenses were$3.9 billion for the nine months endedSeptember 30, 2022 , a decrease of$3.1 billion , compared to$7.0 billion for the nine months endedSeptember 30, 2021 . The decrease was primarily attributable a decrease of$3.3 billion in Total Compensation and Benefits, which is composed of a decrease of$3.8 billion in Performance Allocations Compensation and an increase of$356.8 million in Compensation, partially offset by an increase of$192.2 million in General, Administrative and Other. The decrease in Performance Allocations Compensation was primarily due to the decrease in Investment Income, on which a portion of compensation is based. The increase in Compensation was primarily due to the increase in Management and Advisory Fees, Net, on which a portion of compensation is based. The increase in General, Administrative and Other was primarily due to travel and entertainment, occupancy and technology related expenses, and professional fees.
Other Income (Loss)
Other Income (Loss) was$(51.5) million for the nine months endedSeptember 30, 2022 , a decrease of$396.5 million , compared to$345.0 million for the nine months endedSeptember 30, 2021 . The decrease in Other Income was primarily due to a decrease of$432.1 million inNet Gains (Losses) from Fund Investment Activities. The decrease inNet Gains (Losses) from Fund Investment Activities was principally driven by decreases of$264.3 million ,$99.9 million ,$36.9 million and$31.0 million in our Private Equity, Hedge Fund Solutions, Credit & Insurance and Real Estate segments, respectively. The decrease in our Private Equity segment was primarily due to unrealized depreciation of investments and lower realized gains of investments in our consolidated private equity funds. The decrease in our Hedge Fund Solutions segment was primarily due to unrealized depreciation of investments in our consolidated hedge fund solutions funds. The decrease in our Credit & Insurance segment was primarily due to unrealized depreciation of investments and realized losses of investments in our consolidated credit funds. The decrease in our Real Estate segment was primarily due to unrealized depreciation of investments, partially offset by higher realized gains of investments in our consolidated real estate funds.
Provision for Taxes
Three Months Ended
Blackstone's Provision for Taxes for the three months endedSeptember 30, 2022 and 2021 was$94.2 million and$458.9 million , respectively. This resulted in an effective tax rate of 96.2% and 12.5%, respectively, based on our Income (Loss) Before Provision for Taxes of$97.9 million and$3.7 billion . The increase in Blackstone's effective tax rate for the three months endedSeptember 30, 2022 , compared to the three months endedSeptember 30, 2021 , includes a portion of the reported Income (Loss) Before Provision for Taxes that is attributable to non-controlling interest holders, the state tax provision and deferred tax adjustments.
Nine Months Ended
Blackstone's Provision for Taxes for the nine months endedSeptember 30, 2022 and 2021 was$614.0 million and$746.7 million , respectively. This resulted in an effective tax rate of 21.5% and 7.3%, respectively, based on our Income (Loss) Before Provision for Taxes of$2.9 billion and$10.2 billion . The increase in Blackstone's effective tax rate for the nine months endedSeptember 30, 2022 , compared to the nine months endedSeptember 30, 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.
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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. 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 endedSeptember 30, 2022 and 2021, the Net Income Before Taxes allocated to Blackstone personnel and other limited partners ofBlackstone Holdings was 39.7% and 41.2%, respectively. For the nine months endedSeptember 30, 2022 and 2021, the Net Income Before Taxes allocated to Blackstone personnel and others who are limited partners ofBlackstone Holdings was 39.8% and 41.5%, respectively. The respective decreases of 1.5% and 1.7% were 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
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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 and nine months endedSeptember 30, 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
September 30, 2022 September 30, 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 $ 252,125,870 $ 163,521,507 $ 72,629,621 $ 195,548,963 $ 683,825,961 $ 166,263,493 $ 132,475,486 $ 72,240,152 $ 127,953,395 $ 498,932,526
Inflows (a) 35,565,611 5,720,545 956,594 9,236,906 51,479,656 13,568,086 8,372,265 3,011,092 12,022,947 36,974,390
Outflows (b) (8,845,200 ) (443,618 ) (1,614,636 ) (6,325,326 ) (17,228,780 ) (821,127 ) (822,292 ) (2,282,247 ) (1,914,543 ) (5,840,209 )
Net Inflows (Outflows) 26,720,411 5,276,927 (658,042 ) 2,911,580 34,250,876 12,746,959 7,549,973 728,845 10,108,404 31,134,181
Realizations (c) (4,238,668 ) (1,932,887 ) (431,322 ) (1,457,210 ) (8,060,087 ) (4,228,169 ) (2,649,349 ) (413,232 ) (1,780,911 ) (9,071,661 ) Market Activity (d)(g)
(1,159,763 ) 407,777 (102,021 ) (3,297,392 ) (4,151,399 ) 5,385,810 1,704,148
711,084 (383,538 ) 7,417,504
Balance, End of Period (e) $
273,447,850
Increase (Decrease)$ 21,321,980 $ 3,751,817 $ (1,191,385 ) $ (1,843,022 ) $ 22,039,390 $ 13,904,600 $ 6,604,772 $ 1,026,697 $ 7,943,955 $ 29,480,024 Increase (Decrease) 8 % 2 % -2 % -1 % 3 % 8 % 5 % 1 % 6 % 6 % Nine Months EndedSeptember 30, 2022 September 30, 2021 PrivateHedge Fund Credit & PrivateHedge 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) 83,072,471 17,201,200 6,736,594 34,262,589 141,272,854 31,963,738 15,161,253 6,811,947 34,943,855 88,880,793 Outflows (b) (16,659,446 ) (1,359,978 ) (7,402,333 ) (16,116,378 ) (41,538,135 ) (2,246,364 ) (1,887,923 ) (11,905,577 ) (9,532,557 ) (25,572,421 ) Net Inflows (Outflows) 66,413,025 15,841,222 (665,739 ) 18,146,211 99,734,719 29,717,374 13,273,330 (5,093,630 ) 25,411,298 63,308,372 Realizations (c) (18,443,319 ) (7,585,363 ) (1,255,419 ) (6,717,555 ) (34,001,656 ) (9,153,366 ) (9,024,609 ) (896,526 ) (9,057,779 ) (28,132,280 ) Market Activity (d)(h)
4,001,445 2,460,506 (675,174 ) (15,623,547 ) (9,836,770 ) 10,482,624 5,291,907 5,130,395
2,898,418 23,803,344
Balance, End of Period (e) $
273,447,850
Increase (Decrease) $
51,971,151
23 % 7 % -4 % -2 % 9 % 21 % 7 % -1 % 17 % 13 %
Annualized Base Management Fee Rate (f) 0.97 % 1.09 % 0.78 % 0.62 % 0.88 % 1.12 % 1.11 % 0.83 % 0.56 % 0.93 %
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Three Months Ended
September 30, 2022 September 30, 2021
Private Hedge Fund Credit & Private Hedge 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 $ 320,038,428 $ 275,886,414 $ 80,051,408 $ 264,829,491 $ 940,805,741 $ 207,548,236 $ 223,621,359 $ 79,145,263 $ 173,713,854 $ 684,028,712
Inflows (a) 10,106,034 14,490,688 1,154,963 19,092,560 44,844,245 16,045,781 7,355,730 3,341,522 19,997,259 46,740,292
Outflows (b) (3,832,277 ) (891,533 ) (1,494,809 ) (6,419,532 ) (12,638,151 ) (1,116,933 ) (449,214 ) (2,358,568 ) (2,643,752 ) (6,568,467 )
Net Inflows (Outflows) 6,273,757 13,599,155 (339,846 ) 12,673,028 32,206,094 14,928,848 6,906,516 982,954 17,353,507 40,171,825
Realizations (c) (4,077,373 ) (5,306,409 ) (448,706 ) (5,913,377 ) (15,745,865 ) (7,048,140 ) (10,815,305 ) (422,694 ) (3,466,302 ) (21,752,441 ) Market Activity (d)(i)
(2,888,406 ) (911,462 ) 10,776 (2,530,364 ) (6,319,456 ) 14,754,291 11,808,232
896,734 755,359 28,214,616
Balance, End of Period (e) $
319,346,406
Increase (Decrease)$ (692,022 ) $ 7,381,284 $ (777,776 ) $ 4,229,287 $ 10,140,773 $ 22,634,999 $ 7,899,443 $ 1,456,994 $ 14,642,564 $ 46,634,000 Increase (Decrease) - 3 % -1 % 2 % 1 % 11 % 4 % 2 % 8 % 7 % Nine Months EndedSeptember 30, 2022 September 30, 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) 76,028,056 43,964,395 7,177,191 55,808,400 182,978,042 33,506,903 22,522,400 7,605,641 51,990,890 115,625,834 Outflows (b) (9,969,465 ) (2,869,020 ) (7,524,173 ) (16,635,968 ) (36,998,626 ) (3,505,186 ) (2,277,970 ) (11,280,914 ) (11,152,173 ) (28,216,243 ) Net Inflows (Outflows) 66,058,591 41,095,375 (346,982 ) 39,172,432 145,979,416 30,001,717 20,244,430 (3,675,273 ) 40,838,717 87,409,591 Realizations (c)
(33,462,061 ) (18,611,016 ) (1,364,756 ) (14,853,399 ) (68,291,232 ) (14,307,719 ) (27,541,846 ) (920,598 ) (13,483,353 ) (56,253,516 ) Market Activity (d)(j)
7,275,771 (687,668 ) (348,771 ) (13,882,722 ) (7,643,390 ) 27,297,990 41,268,996 5,775,259
6,607,464 80,949,709
Balance, End of Period (e) $
319,346,406
Increase (Decrease)$ 39,872,301 $ 21,796,691 $ (2,060,509 ) $ 10,436,311 $ 70,044,794 $ 42,991,988 $ 33,971,580 $ 1,179,388 $ 33,962,828 $ 112,105,784 Increase (Decrease) 14 % 8 % -3 % 4 % 8 % 23 % 17 % 1 % 22 % 18 % 85
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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
Assets Under Management due to foreign exchange rate fluctuations was
billion,
billion for the Real Estate, Private Equity, Hedge Fund Solutions, Credit &
Insurance and Total segments, respectively. For the three months ended
Credit & Insurance and Total segments, respectively.
(h) For the nine months ended
Assets Under Management due to foreign exchange rate fluctuations was
billion,
billion for the Real Estate, Private Equity, Hedge Fund Solutions, Credit &
Insurance and Total segments, respectively. For the nine months ended
million and $(2.1) billion for the Real Estate, Private Equity, Credit &
Insurance and Total segments, respectively.
(i) For the three months ended
Under Management due to foreign exchange rate fluctuations was
billion,
for the Real Estate, Private Equity, Hedge Fund Solutions, Credit & Insurance
and Total segments, respectively. For the three months ended
2021, such impact was
Total segments, respectively.
(j) For the nine months ended
Under Management due to foreign exchange rate fluctuations was
billion,
for the Real Estate, Private Equity, Hedge Fund Solutions, Credit & Insurance
and Total segments, respectively. For the nine months ended
2021, such impact was
Total segments, respectively.
Fee-Earning Assets Under Management Fee-Earning Assets Under Management were$705.9 billion atSeptember 30, 2022 , an increase of$22.0 billion , compared to$683.8 billion atJune 30, 2022 . The net increase was due to: • Inflows of$51.5 billion related to:
o
BREP and
co-investment
due to the commencement of BREP X,
from BREDS and $1.9 billion from BPP and
co-investment,
o
from direct lending,
asset-based finance,
strategies and
offset by $1.2 billion from certain liquid credit strategies,
o $5.7 billion in our Private Equity segment driven by $3.4 billion from
Strategic Partners , $980.1 million from Tactical Opportunities,
$744.9 million from BIP and $531.2 million from corporate private equity,
and
o $956.6 million in our Hedge Fund Solutions segment driven by
$580.0 million from liquid and specialized solutions and $345.6 million
from customized solutions.
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Offsetting these increases were:
• Outflows of$17.2 billion primarily attributable to: o$8.8 billion in our Real Estate segment driven by$5.0 billion of uninvested reserves at the end of BREP IX's investment period,$3.1 billion from BREIT and$722.4 million from BPP and co-investment,
o
from certain liquid credit strategies,
and $898.2 million from BIS, and
o
from liquid and specialized solutions and
solutions.
• Realizations of $8.1 billion primarily driven by:
o
BREDS, $1.4 billion from BREIT, $903.5 million from BPP and
co-investment
and $470.6 million from BREP and
co-investment,
o
Strategic Partners ,$555.3 million from Tactical Opportunities and$278.7 million from BIP, and
o
from direct lending,
liquid credit.
• Market activity of $4.2 billion primarily attributable to:
o
driven by depreciation of
strategies,
from CLOs,
$1.5 billion of foreign exchange depreciation across the segment,
o
depreciation of
of $665.1 million from BREP and
co-investment,
partially offset by appreciation of $688.0 million from Core+ real estate
(which included $2.9 billion of foreign exchange depreciation), and
o Partially offset by $407.8 million of market appreciation in our Private
Equity segment driven by appreciation of
offset by a $340.8 million depreciation in Strategic Partners .Fee-Earning
Assets Under Management were
• Inflows of$141.3 billion related to:
o
BREP and
co-investment
due to the commencement of BREP X, $24.5 billion from BREIT,
$12.5 billion from BPP and
co-investment,
$10.2 billion from BREDS and $897.2 million from BEPIF,
o
from asset-based finance,
from CLOs,
BIS,
from stressed/distressed strategies and
funds, partially offset by net allocations to other segments of
$16.1 billion ,
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o
Opportunities, $1.5 billion from corporate private equity and
$925.3 million from multi-asset products, and
o
from liquid and specialized solutions,
solutions and
Offsetting these increases were:
• Outflows of$41.5 billion primarily attributable to:
o
BREIT,
co-investment
from uninvested reserves at the end of BREP Asia III's and BREP IX's
investment period and $2.1 billion from BPP and
co-investment,
o
from certain liquid credit strategies,
$2.2 billion from BIS,$2.0 billion from direct lending,$341.1 million from CLOs and$303.3 million from stressed/distressed strategies, o$7.4 billion in our Hedge Fund Solutions segment driven by$3.6 billion
from customized solutions,
solutions and $1.5 billion from commingled products, and
o
multi-asset products, $329.7 million in corporate private equity,
$326.9 million in Tactical Opportunities and $319.0 million from
Strategic Partners .
• Realizations of $34.0 billion primarily driven by:
o
BREIT, $5.7 billion from BREDS, $3.4 billion from BREP and
co-investment
and $3.0 billion from BPP and
co-investment,
o
Strategic Partners ,$2.3 billion from Tactical Opportunities and$1.7 billion from corporate private equity,
o
from direct lending,
stressed/distressed strategies,
$585.8 million from our energy strategies, and
o
from liquid and specialized solutions.
• Market activity of $9.8 billion primarily attributable to:
o
driven by depreciation of
strategies,
from CLOs, all of which included $3.4 billion of foreign exchange
depreciation across the segment,
o Partially offset by $4.0 billion of market appreciation in our Real
Estate segment driven by appreciation of $9.5 billion from Core+ real
estate (which included
partially offset by depreciation of
vehicles and foreign exchange depreciation of
co-investment,
and
o
by appreciation of $2.1 billion from BIP and $397.1 million from
Strategic Partners .
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Total Assets Under Management
Total Assets Under Management were
• Inflows of$44.8 billion primarily related to:
o
from direct lending, $3.7 billion from our energy strategies,
$2.1 billion from CLOs $1.3 billion from asset-based finance,
$1.2 billion from certain liquid credit strategies, $1.0 billion from
private placement credit and
net allocations to other segments of $1.5 billion across Credit &
Insurance strategies,
o $14.5 billion in our Private Equity segment driven by $6.4 billion from
corporate private equity, $4.9 billion from Strategic Partners and
$1.7 billion from Tactical Opportunities,
o $10.1 billion in our Real Estate segment driven by $5.2 billion from
BREIT, $2.5 billion from BREP and
co-investment,
$1.1 billion from BPP and
co-investment
and $1.1 billion from BREDS, and
o $1.2 billion in our Hedge Fund Solutions segment driven by $771.7 million
from liquid and specialized solutions and
solutions.
For certain segments, Total Assets Under Management inflows exceeds Fee-Earning Assets Under Management inflows due to the following reasons:
• For corporate private equity, due to BCP IX subsequent closings during the
three months ended
inflows are reported at each fund closing, whereas
Fee-Earning
Assets Under Management inflows are reported when a fund's investment
period commences and in each subsequent close.
• For our direct lending funds, 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.
Offsetting these increases were:
• Realizations of$15.7 billion primarily driven by:
o
from direct lending,
$479.2 million from mezzanine funds,$148.4 million from CLOs and$110.0 million from our energy strategies, o$5.3 billion in our Private Equity segment driven by$1.8 billion fromStrategic Partners ,$1.6 billion from corporate private equity and$1.6 billion from Tactical Opportunities, and o$4.1 billion in our Real Estate segment driven by$1.4 billion from BREIT,$1.0 billion from BREP and co-investment,$945.2 million from BPP and co-investment and$687.6 million from BREDS. Total Assets Under Management realizations in our Real Estate and Private Equity segments generally represents the total proceeds and typically exceeds the Fee-Earning Assets Under Management realizations which generally represents only the invested capital. • Outflows of$12.6 billion primarily attributable to:
o
from certain liquid credit strategies,
$899.9 million from BIS, 89
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o
and $723.6 million from BPP and
co-investment,
and
o $1.5 billion in our Hedge Fund Solutions segment driven by $1.0 billion
from liquid and specialized solutions and
solutions.
• Market activity of $6.3 billion primarily driven by:
o
carrying value decreases in BREDS insurance vehicles and BREP and
co-investment
of 4.0% and 0.6%, respectively, partially offset by carrying value
increases in Core+ real estate of 2.3%, all of which included
$5.7 billion of foreign exchange depreciation across the segment,
o
driven by depreciation of
strategies and
included $1.6 billion of foreign exchange depreciation across the
segment, and
o
driven by carrying value decreases in
Opportunities, BXG and corporate private equity of 3.5%, 1.7%, 1.0% and
0.3%, respectively, partially offset by carrying value increases in BIP
of 6.8%, all of which included $1.3 billion of foreign exchange
depreciation across the segment.
Total Assets Under Management market activity in our Real Estate and Private
Equity segments generally represents the change in fair value of the investments
held and typically exceeds the
Fee-Earning
Assets Under Management market activity.
Total Assets Under Management were
• Inflows of$183.0 billion primarily related to:
o
BREP and
co-investment,
$24.5 billion from BREIT, $12.6 billion from BPP and
co-investment
and $6.7 billion from BREDS,
o
from direct lending,
from CLOs,
BIS, partially offset by net allocations to other segments of
$19.2 billion ,
o
corporate private equity, $10.8 billion from Strategic Partners ,
$6.5 billion from BIP, $3.9 billion from Tactical Opportunities,
$3.8 billion from BXG, $881.1 million from multi-asset products and
$219.0 million from BXLS, and
o
from liquid and specialized solutions,
solutions and
Total Assets Under Management inflows may exceed Fee-Earning Assets Under Management inflows due to the reasons discussed above.
Offsetting these increases were:
• Realizations of$68.3 billion primarily driven by:
o
BREP and
co-investment,
$6.4 billion from BREIT, $3.0 billion from BPP and
co-investment
and $2.7 billion from BREDS,
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o $18.6 billion in our Private Equity segment driven by $6.9 billion from
corporate private equity, $6.0 billion from Strategic Partners ,
$4.7 billion from Tactical Opportunities and $839.0 million from BIP,
and
o
from direct lending,
strategies,
Total Assets Under Management realizations in our Real Estate and Private Equity segments generally represents the total proceeds and typically exceeds the Fee-Earning Assets Under Management realizations which generally represents only the invested capital. • Outflows of$37.0 billion primarily attributable to:
o
from certain liquid credit strategies,
$2.3 billion from direct lending and$2.2 billion from BIS, o$10.0 billion in our Real Estate segment driven by$7.2 billion from BREIT,$2.1 billion from BPP and co-investment and$573.9 million from BREDS, o$7.5 billion in our Hedge Fund Solutions segment driven by$3.7 billion
from customized solutions,
solutions and $1.5 billion from commingled products, and
o
Strategic Partners ,$765.1 million from Tactical Opportunities and$518.0 million from corporate private equity. • Market activity of$7.6 billion primarily driven by:
o
driven by depreciation of
strategies and
included $3.8 billion of foreign exchange depreciation across the
segment, and
o Partially offset by
Estate segment driven by carrying value increases in Core+ real estate
and BREP and
co-investment
of 12.0% and 8.8%, respectively, partially offset by carrying value
decreases in the BREDS insurance vehicles of 12.3%, all of which included
Total Assets Under Management market activity in our Real Estate and Private
Equity segments generally represents the change in fair value of the investments
held and typically exceeds the
Fee-Earning
Assets Under Management market activity.
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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.
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Net Accrued Performance Revenues
The following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as ofSeptember 30, 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. September 30, 2022 2021 (Dollars in Millions) Real Estate BREP IV $ 7 $ 22 BREP V 3 44 BREP VI 24 34 BREP VII 145 476 BREP VIII 830 713 BREP IX 1,002 551 BREP Europe IV 68 90 BREP Europe V 96 476 BREP Europe VI 74 176 BREP Asia I 105 112 BREP Asia II 119 116 BPP 735 362 BREIT - 513 BREDS 14 40 BTAS 37 23Total Real Estate (a) 3,258 3,747 Private Equity BCP IV 7 8 BCP V 8 57 BCP VI 463 561 BCP VII 870 1,278 BCP VIII 227 216 BCP Asia I 137 407 BEP I 33 33 BEP III 86 64 BCEP I 219 198 Tactical Opportunities 233 296 BXG - 45 Strategic Partners 548 430 BIP 126 79 BXLS 26 33 BTAS/Other 202 195 Total Private Equity (a) 3,186 3,899 Hedge Fund Solutions 320 362 Credit & Insurance 297 302
Total Blackstone Net Accrued Performance Revenues
8,311
Note: Totals may not add due to rounding.
(a) Real Estate and Private Equity include
co-investments,
as applicable.
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For the twelve months endedSeptember 30, 2022 , Net Accrued Performance Revenues receivable decreased due to Net Performance Revenues of$3.6 billion offset by net realized distributions of$4.8 billion .
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$359.6 billion as ofSeptember 30, 2022 , an increase of$3.7 billion , compared to$355.9 billion as ofJune 30, 2022 . Perpetual Capital Total Assets Under Management in our Credit & Insurance, Private Equity and Real Estate segments increased$2.0 billion ,$1.4 billion and$158.9 million , respectively. Principal drivers of these increases were:
• In our Credit & Insurance segment, net Total Assets Under Management growth
in direct lending resulted in an increase of
by a decrease of $2.2 billion related to BIS.
• In our Private Equity segment, net Total Assets Under Management growth in
BIP resulted in an increase of $1.4 billion .
• In our Real Estate segment, net Total Assets Under Management growth in
BREIT resulted in an increase of
decreases of
translation of non-U.S. dollar funds and $736.2 million in BXMT.
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Perpetual Capital Total Assets Under Management were$359.6 billion as ofSeptember 30, 2022 , an increase of$46.2 billion , or 15%, 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$28.3 billion ,$10.1 billion and$8.0 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
offset by a decrease of $12.3 billion related to BIS.
• In our Private Equity segment, net Total Assets Under Management growth in
BIP resulted in an increase of
Investment Records
Fund returns information for our significant funds is included throughout this
discussion and analysis to facilitate an understanding of our results of
operations for the periods presented. The fund returns information reflected in
this discussion and analysis is not indicative of the financial performance of
Blackstone and is also not necessarily indicative of the future performance of
any particular fund. An investment in Blackstone is not an investment in any of
our funds. There can be no assurance that any of our funds or our other existing
and future funds will achieve similar returns.
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The following table presents the investment record of our significant carry/drawdown funds and selected perpetual capital strategies from inception throughSeptember 30, 2022 : Unrealized Investments Realized Investments Total Investments Fund (Investment Period Committed Available % Net IRRs (d) Beginning Date / Ending Date) (a) Capital Capital (b) Value MOIC (c) Public Value MOIC (c) Value MOIC (c) Realized Total (Dollars/Euros in Thousands, Except Where Noted) Real Estate Pre-BREP$ 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 - 7,046 n/a -
13,450,289 2.3x 13,457,335 2.3x 11 %
11 % BREP VI (Feb 2007 / Aug 2011) 11,060,444 550,439 253,813 1.7x 72 %
27,511,017 2.5x 27,764,830 2.5x 13 %
13 %
BREP VII (Aug 2011 / Apr 2015 ) 13,501,376 1,513,376 3,386,357 0.8x 5 %
27,989,427 2.4x 31,375,784 2.0x 22 %
15 %
BREP VIII (Apr 2015 / Jun 2019 ) 16,592,910 2,298,180 14,936,814 1.6x -
21,372,021 2.5x 36,308,835 2.1x 28 %
18 %
BREP IX (Jun 2019 / Aug 2022 ) 21,601,305 5,428,469 24,944,045 1.6x 1 %
7,643,491 2.2x 32,587,536 1.7x 67 %
34 %
*BREP X (Aug 2022 / Feb 2028 ) 26,542,960 26,320,364 209,582 0.9x 100 %
- n/a 209,582 0.9x n/a n/m
Total Global BREP $
100,279,576
16 %
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) 3,205,318 437,071 251,497 0.5x -
5,811,684 2.4x 6,063,181 2.0x 19 %
14 % BREP Europe IV (Sep 2013 /Dec 2016 )
6,673,049 1,473,527 1,728,575 1.2x -
9,747,521 2.0x 11,476,096 1.8x 20 %
13 % BREP Europe V (Dec 2016 /Oct 2019 )
7,965,078 1,430,203 5,708,266 1.1x -
6,537,218 4.0x 12,245,484 1.8x 43 %
13 % *BREP Europe VI (Oct 2019 /Apr 2025 ) 9,925,135 6,426,505 4,626,528 1.2x - 3,273,739 2.6x 7,900,267 1.6x 75 % 24 % Total BREP Europe € € € € € 30,222,500 9,767,306 12,314,866 1.1x - 29,326,364 2.4x 41,641,230 1.8x 17 % 13 % continued... 97
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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) $
4,263,411
6,316,167 2.1x
13 % BREP Asia II (Dec 2017 /Mar 2022 )
7,369,945 1,627,900 7,256,313 1.3x -
818,696 1.8x 8,075,009 1.3x 43 %
8 % *BREP Asia III (Mar 2022 /Sep 2027 ) 8,068,957 7,285,192 694,80 0.9x - - n/a 694,806 0.9x n/a n/m BREP Co-Investment (f) 7,208,136 37,995 951,100 2.3x - 15,043,270 2.2x 15,994,370 2.2x 16 % 16 % Total BREP $
163,184,517
16 %
*BREDS High-Yield (Various) (g) $
19,981,503
16,644,956 1.3x
9 %
Private Equity
Corporate Private Equity
BCP I (Oct 1987 / Oct 1993) $ 859,081 $ - $ - n/a - $
1,741,738 2.6x
19 % BCP II (Oct 1993 / Aug 1997) 1,361,100 - - n/a -
3,256,819 2.5x 3,256,819 2.5x 32 %
32 % BCP III (Aug 1997 / Nov 2002) 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 14,208 n/a - 2,953,649 1.4x 2,967,857 1.4x 6 % 6 % BCP IV (Nov 2002 / Dec 2005) 6,773,182 157,644 136,355 1.2x -
21,479,599 2.9x 21,615,954 2.8x 36 %
36 % BCP V (Dec 2005 /Jan 2011 )
21,009,112 1,035,259 115,599 7.8x 93 %
38,427,169 1.9x 38,542,768 1.9x 8 % 8 % BCP VI (Jan 2011 /May 2016 )
15,195,537 1,158,107 7,117,830 1.9x 40 %
24,467,594 2.2x 31,585,424 2.1x 16 %
12 % BCP VII (May 2016 /Feb 2020 )
18,860,928 1,612,486 21,198,399 1.6x 31 %
10,590,931 2.4x 31,789,330 1.8x 34 %
14 % *BCP VIII (Feb 2020 /Feb 2026 ) 25,432,016 14,722,928 13,633,546 1.3x 9 % 573,328 3.0x 14,206,874 1.3x n/m 18 % BCP IX (TBD) 14,411,850 14,411,850 - n/a - - n/a - n/a n/a n/a Energy I (Aug 2011 / Feb 2015) 2,441,558 142,138 661,369 1.7x 48 %
3,999,633 2.0x 4,661,002 1.9x 14 %
12 % Energy II (Feb 2015 /Feb 2020 ) 4,938,719 847,680 4,865,944 1.7x 52 % 2,104,834 1.2x 6,970,778 1.5x 1 % 8 % *Energy III (Feb 2020 /Feb 2026 )
4,338,099 2,114,159 2,918,920 1.5x 42 %
533,929 2.8x 3,452,849 1.6x 66 %
38 % BCP Asia I (Dec 2017 / Sep 2021) 2,452,208 663,800 2,882,092 1.8x 46 %
1,404,049 4.8x 4,286,141 2.2x 97 %
34 % *BCP Asia II (Sep 2021 /Sep 2027 )
6,554,832 6,462,967 (3,277) n/a -
- n/a (3,277) n/a n/a n/a
Core Private Equity I (Jan 2017 /Mar 2021 ) (h)
4,764,469 1,093,991 7,927,971 2.1x -
2,260,394 4.1x 10,188,365 2.3x 55 %
24 % *Core Private Equity II (Mar 2021 /Mar 2026 ) (h)
8,189,963 5,720,136 2,516,238 1.0x -
9,592 n/a 2,525,830 1.0x n/a
2 %
Total Corporate Private Equity$ 143,687,406 $ 50,167,720 $ 63,985,194 1.6x 25 %$ 122,987,946 2.2x$ 186,973,140 1.9x 16 % 15 % continued... 98
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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) $
22,515,577
20,504,793 1.9x$ 32,158,272 1.6x 18 % 11 % *Tactical Opportunities Co-Investment and Other (Various)
16,282,765 7,371,547 5,015,093 1.8x 5 %
8,265,944 1.6x 13,281,037 1.6x 18 %
18 %
Total Tactical Opportunities$ 38,798,342 $ 14,311,503 $ 16,668,572 1.3x 7 %$ 28,770,737 1.8x$ 45,439,309 1.6x 18 % 13 % Growth *BXG I (Jul 2020 /Jul 2025 )$ 5,046,626 $ 1,259,722 $ 3,642,869 1.0x 5 %$ 354,582 3.3x$ 3,997,451 1.1x n/m - BXG II (TBD) 3,428,640 3,428,640 - n/a - - n/a - n/a n/a n/a Total Growth$ 8,475,266 $ 4,688,362 $ 3,642,869 1.0x 5 %$ 354,582 3.3x$ 3,997,451 1.1x n/m -Strategic Partners (Secondaries)Strategic Partners I-V (Various) (i)$ 11,447,898 $ 645,878 $ 420,496 n/a -$ 16,913,196 n/a$ 17,333,692 1.7x n/a 13 % Strategic Partners VI (Apr 2014 /Apr 2016 ) (i)
4,362,750 1,491,955 1,088,452 n/a -
4,012,194 n/a 5,100,646 1.7x n/a
15 % Strategic Partners VII (May 2016 /Mar 2019 ) (i)
7,489,970 1,794,752 4,702,171 n/a -
5,792,772 n/a 10,494,943 2.0x n/a
20 % Strategic Partners Real Assets II (May 2017 /Jun 2020 ) (i) 1,749,807 533,829 1,099,578 n/a - 975,172 n/a 2,074,750 1.5x n/a 16 % Strategic Partners VIII (Mar 2019 /Oct 2021 ) (i)
10,763,600 4,866,535 9,062,102 n/a -
5,186,528 n/a 14,248,630 1.9x n/a
43 % *Strategic Partners Real Estate , SMA and Other (Various) (i)
8,771,763 3,003,592 3,462,601 n/a -
3,147,301 n/a 6,609,902 1.7x n/a
19 % *Strategic Partners Infra III (Jun 2020 /Jul 2024 ) (i)
3,250,100 1,708,501 1,113,984 n/a -
124,956 n/a 1,238,940 1.4x n/a
58 % *Strategic Partners IX (Oct 2021 /Jul 2026 ) (i)
17,196,913 12,285,298 3,309,826 n/a -
113,017 n/a 3,422,843 1.4x n/a
n/m
Total Strategic Partners (Secondaries)$ 65,032,801 $ 26,330,340 $ 24,259,210 n/a -$ 36,265,136 n/a$ 60,524,346 1.7x n/a 16 % Life Sciences Clarus IV (Jan 2018 / Jan 2020) $
910,000
239,846 1.9x
15 % *BXLS V (Jan 2020 /Jan 2025 ) 4,839,511 3,742,428 1,178,568 1.3x 3 % 71,549 1.3x 1,250,117 1.3x 9 % 2 % continued... 99
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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
4,786,397 1.6x$ 4,808,906 1.6x n/a 17 % Mezzanine / Opportunistic II (Nov 2011 /Nov 2016 ) 4,120,000 998,027 249,574 0.3x - 6,496,230 1.6x 6,745,804 1.4x n/a 10 % Mezzanine / Opportunistic III (Sep 2016 /Jan 2021 ) 6,639,133 953,406 3,796,336 1.0x - 5,573,791 1.6x 9,370,127 1.3x n/a 10 % *Mezzanine / Opportunistic IV (Jan 2021 /Jan 2026 )
5,016,771 3,476,787 1,622,867 1.0x -
65,480 n/m 1,688,347 1.0x n/a 10 %
Stressed / Distressed I (Sep 2009 / May 2013 ) 3,253,143 76,000 - n/a - 5,777,098 1.3x 5,777,098 1.3x n/a 9 %
Stressed / Distressed II (Jun 2013 / Jun 2018 ) 5,125,000 547,430 364,069 0.5x - 5,242,349 1.2x 5,606,418 1.1x n/a 1 %
*Stressed / Distressed III (Dec 2017 / Dec 2022 ) 7,356,380 2,646,972 2,576,770 0.9x -
2,796,308 1.4x 5,373,078 1.1x n/a 7 % Energy I (Nov 2015 /Nov 2018 )
2,856,867 1,045,894 842,545 1.0x -
2,580,579 1.7x 3,423,124 1.4x n/a 10 % *Energy II (Feb 2019 /Feb 2024 )
3,616,081 1,957,123 1,951,379 1.2x -
1,048,553 1.5x 2,999,932 1.3x n/a 26 % European Senior Debt I (Feb 2015 /Feb 2019 ) € € € € € 1,964,689 352,855 918,765 0.8x - 2,278,324 1.4x 3,197,089 1.2x n/a 3 % *European Senior Debt II (Jun 2019 /Jun 2024 ) € € € € € 4,088,344 1,185,458 4,214,580 1.0x - 1,372,464 1.6x 5,587,044 1.1x n/a 13 % Total Credit Drawdown Funds (j)$ 46,889,033 $ 13,305,779 $ 16,454,930 0.9x -$ 38,548,150 1.5x$ 55,003,080 1.2x n/a 10 % 100
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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 $ 72,685,947 12 %
BREIT - Blackstone Real Estate
Income Trust (2017) (n) Core+ Real Estate 70,314,335 13 %
BXMT - Blackstone Mortgage Trust
(2013) (o) Real Estate Debt 6,541,046 7 %
Private Equity
BIP - Blackstone Infrastructure
Partners (2019) (p) Infrastructure 25,778,540 18 %
Hedge Fund Solutions
BSCH - Blackstone Strategic Capital
Holdings (2014) (q) GP Stakes 10,325,973 15 %
Credit
BXSL - Blackstone Secured Lending Fund (2018) (r) U.S. Direct Lending 11,113,320 10 % BCRED - Blackstone Private Credit Fund (2021) (s) U.S. Direct Lending 57,469,317 8 %
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
capital 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 from
the impact of economic and market activities in the current quarter.
(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.
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(k) Represents the performance for select Perpetual Capital Strategies;
strategies excluded consist primarily of (1) investment strategies that
have 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
realized 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
represented
(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
of all dividends received during the period. Return incorporates the
closing NYSE stock price as of
May 22, 2013 . (p) Including co-investment vehicles that do not pay fees, BIP Total Assets Under Management is$31.1 billion . (q) BSCH represents the aggregate Total Assets Under Management and Total Net
Return 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
$11.2 billion .
(r) The BXSL Total Assets Under Management and Total Net Return are presented
as of
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
(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 Nine Months Ended
September 30, 2022 vs. 2021 September 30, 2022 vs. 2021
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)
Management Fees, Net
Base Management Fees $ 610,606 $ 485,308 $ 125,298 26 % $ 1,802,543 $ 1,366,158 $ 436,385 32 %
Transaction and Other Fees, Net 54,342 53,876 466 1 % 141,801 117,975 23,826 20 %
Management Fee Offsets (1,842 ) (446 ) (1,396 ) 313 % (3,491 ) (2,562 ) (929 ) 36 %
Total Management Fees, Net 663,106 538,738 124,368 23 % 1,940,853 1,481,571 459,282 31 %
Fee Related Performance Revenues 260,003 35,625 224,378 630 % 1,017,027 224,793 792,234 352 %
Fee Related Compensation (239,572 ) (137,313 ) (102,259 ) 74 % (858,307 ) (447,762 ) (410,545 ) 92 %
Other Operating Expenses (74,701 ) (61,398 ) (13,303 ) 22 % (229,033 ) (160,520 ) (68,513 ) 43 %
Fee Related Earnings 608,836 375,652 233,184 62 % 1,870,540 1,098,082 772,458 70 %
Realized Performance Revenues 142,794 495,727 (352,933 ) -71 % 2,943,430 935,418 2,008,012 215 %
Realized Performance Compensation (33,464 ) (199,100 ) 165,636 -83 % (1,154,897 ) (376,790 ) (778,107 ) 207 %
Realized Principal Investment Income 45,297 42,677 2,620 6 % 128,388 171,626 (43,238 ) -25 %
Net Realizations 154,627 339,304 (184,677 ) -54 % 1,916,921 730,254 1,186,667 163 %
Segment Distributable Earnings $ 763,463 $ 714,956 $ 48,507 7 % $ 3,787,461 $ 1,828,336 $ 1,959,125 107 %
n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$763.5 million for the three months endedSeptember 30, 2022 , an increase of$48.5 million , compared to$715.0 million for the three months endedSeptember 30, 2021 . The increase in Segment Distributable Earnings was attributable to an increase of$233.2 million in Fee Related Earnings, partially offset by a decrease of$184.7 million in Net Realizations. Segment Distributable Earnings in our Real Estate segment in the third quarter of 2022 were higher compared to the third 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, partially offset by a decrease in Net Realizations. Against a challenging market backdrop and some near-term industry headwinds, our institutional fundraising has remained positive, with particular strength in the largely completed fundraise for our recent global opportunistic real estate flagship strategy. Perpetual capital strategies, including certain private wealth strategies such as BREIT, represent an increasing percentage of Total Assets Under Management in our Real Estate segment. While in the third quarter we experienced net inflows, market volatility and investor capital constraints led to a decline in inflows and an increase in repurchase requests in our private wealth strategies, particularly from ourAsia -based private wealth investors. A continuation or worsening of this challenging market environment would further adversely affect our net flows, which could potentially be negative to some extent in the near-term. We believe the long-term trends remain positive, however, with well-disclosed liquidity and structural protections as well as compelling performance. Our current performance has been assisted by interest rate hedges put in place related to debt liabilities, in anticipation of rising interest rates.
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Despite significant market volatility globally, including as a result of the high rate of inflation and escalating interest rates, our real estate business is demonstrating fundamental strength. Our real estate strategies have generally oriented their portfolios in sectors and markets, such as logistics and rental housing, that are better insulated from inflationary pressures 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. 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 more challenged sectors such as older, traditional office buildings and long-term leases which may be more exposed to rising inflation and interest rates. Elevated inflation is likely to contribute to more significant interest rate hikes and market volatility, which may lead to downward pressure on the value of our real estate portfolio. Capital market volatility and economic uncertainty led to lower realizations and capital deployment in the third quarter of 2022, both of which are likely to be muted until market conditions improve. 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$608.8 million for the three months endedSeptember 30, 2022 , an increase of$233.2 million , or 62%, compared to$375.7 million for the three months endedSeptember 30, 2021 . The increase in Fee Related Earnings was primarily attributable to increases of$224.4 million in Fee Related Performance Revenues and$124.4 million in Management Fees, Net, partially offset by increases of$102.3 million in Fee Related Compensation and$13.3 million in Other Operating Expenses. Fee Related Performance Revenues were$260.0 million for the three months endedSeptember 30, 2022 , an increase of$224.4 million , compared to$35.6 million for the three months endedSeptember 30, 2021 . The increase was primarily due to the crystallization of BREIT performance revenues, which, beginning in the three months endedMarch 31, 2022 , crystallizes on a quarterly basis in lieu of annually. Management Fees, Net were$663.1 million for the three months endedSeptember 30, 2022 , an increase of$124.4 million , compared to$538.7 million for the three months endedSeptember 30, 2021 , primarily driven by an increase in Base Management Fees. Base Management Fees increased$125.3 million primarily due to Fee-Earning Assets Under Management growth in Core+ real estate. Fee Related Compensation was$239.6 million for the three months endedSeptember 30, 2022 , an increase of$102.3 million , compared to$137.3 million for the three months endedSeptember 30, 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$74.7 million for the three months endedSeptember 30, 2022 , an increase of$13.3 million , compared to$61.4 million for the three months endedSeptember 30, 2021 . The increase was primarily due to travel and entertainment, occupancy related expenses, and professional fees.
Net Realizations
Net Realizations were$154.6 million for the three months endedSeptember 30, 2022 , a decrease of$184.7 million , compared to$339.3 million for the three months endedSeptember 30, 2021 . The decrease in Net Realizations was attributable to a decrease of$352.9 million in Realized Performance Revenues, partially offset by an decrease of$165.6 million in Realized Performance Compensation. 104
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Realized Performance Revenues were$142.8 million for the three months endedSeptember 30, 2022 , a decrease of$352.9 million , compared to$495.7 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to lower Realized Performance Revenues in BREP and co-investment. Realized Performance Compensation was$33.5 million for the three months endedSeptember 30, 2022 , a decrease of$165.6 million , compared to$199.1 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to the decrease in Realized Performance Revenues.
Nine Months Ended
Segment Distributable Earnings were
Fee Related Earnings
Fee Related Earnings were$1.9 billion for the nine months endedSeptember 30, 2022 , an increase of$772.5 million , or 70%, compared to$1.1 billion for the nine months endedSeptember 30, 2021 . The increase in Fee Related Earnings was attributable to increases of$792.2 million in Fee Related Performance Revenues and$459.3 million in Management Fees, Net, partially offset by increases of$410.5 million in Fee Related Compensation and$68.5 million in Other Operating Expenses. Fee Related Performance Revenues were$1.0 billion for the nine months endedSeptember 30, 2022 , an increase of$792.2 million , compared to$224.8 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to the crystallization of BREIT performance revenues, which, beginning in the three months endedMarch 31, 2022 , crystallizes on a quarterly basis in lieu of annually. Management Fees, Net were$1.9 billion for the nine months endedSeptember 30, 2022 , an increase of$459.3 million , compared to$1.5 billion for the nine months endedSeptember 30, 2021 , primarily driven by an increase in Base Management Fees. Base Management Fees increased$436.4 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% atSeptember 30, 2021 to 0.97% atSeptember 30, 2022 . The decrease was primarily due to growth in BREDS insurance vehicles, which have a lower management fee rate and the commencement of BREP X, which is currently in its management fee holiday period. Fee Related Compensation was$858.3 million for the nine months endedSeptember 30, 2022 , an increase of$410.5 million , compared to$447.8 million for the nine months endedSeptember 30, 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
Net Realizations
Net Realizations were$1.9 billion for the nine months endedSeptember 30, 2022 , an increase of$1.2 billion , or 163%, compared to$730.3 million for the nine months endedSeptember 30, 2021 . The increase in Net Realizations was attributable to an increase of$2.0 billion in Realized Performance Revenues, partially offset by an increase of$778.1 million in Realized Performance Compensation and a decrease of$43.2 million inRealized Principal Investment Income. 105
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Realized Performance Revenues were
Realized Performance Compensation was$1.2 billion for the nine months endedSeptember 30, 2022 , an increase of$778.1 million , compared to$376.8 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to the increase in Realized Performance Revenues. Realized Principal Investment Income was$128.4 million for the nine months endedSeptember 30, 2022 , a decrease of$43.2 million , compared to$171.6 million for the nine months endedSeptember 30, 2021 . The decrease was primarily due to the segment's allocation of the gain recognized in connection with the Pátria sale transaction during the three months endedMarch 31, 2021 .
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.
The following table presents the internal rates of return, except where noted, of our significant real estate funds:
Three Months Ended Nine Months Ended September 30, 2022
September 30, September 30, Inception to Date
2022 2021 2022 2021 Realized Total
Fund (a) Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net
BREP VII -4% -3% 26% 22% 8% 6% 39% 32% 30% 22% 21% 15%
BREP VIII - - 17% 14% 13% 10% 36% 29% 36% 28% 24% 18%
BREP IX - - 18% 14% 17% 13% 50% 38% 97% 67% 48% 34%
BREP Europe IV (b) -4% -4% 1% 1% -2% -3% - - 28% 20% 19% 13%
BREP Europe V (b) -2% -2% 18% 15% 5% 4% 29% 23% 52% 43% 19% 13%
BREP Europe VI (b) -3% -3% 25% 19% 10% 6% 52% 37% 103% 75% 37% 24%
BREP Asia I -3% -2% 4% 3% -3% -3% 27% 21% 27% 20% 19% 13%
BREP Asia II -1% -1% 6% 4% -1% -1% 23% 15% 63% 43% 15% 8%
BREP
Co-Investment
(c) - - 19% 18% 22% 21% 48% 44% 18% 16% 18% 16%
BPP (d) 2% 2% 6% 5% 14% 12% 13% 11% n/a n/a 14% 12%
BREIT (e) n/a 2% n/a 8% n/a 9% n/a 21% n/a n/a n/a 13%
BREDS High-Yield (f) 2% 2% 3% 2% 2% - 13% 9% 15% 10% 14% 9%
BXMT (g) n/a -13% n/a -3% n/a -19% n/a 17% n/a n/a n/a 7%
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.
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(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 twelve funds with closed investment periods as ofSeptember 30, 2022 : BREP IX, 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 ofSeptember 30, 2022 , BREP VII, BREP VI, BREP V, BREP IV, BREP Europe IV and BREP Europe III were 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 IX, BREP VIII, BREP Europe V, BREP Asia II, BREP Asia I and BREDS III were above their carried interest thresholds. Funds are considered above their carried interest thresholds based on the aggregate fund position, although individual limited partners may be below their respective carried interest thresholds in certain funds. 107
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Private Equity
The following table presents the results of operations for our Private Equity
segment:
Three Months Ended Nine Months Ended
September 30, 2022 vs. 2021 September 30, 2022 vs. 2021
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)
Management and Advisory Fees, Net
Base Management Fees $ 466,474 $ 370,083 $ 96,391 26% $ 1,321,405 $ 1,112,349 $ 209,056 19%
Transaction, Advisory and Other Fees, Net 24,313 50,241 (25,928 ) -52% 64,522 125,220 (60,698 ) -48%
Management Fee Offsets (3,634 ) 10 (3,644 ) n/m (53,933 ) (17,510 ) (36,423 ) 208%
Total Management and Advisory Fees, Net 487,153 420,334 66,819 16% 1,331,994 1,220,059 111,935 9% Fee Related Performance Revenues - - - n/a (648 ) - (648 ) n/m Fee Related Compensation (142,381 ) (139,211 ) (3,170 ) 2% (446,053 ) (416,575 ) (29,478 ) 7% Other Operating Expenses (76,138 ) (56,792 ) (19,346 ) 34% (227,115 ) (168,888 ) (58,227 ) 34% Fee Related Earnings 268,634 224,331 44,303 20% 658,178 634,596 23,582 4% Realized Performance Revenues 309,326 988,331 (679,005 ) -69% 882,448 1,627,186 (744,738 ) -46% Realized Performance Compensation (164,531 ) (417,386 ) 252,855 -61% (428,614 ) (687,970 ) 259,356 -38% Realized Principal Investment Income 38,015 77,570 (39,555 ) -51% 112,357
220,769 (108,412 ) -49%
Net Realizations 182,810 648,515 (465,705 ) -72% 566,191
1,159,985 (593,794 ) -51%
Segment Distributable Earnings$ 451,444 $ 872,846 $ (421,402 ) -48%$ 1,224,369 $ 1,794,581 $ (570,212 ) -32% n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$451.4 million for the three months endedSeptember 30, 2022 , a decrease of$421.4 million , compared to$872.8 million for the three months endedSeptember 30, 2021 . The decrease in Segment Distributable Earnings was attributable to a decrease of$465.7 million in Net Realizations, partially offset by an increase of$44.3 million in Fee Related Earnings. Segment Distributable Earnings in our Private Equity segment in the third quarter of 2022 were lower compared to the third quarter of 2021. This was primarily driven by a decrease in Net Realizations, partially offset by an increase in Fee Related Earnings. Heightened labor and wage inflation have continued to put profit margin pressure on certain of our private equity portfolio companies, including those in labor-intensive businesses. Heightened energy and materials costs have also continued to put profit margin pressure on our materials-intensive private equity portfolio companies. The impact of such pressures, however, on our overall private equity portfolio has been to some extent mitigated by its focus on investing in companies that are less impacted by rising input costs or that benefit from pricing power. In addition, higher than expected rates of inflation and the possibility that inflation could remain elevated for longer than generally anticipated, as well as continued significant interest rate increases, have contributed and are likely to continue to contribute to significant market volatility. This has disproportionately impacted the value of future cash flows of technology and growth companies, whose values fell materially in 2022. These companies may be subject to continued depressed, or even further declines in, values in a challenging market environment. Continued uncertainty and a difficult market environment led to lower realizations and capital deployment in the third quarter of 2022, both of which are likely to be muted until market conditions improve, which would negatively impact Segment Distributable Earnings in
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our Private Equity segment. Moreover, challenging market conditions have pressured investors' ability to allocate to private equity strategies and contributed to an already competitive fundraising environment. Despite these near-term headwinds, our institutional fundraising has remained positive, and we have progressed meaningfully toward our overall flagship fundraise goal. In energy, favorable market conditions contributed to a meaningful increase in the value of certain energy investments, as energy, oil and gas prices remained elevated in the third quarter of 2022. This short-term trend, in part due to decreased supply because of the ongoing war betweenRussia andUkraine and heightened global demand, has had a positive impact on our energy portfolio. Beyond this short-term trend, 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
Management and Advisory Fees, Net were$487.2 million for the three months endedSeptember 30, 2022 , an increase of$66.8 million , compared to$420.3 million for the three months endedSeptember 30, 2021 , primarily driven by an increase in Base Management Fees, partially offset by a decrease in Transaction and Advisory Fees, Net. Base Management Fees increased$96.4 million primarily due to (a) the commencement ofStrategic Partners IX's investment period during the three months endedDecember 31, 2021 and (b) Fee-Earning Assets Under Management Growth in BIP. Transaction and Advisory Fees, Net decreased$25.9 million primarily due to deal activity in BXCM. Other Operating Expenses were$76.1 million for the three months endedSeptember 30, 2022 , an increase of$19.3 million , compared to$56.8 million for the three months endedSeptember 30, 2021 . The increase was primarily due to travel and entertainment, occupancy and technology related expenses, and professional fees. Fee Related Compensation was$142.4 million for the three months endedSeptember 30, 2022 , an increase of$3.2 million , compared to$139.2 million for the three months endedSeptember 30, 2021 . The increase was primarily due to an increase in Base Management Fees on which a portion of Fee Related Compensation is based. Net Realizations Net Realizations were$182.8 million for the three months endedSeptember 30, 2022 , a decrease of$465.7 million , compared to$648.5 million for the three months endedSeptember 30, 2021 . The decrease in Net Realizations was attributable to decreases of$679.0 million in Realized Performance Revenues and$39.6 million in Realized Principal Investment Income, partially offset by a decrease of$252.9 million in Realized Performance Compensation.
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Realized Performance Revenues were$309.3 million for the three months endedSeptember 30, 2022 , a decrease of$679.0 million , compared to$988.3 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to lower Realized Performance Revenues in corporate private equity and Tactical Opportunities, partially offset by an increase of Realized Performance Revenues inStrategic Partners . Realized Principal Investment Income was$38.0 million for the three months endedSeptember 30, 2022 , a decrease of$39.6 million , compared to$77.6 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to a decrease of Realized Principal Investment Income in corporate private equity. Realized Performance Compensation was$164.5 million for the three months endedSeptember 30, 2022 , a decrease of$252.9 million , compared to$417.4 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to the decrease in Realized Performance Revenues.
Nine Months Ended
Segment Distributable Earnings were$1.2 billion for the nine months endedSeptember 30, 2022 , a decrease of$570.2 million , compared to$1.8 billion for the nine months endedSeptember 30, 2021 . The decrease in Segment Distributable Earnings was attributable to a decrease of$593.8 million in Net Realizations, partially offset by an increase of$23.6 million in Fee Related Earnings.
Fee Related Earnings
Fee Related Earnings were$658.2 million for the nine months endedSeptember 30, 2022 , an increase of$23.6 million , compared to$634.6 million for the nine months endedSeptember 30, 2021 . The increase in Fee Related Earnings was attributable to an increase of$111.9 million in Management and Advisory Fees, Net, partially offset by increases of$58.2 million in Other Operating Expenses and$29.5 million in Fee Related Compensation. Management and Advisory Fees, Net were$1.3 billion for the nine months endedSeptember 30, 2022 , an increase of$111.9 million , compared to$1.2 billion for the nine months endedSeptember 30, 2021 , primarily driven by an increase in Base Management Fees, partially offset by a decrease in Transaction, Advisory and Other Fees, Net and an increase in Management Fee Offsets. Base Management Fees increased$209.1 million primarily due to (a) the commencement ofStrategic Partners GP Solutions and Strategic Partners IX's investment periods during the three months endedJune 30, 2021 and the three months endedDecember 31, 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 three months endedMarch 31, 2021 . Transaction, Advisory and Other Fees, Net decreased$60.7 million primarily due to deal activity in BXCM. Management Fee Offsets increased$36.4 million primarily due to the launch of Strategic Partners IX during the three months endedDecember 31, 2021 .
Other Operating Expenses were
Fee Related Compensation was$446.1 million for the nine months endedSeptember 30, 2022 , an increase of$29.5 million , compared to$416.6 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to an increase in Base Management Fees on which a portion of Fee Related Compensation is based. Net Realizations Net Realizations were$566.2 million for the nine months endedSeptember 30, 2022 , a decrease of$593.8 million , compared to$1.2 billion for the nine months endedSeptember 30, 2021 . The decrease in Net Realizations was attributable to decreases of$108.4 million inRealized Principal Investment Income and$744.7 million in Realized Performance Revenues, partially offset by a decrease of$259.4 million in Realized Performance Compensation.
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Realized Principal Investment Income was$112.4 million for the nine months endedSeptember 30, 2022 , a decrease of$108.4 million , compared to$220.8 million for the nine months endedSeptember 30, 2021 . The decrease was primarily due to the segment's allocation of the gain recognized in connection with the Pátria sale transaction during the three months endedMarch 31, 2021 . Realized Performance Revenues were$882.4 million for the nine months endedSeptember 30, 2022 , a decrease of$744.7 million , compared to$1.6 billion for the nine months endedSeptember 30, 2021 . The decrease was primarily due to lower Realized Performance Revenues in corporate private equity and Tactical Opportunities, partially offset by higher Realized Performance Revenues inStrategic Partners . Realized Performance Compensation was$428.6 million for the nine months endedSeptember 30, 2022 , a decrease of$259.4 million , compared to$688.0 million for the nine months endedSeptember 30, 2021 . The decrease was primarily due to a decrease in Realized Performance 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 Nine Months Ended September 30, 2022
September 30, September 30, Inception to Date
2022 2021 2022 2021 Realized Total
Fund (a) Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net
BCP V 2% -1% 27% 11% 26% 15% 228% 96% 10% 8% 10% 8%
BCP VI 7% 6% -2% -1% 3% 3% 14% 12% 20% 16% 17% 12%
BCP VII -4% -4% 7% 6% -13% -12% 38% 31% 45% 34% 20% 14%
BCP VIII - -1% n/a n/a -1% -3% n/a n/a n/m n/m 34% 18%
BEP I 9% 8% 7% 5% 45% 36% 67% 52% 18% 14% 15% 12%
BEP II 2% 2% 7% 7% 28% 27% 50% 48% 6% 1% 11% 8%
BEP III 9% 6% 14% 11% 15% 10% 79% 53% 195% 66% 63% 38%
BCP Asia I -8% -7% 53% 47% -39% -36% 186% 156% 137% 97% 49% 34%
BCEP I (b) 1% 1% 7% 7% 6% 5% 38% 35% 61% 55% 27% 24%
BCEP II (b) - -1% n/a n/a 4% 1% n/a n/a n/a n/a 8% 2%
Tactical Opportunities -3% -3% 1% 1% -2% -2% 29% 22% 22% 18% 16% 11%
Tactical Opportunities
Co-Investment
and Other -2% 1% 6% 6% -1% 2% 28% 24% 19% 18% 21% 18%
BXG I -1% -2% -5% -5% -14% -14% 71% 65% n/m n/m 7% -
Strategic Partners VI (c) -6% -7% 18% 17% -2% -3% 49% 45% n/a n/a 19% 15%
Strategic Partners VII (c) -6% -7% 24% 21% -1% -2% 65% 58% n/a n/a 25% 20%
Strategic Partners Real Assets II (c) -1% -1% 10% 9% 14% 12% 18% 15% n/a n/a 20% 16%
Strategic Partners VIII (c) -2% -2% 31% 27% 6% 5% 96% 80% n/a n/a 54% 43%
Strategic Partners Real Estate , SMA and
Other (c) 4% 2% 13% 13% 20% 16% 28% 28% n/a n/a 22% 19%
Infra III (c) 3% 2% n/m n/m 41% 29% n/m n/m n/a n/a 97% 58%
BIP 8% 6% - - 18% 14% 35% 28% n/a n/a 24% 18%
Clarus IV 3% 3% 6% 4% 6% 4% 24% 18% 30% 23% 24% 15%
BXLS V 4% 2% 12% 8% 6% -1% 30% 9%
18% 9% 17% 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.
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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 ofSeptember 30, 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 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. Funds are considered above their carried interest thresholds based on the aggregate fund position, although individual limited partners may be below their respective carried interest thresholds in certain funds. 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 Nine Months Ended September 30, 2022 vs. 2021 September 30,
2022 vs. 2021
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)
Management Fees, Net
Base Management Fees $ 138,818 $ 154,884 $ (16,066 ) -10% $ 428,941 $ 460,661 $ (31,720 ) -7%
Transaction and Other Fees, Net 581 2,535 (1,954 ) -77% 5,500 8,439 (2,939 ) -35%
Management Fee Offsets (57 ) (255 ) 198 -78% (166 ) (516 ) 350 -68%
Total Management Fees, Net 139,342 157,164 (17,822 ) -11% 434,275 468,584 (34,309 ) -7%
Fee Related Compensation (40,895 ) (35,092 ) (5,803 ) 17% (145,993 ) (112,580 ) (33,413 ) 30%
Other Operating Expenses (26,599 ) (25,476 ) (1,123 ) 4% (75,849 ) (66,521 ) (9,328 ) 14%
Fee Related Earnings 71,848 96,596 (24,748 ) -26% 212,433 289,483 (77,050 ) -27%
Realized Performance Revenues 4,430 7,271 (2,841 ) -39% 40,540 55,900 (15,360 ) -27%
Realized Performance Compensation (3,237 ) (1,443 ) (1,794 ) 124% (14,320 ) (13,977 )
(343 ) 2%
Realized Principal Investment Income 9,460 14,943 (5,483 ) -37% 22,831 52,618 (29,787 ) -57%
Net Realizations 10,653 20,771 (10,118 ) -49% 49,051 94,541 (45,490 ) -48%
Segment Distributable Earnings $ 82,501 $ 117,367 $ (34,866 ) -30% $ 261,484 $ 384,024 $ (122,540 ) -32%
n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$82.5 million for the three months endedSeptember 30, 2022 , a decrease of$34.9 million , compared to$117.4 million for the three months endedSeptember 30, 2021 . The decrease in Segment Distributable Earnings was attributable to decreases of$24.7 million in Fee Related Earnings and$10.1 million in Net Realizations.
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Segment Distributable Earnings in our Hedge Fund Solutions segment in the third quarter of 2022 were lower compared to the third quarter of 2021. This decrease was primarily driven by decreases in Fee Related Earnings and Net Realizations. Strategies across our Hedge Fund Solutions segment navigated a period of significant market volatility caused by high inflation and escalating interest rates to generally outperform the broader market. Despite such a challenging environment adversely impacting the performance of some of the underlying managers in our Hedge Fund Solutions segment, the segment demonstrated significantly less volatility than the broader markets in the third quarter of 2022 and an ability to provide downside protection in a difficult global market environment. Segment Distributable Earnings in the Hedge 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. To the extent the meaningful equity market volatility experienced in 2022 subsides and markets experience a prolonged period of low volatility, investors may 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. In addition, although fundraising in our Hedge Fund Solutions segment may be negatively impacted by market turbulence, which may result in a delay in management fees, continued performance relative to the broader markets could contribute to increased inflows in the segment. 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$71.8 million for the three months endedSeptember 30, 2022 , a decrease of$24.7 million , compared to$96.6 million for the three months endedSeptember 30, 2021 . The decrease in Fee Related Earnings was primarily attributable to a decrease of$17.8 million in Management Fees, Net and an increase of$5.8 million in Fee Related Compensation. Management Fees, Net were$139.3 million for the three months endedSeptember 30, 2022 , a decrease of$17.8 million , compared to$157.2 million for the three months endedSeptember 30, 2021 , primarily due to a decrease in Base Management Fees. Base Management Fees decreased$16.1 million primarily driven by a decrease in Fee-Earning Assets Under Management in customized solutions and commingled products. Fee Related Compensation was$40.9 million for the three months endedSeptember 30, 2022 , an increase of$5.8 million , compared to$35.1 million for the three months endedSeptember 30, 2021 . The increase was primarily due to changes in compensation accruals.
Net Realizations
Net Realizations were$10.7 million for the three months endedSeptember 30, 2022 , a decrease of$10.1 million , compared to$20.8 million for the three months endedSeptember 30, 2021 . The decrease in Net Realizations was primarily attributable to decreases of$5.5 million inRealized Principal Investment Income (Loss) and$2.8 million in Realized Performance Revenues, partially offset by an increase of$1.8 million in Realized Performance Compensation.
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Realized Performance Revenues were$4.4 million for the three months endedSeptember 30, 2022 , a decrease of$2.8 million , compared to$7.3 million for the three months endedSeptember 30, 2021 . The decrease was primarily due to lower Realized Performance Revenues in our customized solutions and commingled products.
Realized Principal Investment Income (Loss) was
Realized Performance Compensation was$3.2 million for the three months endedSeptember 30, 2022 , an increase of$1.8 million , compared to$1.4 million for the three months endedSeptember 30, 2021 . The increase was primarily due to changes in compensation accruals.
Nine Months Ended
Segment Distributable Earnings were$261.5 million for the nine months endedSeptember 30, 2022 , a decrease of$122.5 million , compared to$384.0 million for the nine months endedSeptember 30, 2021 . The decrease in Segment Distributable Earnings was attributable to decreases of$77.1 million in Fee Related Earnings and$45.5 million in Net Realizations.
Fee Related Earnings
Fee Related Earnings were$212.4 million for the nine months endedSeptember 30, 2022 , a decrease of$77.1 million , compared to$289.5 million for the nine months endedSeptember 30, 2021 . The decrease in Fee Related Earnings was primarily attributable to a decrease of$34.3 million in Management Fees, Net and an increase of$33.4 million in Fee Related Compensation. Management Fees, Net were$434.3 million for the nine months endedSeptember 30, 2022 , a decrease of$34.3 million , compared to$468.6 million for the nine months endedSeptember 30, 2021 , primarily due to a decrease in Base Management Fees. Base Management Fees decreased$31.7 million primarily driven by a decrease in Fee-Earning Assets Under Management in customized solutions and commingled products, partially offset by an increase in Fee-Earning Assets Under Management in liquid and specialized solutions.
Fee Related Compensation was
Net Realizations
Net Realizations were$49.1 million for the nine months endedSeptember 30, 2022 , a decrease of$45.5 million , compared to$94.5 million for the nine months endedSeptember 30, 2021 . The decrease in Net Realizations was attributable to decreases of$29.8 million inRealized Principal Investment Income and$15.4 million in Realized Performance Revenues.
Realized Principal Investment Income (Loss) was
Realized Performance Revenues were$40.5 million for the nine months endedSeptember 30, 2022 , a decrease of$15.4 million , compared to$55.9 million for the nine months endedSeptember 30, 2021 . The decrease was primarily due to lower Realized Performance Revenues in customized solutions and commingled products, partially offset by increased Realized Performance Revenues in liquid and specialized solutions. 115
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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 of the BAAM Principal
Solutions Composite:
Three Nine Average Annual Returns (a)
Months Ended Months Ended Periods Ended
September 30, September 30, September 30, 2022
2022 2021 2022 2021 One Year Three Year Five Year Historical
Composite Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net
BAAM Principal Solutions Composite (b) 1 % 1 % 1 % 1 % 3 % 2 % 7 % 7 % 4 % 3 % 6 % 5 %
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 January 1, 2000 .
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Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance
Eligible Assets Under Estimated % Above
High Water Mark/
Management Benchmark (a)
As of September 30, As of September 30,
2022 2021 2022 2021
(Dollars in Thousands)
Hedge Fund Solutions Managed Funds (b) $ 48,764,525 $ 45,560,404 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
Of the Invested Performance Eligible Assets Under Management below their
respective High Water Marks/Benchmarks as of
within 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 Nine Months Ended
September 30, 2022 vs. 2021 September 30, 2022 vs. 2021
2022 2021 $ % 2022 2021 $ %
(Dollars in Thousands)
Management Fees, Net
Base Management Fees $ 312,663 $ 197,591 $ 115,072 58 % $ 911,697 $ 526,039 $ 385,658 73 %
Transaction and Other Fees, Net 10,629 8,132 2,497 31 % 27,143 19,915 7,228 36 %
Management Fee Offsets (1,323 ) (1,884 ) 561 -30 % (4,107 ) (5,146 ) 1,039 -20 %
Total Management Fees, Net 321,969 203,839 118,130 58 % 934,733 540,808 393,925 73 %
Fee Related Performance Revenues 112,128 37,688 74,440 198 % 260,410 66,577 193,833 291 %
Fee Related Compensation (135,420 ) (107,865 ) (27,555 ) 26 % (399,799 ) (263,059 ) (136,740 ) 52 %
Other Operating Expenses (68,696 ) (51,276 ) (17,420 ) 34 % (189,745 ) (142,615 ) (47,130 ) 33 %
Fee Related Earnings 229,981 82,386 147,595 179 % 605,599 201,711 403,888 200 %
Realized Performance Revenues 12,459 6,148 6,311 103 % 122,175 73,234 48,941 67 %
Realized Performance Compensation (4,992 ) (1,145 ) (3,847 ) 336 % (54,487 ) (29,532 ) (24,955 ) 85 %
Realized Principal Investment Income 46,993 15,820 31,173 197 % 76,793 67,285 9,508 14 %
Net Realizations 54,460 20,823 33,637 162 % 144,481 110,987 33,494 30 %
Segment Distributable Earnings $ 284,441 $ 103,209 $ 181,232 176 % $ 750,080 $ 312,698 $ 437,382 140 %
n/m Not meaningful.
Three Months Ended
Segment Distributable Earnings were$284.4 million for the three months endedSeptember 30, 2022 , an increase of$181.2 million , or 176%, compared to$103.2 million for the three months endedSeptember 30, 2021 . The increase in Segment Distributable Earnings was attributable to increases of$147.6 million in Fee Related Earnings and$33.6 million in Net Realizations. Segment Distributable Earnings in our Credit & Insurance segment in the third quarter of 2022 were higher compared to the third quarter of 2021, driven by an increase in Fee Related Earnings and an increase in Net Realizations. While public spreads further widened amid market volatility and heightened uncertainty, rising interest rates and solid underlying company performance favorably impacted returns in our private credit strategies. Perpetual capital strategies, including certain private wealth strategies such as BCRED, represent an increasing percentage of our Total Assets Under Management in our Credit & Insurance segment. While in the third quarter we experienced net inflows, market volatility and investor capital constraints led to a decline in inflows and an increase in repurchase requests in our private wealth strategies. A continuation or worsening of this challenging market environment would further adversely affect our net flows, which could potentially be negative to some extent in the near term. We believe the long-term trends, however, remain positive. In theU.S. , rising interest rates and the resulting higher cost of capital has the potential to negatively impact the free cash flow and credit quality of certain borrowers. In addition, rising costs resulting from heightened energy prices and input costs are contributing to margin pressures at certain of our Credit & Insurance segment investments. Such investments would continue to be negatively impacted by a sustained high rate of inflation if they are unable to mitigate margin pressures, especially if concurrent with an increase in their debt service costs. If 118
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higher than expected rates of inflation and expected significant interest rate increases in 2022 occur concurrently with a period of economic weakness or a slowdown in growth, portfolio performance 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, the performance of our credit funds have generally benefitted from rising interest rates as a substantial majority of the portfolio is floating rate. In addition, continued market dislocation may create attractive deployment opportunities, particularly for our private credit strategies as borrowers seek alternative lending sources. Nonetheless, significant market dislocation could limit the liquidity of certain assets traded in the credit markets, and this would impact our funds' ability to sell such assets at attractive prices or in a timely manner. In energy, oil and gas prices remained elevated in the third quarter of 2022, in part due to decreased supply as a result of the ongoing war betweenRussia andUkraine and heightened global demand. This short-term trend has had a positive impact on our energy portfolio. Beyond this short-term trend, 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$230.0 million for the three months endedSeptember 30, 2022 , an increase of$147.6 million , or 179%, compared to$82.4 million for the three months endedSeptember 30, 2021 . The increase in Fee Related Earnings was primarily attributable to increases of$118.1 million in Management Fees, Net and$74.4 million in Fee Related Performance Revenues, partially offset by increases of$27.6 million in Fee Related Compensation and$17.4 million in Other Operating Expenses. Management Fees, Net were$322.0 million for the three months endedSeptember 30, 2022 , an increase of$118.1 million , compared to$203.8 million for the three months endedSeptember 30, 2021 , primarily driven by an increase in Base Management Fees. Base Management Fees increased$115.1 million primarily due to an increase in inflows in BCRED and BIS. Fee Related Performance Revenues were$112.1 million for the three months endedSeptember 30, 2022 , an increase of$74.4 million , compared to$37.7 million for the three months endedSeptember 30, 2021 . The increase was primarily due to performance and growth in BCRED, including the expiration of BCRED's fee holiday during the three months endedSeptember 30, 2021 . Fee Related Compensation was$135.4 million for the three months endedSeptember 30, 2022 , an increase of$27.6 million , compared to$107.9 million for the three months endedSeptember 30, 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$68.7 million for the three months endedSeptember 30, 2022 , an increase of$17.4 million , compared to$51.3 million for the three months endedSeptember 30, 2021 . The increase was primarily due to travel and entertainment, occupancy and technology related expenses, and professional fees. 119
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Net Realizations
Net Realizations were$54.5 million for the three months endedSeptember 30, 2022 , an increase of$33.6 million , or 162%, compared to$20.8 million for the three months endedSeptember 30, 2021 . The increase in Net Realizations was primarily attributable to increases of$31.2 million in Realized Principal Investment Income and$6.3 million in Realized Performance Revenues, partially offset by an increase of$3.8 million in Realized Performance Compensation.
Realized Principal Investment Income was
Realized Performance Revenues were$12.5 million for the three months endedSeptember 30, 2022 , an increase of$6.3 million , compared to$6.1 million for the three months endedSeptember 30, 2021 . The increase was primarily due to increases in our mezzanine opportunistic funds, energy strategies and direct lending separately managed accounts. Realized Performance Compensation was$5.0 million for the three months endedSeptember 30, 2022 , an increase of$3.8 million , compared to$1.1 million for the three months endedSeptember 30, 2021 . The increase was primarily due to the increase in Realized Performance Revenues.
Nine Months Ended
Segment Distributable Earnings were$750.1 million for the nine months endedSeptember 30, 2022 , an increase of$437.4 million , or 140%, compared to$312.7 million for the nine months endedSeptember 30, 2021 . The increase in Segment Distributable Earnings was primarily attributable to increases of$403.9 million in Fee Related Earnings and$33.5 million in Net Realizations.
Fee Related Earnings
Fee Related Earnings were$605.6 million for the nine months endedSeptember 30, 2022 , an increase of$403.9 million , or 200%, compared to$201.7 million for the nine months endedSeptember 30, 2021 . The increase in Fee Related Earnings was primarily attributable to increases of$393.9 million in Management Fees, Net and$193.8 million in Fee Related Performance Revenues, partially offset by increases of$136.7 million in Fee Related Compensation and$47.1 million in Other Operating Expenses. Management Fees, Net were$934.7 million for the nine months endedSeptember 30, 2022 , an increase of$393.9 million , compared to$540.8 million for the nine months endedSeptember 30, 2021 , primarily driven by an increase in Base Management Fees. Base Management Fees increased$385.7 million primarily due to an increase in inflows in BCRED and BIS. The annualized Base ManagementFee Rate increased from 0.56% atSeptember 30, 2021 to 0.62% atSeptember 30, 2022 . The increase was primarily due to BCRED management fee holiday ending. Fee Related Performance Revenues were$260.4 million for the nine months endedSeptember 30, 2022 , an increase of$193.8 million , compared to$66.6 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to performance and growth in BCRED, including the expiration of BCRED's fee holiday during the three months endedSeptember 30, 2021 . Fee Related Compensation was$399.8 million for the nine months endedSeptember 30, 2022 , an increase of$136.7 million , compared to$263.1 million for the nine months endedSeptember 30, 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.
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Other Operating Expenses were
Net Realizations
Net Realizations were$144.5 million for the nine months endedSeptember 30, 2022 , an increase of$33.5 million , or 30%, compared to$111.0 million for the nine months endedSeptember 30, 2021 . The increase in Net Realizations was attributable to an increase of$48.9 million in Realized Performance Revenues and an increase of$9.5 million in Realized Principal Investment Income, partially offset by an increase of$25.0 million in Realized Performance Compensation. Realized Performance Revenues were$122.2 million for the nine months endedSeptember 30, 2022 , an increase of$48.9 million , compared to$73.2 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to higher realized carry interest in our energy strategies and our direct lending separately managed accounts. Realized Principal Investment Income was$76.8 million for the nine months endedSeptember 30, 2022 , an increase of$9.5 million , compared to$67.3 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to the segment's allocation of the gain recognized in connection with the Pátria sale transaction during the three months endedMarch 31, 2021 . Realized Performance Compensation was$54.5 million for the nine months endedSeptember 30, 2022 , an increase of$25.0 million , compared to$29.5 million for the nine months endedSeptember 30, 2021 . The increase was primarily due to the increase in Realized Performance 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 Nine Months Ended
September 30, September 30, September 30, 2022
2022 2021 2022 2021 Inception to DateComposite (a) Gross Net Gross Net Gross Net Gross Net Gross Net Private Credit (b)(c) 3 % 2 % 5 % 3 % 5 % 2 % 17 % 13 % 11 % 7 % Liquid Credit (b) 1 % 1 % 1 % 1 % -5 % -6 % 4 % 4 % 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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(c) Effective
Credit composite return, cash flows are translated using a historical rate
instead of the daily spot rate to more closely reflect the actual performance
of foreign-denominated funds in the composite returns.
Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance
Eligible Assets Under Estimated % Above
High Water Mark/
Management Hurdle (a)
As of September 30, As of September 30,
2022 2021 2022 2021
(Dollars in Thousands)
Credit & Insurance (b) $ 85,164,349 $ 49,934,469 93 % 87 %
(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
incremental 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
of
Invested Performance Eligible Assets Under Management below their respective
High Water Marks/Hurdles as of September 30, 2022 , 40% were within 5% of
reaching 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 (Loss) Attributable toBlackstone Inc. to Distributable Earnings, Total Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 (Dollars in Thousands) Net Income Attributable to Blackstone Inc.$ 2,296 $ 1,401,895 $ 1,189,777 $ 4,458,919 Net Income Attributable to Non-Controlling Interests in Blackstone Holdings 37,724 1,315,641 1,061,516 3,667,618 Net Income (Loss) Attributable to Non-Controlling Interests in Consolidated Entities (62,093 ) 486,907 (62,425 ) 1,305,273 Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities 25,773 1,550 56,700 2,816 Net Income 3,700 3,205,993 2,245,568 9,434,626 Provision for Taxes 94,231 458,904 614,026 746,707 Net Income Before Provision for Taxes 97,931 3,664,897 2,859,594 10,181,333 Transaction-Related Charges (a) 9,247 59,193 59,721 122,614 Amortization of Intangibles (b) 13,238 17,044 47,326 51,212 Impact of Consolidation (c) 36,320 (488,457 ) 5,725 (1,308,089 ) Unrealized Performance Revenues (d) 771,637 (2,724,366 ) 2,946,255 (7,886,033 ) Unrealized Performance Allocations Compensation (e) (359,590 ) 1,193,853 (1,273,849 ) 3,394,041Unrealized Principal Investment (Income) Loss (f) 996,105 2,343 1,172,635 (526,249 ) Other Revenues (g) (198,546 ) (64,109 ) (427,069 ) (152,252 ) Equity-Based Compensation (h) 190,197 129,254 587,386 394,948 Administrative Fee Adjustment (i) 2,460 2,488 7,421 7,747 Taxes and Related Payables (j) (184,130 ) (156,867 ) (686,571 ) (381,762 ) Distributable Earnings 1,374,869 1,635,273 5,298,574 3,897,510 Taxes and Related Payables (j) 184,130 156,867 686,571 381,762 Net Interest and Dividend Loss (k) 22,850 16,238 38,249 40,367 Total Segment Distributable Earnings 1,581,849 1,808,378 6,023,394 4,319,639 Realized Performance Revenues (l) (469,009 )
(1,497,477 ) (3,988,593 ) (2,691,738 ) Realized Performance Compensation (m)
206,224 619,074 1,652,318 1,108,269
Realized Principal Investment Income (n) (139,765 ) (151,010 ) (340,369 ) (512,298 )
Fee Related Earnings $ 1,179,299 $
778,965
Adjusted EBITDA Reconciliation Distributable Earnings$ 1,374,869 $
1,635,273
80,312 51,773 216,339 140,245
Taxes and Related Payables (j) 184,130 156,867 686,571 381,762
Depreciation and Amortization (p) 14,958 12,771 44,918 37,645
Adjusted EBITDA $ 1,654,269 $ 1,856,684 $ 6,246,402 $ 4,457,162 (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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(Dollars in Thousands)
GAAP Unrealized Principal Investment
Income (Loss) $ (1,069,697 ) $ 183,754 $ (1,496,226 ) $ 1,151,904
Segment Adjustment 73,592 (186,097 ) 323,591 (625,655 )
Unrealized Principal Investment Income
(Loss) $ (996,105 ) $ (2,343 ) $ (1,172,635 ) $ 526,249 (g) This adjustment removes Other Revenues on a segment basis. The Segment
Adjustment represents the removal of certain Transaction-Related Charges.
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(Dollars in Thousands)
GAAP Other Revenue $ 199,382 $ 64,187 $ 427,839 $ 152,387
Segment Adjustment (836 ) (78 ) (770 ) (135 )
Other Revenues $ 198,546 $ 64,109 $ 427,069 $ 152,252 (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 (Loss) Before Provision
(Benefit) for Taxes and adjusted to exclude the tax impact of any
divestitures. For interim periods, taxes are calculated using the preferred
annualized effective tax rate approach. Related Payables represent
tax-related
payables 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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(Dollars in Thousands)
Taxes $ 163,602 $ 140,548 $ 613,201 $ 337,966
Related Payables 20,528 16,319 73,370 43,796
Taxes and Related Payables $ 184,130 $ 156,867 $ 686,571 $ 381,762 (k) This adjustment removes Interest and Dividend Revenue less Interest Expense
on a segment basis. The Segment Adjustment represents (1) the add back of
Interest and Dividend Revenue earned from consolidated Blackstone Funds which
have been eliminated in consolidation, and (2) the removal of interest
expense associated with the Tax Receivable Agreement.
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(Dollars in Thousands)
GAAP Interest and Dividend Revenue $ 52,420 $ 35,048 $ 168,980 $ 97,477
Segment Adjustment 5,042 487 9,110 2,401
Interest and Dividend Revenue 57,462 35,535 178,090 99,878
GAAP Interest Expense 80,507 52,413 216,896 141,718
Segment Adjustment (195 ) (640 ) (557 ) (1,473 )
Interest Expense 80,312 51,773 216,339 140,245
Net Interest and Dividend Loss $ (22,850 ) $ (16,238 ) $ (38,249 ) $ (40,367 ) (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:
September 30,
2022 2021
(Dollars in Thousands)
Investments of Consolidated Blackstone Funds $ 3,828,497 $ 2,104,705
Equity Method Investments
Partnership Investments 5,566,645 5,303,334
Accrued Performance Allocations 12,938,888
15,063,648
Corporate Treasury Investments 799,016 1,520,426 Other Investments 3,123,102 1,112,082 Total GAAP Investments$ 26,256,148 $ 25,104,195 Accrued Performance Allocations - GAAP$ 12,938,888 $ 15,063,648 Impact of Consolidation (a) 2,412 1 Due from Affiliates - GAAP (b) 154,587
59,669
Less: Net Realized Performance Revenues (c) (342,922 ) (416,336 ) Less: Accrued Performance Compensation - GAAP (d) (5,693,325 )
(6,395,903 )
Net Accrued Performance Revenues$ 7,059,640 $ 8,311,079
(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 that are consolidated 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 Equity. 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 $40.3 billion as of September 30, 2022, a decrease of $937.1 million, from December 31, 2021. The decrease in Total Assets was principally due to a decrease of $2.2 billion in total assets attributable to consolidated operating partnerships, partially offset by an increase of $1.8 billion in total assets attributable to consolidated Blackstone funds. The decrease in total assets attributable to consolidated operating partnerships was primarily due to a decrease of $3.7 billion in Investments, partially offset by an increase of $1.4 billion in Cash and Cash Equivalents. The decrease in Investments was primarily due to distributions received in real estate and private equity investments. The increase in Cash and Cash Equivalents was primarily due to the issuance of $1.5 billion of notes on January 10, 2022 and € 500 million of notes on June 1, 2022. The increase in total assets attributable to consolidated Blackstone funds was primarily due to an increase of $1.8 billion in Investments. The increase in Investments was primarily due to the consolidation of five Blackstone funds. The other net variances of the assets attributable to the consolidated operating partnerships and consolidated Blackstone funds were relatively unchanged. Total Liabilities were $20.5 billion as of September 30, 2022, an increase of $1.0 billion, from December 31, 2021. The increase in Total Liabilities was principally due to an increase of $1.0 billion in total liabilities attributable to consolidated operating partnerships. The increase in total liabilities attributable to the consolidated operating partnerships was primarily due to an increase of $1.5 billion in Loans Payable, partially offset by a decrease of $1.2 billion in Accrued Compensation and Benefits. The increase in Loans Payable was primarily due to the issuance of $1.5 billion of notes on January 10, 2022 and € 500 million of notes on June 1, 2022. The decrease in Accrued Compensation and Benefits was primarily due to a decrease in performance compensation. The other net variances of the liabilities attributable to the consolidated operating partnerships were relatively unchanged.
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 $4.1 billion committed revolving credit facility. As of
September 30, 2022, Blackstone had $3.5 billion in Cash and Cash Equivalents,
$799.0 million invested in Corporate Treasury Investments and $3.1 billion in
Other Investments (which included $2.8 billion of liquid investments), against
$9.4 billion in borrowings from our bond issuances, and no borrowings
outstanding under our revolving credit facility.
On November 3, 2022, Blackstone issued $600 million aggregate principal amount
of 5.900% senior notes due November 3, 2027 and $900 million aggregate principal
amount of 6.200% senior notes due April 22, 2033. Blackstone intends to use the
net proceeds from the sale of the notes for general corporate purposes. For
additional information 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 September 30, 2022 consisted of the following:
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 43,060 100,000 14,353
BREP IX 300,000 74,696 100,000 24,899
BREP X 300,000 297,565 100,000 99,188
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 26,592 43,333 7,682
BREP Europe VI 130,000 81,097 43,333 27,032
BREP Asia I 50,000 9,950 16,667 3,317
BREP Asia II 70,707 15,966 23,569 5,322
BREP Asia III 79,663 72,204 26,124 24,068
BREDS III 50,000 13,499 16,667 4,500
BREDS IV 50,000 23,167 - -
BPP 312,725 40,805 - -
Other (b) 24,090 6,528 - -
Total Real Estate (c) 3,097,185 811,395 798,026 245,783
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 $ 23,701 $ - $ -
BCP VI 719,718 82,829 250,000 28,771
BCP VII 500,000 42,980 225,000 19,341
BCP VIII 500,000 297,404 225,000 133,832
BCP IX 500,000 500,000 225,000 225,000
BEP I 50,000 4,728 - -
BEP II 80,000 14,633 26,667 4,878
BEP III 80,000 43,269 26,667 14,423
BEP IV 17,545 17,545 5,848 5,848
BCEP I 120,000 27,202 18,992 4,305
BCEP II 160,000 112,276 32,640 22,904
BCP Asia I 40,000 10,428 13,333 3,476
BCP Asia II 100,000 100,000 33,333 33,333
Tactical Opportunities 485,872 222,776 153,967 74,259
Strategic Partners 1,165,991 753,349 161,508 97,832
BIP 281,967 79,204 - -
BXLS 142,057 102,947 37,353 31,927
BXG 135,001 76,987 44,832 25,651
Other (b) 290,208 29,646 - -
Total Private Equity (c) 5,997,715 2,541,904 1,480,140 725,780
Hedge Fund Solutions
Strategic Alliance I 50,000 2,033 - -
Strategic Alliance II 50,000 1,482 - -
Strategic Alliance III 22,000 9,639 - -
Strategic Alliance IV 15,000 15,000 - -
Strategic Holdings I 154,610 27,634 - -
Strategic Holdings II 50,000 27,125 - -
Horizon 100,000 27,765 - -
Dislocation 10,000 8,930 - -
Other (b) 17,209 7,914 - -
Total Hedge Fund Solutions 468,819 127,522 - -
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 $ 29,197 $ 110,101 $ 26,788
Mezzanine / Opportunistic III 130,783 38,898 31,776 9,451
Mezzanine / Opportunistic IV 122,000 99,994 33,757 27,668
European Senior Debt I 63,000 16,508 56,882 14,905
European Senior Debt II 91,858 48,079 25,410 13,308
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 151,000 110,424 32,762 23,959
Energy I 80,000 37,630 75,445 35,487
Energy II 150,000 118,111 26,615 20,956
Credit Alpha Fund 52,102 19,752 50,670 19,209
Credit Alpha Fund II 25,500 12,550 6,289 3,095
Other (b) 267,733 182,090 19,964 3,948
Total Credit & Insurance 1,428,976 769,797 617,215 251,044
Other
Treasury (d) 1,227,017 740,163 - -
$ 12,219,712 $ 4,990,781 $ 2,895,381 $ 1,222,607
(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) Real Estate and Private Equity include
co-investments,
as applicable.
(d) 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 September 30, 2022, Blackstone Holdings Finance Co. L.L.C. (the "Issuer"),
an indirect subsidiary of Blackstone, had issued and outstanding the following
senior notes (collectively the "Notes"):
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
3.500%, Due 6/1/2034 € 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
$ 9,360,400
(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 the Issuer, has a $4.1 billion unsecured revolving credit
facility (the "Credit Facility") with Citibank, N.A ., as administrative agent
with a maturity date of June 3, 2027. 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 September 30, 2022 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:
October 1, 2022 to
Contractual Obligations December 31, 2022 2023-2024 2025-2026 Thereafter Total
(Dollars in Thousands)
Operating Lease Obligations (a) $ 32,589 $ 289,062 $ 298,188 $ 771,694 $ 1,391,533
Purchase Obligations 64,419 84,162 12,169 - 160,750Blackstone Issued Notes and Revolving Credit Facility (b)
- 400,000 882,180 8,078,220 9,360,400
Interest on Blackstone Issued Notes and Revolving Credit Facility (c) 45,714 510,684 492,785 3,466,243
4,515,426
Blackstone Funds Debt Obligations Payable - - 30,627 -
30,627
Interest on Blackstone Funds Debt Obligations Payable 282 2,259 604 -
3,145
Blackstone Funds Capital Commitments to Investee Funds (d) 198,250 - - - 198,250 Due to Certain Non-Controlling Interest Holders in Connection with Tax Receivable Agreements (e) - 156,550 218,086 1,226,522
1,601,158
Unrecognized Tax Benefits, Including Interest and Penalties (f) - - - -
-
Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (g)
4,990,781 - - - 4,990,781
Consolidated Contractual Obligations 5,332,035 1,442,717 1,934,639 13,542,679
22,252,070
Blackstone Funds Debt Obligations Payable - - (30,627 ) - (30,627 ) Interest on Blackstone Funds Debt Obligations Payable (282 ) (2,259 ) (604 ) -
(3,145 ) Blackstone Funds Capital Commitments to Investee Funds (d)
(198,250 ) - - - (198,250 )
Blackstone Operating Entities Contractual Obligations $ 5,133,503
$ 1,440,458 $ 1,903,408 $ 13,542,679 $ 22,020,048
(a) We lease our primary office space and certain office equipment under
agreements that expire through 2043. 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.
(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
September 30, 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.
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(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 initial public offering ("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 September 30, 2022, there were no Unrecognized Tax Benefits, including
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 $104.1 million and interest of
$32.8 million, therefore, such amounts are not included in the above
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 of September 30, 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.
Share Repurchase Program
On December 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.
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During the three and nine months ended September 30, 2022, Blackstone repurchased 2.0 million and 3.9 million shares of common stock at a total cost of $196.6 million and $392.0 million, respectively. As of September 30, 2022, the amount remaining available for repurchases under the program was $1.1 billion.
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.
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With respect to the third quarter of fiscal year 2022, we paid to shareholders
of our common stock a dividend of $0.90 per share, aggregating to $3.49 per
share of common stock in respect of the nine months ended September 30, 2022.
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 note 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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