BX 10-K diff: FY 2023-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+454 paragraphs −306 paragraphs ~306 changed
FY 2023-12-31 (earlier)
Item 1A.
Risk Factors
Risks Related to Our Business
Difficult market, economic 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.Our business is materially affected by financial market and economic conditions and events throughout the world that are outside our control. We may not be able to or may choose not to manage our exposure to these conditions and/or events. Such conditions and/or events can adversely affect our business in many ways, including reducing the ability of our funds to raise or deploy capital, reducing the value or performance of our funds’ investments and making it more difficult for our funds to exit and realize value from existing investment. This could in turn materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition. In addition, in the face of a difficult market or economic environment, we may need to reduce our fixed costs and other expenses in order to maintain profitability, including cutting back or eliminating the use of certain services or service providers, or terminating the employment of a significant number of our personnel that, in each case, could be important to our business and without which our operating results could be adversely affected. A failure to manage or reduce our costs and other expenses within a time frame sufficient to match any decrease in profitability would adversely affect our operating performance.
Turmoil in the global financial markets can provoke significant volatility of equity and debt securities prices. This can have a material and rapid impact on our mark-to-market valuations, particularly with respect to our public holdings and credit investments. While inflation in the U.S. has decreased significantly in recent months, 2023 was characterized by elevated inflation and high interest rates, which contributed to significant volatility in debt and equity markets. The valuations of our funds’ real estate assets, and fundraising in certain of our real estate strategies targeting high-net-worth investors, have been adversely impacted by elevated interest rates and a high cost of capital. An extended period of high interest rates would continue to present a challenge to real estate valuations. Such factors could be even more challenging for traditional office properties and those properties with long-term leases that do not provide for short-term rent increases. In addition, should inflation begin to increase again, some of our funds’ portfolio companies’ profit margins may be pressured, particularly against a backdrop of economic slowdown or contraction.
As publicly traded equity securities have in recent years represented meaningful proportion of the assets of many of our funds, stock market volatility, including a sharp decline in the stock market, may adversely affect our results, including our revenues and net income. Moreover, our public equity holdings have at times been concentrated in a few large positions, thereby making our unrealized mark-to-market valuations particularly sensitive to sharp changes in the price of any of these positions. Further, although the equity markets are not the only means by which we exit investments, should we experience a period of challenging equity markets, our funds may experience continued difficulty in realizing value from investments. In China, after a period of measures instituted to control the rate of economic growth in the country, the China growth rate has been slowing, and further slowing could have a systemic impact on the global economy and on equity and debt markets.
24Table of ContentsGeopolitical concerns and other global events outside of our control have contributed and may continue to contribute to volatile global equity and debt markets. These concerns and events include, without limitation, trade conflict, civil unrest, threats to national security, national and international political circumstances (including war, terrorist acts or security operations) and pandemics or other severe public health events. Geopolitical instability has in recent years become more prevalent. For example, the ongoing war between Russia and Ukraine, and Israel’s war against Hamas, and the global responses thereto, have contributed to volatility in the global financial markets, which may adversely impact our performance and the performance of our funds and their respective portfolio companies.
In addition to the factors described above, other market, economic and geopolitical factors described herein that may adversely affect our business include, without limitation:
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higher prices for commodities or other goods,
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economic slowdown or recession in the U.S. and internationally,
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changes in interest rates and/or a lack of availability of credit in the U.S. and internationally and
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changes in law and/or regulation, and uncertainty regarding government and regulatory policy.A period of economic slowdown, which may occur across one or more industries, sectors or geographies, creates operating performance challenges for certain of our funds’ investments, which could adversely affect our operating results and cash flows.Despite overall resilience in some geographies, many global economies have in recent years experienced periods of deceleration. Further economic deceleration or contraction in the rate of growth in certain industries, sectors or geographies may contribute to poor financial results for our funds’ portfolio companies or assets, which may result in lower investment returns for our funds. For example, periods of economic weakness have contributed and may in the future contribute to a decline in commodity prices and decreased consumer demand for certain goods and services (including energy), and/or volatility in the oil and natural gas markets, each of which would have an adverse effect on our energy and consumer investments. In addition, slowing growth in certain real estate sectors with excess near-term supply, such as life sciences office and U.S. multifamily, has negatively impacted and may continue to negatively impact the valuations of assets in such sectors in the near-term.
In addition, in recent years elevated inflation globally contributed to heightened costs of labor, energy and materials, which put profit margin pressure on certain of our funds’ portfolio companies and negatively impacted the performance of certain of such companies. Should inflation, which recently has decreased significantly, begin to increase again, our funds’ portfolio companies profit margins may be pressured, particularly if such companies lack pricing power against a backdrop of economic slowdown or contraction. For example, high rates of inflation and significant interest rate increases contributed to significant market volatility in 2022 and 2023, which disproportionately negatively impacted the value of future cash flows of technology and growth companies. These companies may be subject to continued depressed, or even further declines in, values in a challenging market environment. To the extent the performance of our funds’ investments in such companies, as well as valuation25
Table of Contentsmultiples, do not ultimately improve, our funds may sell those assets at values that are less than we projected or even at a loss, thereby significantly affecting those investment funds’ performance. In addition, as the governing agreements of our funds contain only limited requirements regarding diversification of fund investments (by, for example, sector or geographic region), during periods of economic slowdown in certain sectors or regions, the impact on our funds may be exacerbated by concentration of investments in such sectors or regions. Such concentration may increase the risk that events affecting specific sectors, geographic regions or asset types could have an adverse or disparate impact on such funds, as compared to funds that invest more broadly. As a result, our ability to raise new funds, as well as our operating results and cash flows, could be adversely affected.
Moreover, during periods of weakness, our funds’ portfolio companies may also have difficulty expanding their businesses and operations or meeting their debt service obligations or other expenses as they become due, including expenses payable to us. Furthermore, negative market conditions could potentially result in a portfolio company entering bankruptcy proceedings, thereby potentially resulting in a complete loss of the fund’s investment in such portfolio company and a significant negative impact to the fund’s performance and consequently to our operating results and cash flow, as well as to our reputation. In addition, negative market conditions would also increase the risk of default with respect to investments held by our funds that have significant debt investments, such as our credit-focused funds.
High interest rates and challenging debt market conditions have negatively impacted and could continue to negatively impact the values of certain assets or investments and the ability of our funds and their portfolio companies to access the capital markets, which could adversely affect investment and realization opportunities, lead to lower-yielding investments and potentially decrease our net income.
In light of elevated inflation, the U.S. Federal Reserve increased interest rates eleven times over the course of 2022 and 2023. High interest rates create downward pressure on the value of certain assets owned by our funds, including, among others, real estate and fixed-rate debt. An extended period of high interest rates would continue to present a challenge for the valuations of such assets, as well as for fundraising in certain of our real estate strategies targeting high-net-worth investors. Relatedly, opportunities to realize value from certain of our investments are likely to continue to be more limited if interest rates remain at high levels for an extended period, such as, in certain real estate sectors and operating companies given the potential adverse impact on equity prices and caution on the part of potential acquirers. Further, our funds have faced, and could continue to face, difficulty in realizing value from investments due to sustained declines in equity market values as a result of concerns regarding interest rates.
In recent years, high interest rates have increased the cost of debt financing for the transactions our funds pursue. In addition, during 2023, financing markets experienced challenges amid the failure of multiple U.S. regional banks. A significant contraction or weakening in the market for debt financing or other adverse change relating to the terms of debt financing (such as, for example, higher equity requirements and/or more restrictive covenants), particularly in the area of acquisition financings for private equity and real estate transactions, could have a material adverse effect on our business. For example, a portion of the indebtedness used to finance certain fund investments often includes high-yield debt securities issued in the capital markets. Availability of capital from the high-yield debt markets is subject to significant volatility, and there may be times when we might not be able to access those markets at attractive rates, or at all, when completing an investment. Further, the financing of acquisitions or the operations of our funds’ portfolio companies with debt may become less attractive due to limitations on the deductibility of corporate interest expense. See “— Changes in U.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.”
If our funds are unable to obtain committed debt financing for potential acquisitions, can only obtain debt financing at an increased interest rate or on unfavorable terms or the ability to deduct corporate interest expense is substantially limited, our funds may face increased competition from strategic buyers of assets who may have an overall lower cost of capital or the ability to benefit from a higher amount of cost savings following an acquisition,26
Table of Contentsor may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than would otherwise be the case, each of which could lead to a decrease in our funds’ performance and therefore our revenues. In addition, rising interest rates, coupled with periods of significant equity and credit market volatility may potentially make it more difficult for us to find attractive opportunities for our funds to exit and realize value from their existing investments.
Our funds’ portfolio companies also regularly utilize the corporate debt markets to obtain financing for their operations. To the extent monetary policy, tax or other regulatory changes or difficult credit markets render such financing difficult to obtain, more expensive or otherwise less attractive, this may also negatively impact the financial results of those portfolio companies and, therefore, the investment returns on our funds and our revenues. In addition, to the extent that market conditions, and/or tax or other regulatory changes make it difficult or not possible to refinance debt that is maturing in the near term, or to the extent that such refinancing would result in a rating agency viewing a portfolio company as having incurred an excessive amount of debt, some of our funds’ portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.
A decline in the pace or size of investments made by our funds may adversely affect our revenues.
The revenues that we earn are driven in part by the pace at which our funds make investments and the size of those investments, and a decline in the pace or the size of such investments may reduce our revenues. In particular, in recent years we have meaningfully increased the number of perpetual capital vehicles we offer and the assets under management in such vehicles. The fees we earn from our perpetual capital vehicles, including our Core+ real estate strategy, represent a significant and growing portion of our overall revenues. If our funds, including our perpetual capital vehicles, are unable to deploy capital at a sufficient pace, our revenues would be adversely impacted. Many factors could cause a decline in the pace of investment, including a market environment characterized by high prices, the inability of our investment professionals to identify attractive investment opportunities, competition for such opportunities among other potential acquirers, decreased availability of financing on attractive terms or at all or decreased availability of investor capital, including as a result of a challenging fundraising environment or heightened investor requests for repurchases in certain vehicles. A number of our funds, including our real estate and private equity funds, have invested and intend to continue to invest in large transactions or transactions that otherwise have substantial business, regulatory or legal complexity and may be more difficult to execute successfully than smaller or less complex investments. In addition, realizing value from such investments may be more difficult as a result of, among other things, a limited universe of potential acquirers.
We may also fail to consummate identified investment opportunities because of regulatory or legal complexities or uncertainty and adverse developments in the U.S. or global economy, financial markets or geopolitical conditions, and our ability to deploy capital in certain countries may be adversely impacted by U.S. and foreign government policy changes and regulations. For example, the ability to deploy capital in China has been adversely impacted by policies and regulations in China and the U.S., which may be exacerbated prospectively. For example, the President signed an Executive Order in August 2023 that established an outbound investment screening regime intended to regulate or prohibit certain investments by U.S. persons in advanced technology sectors in China and other jurisdictions that may be designated as a “country of concern.” See “— Laws and regulations on foreign direct investment applicable to us and our funds’ portfolio companies, both within and outside the U.S, may make it more difficult for us to deploy capital in certain jurisdictions or to sell assets to certain buyers.”27
Table of ContentsOur revenue, earnings, net income and cash flow can all vary materially, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of our common stock to decline.
Our revenue, earnings, net income and cash flow can all vary materially due to our reliance on Performance Revenues. We may experience fluctuations in our results, including our revenue and net income, from quarter to quarter due to a number of other factors, including timing of realizations, changes in the valuations of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses and the degree to which we encounter competition, each of which may be impacted by economic and market conditions. Achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn lead to large adverse movements or general increased volatility in the price of our common stock. We do not provide guidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in our common stock price.
For certain of our vehicles, including our Core+ real estate and infrastructure funds and BCRED and other of our perpetual capital vehicles, which have in recent years become increasingly large contributors to our earnings, our incentive income is paid between quarterly and every five years. The varying frequency of these payments will contribute to the volatility of our cash flow. Furthermore, we earn this incentive income only if the net asset value of a vehicle has increased or, in the case of certain vehicles, increased beyond a particular return threshold, or if the vehicle has earned a net profit. Certain of these vehicles also have “high water marks” whereby we do not earn incentive income during a particular period even though the vehicle had positive returns in such period as a result of losses in prior periods. If one of these vehicles experiences losses, we will not earn incentive income from it until it surpasses the previous high-water mark. The incentive income we earn is therefore dependent on the net asset value or the net profit of the vehicle, which could lead to significant volatility in our results.
Our cash flow may fluctuate significantly because we receive Performance Allocations from our carry funds only when investments are realized and achieve a certain preferred return. Performance Allocations depend on our carry funds’ performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to realize the cash value (or other proceeds) of an investment. Even if an investment proves to be profitable, it may be a number of years before any profits can be realized, particularly if market conditions were unaccomodating. We cannot predict when, or if, any realization of investments will occur. In addition, the valuations of, and realization opportunities for, investments made by our funds, could also be subject to high volatility as a result of uncertainty or potential changes to governmental policy with respect to, among other things, tax, trade, immigration, healthcare, labor, infrastructure and energy.
Prior to our receiving any Performance Allocations in respect of realization of a profitable investment, 100% of the proceeds of that investment must generally be paid to the investors in that carry fund until they have recovered certain fees and expenses and achieved a certain return on all realized investments by that carry fund as well as a recovery of any unrealized losses. A particular realization event may have a significant impact on our results for that particular quarter that may not be replicated in subsequent quarters. We recognize revenue on investments in our investment funds based on our allocable share of realized and unrealized gains (or losses) reported by such investment funds, and a decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue and possibly cash flow, which could further increase the volatility of our quarterly results. Because our carry funds have preferred return thresholds to investors that need to be met prior to our receiving any Performance Allocations, substantial declines in the carrying value of the investment portfolios of a carry fund can significantly delay or eliminate any Performance Allocations paid to us in respect of that fund because the value of the assets in the fund would need to recover to their aggregate cost basis plus the preferred return over time before we would be entitled to receive any Performance Allocations from that fund.
The timing and receipt of Performance Allocations also varies with the life cycle of our carry funds. During periods in which a relatively large portion of our assets under management is attributable to carry funds and investments in their “harvesting” period, our carry funds would make larger distributions than in the fundraising or investment periods that precede harvesting. During periods in which a significant portion of our assets under management is attributable to carry funds that are not in their harvesting periods, we may receive substantially lower Performance Allocations.28
Table of ContentsAdverse economic and market conditions may adversely affect the amount of cash generated by our businesses, the value of our principal investments, and in turn, our ability to pay dividends to our stockholders.
We primarily use cash to, without limitation (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, including servicing our debt and (d) pay dividends to our stockholders, make distributions to the holders of Blackstone Holdings Partnership Units and make repurchases under our share repurchase program. Our principal sources of cash are: (a) cash we received in connection with our prior bond offerings, (b) management fees, (c) realized incentive fees and (d) realized performance allocations, which is the sum of Realized Principal Investment Income and Realized Performance Revenues less Realized Performance Compensation. We have also entered into a $4.325 billion revolving credit facility with a final maturity date of December 15, 2028. Our long-term debt totaled $10.7 billion in borrowings from our prior bond issuances. As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. As of December 31, 2023, we had $3.0 billion in Cash and Cash Equivalents, $803.9 million invested in Corporate Treasury Investments and $4.3 billion in Other Investments.
If growth of the global economy continues to decelerate, or conditions in the financing markets were challenged, the investment performance of our funds could suffer, resulting in, for example, the payment of decreased or no Performance Allocations to us. This could materially and adversely affect the amount of cash we have on hand, which could in turn require us to rely on other sources of cash, such as the capital markets, which may not be available to us on acceptable terms or at all for the above purposes. A decrease in the amount of cash we have on hand could also materially and adversely affect our ability to pay dividends to our stockholders and make repurchases under our share repurchase program. Furthermore, during adverse economic and market conditions, we might not be able to renew all or part of our existing revolving credit facility or find alternate financing on commercially reasonable terms or at all. As a result, our uses of cash may exceed our sources of cash, thereby potentially affecting our liquidity position. In addition, we have made and expect to continue to make significant principal investments in our current and future investment funds. Contributing capital to these investment funds is risky, and we may lose some or the entire principal amount of our investments, including, without limitation, as a result of poor investment performance in a challenging economic and market environment.
Our business depends in large part on our ability to raise capital from third-party investors. A failure to raise capital from third-party investors on attractive fee terms or at all, would impact our ability to collect management fees or deploy such capital into investments and potentially collect Performance Revenues, which would materially reduce our revenue and cash flow and adversely affect our financial condition.
Our ability to raise capital from third-party investors depends on a number of factors, including certain factors that are outside our control. Certain factors, such as economic and market conditions (including the level of interest rates and stock market performance) and the asset allocation rules or investment policies to which such third-party investors are subject, could inhibit or restrict the ability of third-party investors to make investments in our investment funds or the asset classes in which our investment funds invest. For example, lawmakers across a number of states, including Pennsylvania and Florida, have put forth proposals or expressed intent to take steps to reduce or minimize the ability of their state pension funds to invest in alternative asset classes, including by proposing to increase the reporting or other obligations applicable to their state pension funds that invest in such asset classes. Such proposals or actions would potentially discourage investment by such state pension funds in alternative asset classes by imposing meaningful compliance burdens and costs on them, which could adversely affect our ability to raise capital from such state pension funds. Other states could potentially take similar actions, which may further impair our access to capital from an investor base that has historically represented a significant portion of our fundraising.29
Table of ContentsIn addition, volatility in the valuations of investments, has in the past and may in the future affect our ability to raise capital from third-party investors. To the extent periods of volatility are coupled with a lack of realizations from investors’ existing portfolios, such investors may be left with disproportionately outsized remaining commitments to a number of investment funds, which significantly limits such investors’ ability to make new commitments to third-party managed investment funds such as those managed by us. Further, during periods of market volatility, investor subscription requests may be reduced and investor redemption or repurchase requests may be elevated in products that permit redemption or repurchase of investor interests. See “ —Investors in a number of our vehicles may withdraw their investments, and investors in certain of our vehicles may have a right to terminate our management of, or cause the dissolution of, such vehicles, which would lead to a decrease in our revenues.” In addition, certain of our investment vehicles that are available to individual investors are subject to state registration requirements that impose limits on the proportion of such investors’ net worth that can be invested in our products. These restrictions may limit such investors’ ability or willingness to allocate capital to such products and adversely affect our fundraising in the retail channel.
Our ability to raise new funds could similarly be hampered if the general appeal of alternative investments were to decline. An investment in a limited partner interest in an alternative investment fund is generally more illiquid and the returns on such investment may be more volatile than an investment in securities for which there is a more active and transparent market. In periods of positive markets and low volatility, for example, investors may favor passive investment strategies such as index funds over our actively managed investment vehicles. Similarly, during periods of high interest rates, investors may favor investments that are generally viewed as producing a risk-free return, such as treasury bonds, over investments in our products, particularly if the spread between the products declines. Alternative investments could also fall into disfavor as a result of concerns about liquidity and short-term performance. Such concerns could be exhibited, in particular, by public pension funds, which have historically been among the largest investors in alternative assets. Many public pension funds are significantly underfunded and their funding problems have been, and may in the future be, exacerbated by economic downturn. Concerns with liquidity could cause such public pension funds to reevaluate the appropriateness of alternative investments. In addition, our ability to raise capital from third parties outside of the United States could be limited to the extent the other countries, such as China, impose restrictions or limitations on outbound foreign investment.
Moreover, certain institutional investors are demonstrating a preference to in-source their own investment professionals and to make direct investments in alternative assets without the assistance of alternative asset advisers like us. Such institutional investors may become our competitors and could cease to be our clients. As some existing investors cease or significantly curtail making commitments to alternative investment funds, we may need to identify and attract new investors in order to maintain or increase the size of our investment funds. We may be unable to find or secure commitments from those new investors or that the fee terms of the commitments from such new investors will be consistent with the fees historically paid to us by our investors. If economic conditions were to deteriorate or if we are unable to find new investors, we might raise less than our desired amount for a given fund. Further, as we seek to expand into other asset classes, we may be unable to raise a sufficient amount of capital to adequately support such businesses. A failure to successfully raise capital could materially reduce our revenue and cash flow and adversely affect our financial condition.
In connection with raising new funds or making further investments in existing funds, we negotiate terms for such funds and investments with existing and potential investors. The outcome of such negotiations could result in our agreement to terms that are materially less favorable to us than for prior funds we have managed or funds managed by our competitors, including with respect to management fees, incentive fees and/or carried interest, which could have an adverse impact on our revenues. Such terms could also restrict our ability to raise investment funds with investment objectives or strategies that compete with existing funds, add additional expenses and obligations for us in managing the fund or increase our potential liabilities, all of which could ultimately reduce our revenues. In addition, certain institutional investors, including sovereign wealth funds and public pension funds, have demonstrated an increased preference for alternatives to the traditional investment fund structure, such as managed accounts, smaller funds and co-investment vehicles. There can be no assurance that such alternatives will be as profitable for us as the traditional investment fund structure, or as to the impact such a trend could have on the cost of our operations or profitability if we were to implement these alternative investment structures. Although we have no obligation to modify any of our fees with respect to our existing funds, we may experience pressure to do so in our funds, including in response to regulatory focus by the SEC on the quantum and types of fees and expenses charged by private funds. We have confronted and expect to continue to confront requests from a variety of investors and groups representing investors to decrease fees, which could result in a reduction in the fees and Performance Revenues we earn.30
Table of ContentsThe asset management business is intensely competitive.
The asset management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of client service, investor availability of capital and willingness to invest, fund terms (including fees and liquidity terms), brand recognition and business reputation. Our asset management business competes with a number of private funds, specialized investment funds, funds structured for individual investors, hedge funds, funds of hedge funds and other sponsors managing pools of capital, as well as corporate buyers, traditional asset managers, commercial banks, investment banks and other financial institutions (including sovereign wealth funds), and we expect that competition will continue to increase. For example, certain traditional asset managers have developed their own private equity and retail platforms and are marketing other asset allocation strategies as alternatives to hedge fund investments. A number of factors serve to increase our competitive risks:
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a number of our competitors in some of our businesses have greater financial, technical, research, marketing and other resources and more personnel than we do,
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some of our funds may not perform as well as competitors’ funds or other available investment products,
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several of our competitors have significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that many alternative investment strategies seek to exploit,
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some of our competitors, particularly strategic competitors, may have a lower cost of capital, which may be exacerbated by limits on the deductibility of interest expense,
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some of our competitors may have access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities,
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some of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain businesses or investments than we can and/or bear less compliance expense than we do,
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some of our competitors may have more flexibility than us in raising certain types of investment funds under the investment management contracts they have negotiated with their investors,
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some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make or to seek exit opportunities through different channels, such as special purpose acquisition vehicles,
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some of our competitors may be more successful than we are in the development of new products to address investor demand for new or different investment strategies and/or regulatory changes, including with respect to products with mandates that incorporate environmental, social and governance considerations, or products that developed for individual investors or that target insurance capital,
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there are relatively few barriers to entry impeding new alternative asset fund management firms, and the successful efforts of new entrants into our various businesses, including former “star” portfolio managers at large diversified financial institutions as well as such institutions themselves, is expected to continue to result in increased competition,
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some of our competitors may have better expertise or be regarded by investors as having better expertise in a specific asset class or geographic region than we do,
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our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment,
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some investors may prefer to invest with an investment manager that is not publicly traded or is smaller, with a more limited number of investment products that it manages and
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other industry participants will from time to time seek to recruit our investment professionals and other employees away from us.
Additionally, technological innovation, including the use of artificial intelligence and data science, has the potential to disrupt the financial industry and change the way financial institutions, including asset managers, do business. Some of our competitors may be more successful than us in the development and implementation of new technologies, including services and platforms based on artificial intelligence, to address investor demand or improve operations. If we are unable to adequately advance our capabilities in these areas, or do so at a slower pace than others in our industry, we may be at a competitive disadvantage.
We may lose investment opportunities if we do not match investment prices, structures and terms offered by competitors. Alternatively, we may experience decreased rates of return and increased risks of loss if we match investment prices, structures and terms offered by competitors. Moreover, if we are forced to compete with other alternative asset managers on the basis of price, we may31
Table of Contentsnot be able to maintain our current fund fee and carried interest terms. We have historically competed primarily on the performance of our funds, and not on the level of our fees or carried interest relative to those of our competitors. However, there is a risk that fees and carried interest in the alternative investment management industry will decline, without regard to the historical performance of a manager. Further, some of our competitors may be willing to pay higher placement fees in order to gain distribution of their private wealth products. Fee or carried interest income reductions, or placement fee increases, on existing or future products, without corresponding decreases in our cost structure, would adversely affect our revenues and profitability.
In addition, the attractiveness of our investment funds relative to investments in other investment products could decrease depending on economic conditions. Furthermore, any new or incremental regulatory measures for the U.S. financial services industry may increase costs and create regulatory uncertainty and additional competition for many of our funds. See “— Financial regulatory changes in the United States could adversely affect our business.”
These competitive pressures could adversely affect our ability to make successful investments and limit our ability to raise future investment funds, either of which would adversely impact our business, revenue, results of operations and cash flow.
We have increasingly undertaken business initiatives to increase the number and type of investment products we offer to individual investors, which could expose us to new and greater levels of risk.
Although individual investors have been part of our historic distribution efforts, we have increasingly undertaken business initiatives to increase the number and type of investment products we offer to high-net-worth individuals, family offices and mass affluent investors in the U.S. and other jurisdictions around the world. Specifically, we create investment products designed for investment by individual investors in the U.S., some of whom are not accredited investors, or similar investors in non-U.S. jurisdictions, including in Europe. In some cases, our funds are distributed to such investors indirectly through third-party managed vehicles sponsored by brokerage firms, private banks or third-party feeder providers, and in other cases directly to the clients of private banks, independent investment advisors and brokers.
Accessing individual investors and offering products directed at such investors exposes us to new and greater levels of risk, including heightened litigation and regulatory enforcement, an increased compliance burden, and more complex administration and accounting operations. We may be subject to claims related to matters such as the adequacy of disclosures, appropriateness of fees, suitability and board of directors oversight, each which could result in civil lawsuits, regulatory penalties and enforcement actions. Our registered investment advisers could also be subject to direct or derivative claims from a fund’s investors or board of directors for alleged mismanagement of the fund. In addition, regulatory requirements imposing limitations on the ability of affiliates of certain of our vehicles to engage in certain transactions may limit our funds’ ability to engage in otherwise attractive investment opportunities.
To the extent distribution of such products is through new channels and markets, including through an increasing number of distributors with whom we engage, we may not be able to effectively monitor or control the manner of their distribution, which could result in litigation or regulatory action against us, including with respect to, among other things, claims that products distributed through such channels are distributed to investors for whom they are unsuitable, claims related to conflicts of interest or the adequacy of disclosure to investors or claims that the products are distributed in a manner inconsistent with our regulations requirements or otherwise inappropriate manner. In addition, regulation applicable to our arrangements with such distributors and channels increases the compliance burden associated with onboarding new distributors or pursuing new distribution channels, resulting in increased cost and complexity. Although we engage in due diligence and onboarding procedures that seek to uncover issues relating to the third-party channels through which individual investors access our investment products, we do not control and have limited information regarding many of these third-party channels and thus we are exposed to the risks of reputational damage, regulatory scrutiny and legal liability to the extent such third parties improperly sell our products to investors. This risk is heightened by the continuing increase in the number of third parties through whom we distribute our investment products around the world and who we do not control. For example, in certain cases, we may be viewed by a regulator as responsible for the content of materials prepared by third parties.
Similarly, there is a risk that Blackstone employees involved in the direct distribution of our products, or employees who oversee independent advisors, brokerage firms and other third parties around the world involved in distributing our products, do not follow our compliance and supervisory procedures. In addition, the distribution of such products, including through new channels whether directly or through market intermediaries, could expose us to allegations of improper conduct and/or actions by state and federal regulators in the U.S. and regulators in jurisdictions outside of the United States with respect to, among other things, product32
Table of Contentssuitability, distributor eligibility, investor classification, compliance with securities laws, conflicts of interest and the adequacy of disclosure to investors to whom our products are distributed through those channels.
As we expand the distribution of products to individual investors outside of the United States, we are increasingly exposed to risks in non-U.S. jurisdictions. While many of the risks we face in non-U.S. jurisdictions are similar to those that we face in the distribution of products to individual investors in the U.S., securities laws and other applicable regulatory regimes can be extensive, complex and vary by jurisdiction. In addition, the distribution of products to individual investors out of the U.S. may involve complex structures (such as distributor-sponsored feeder funds or nominee/omnibus investors) and market practices that vary by local jurisdiction. As a result, this expansion subjects us to additional complexity, litigation and regulatory risk.
Furthermore, our initiatives to expand our individual investor base, including outside of the United States, requires the investment of significant time, effort and resources, including the potential hiring of additional personnel, the implementation of new operational, compliance and other systems and processes and the development or implementation of new technology. Our efforts to continue to grow the assets we manage on behalf of individual investors may not be successful.
We depend on our co-founder and other key senior managing directors and personnel, and the loss of their services would have a material adverse effect on our business, results and financial condition.
We depend on the efforts, skill, reputations and business contacts of our co-founder, Stephen A. Schwarzman, our President, Jonathan D. Gray, and other key senior managing directors and personnel, the information and deal flow they generate during the normal course of their activities and the synergies among the diverse fields of expertise and knowledge held by our professionals. Accordingly, our success will depend on the continued service of these individuals, who are not obligated to remain employed with us. Several key personnel have left the firm in the past and others may do so in the future, and we cannot predict the impact that the departure of any key personnel will have on our ability to achieve our investment objectives. For example, the governing agreements of many of our funds generally provide investors with the ability to terminate the investment period in the event that certain “key persons” in the fund do not meet the specified time commitment to the fund or our firm ceases to control the general partner. The loss of the services of any key personnel could have a material adverse effect on our revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future. Our senior managing directors and other key personnel possess substantial experience and expertise and have strong business relationships with our investors and other members of the business community. As a result, the loss of these personnel could jeopardize our relationships with such parties and result in the reduction of assets under management or fewer investment opportunities.
We have historically relied in part on the interests of these professionals in the investment funds’ carried interest and incentive fees to discourage them from leaving the firm. However, to the extent our investment funds perform poorly, thereby reducing the potential for carried interest and incentive fees, their interests in carried interest and incentive fees become less valuable to them and become less effective as incentives for them to continue to be employed at Blackstone. We might not be able to provide future key personnel with interests in our business to the same extent or with the same tax consequences from which our existing personnel previously benefited. For example, U.S. federal income tax law currently imposes a three-year holding period requirement for carried interest to be treated as long-term capital gains. The holding period requirement may result in some of the carried interest received by such individuals being treated as ordinary income, which would materially increase the amount of taxes that such key personnel would be required to pay. Moreover, the tax treatment of carried interest continues to be an area of focus for policymakers and government officials, which could result in further regulatory action by federal or state governments. See “—Changes in U.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.” Moreover, possible increases in state tax rates or changes to the tax treatment of, or the levying of additional taxes on, carried interest, along with changing opinions regarding living in some geographies where we have offices, may adversely affect our ability to recruit, retain and motivate our current and future professionals.
There is no guarantee that the non-competition and non-solicitation agreements to which our senior managing directors and other key personnel are subject, together with our other arrangements with them, will prevent them from leaving, joining our competitors or otherwise competing with us. Such agreements also expire after a certain period of time, at which point such personnel would be free to compete against us and solicit our clients and employees. In addition, such agreements may not be33
Table of Contentsenforceable in all cases, particularly as U.S. states and/or federal agencies enact legislation or adopt rules aimed at effectively prohibiting non-competition agreements. For example, the U.S. Federal Trade Commission (the “FTC”) published a proposed rule in January 2023 that, if issued in its current form, would generally prohibit post-employment non-competition provisions in agreements between employers and their employees. Further, in 2023, legislation that would ban post-employment non-competition agreements was introduced in New York, but subsequently vetoed by the Governor. Similar legislation is likely to be reintroduced in 2024 and if enacted, would generally prohibit some or all post-employment non-competition provisions in employment agreements.
We strive to maintain a work environment that reinforces our culture of collaboration, motivation and alignment of interests with investors. If we do not continue to develop and implement the right processes and tools to maintain this culture, particularly in light of rapid and significant growth in our scale, global presence and employee population, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations.
Changes in U.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.
Our effective tax rate and tax liability is based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex, and the manner which they apply to us and our funds is sometimes open to interpretation. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Although management believes its application of current laws, regulations and treaties to be correct and sustainable upon examination by the tax authorities, the tax authorities could challenge our interpretation resulting in additional tax liability or adjustment to our income tax provision that could increase our effective tax rate.
In addition, past and future changes to tax laws and regulations may have an adverse impact on us. For example, the Inflation Reduction Act of 2022 imposes, among other things, a minimum “book” tax on certain large corporations and creates a new excise tax on net stock repurchases made by certain publicly traded corporations. These and other changes could materially change the amount and/or timing of tax we and our portfolio companies may be required to pay and may increase tax-related regulatory and compliance costs.
The U.S. Congress, the Organization for Economic Co-operation and Development (“OECD”) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD, which represents a coalition of member countries, is contemplating changes to numerous long-standing tax principles through its base erosion and profit shifting (“BEPS”) project, which is focused on a number of issues, including the shifting of profits between affiliated entities in different tax jurisdictions, interest deductibility and eligibility for the benefits of double tax treaties. Several of the proposed measures are potentially relevant to some of our structures and could have an adverse tax impact on our funds, investors and/or our funds’ portfolio companies. Some member countries have been moving forward on the BEPS agenda but, because timing of implementation and the specific measures adopted will vary among participating member countries, significant uncertainty remains regarding the impact of BEPS proposals. If implemented, these proposals could result in a loss of tax treaty benefits and increased taxes on income from our investments.
The OECD is also working on a two-pillar initiative, which is aimed at (a) shifting taxing rights to the jurisdiction of the consumer (“Pillar One”) and (b) ensuring all companies pay a global minimum tax (“Pillar Two”). Under Pillar Two, certain entities within a multinational group will be subject to top-up taxes where the overall tax paid on the group’s profit in any jurisdiction falls below the minimum 15% effective tax rate. The EU, among other regions implementing or intending to implement these rules, adopted Pillar Two and required that all EU member states adopt local legislation to implement such rules beginning December 31, 2023. If implemented in any of the countries in which our business, our portfolio companies, or our investment structures are located, these rules could result in increased effective tax rates, possible denial of deductions, withholding taxes and/or profits being allocated differently and increased complexity, burden and cost of tax compliance. Given the ongoing design, implementation and administration of Pillar One and Pillar Two, the timing, scope and impact of any relevant domestic legislation or multilateral conventions remain uncertain.34
Table of ContentsCybersecurity and data protection risks could result in the loss of data, interruptions in our business, and damage to our reputation, and subject us to regulatory actions, increased costs and financial losses, each of which could have a material adverse effect on our business and results of operations.
Our operations are highly dependent on our technology platforms and we rely heavily on our analytical, financial, accounting, communications and other data processing systems. Our systems face ongoing cybersecurity threats and attacks, which could result in the loss of confidentiality, integrity or availability of such systems and the data held by such systems. Attacks on our systems could involve, and in some instances have in the past involved, attempts intended to obtain unauthorized access to our proprietary information, destroy data or disable, degrade or sabotage our systems, or divert or otherwise steal funds, including through the introduction of computer viruses, “phishing” attempts and other forms of social engineering. Attacks on our systems could also involve ransomware or other forms of cyber extortion. Cyberattacks and other data security threats could originate from a wide variety of external sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. Cyberattacks and other security threats could also originate from the malicious or accidental acts of insiders, such as employees, consultants, independent contractors or other service providers.
There has been an increase in the frequency and sophistication of the cyber and data security threats we face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent, which may target us because, as an alternative asset management firm, we hold a significant amount of confidential and sensitive information about our investors, our funds’ portfolio companies and potential investments. As a result, we may face a heightened risk of a security breach or disruption with respect to this information. Measures we take to ensure the integrity of our systems may not provide adequate protection, especially because cyberattack techniques are continually evolving, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack on Blackstone, our investors, our portfolio companies or potential investments. If our systems or those of third-party serve providers are compromised either as a result of malicious activity or through inadvertent transmittal or other loss of data, do not operate properly or are disabled, or we fail to provide the appropriate regulatory or other notifications in a timely manner, we could suffer financial loss, increased costs, a disruption of our businesses, liability to our counterparties, investment funds or fund investors, regulatory intervention or reputational damage. The costs related to cyber or other data security threats or disruptions may not be fully insured or indemnified by other means.
In addition, we could also suffer losses in connection with updates to, or the failure to timely update, the technology platforms on which we rely. We are reliant on third-party service providers for certain aspects of our business, including for the administration of certain funds, as well as for certain technology platforms, including cloud-based services. These third-party service providers could also face ongoing cybersecurity threats and compromises of their systems and as a result, unauthorized individuals could gain, and in some past instances have gained, access to certain confidential data.
Cybersecurity and data protection have become top priorities for regulators around the world. Many jurisdictions in which we operate have laws and regulations relating to privacy, data protection and cybersecurity, including, as examples, the General Data Protection Regulation (“GDPR”) in the European Union, the U.K. Data Protection Act, and the California Privacy Rights Act (“CPRA”). For example, in February 2022, the SEC proposed rules regarding registered investment advisers’ and funds’ cybersecurity risk management requiring the adoption and implementation of cybersecurity policies and procedures, enhanced disclosure in regulatory filings and prompt reporting of incidents to the SEC, which, if adopted, could increase our compliance costs and potential regulatory liability related to cybersecurity. Some jurisdictions have also enacted or proposed laws requiring companies to notify individuals and government agencies of data security breaches involving certain types of personal data.35
Table of ContentsBreaches in our security or in the security of third-party service providers, whether malicious in nature or through inadvertent transmittal or other loss of data, could potentially jeopardize our, our employees’ or our fund investors’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our employees’, our fund investors’, our counterparties’ or third parties’ business and operations, which could result in significant financial losses, increased costs, liability to our fund investors and other counterparties, regulatory intervention and reputational damage. Furthermore, if we fail to comply with the relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of breach in a timely matter, it could result in regulatory investigations and penalties, which could lead to negative publicity and reputational harm and may cause our fund investors and clients to lose confidence in the effectiveness of our security measures and Blackstone more generally.
Our funds’ portfolio companies also rely on data processing systems and the secure processing, storage and transmission of information, including payment and health information, which in some instances are provided by third parties. A disruption or compromise of these systems could have a material adverse effect on the value of these businesses. Our funds may invest in strategic assets having a national or regional profile or in infrastructure, the nature of which could expose them to a greater risk of being subject to a terrorist attack or a security breach than other assets or businesses. Such an event may have material adverse consequences on our investment or assets of the same type or may require portfolio companies to increase preventative security measures or expand insurance coverage.
Finally, our and our funds’ portfolio companies’ technology platforms, data and intellectual property are also subject to a heightened risk of theft or compromise to the extent we or our funds’ portfolio companies engage in operations outside the United States, in particular in those jurisdictions that do not have comparable levels of protection of proprietary information and assets such as intellectual property, trademarks, trade secrets, know-how and customer information and records. In addition, we and our funds’ portfolio companies may be required to compromise protections or forego rights to technology, data and intellectual property in order to operate in or access markets in a foreign jurisdiction. Any such direct or indirect compromise of these assets could have a material adverse impact on us and our funds’ portfolio companies.
Rapidly developing and changing global data security and privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.
We and our funds’ portfolio companies are subject to various risks and costs associated with the collection, storage, transmission and other processing of personally identifiable information (“PII”) and other sensitive and confidential information. This data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties. Any inability, or perceived inability, by us to adequately address privacy concerns, or comply with applicable privacy laws, regulations, policies, industry standards, or related contractual obligations, even if unfounded, could result in regulatory and third-party liability, increased costs, disruption business and operations, and reputational damage. Furthermore, any such inability or perceived inability of our funds’ portfolio companies, even if unfounded, could result in reputational damage to us.
Data security and privacy compliance obligations to which we are subject impose compliance costs on us, which could increase significantly as laws and regulations evolve globally. Our compliance obligations include those relating to U.S. laws and regulations, including, without limitation, state regulations such as the CPRA, which provides for enhanced consumer protections for California residents, a private right of action for data breaches and statutory fines and damages for data breaches or other California Consumer Privacy Act (“CCPA”) violations, as well as a requirement of “reasonable” cybersecurity. At the U.S. federal level, the SEC has proposed changes to Regulation S-P, which would require, among other things, that investment companies, broker-dealers, and SEC-registered investment advisers notify affected individuals of a breach involving their personal financial information within 30 days of becoming aware that it occurred.36
Table of ContentsOur compliance obligations also include those relating to foreign data collection and privacy laws, including, for example, the GDPR and U.K. Data Protection Act, as well as laws in many other jurisdictions globally, including Switzerland, Japan, Hong Kong, Singapore, India, China, Australia, Canada and Brazil. Global laws in this area are rapidly increasing in the scale and depth of their requirements, and are also often extra-territorial in nature. In addition, a wide range of regulators and private actors are seeking to enforce these laws across regions and borders. Furthermore, we frequently have privacy compliance requirements as a result of our contractual obligations with counterparties. These legal, regulatory and contractual obligations heighten our data protection and privacy obligations in the ordinary course of conducting our business in the U.S. and internationally.
Any inability, or perceived inability, by us or our funds’ portfolio companies to adequately address data protection or privacy concerns, or comply with applicable laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, even if unfounded, could result in significant legal, regulatory and third-party liability, increased costs, disruption of our and our funds’ portfolio companies’ business and operations, and a loss of client (including investor) confidence and other reputational damage. Many regulators have indicated an intention to take more aggressive enforcement actions regarding data privacy matters, and private litigation resulting from such matters is increasing and resulting in progressively larger judgments and settlements. Furthermore, as new data protection and privacy-related laws and regulations are implemented, the time and resources needed for us and our funds’ portfolio companies to comply with such laws and regulations continues to increase and become a significant compliance workstream.
Technological developments in artificial intelligence could disrupt the markets in which we operate and subject us to increased competition, legal and regulatory risks and compliance costs.
Technological developments in artificial intelligence, including machine learning technology and generative artificial intelligence (collectively, “AI Technologies”) and their current and potential future applications, including in the private investment and financial sectors, as well as the legal and regulatory frameworks within which they operate, are rapidly evolving. The full extent of current or future risks related thereto is not possible to predict. AI Technologies could significantly disrupt the markets in which we operate and subject us to increased competition, legal and regulatory risks and compliance costs, which could have a material adverse effect on our business, financial condition and results of operations.
We intend to seek to avail ourselves of the potential benefits, insights and efficiencies that are available through the use of AI Technologies, which presents a number of potential risks that cannot be fully mitigated. Data in models that AI Technologies utilize are likely to contain a degree of inaccuracy and error, which could result in flawed algorithms. This could reduce the effectiveness of AI Technologies and adversely impact us and our operations to the extent we rely on the work product of such AI Technologies in such operations. There is also a risk that AI Technologies may be misused or misappropriated by our employees and/or third parties engaged by us. For example, a user may input confidential information, including material non-public information or personal identifiable information, into AI Technology applications, resulting in such information becoming part of a dataset that is accessible by third-party AI Technology applications and users, including our competitors. Such actions could subject us to legal and regulatory investigations and/or actions. Further, we may not be able to control how third-party AI Technologies that we choose to use are developed or maintained, or how data we input is used or disclosed, even where we have sought contractual protections with respect to these matters. The misuse or misappropriation of our data could have an adverse impact on our reputation and could subject us to legal and regulatory investigations and/or actions. In addition, we may communicate externally regarding AI Technology-related initiatives, including our development and use of AI Technologies, which subjects us to the risk of being accused of making inaccurate or misleading statements regarding our ability to avail ourselves of the potential benefits of AI Technology.37
Table of ContentsRegulations related to AI Technologies may also impose on us certain obligations and costs related to monitoring and compliance. For example, in April 2023, the Federal Trade Commission, U.S. Department of Justice, Consumer Financial Protection Bureau, and U.S. Equal Employment Opportunity Commission released a joint statement on artificial intelligence demonstrating interest in monitoring the development and use of automated systems and enforcement of their respective laws and regulations. In October 2023, the Presidential Administration signed an executive order that establishes new standards for AI safety and security. In addition to the U.S. regulatory framework, the EU is in the process of introducing a new regulation applicable to certain AI Technologies and the data used to train, test and deploy them, which if enacted, could impose significant requirements on both the providers and deployers of AI Technologies.
Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus, particularly given the current administration, could result in additional burdens on our business.
Our business is subject to extensive regulation, including periodic examinations, inquiries and investigations, by governmental agencies and self-regulatory organizations in the jurisdictions in which we operate around the world. These authorities have regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities. Many of these regulators, including U.S. and foreign government agencies and self-regulatory organizations, as well as state securities commissions in the United States, are also empowered to conduct examinations, inquiries, investigations and administrative proceedings that can result in fines, suspensions of personnel, changes in policies, procedures or disclosure or other sanctions, including censure, the issuance of cease-and-desist orders, the suspension or expulsion of a broker-dealer or investment adviser from registration or memberships or the commencement of a civil or criminal lawsuit against us or our personnel.
The financial services industry in recent years has been the subject of heightened scrutiny, which is expected to continue to increase, and the SEC has specifically focused on private equity and the private funds industry. In that connection, in recent years the SEC’s stated examination priorities and published observations from examinations have included, among other things, private equity firms’ collection of fees and allocation of expenses, their marketing and valuation practices, allocation of investment opportunities, investor side letter terms, consistency of firms’ practices with disclosures, handling of material non-public information and insider trading, disclosures of investment risk, conflicts of interest, adherence to notice, consent and other contractual requirements regarding limited partnership advisory committees and compliance policies and procedures with respect to conflicts of interest. The SEC’s stated examination priorities also include investment advisers’ and funds’ compliance with recently adopted rules, including those referenced herein. Statements by SEC staff in 2023 and the SEC’s enforcement and rulemaking activities reflected a focus on certain of these topics and on bolstering transparency in the private funds industry, including with respect to fees earned and expenses charged by advisers.
In recent years, the SEC has proposed, and in some instances, adopted, a number of rules related to private funds and private fund advisors that impact our business and operations. Most significantly, in August 2023, the SEC adopted new rules and amendments to existing rules under the Advisers Act (collectively, the “Private Fund Adviser Rules”). The Private Fund Adviser Rules require registered investment advisers to distribute quarterly statements containing detailed information about, among other things, compensation, fees and expenses, investments, and performance; obtain an annual audit for private funds; and obtain a fairness or valuation opinion and make certain disclosures in connection with adviser-led secondary transactions. In addition, the rules restrict all investment advisers from engaging in certain practices unless they satisfy specified disclosure, and in some cases, consent requirements. The Private Fund Adviser Rules also prohibit providing preferential liquidity and information rights to investors unless certain conditions are met.
Although there is a pending legal challenge to the Private Fund Adviser Rules, whether such legal challenge will succeed is uncertain. While the full extent of the Private Funds Adviser Rules’ impact cannot yet be determined, the general anticipation is that they will increase regulatory and compliance costs, place burdens on our resources, including the time and attention of our personnel, and heighten the risk of regulatory action.38
Table of ContentsThe Private Fund Adviser Rules are complemented by amended rules that require enhanced record retention and documentation. Furthermore, the SEC (in May 2023) and the SEC and CFTC jointly (in February 2024) adopted changes to Form PF, a confidential form relating to reporting by private fund advisers and intended to be used by the Financial Stability Oversight Counsel (“FSOC”) for systemic risk oversight purposes, that expand existing reporting obligations. Such increased obligations may increase our costs, including if we are required to spend more time, hire additional personnel, or buy new technology to comply effectively.
The SEC has also proposed several other rules that may impact our operations. For example, an October 2022 SEC proposal would, if adopted, impose substantial obligations on registered investment advisers to conduct initial due diligence and ongoing monitoring of a broad universe of service providers that we may use in our investment advisory business. If adopted, these new rules could significantly increase compliance burdens and associated regulatory costs and complexity for us and enhance the risk of regulatory action, which could adversely impact our reputation and our fundraising efforts, including as a result of regulatory sanctions. Moreover, in February 2023, the SEC proposed extensive amendments to the custody rule for SEC-registered investment advisers which would apply to all assets of an advisory client, including real estate and other assets that generally are not considered securities under the federal securities laws. If adopted, the amendments would require, among other things, that qualified custodians maintain possession of and control of assets of advisory clients and participate in or effectuate any changes of such assets’ beneficial ownership. There is a lack of clarity as to whether all assets held by Blackstone’s advisory clients can be custodied in a manner that satisfies the proposed rule or whether existing qualified custodians will provide custodial services for such assets at a reasonable cost or at all. If adopted, these amendments could expose our registered investment advisers to additional regulatory liability, increase compliance costs and impose limitations on our investing activities.
We regularly are subject to requests for information, inquiries and informal or formal investigations by the SEC and other regulatory authorities, with which we routinely cooperate, and which have included review of historical practices that were previously examined. Such investigations have previously and may in the future result in penalties and other sanctions. SEC actions and initiatives can have an adverse effect on our financial results, including as a result of the imposition of a sanction, a limitation on our or our personnel’s activities, or changing our historic practices. Even if an investigation or proceeding did not result in a sanction, or the sanction imposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing clients or fail to gain new clients.
In addition, certain states and other regulatory authorities have required investment managers to register as lobbyists, and we have registered as such in a number of jurisdictions. Other states or municipalities may consider similar legislation or adopt regulations or procedures with similar effect. These registration requirements impose significant compliance obligations on registered lobbyists and their employers, which may include annual registration fees, periodic disclosure reports and internal recordkeeping.
We are subject to increasing scrutiny from regulators, elected officials, stockholders, investors and other stakeholders with respect to environmental, social and governance matters, which may adversely impact our ability to raise capital from certain investors, constrain capital deployment opportunities for our funds and harm our brand and reputation.
We, our funds and their portfolio companies are subject to increasing scrutiny from regulators, elected officials, stockholders, investors and other stakeholders with respect to ESG matters. With respect to the alternative asset management industry, in recent years, certain investors, including public pension funds, have placed increasing importance on the impacts of investments made by the private funds to which they commit capital, including with respect to climate change, among other aspects of ESG. Conversely, certain investors have raised concerns as to whether the incorporation of ESG factors in the investment and portfolio management process may be inconsistent with the fiduciary duty to maximize return for investors.39
Table of ContentsCertain investors have demonstrated increased concern with respect to asset managers taking certain actions that could adversely impact the value of, or, refraining from taking certain actions that could improve the value of, an existing or potential investment. At times, investors, including public pension funds, have limited participation in certain investment opportunities, such as hydrocarbons, and/or conditioned future capital commitments to certain funds on the implementation of screens or other sector-specific investment guidelines. Other investors have voiced concern with respect to asset managers’ policies that may result in such managers subordinating the interests of investors based solely or in part on ESG considerations. We may be subject to competing demands from different investors and other stakeholder groups with divergent views on ESG matters, including the role of ESG in the investment process. Investors, including public pension funds, which represent a significant portion of our funds’ investor bases, may decide to withdraw previously committed capital (where such withdrawal is permitted) or not commit capital to future fundraises based on their assessment of how we approach and consider the ESG cost of investments and whether the return-driven objectives of our funds align with their ESG priorities. This divergence increases the risk that any action or lack thereof with respect to ESG matters will be perceived negatively by at least some stakeholders and adversely impact our reputation and business. If we do not successfully manage ESG-related expectations across the varied interests of our stakeholders, including existing or potential investors, our ability to access and deploy capital may be adversely impacted. In addition, a failure to successfully manage ESG-related expectations may negatively impact our reputation and erode stakeholder trust.
Certain investors also have begun to request or require data from their asset managers and/or use third-party benchmarks and ratings to allow them to monitor the ESG impact of their investments. Regulatory initiatives to require investors to make disclosures to their stakeholders regarding ESG matters are becoming increasingly common, which may further increase the number and type of investors who place importance on these issues and who demand certain types of reporting from us or our funds. In addition, government authorities of certain U.S. states have requested information from and scrutinized certain asset managers with respect to whether such managers have adopted ESG policies that would restrict such asset managers from investing in certain industries or sectors, such as conventional energy. These authorities have indicated that such asset managers may lose opportunities to manage money belonging to these states and their pension funds to the extent the asset managers boycott certain industries. This may impair our ability to access capital from certain investors, and we may in turn not be able to maintain or increase the size of our funds or raise sufficient capital for new funds, which may adversely impact our revenues.
There has been increased regulatory focus on ESG-related practices by investment managers, particularly with respect to the accuracy of statements made regarding ESG practices, initiatives and investment strategies. The SEC maintains an enforcement task force to examine ESG practices and disclosures by public companies and investment managers and identify inaccurate or misleading statements, often referred to as “greenwashing.” The SEC has commenced enforcement actions against at least three investment advisers relating to ESG disclosures and policies and procedures failures, and we expect that there will continue to be significant enforcement activity in this area. The SEC has also proposed or adopted two ESG-related rules for investment advisers and for 1940 Act funds that address, among other things, enhanced ESG-related disclosure requirements concerning the use of ESG themes in their investing practices. This could increase the risk that we are perceived as, or accused of, greenwashing. Such perception or accusation could damage our reputation, result in litigation or regulatory actions, and adversely impact our ability to raise capital and attract new investors. Outside of the United States, the European regulatory environment for alternative investment fund managers and financial services firms continues to evolve and increase in complexity, making compliance more costly and time-consuming. See “— Climate change, climate and sustainability-related regulation and sustainability concerns could adversely affect our business and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.”40
Table of ContentsWe may also communicate certain initiatives, commitments and goals regarding environmental, human capital management, and other ESG-related matters in our SEC filings or in other disclosures by us or our funds. These initiatives, commitments and goals could be difficult and expensive to implement, the personnel, processes and technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we may not be able to accomplish them within the timelines we announce or at all. We could, for example, determine that it is not feasible or practical to implement or complete certain of such initiatives, commitments or goals based on cost, timing or other consideration. Furthermore, we could be criticized for the accuracy, adequacy or completeness of the disclosure related to our or our funds’ ESG-related policies, practices, initiatives, commitments and goals, and progress against those goals, which disclosure may be based on frameworks and standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. Further, as part of our ESG practices, we rely from time to time on third-party data, services and methodologies and such services, data and methodologies could prove to be incomplete or inaccurate. If our or such third parties’ ESG-related data, processes or reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, we may be subject to enforcement action and our reputation could be adversely affected, particularly if in connection with such matters we were to be accused of greenwashing.
Climate change, climate and sustainability-related regulation and sustainability concerns could adversely affect our businesses and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.
We, our funds and our funds’ portfolio companies face risks associated with climate change including risks related to the impact of climate-and ESG-related legislation and regulation (both domestically and internationally), risks related to business trends related to climate change and technology (such as the process of transitioning to a lower-carbon economy), and risks stemming from the physical impacts of climate change.
Climate and sustainability-related regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us, our funds and our funds’ portfolio companies and materially increase the regulatory burden and cost of compliance. For example, SEC proposed rules, if enacted, would require certain climate-related disclosures by us, including disclosure of financed emissions, an extensive and complex category of emissions that is difficult to calculate accurately and for which there is currently no agreed measurement standard or methodology. Further, in October 2023, California enacted climate disclosure laws that could require us and/or certain of our portfolio companies to report on greenhouse gas emissions, climate-related financial risks and other climate-related matters. In addition, beginning in 2024, our U.K. entity is expected to be required to disclose certain climate-related financial information in line with the Task Force on Climate-Related Financial Disclosure’s recommendations. Further, in January 2023, the Corporate Sustainability Reporting Directive (“CSRD”) came into effect. CSRD will require a much broader range of companies, including non-EU companies with significant turnover and a legal presence in EU markets, to produce detailed and prescriptive reports on sustainability-related matters within their financial statements. Also in the EU, the Sustainable Finance Disclosure Regulation (“SFDR”) currently imposes disclosure requirements on certain of our funds and the EU Taxonomy Regulation supplements SFDR’s disclosure requirements for certain entities and sets out a framework for classifying economic activities as “environmentally sustainable.” Certain requirements under SFDR and the EU Taxonomy Regulation, such as those requiring us to make certain public disclosures regarding our private funds, may conflict with certain of our other regulatory obligations, such as limitations on general solicitation for private funds. As a consequence, we may be unable to fully comply with some requirements of these new regimes, which could result in regulatory actions against us. The European Commission is currently consulting on making changes to the SFDR and certain SFDR-related regulations are likely to be amended or new guidance may be issued. Furthermore, the41
Table of ContentsU.K. is implementing its own regulation and a new “U.K. Green Taxonomy” that imposes substantial data collection and disclosure obligations on us. Collecting, measuring and reporting the information and metrics required under various existing regulations has imposed administrative burden and increased cost on us, and such burden and cost are likely to increase as new or proposed regulations are enacted, particularly if the requirements imposed on us by various regulations lack harmonization on a global basis. We may also communicate certain climate-related initiatives, commitments and goals in our SEC filings or in other disclosures, which subjects us to additional risks, including the risk of being accused of greenwashing.
Certain of our funds’ portfolio companies operate in sectors that could face transition risk if carbon-related regulations or taxes are implemented. For certain of our funds’ portfolio companies, business trends related to climate change may require capital expenditures, product or service redesigns, and changes to operations and supply chains to meet changing customer expectations. While this can create opportunities, not addressing these changed expectations could create business risks for portfolio companies, which could negatively impact the value of such companies and the returns in our funds. Further, advances in climate science may change society’s understanding of sources and magnitudes of negative effects on climate, which could also negatively impact portfolio company financial performance. Further, significant chronic or acute physical effects of climate change, including extreme weather events such as hurricanes or floods, can also have an adverse impact on certain of our funds’ portfolio companies and investments, especially our real asset investments and portfolio companies that rely on physical factories, plants, stores or other assets located in the affected areas, or that focus on tourism or recreational travel. As the effects of climate change increase, we expect the frequency and impact of weather- and climate-related events and conditions to increase as well.
In addition, our reputation and fundraising may be harmed if certain stakeholders, such as our limited partners or stockholders, believe that we are not adequately or appropriately responding to climate change, including through the way in which we operate our business, the composition of our funds’ existing portfolios, the new investments made by our funds, or the decisions we make to continue to conduct or change our activities in response to climate change considerations. Moreover, we face business trends related to climate change risks, such as, for example, the increased attention to ESG considerations by our fund investors, including in connection with their determination of whether to invest in our funds. See “— We are subject to increasing scrutiny from regulators, elected officials, stockholders, investors and other stakeholders with respect to environmental, social and governance matters, which may adversely impact our ability to raise capital from certain investors, constrain capital deployment opportunities for our funds and harm our brand and reputation.”
Financial regulatory changes in the United States could adversely affect our business.
The financial services industry continues to be the subject of heightened regulatory scrutiny in the United States. There has been active debate over the appropriate extent of regulation and oversight of private investment funds and their managers. Our business may be adversely affected by new or revised regulations imposed by the SEC or other U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. Our business also may be adversely affected by changes in the interpretation or enforcement of existing laws and regulations by these governmental authorities and self-regulatory organizations. Further, new regulations or interpretations of existing laws may result in enhanced disclosure obligations, including with respect to climate matters, which could materially increase the regulatory burden imposed on us, our funds or our funds’ portfolio companies.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, imposed significant changes on almost every aspect of the U.S. financial services industry, including aspects of our business. The Dodd-Frank Act created the FSOC, an interagency body charged with identifying and monitoring systemic risk to financial markets. The FSOC can designate certain financial companies as nonbank financial companies subject to supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). If we were to be designated as such by the FSOC, or if any of our business activities were to be identified by the FSOC as warranting enhanced regulation or supervision by certain regulators, we could be subject to a materially greater regulatory burden, which could adversely impact our compliance and other costs, the implementation of certain of our investment strategies and our profitability.42
Table of ContentsUnder the Dodd-Frank Act, whistleblowers who voluntarily provide original information to the SEC can receive compensation and protection, including payment equal to between 10% and 30% of certain monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower. Whistleblower claims have increased significantly since the enactment of these provisions and in the 2023 fiscal year the SEC awarded approximately $600 million to 68 individuals. Addressing such claims could generate significant expenses and take up significant management time for us and our funds’ portfolio companies, even if such claims are frivolous or without merit.
Rule 206(4)-5 under the Advisers Act prohibits investment advisers from providing advisory services for compensation to a government plan investor for two years, subject to limited exceptions, after the investment adviser, its senior executives or its personnel involved in soliciting investments from government entities make political contributions to certain candidates and officials in position to influence the hiring of an investment adviser by such government client. Advisers are required to implement compliance policies designed, among other matters, to comply with this rule. In addition, there have been similar rules on a state level regarding “pay to play” practices by investment advisers. Additionally, the SEC has instituted and settled multiple actions against investment advisers for violating its 2022 amended marketing rule, which imposed more prescriptive requirements on fund marketing. Any failure on our part to comply with such rules could expose us to significant penalties and reputational damage.
The SEC has adopted “Regulation Best Interest,” which imposes a “best interest” standard of care for broker-dealers when recommending certain securities transactions to a customer. Regulation Best Interest requires such broker-dealers to evaluate available alternatives, including those that may have lower expenses and/or lower investment risk than our investment funds. The continued regulatory focus on Regulation Best Interest may negatively impact whether certain broker-dealers and their associated persons are willing to recommend investment products, including certain of our funds, to retail customers, which may adversely impact our ability to distribute our products to certain investors. Furthermore, the U.S. Department of Labor as well as several states have proposed regulations or taken other actions pertaining to conduct standards for investment advisers and broker-dealers that may result in additional requirements related to our business.
The potential for governmental policy and/or legislative changes and regulatory reform by the current administration may create regulatory uncertainty for our investment strategies, may make it more difficult to operate our business, and may adversely affect the profitability of our funds’ portfolio companies.
Governmental policy and/or legislative changes and regulatory reform could make it more difficult for us to operate our business, including by impeding fundraising or making certain investments or investment strategies unattractive or less profitable. In addition, our ability to identify business and other risks associated with new investments depends in part on our ability to anticipate and accurately assess regulatory, legislative and other changes that may have a material impact on our investments. Anticipating policy changes and reforms may be particularly difficult during periods of heightened partisanship at the federal, state and local levels, including due to the divisiveness surrounding populist movements, political disputes and socioeconomic issues. The failure to accurately anticipate the possible outcome of such changes and/or reforms could have a material adverse effect on the returns generated from our funds’ investments and our revenues.43
Table of ContentsIn recent years, there has been increased regulatory enforcement activity and rulemaking impacting the financial services industry. Given the breadth of initiatives by the current administration and at the SEC and certain other regulatory bodies, policy changes could impose additional costs on us or our investments, require significant attention of senior management or result in limitations on the manner in which we or the companies in which we invest conduct business. Such changes or reforms may include, without limitation:
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There has been recurring consideration amongst regulators and intergovernmental institutions regarding the role of nonbank institutions in providing credit and, particularly, so-called “shadow banking,” a term generally taken to refer to financial intermediation involving entities and activities outside the regulated banking system. Federal regulatory bodies, such as the FSOC, and international organizations, such as the Financial Stability Board, are assessing financial stability-related risks associated with, among other things, nonbank lending and certain types of open-end funds. At this time, whether any rules or regulations related thereto will be proposed is unclear. If nonbank financial intermediation became subject to regulations or oversight standards similar to those applicable to traditional banks, certain of our business activities, including nonbank lending, would be adversely affected and the regulatory burden on us would materially increase, which could adversely impact the implementation of our investment strategy and our returns.
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In the United States, FSOC has the authority to designate nonbank financial companies as systemically important financial institutions (“SIFIs”) subject to supervision by the Federal Reserve Board. Currently, there are no nonbank financial companies with a nonbank SIFI designation. The FSOC has, however, designated certain nonbank financial companies as SIFIs in the past, and additional nonbank financial companies, which may include large asset management companies such as us, may be designated as SIFIs in the future. In November 2023, FSOC adopted amendments to its guidance regarding procedures for designating nonbank financial companies as SIFIs which eliminated the prior guidance’s prioritization of an “activities-based” approach for identifying, assessing and addressing potential risks to financial stability. Under the previous guidance’s “activities-based” approach, FSOC indicated that it would primarily focus on regulating activities
that pose systemic risk rather than focusing on individual firm-specific
determinations. The elimination of an “activities-based” approach over designation of an individual firm as a nonbank SIFI may increase the likelihood of FSOC designating one or more firms as a nonbank SIFI. If we were designated as a nonbank SIFI, including as a result of our asset management or nonbank lending activities, we could become subject to direct supervision by the Federal Reserve Board, and could become subject to enhanced prudential, capital, supervisory and other requirements, such as risk-based capital requirements, leverage limits, liquidity requirements, resolution plan and credit exposure report requirements, concentration limits, a contingent capital requirement, enhanced public disclosures, short-term debt limits and overall risk management requirements. Requirements such as these, which were designed to regulate banking institutions, would likely need to be modified to be applicable to an asset manager, although no proposals have been made indicating how such measures would be adapted for asset managers.
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In addition, future reviews by the FSOC of nonbank financial companies for designation as SIFIs may focus on other types of products and activities, such as nonbank lending activities conducted by certain of our businesses. If any of our activities were identified by the FSOC as posing potential risks to U.S. financial stability, such activities could be subject to modified or enhanced regulation or supervision by U.S. regulators with jurisdiction over such activities, although no proposals have been made indicating how such measures would be applied to any such identified activities.
Trade negotiations and related government actions may create regulatory uncertainty for our funds’ portfolio companies and our investment strategies and adversely affect the profitability of our funds’ portfolio companies.
In recent years, the U.S. government has indicated its intent to alter its approach to international trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries, and has made proposals and taken actions related thereto. For example, the U.S. government has imposed tariffs on certain foreign goods, including from China, such as steel and aluminum. Some foreign governments, including China, have instituted retaliatory tariffs on certain U.S. goods.44
Table of ContentsFurthermore, the U.S. has implemented a number of economic sanctions programs and export controls that specifically target Chinese entities and nationals on national security grounds, including, for example, with respect to China’s response to political demonstrations in Hong Kong and China’s conduct concerning the treatment of Uyghurs and other ethnic minorities in its Xinjiang province. Moreover, the U.S. has implemented additional sanctions against entities participating in China’s military industrial complex and providing support to the country’s military, intelligence, and surveillance apparatuses. These sanctions impose certain restrictions on U.S. persons and entities buying or selling publicly traded securities of these designated entities. Further escalation of the “trade war” between the U.S. and China, the countries’ inability to reach further trade agreements, or the continued use of reciprocal sanctions by each country, may negatively impact opportunities for investment as well as the rate of global growth, particularly in China, which has and continues to exhibit signs of slowing growth. Such slowing growth could adversely affect the revenues and profitability of our funds’ portfolio companies.
There is uncertainty as to the actions that may be taken under the current administration with respect to U.S. trade policy, including with China. Further governmental actions related to the imposition of tariffs or other trade barriers or changes to international trade agreements or policies, could further increase costs, decrease margins, reduce the competitiveness of products and services offered by current and future portfolio companies and adversely affect the revenues and profitability of companies whose businesses rely on goods imported from outside of the United States. See “— Laws and regulations on foreign direct investment applicable to us and our funds’ portfolio companies, both within and outside the U.S, may make it more difficult for us to deploy capital in certain jurisdictions or to sell assets to certain buyers.”
Our provision of products and services to insurance companies subjects us to a variety of risks and uncertainties.
We have increasingly undertaken initiatives to deliver to insurance companies customizable and diversified portfolios of Blackstone products and strategies across asset classes, as well as the option for partial or full management of insurance companies’ general account assets. This strategy has in recent years contributed to meaningful growth in our Assets Under Management, including in Perpetual Capital Assets Under Management. BXCI’s insurance platform currently manages assets for a number of insurance companies and certain of their respective affiliates pursuant to several investment management agreements. Our insurance platform also manages or sub-manages assets for certain insurance-dedicated funds and special purpose vehicles, and has developed, and may continue to develop, other capital-efficient products for insurance companies.
The continued success of our insurance platform will depend in large part on further developing investment partnerships with insurance company clients and maintaining existing asset management arrangements, including those described above. If we fail to deliver high-quality, high-performing products and strategies that help our insurance company clients meet long-term policyholder obligations, we may not be successful in retaining existing investment partnerships, developing new investment partnerships or originating or selling capital-efficient assets or products and such failure may have a material adverse effect on our business, results and financial condition.
The U.S. and non-U.S. insurance industries are subject to significant regulatory oversight. Regulatory authorities in many relevant jurisdictions have broad regulatory (including through certain regulatory support organizations), administrative, and in some cases discretionary, authority with respect to insurance companies and/or their investment advisors, which may include, among other things, the investments insurance companies may acquire and hold, marketing practices, affiliate transactions, reserve requirements and capital adequacy. These requirements are primarily concerned with the protection of policyholders, and regulatory authorities often have wide discretion in applying the relevant restrictions and regulations to insurance companies, which may indirectly affect us. We may be the target or subject of, or may have indemnification obligations related to, litigation (including class action litigation by policyholders), enforcement investigations or regulatory scrutiny. Regulators and other authorities generally have the power to bring administrative or judicial proceedings against insurance companies, which could result in, among other things, suspension or revocation of licenses, cease-and-desist orders, fines, civil penalties, criminal penalties or other disciplinary action. To the extent we are involved in such regulatory actions, our reputation could be harmed, we may become liable for indemnification obligations and we could potentially be subject to enforcement actions, fines and penalties.
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Recently, insurance regulatory authorities and regulatory support organizations have increased scrutiny of alternative asset managers’ involvement in the insurance industry, including with respect to the ownership by such managers or their affiliated funds of, and the management of assets on behalf of, insurance companies. For example, insurance regulators, including the National Association of Insurance Commissioners (“NAIC”) — the U.S. standard-setting and regulatory support organization for the insurance industry — have increasingly focused on the terms and structure of investment management agreements, including whether they are at arms’ length, establish a control relationship with the insurance company, grant the asset manager excessive authority or oversight over the investment strategy of the insurance company or provide for management fees that are not fair and reasonable or termination provisions that make it difficult or costly for the insurer to terminate the agreement. Regulators have also increasingly focused on the risk profile of certain investments held by insurance companies (including, without limitation, all or certain tranches of collateralized loan obligations and other structured securities), appropriateness of investment ratings and potential conflicts of interest, including affiliated investments, and potential misalignment of incentives and any potential risks from these and other aspects of an insurance company’s relationship with alternative asset managers that may impact the insurance company’s risk profile. This enhanced scrutiny may increase the risk of regulatory actions against us and could result in new or amended regulations that limit our ability, or make it more burdensome or costly, to enter into new investment management agreements with insurance companies and thereby grow our insurance strategy. Some of the arrangements we have or will develop with insurance companies involve complex U.S. and non-U.S. tax structures for which no clear precedent or authority may be available. Such structures may be subject to potential regulatory, legislative, judicial or administrative change or scrutiny and differing interpretations and any adverse regulatory, legislative, judicial or administrative changes, scrutiny or interpretations may result in substantial costs to insurance companies or us. In some cases we may agree to indemnify insurance companies for their losses resulting from any such adverse changes or interpretations.
Insurance company investment portfolios are often subject to internal and regulatory requirements governing the categories and ratings of investment products and assets they may acquire and hold. Many of the investment products and strategies we originate or develop for, or other assets or investments we include in, insurance company portfolios will be rated and a ratings downgrade or any other negative action by a rating agency or the NAIC’s Securities Valuation Office (“SVO”), as applicable, with respect to such products, assets or investments could make them less attractive and limit our ability to offer such products to, or invest or deploy capital on behalf of, insurers. Furthermore, insurance companies are subject to certain minimum capital and surplus requirements that vary by the jurisdiction where the insurance company is domiciled and are generally subject to change over time (as discussed in more detail below). In the United States, our insurance company clients are subject to risk-based capital (“RBC”) standards and other minimum capital and surplus requirements imposed by state laws. The RBC standards are based upon the Risk-Based Capital for Insurers Model Act promulgated by the NAIC, as adopted by applicable clients’ insurance regulators. Our Bermuda insurance company clients are subject to Bermuda Solvency Capital Requirements standards and other minimum capital and surplus requirements imposed by the Bermuda Monetary Authority.
New statutory accounting guidance or changes or clarifications in interpretations of existing guidance may adversely impact our ability to originate, or invest in, such assets on behalf of our insurance company clients or cause our clients to increase their required capital in respect of such assets, thus making such assets less attractive to insurers, which may adversely affect our business. Certain proposals or exposure drafts released by insurance regulatory authorities, including the NAIC or the SVO, may result in changes to the risk-based capital treatment and/or ratings or re-ratings processes of certain assets or investments that are, or may be, held by our insurance company clients. In particular, the NAIC is considering revisions to the capital charges for asset-backed securities with a focus on increasing the capital charge on the mezzanine and/or residual tranches (i.e., equity securities) of
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these securitizations. Recent proposals would increase the applicable capital charge of such residual tranches or equity securities of asset-based securitizations from 30% to 45% as of year-end 2024. This potential 50% increase in the applicable RBC charge of such assets could potentially make such assets or investments less attractive to insurers and limit our ability to originate, or invest in, such assets on behalf of insurers.We rely on complex exemptions from statutes in conducting our asset management activities.We regularly rely on exemptions from various requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act, the 1940 Act, the Commodity Exchange Act and the U.S. Employee Retirement Income Security Act of 1974, as amended, in conducting our asset management activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third-party claims and our business could be materially and adversely affected. For example, the “bad actor” disqualification provisions of Rule 506 of Regulation D under the Securities Act ban an issuer from offering or selling securities pursuant to the safe harbor rule in Rule 506 if the issuer or any other “covered person” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived. The definition of “covered person” includes an issuer’s directors, general partners, managing members and executive officers; affiliates who are also issuing securities in the offering; beneficial owners of 20% or more of the issuer’s outstanding equity securities; and promoters and persons compensated for soliciting investors in the offering. Accordingly, our ability to rely on Rule 506 to offer or sell securities would be impaired if we or any “covered person” is the subject of a disqualifying event under the rule and we are unable to obtain a waiver. These regulations often serve to limit our activities and impose burdensome compliance requirements.Complex regulatory regimes and potential regulatory changes in jurisdictions outside the United States could adversely affect our business.Similar to the United States, the jurisdictions outside the United States in which we operate, in particular Europe, have become subject to further regulation. Governmental regulators and other authorities in Europe have proposed or implemented a number of initiatives, rules and regulations that could adversely affect our business, including by imposing additional compliance and administrative burdens and increasing the costs of doing business in such jurisdictions. Increasingly, the rules and regulations in the financial sector in Europe are becoming more prescriptive. Rules and regulations in other jurisdictions are often informed by key features of U.S. and European rules and regulations and, as a result, our businesses in all jurisdictions, including across Asia, may become subject to increased regulation in the future.
In Europe, the EU Alternative Investment Fund Managers Directive (“AIFMD”) establishes a regulatory regime for alternative investment fund managers (“AIFMs”), including our AIFMs in Luxembourg and Ireland. The U.K. has “on-shored” AIFMD and therefore similar requirements continue to apply to funds marketed to U.K. investors notwithstanding Brexit. Changes to AIFMD have been adopted and are expected to come into force in late-2025. These changes increase the compliance burdens on certain of our funds and require them to make changes to their operations, including, among other things, in respect of their use of leverage, which could impact the returns of such funds.
In addition, on August 2, 2021, Directive (EU) 2019/1160 (the “CBDF Directive”) and Regulation (EU) 2019/1156 (the “CBDF Regulation”) came into effect, which in part amended AIFMD. The CBDF Regulation contains standardized requirements for cross-border fund distribution in the EU. CBDF Directive has been implemented in most EU member states, which may make it more complex and costly for us to raise capital from EEA investors.
47Table of ContentsThe EU Securitization Regulation (the “Securitization Regulation”), which became effective on January 1, 2019, imposes due diligence and risk retention requirements on “institutional investors” (which includes managers of alternative investment funds assets) which must be satisfied prior to holding a securitization position. These requirements may apply to AIFs managed by not only EEA AIFMs but also non-EEA AIFMs where those AIFs have been registered for marketing in the EU under national private placement regimes. Similar requirements continue to apply in the U.K. notwithstanding Brexit. The FCA is looking at amending the regime in the U.K. in the coming years which could result in divergence between the EU and U.K. requirements, thereby increasing the cost and complexity of compliance. The Securitization Regulation may impact or limit our funds’ ability to make certain investments that constitute “securitizations” under the regulation. The Securitization Regulation may also constrain certain of our funds’ ability to invest in securitization positions that do not comply with, among other things, the risk retention requirements. Failure to comply with these requirements could result in various penalties.
The EU regulation on over-the-counter (“OTC”) derivative transactions, central counterparties and trade repositories ( “EMIR”) requires mandatory clearing of certain OTC derivatives through central counterparties, creates additional risk mitigation requirements (including, in particular, margining requirements) in respect of certain OTC derivative transactions that are not cleared by a central counterparty, and imposes reporting and recordkeeping requirements in respect of most derivative transactions. The U.K. has on-shored EMIR in similar, but not identical form. In addition, the EU regulation on transparency of securities financing transactions (“SFTR”) requires certain mandatory reporting and disclosure in connection with certain securities financing transactions and total return swaps. Furthermore, the EU Central Securities Depositories Regulation (“CSDR”) provides for an EU-wide framework with respect to securities settlement and central securities depository and settlement services. The effectiveness of certain requirements under this framework has been postponed until November 2025. The U.K. has on-shored SFTR and CSDR, in similar, but not identical, forms. Each of the aforementioned regulations is likely to increase the operational burden and costs associated with certain of our and our funds’ operations.
In December 2023, the European Commission reached a provisional agreement on previously proposed regulations to strengthen the regulatory and supervisory framework over money laundering and financing of terrorism, which includes the establishment of a new regulatory authority. Additionally, in the U.K., amendments to the anti-money laundering and financing of terrorism regime are expected to be finalized in 2024. These proposals, if adopted, could increase the risk of regulatory actions against us.
Further, in the EU, the Markets in Financial Instruments Directive 2014 (2014/65/EU) (“MiFID II”), which has also been on-shored in the U.K., requires us to comply with disclosure, transparency, reporting and record keeping obligations and enhanced obligations in relation to the receipt of investment research, best execution, product governance and marketing communications. Compliance with MiFID II has resulted in greater overall complexity, higher compliance and administration and operational costs and less overall flexibility for us. Certain aspects of MiFID II are subject to review and amendment in the EU and the U.K. Associated changes to the prudential regulation of EEA and U.K. MiFID investment firms have increased the regulatory capital and liquidity adequacy requirements for certain of our entities licensed under MiFID, as well as required us to make changes to the way in which we remunerate certain senior staff. Additional regulation around remuneration may make it harder for us to attract and retain talent, compared to competitors not subject to the same rules. Enhanced internal governance, disclosure and reporting requirements increase the costs of compliance.
Certain regulatory requirements in the EU and U.K. intended to enhance protection for retail investors and impose additional obligations on the distribution of certain products to retail investors may lead to increased costs and limit our ability to access capital from retail investors in certain jurisdictions. These include EU and U.K. rules requiring that retail investors in packaged retail investment and insurance products receive key information documents and U.K rules enhancing duties related to distribution of financial products to retail investors. Furthermore, in May 2023, the European Commission announced its Retail Investment Strategy, which could result in new regulation that could impact our ability to offer our funds to retail investors in the EU.
We are required to comply with the Regulation (EU) 2016/679 (General Data Protection Regulation) (the “EU GDPR”) because, among other things, we process European Union data subjects’ personal data in the U.S. via our global technology systems. Following Brexit, the U.K. implemented its own version of EU GDPR (the “U.K. GDPR”).
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The EU GDPR and U.K. GDPR impose a range of obligations on processors of personal data, including obligations that apply in respect of the transfer of personal data to other countries, including potential limitations on transfer or requirements to implement further protections for personal data. Data protection authorities have significant audit and investigatory powers to probe how personal data is being used and processed and breaches of these regulations can lead to significant fines, regulatory action and reputational risk. See “— Rapidly developing and changing global data security and privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.” European regulators, including the U.K. FCA are increasing their attention on greenwashing and rapidly developing and implementing regimes focused on ESG and sustainability within the financial services sector, which could adversely affect our business and the operations of our funds’ portfolio companies in various ways. See “— Climate change, climate and sustainability-related regulation and sustainability concerns could adversely affect our business and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.”Laws and regulations on foreign direct investment applicable to us and our funds’ portfolio companies, both within and outside the U.S., may make it more difficult for us to deploy capital in certain jurisdictions or to sell assets to certain buyers.A number of jurisdictions, including the U.S., have restrictions on foreign direct investment pursuant to which their respective heads of state and/or regulatory bodies have the authority to block or impose conditions with respect to certain transactions, such as investments, acquisitions and divestitures, if such transaction threatens to impair national security. In addition, many jurisdictions restrict foreign investment in assets important to national security by taking steps including, but not limited to, placing limitations on foreign equity investment, implementing investment screening or approval mechanisms, and restricting the employment of foreigners as key personnel. These U.S. and foreign laws could limit our funds’ ability to invest in certain businesses or entities or impose burdensome notification requirements, operational restrictions or delays in pursuing and consummating transactions. For example, the Committee on Foreign Investment in the United States (“CFIUS”) has the authority to review transactions that could result in potential control of, or certain types of non-controlling investments in, a U.S. business or U.S. real estate by a foreign person. In recent years, legislation has expanded the scope of CFIUS’ jurisdiction to cover more types of transactions and empower CFIUS to scrutinize more closely investments in certain transactions. CFIUS may recommend that the President block, unwind or impose conditions or terms on such transactions, certain of which may adversely affect the ability of the fund to execute on its investment strategy with respect to such transaction as well as limit our flexibility in structuring or financing certain transactions. Additionally, CFIUS or any non-U.S. equivalents thereof may seek to impose limitations on one or more such investments that may prevent us from maintaining or pursuing investment opportunities that we otherwise would have maintained or pursued, which could make it more difficult for us to deploy capital in certain of our funds.
In August 2023, the President signed an Executive Order establishing an outbound investment screening regime that is intended to regulate or prohibit certain investments by U.S. persons in advanced technology sectors in China and other jurisdictions that may be designated as a “country of concern.” While the details of this new regime remain subject to a rulemaking process, the forthcoming requirements could further negatively impact our ability to deploy capital in such countries. Further, state regulatory agencies may impose restrictions on private funds’ investments in certain types of assets, which could affect our funds’ ability to find attractive and diversified investments and to complete such investments in a timely manner. For example, California adopted regulations that are scheduled to take effect in April 2024 and would subject certain potential investments in the healthcare sector that transfer a material amount of a healthcare portfolio company’s assets or governance to review by a state regulatory agency. In addition, a number of U.S. states are passing and implementing state laws prohibiting or otherwise restricting the acquisition of interests in real property located in the state by foreign persons. These laws may impact the ability of non-U.S. limited partners to participate in certain of our investment strategies.
49Table of ContentsOur investments outside of the United States may also face delays, limitations, or restrictions as a result of notifications made under and/or compliance with these legal regimes and rapidly changing agency practices. Other countries continue to establish and/or strengthen their own national security investment clearance regimes, which could have a corresponding effect of limiting our ability to make investments in such countries. Heightened scrutiny of foreign direct investment worldwide may also make it more difficult for us to identify suitable buyers for investments upon exit and may constrain the universe of exit opportunities for an investment in a portfolio company. As a result of such regimes, we may incur significant delays and costs, be altogether prohibited from making a particular investment or impede or restrict syndication or sale of certain assets to certain buyers, all of which could adversely affect the performance of our funds and in turn, materially reduce our revenues and cash flow. Complying with these laws imposes potentially significant costs and complex additional burdens, and any failure by us or our funds’ portfolio companies to comply with them could expose us to significant penalties, sanctions, loss of future investment opportunities, additional regulatory scrutiny, and reputational harm.We are subject to substantial risk of litigation and regulatory proceedings and may face significant liabilities and damage to our reputation as a result of allegations of improper conduct and negative publicity.From time to time we, our funds and our funds’ portfolio companies have been and may be subject to litigation, including securities class action lawsuits by stockholders, as well as class action lawsuits that challenge our acquisition transactions and/or attempt to enjoin them. For a discussion of certain legal proceedings to which we are a party, see “Part II. Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 19. Commitments and Contingencies — Contingencies — Litigation.” Any private lawsuits or regulatory actions brought against us and resulting in a finding of substantial legal liability could materially adversely affect our business, financial condition or results of operations. In addition, such actions, even if resulting in a favorable outcome to us, could result in significant reputational harm, which could seriously harm our business.
In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against the financial services industry in general have been increasing. The investment decisions we make in our asset management business and the activities of our investment professionals (including in connection with portfolio companies and investment advisory activities) may subject us, our funds and our funds’ portfolio companies to the risk of third-party litigation or regulatory proceedings arising from investor dissatisfaction with the performance of those investment funds, alleged conflicts of interest, the suitability or manner of distribution of our products, including to retail investors, the activities of our funds’ portfolio companies and a variety of other claims.
In addition, to the extent investors in our investment funds suffer losses resulting from fraud, gross negligence, willful misconduct or other similar misconduct, investors may have remedies against us, our investment funds, our senior managing directors or our affiliates under the federal securities law and/or state law. While the general partners and investment advisers to our investment funds, including their directors, officers, other employees and affiliates, are generally indemnified to the fullest extent permitted by law with respect to their conduct in connection with the management of the business and affairs of our investment funds, such indemnity does not extend to actions determined to have involved fraud, gross negligence, willful misconduct or other similar misconduct. The activities of our capital markets services business may also subject us to the risk of liabilities to our clients and third parties, including our clients’ stockholders, under securities or other laws in connection with transactions in which we participate. See “— Underwriting activities by our capital markets services business expose us to risks.”
We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and to pursue investment opportunities for our funds. As a result, allegations by private actors, regulators, or employees of improper conduct by us, even if unfounded, as well as negative publicity and press speculation about us, may harm our reputation. This could adversely impact our relationships with clients and our fundraising. In recent years, there has been increased activity on the part of certain activist and other organized groups, with respect to investments made by private funds. Such groups have at times contacted and otherwise sought to engage with government and regulatory bodies and fund investors, including public pension funds, on our funds’ investments, which has led to negative publicity that could harm our reputation. The pervasiveness of social media and public focus on the externalities of business activities could lead to wider dissemination of adverse or inaccurate information about us, making remediation more difficult and magnifying reputational risk.
50Table of ContentsEmployee misconduct could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm. Fraud, deceptive practices or other misconduct at portfolio companies or service providers could similarly subject us to liability and reputational damage and also harm performance.Our employees could engage in misconduct that adversely affects our business. We are subject to a number of obligations and standards arising from our asset management business and our authority over the assets managed by our asset management business. The violation of these obligations and standards by any of our employees would adversely affect our clients and us. Our business often requires that we deal with confidential matters of great significance to companies in which we may invest. If our employees were to improperly use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and future business relationships. Detecting or deterring employee misconduct is not always possible, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. In addition, a prolonged period of remote work, such as the one experienced during the COVID-19 pandemic, may require us to develop and implement additional precautions in order to detect and prevent employee misconduct. Such additional precautions, which may include the implementation of security and other restrictions, may make our systems more difficult and costly to operate and may not be effective in preventing employee misconduct in a remote work environment. If one of our employees were to engage in misconduct or were to be accused of such misconduct, our business and our reputation could be adversely affected.
We are subject to U.S. and foreign anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, as amended (“FCPA”), as well as anti-money laundering laws. In recent years, the U.S. Department of Justice and the SEC have devoted greater resources to enforcement of the FCPA. In addition, the U.K. has also significantly expanded the reach of its anti-bribery laws. While we have policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and other applicable laws, such policies and procedures may not be effective in all instances to prevent violations. Any determination that we have violated the FCPA, the U.K. anti-bribery laws or other applicable anti-corruption, anti-bribery, or anti-money laundering laws could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects, financial position or the price of our common stock.
Furthermore, we may also be adversely affected if there is misconduct by personnel of our funds’ portfolio companies or by such companies’ service providers. For example, financial fraud or other deceptive practices at our funds’ portfolio companies, or failures by personnel at our funds’ portfolio companies to comply with anti-corruption, anti-bribery, anti-money laundering, trade and economic sanctions, export controls, anti-harassment, anti-discrimination or other legal and regulatory requirements, could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct and securities litigation, and could also cause significant reputational and business harm to us. Such misconduct may undermine our due diligence efforts with respect to such portfolio companies and could negatively affect the valuations of the investments by our funds in such portfolio companies. Losses to our funds and us could also result from misconduct or other actions by service providers, such as administrators, consultants or other advisors, if such service providers improperly use or disclose confidential information, misappropriate funds, or violate legal or regulatory obligations. Moreover, we may face an increased risk of such misconduct to the extent our investment in non-U.S. markets, particularly emerging markets, increases.
51Table of ContentsAnother pandemic or global health crisis like the COVID-19 pandemic may adversely impact our performance and results of operations.
From 2020 to 2022, in response to the COVID-19 pandemic, many countries instituted quarantine restrictions and took other measures to limit the spread of the virus. This resulted in labor shortages and disruption of supply chains and contributed to prolonged disruption of the global economy. A widespread reoccurrence of another pandemic or global health crisis could increase the possibility of periods of increased restrictions on business operations, which may adversely impact our business, financial condition, results of operations, liquidity and prospects materially and exacerbate many of the other risks discussed in this “Risk Factors” section.
In the event of another pandemic or global health crisis like the COVID-19 pandemic, our funds’ portfolio companies may experience decreased revenues and earnings, which may adversely impact our ability to realize value from such investments and in turn reduce our performance revenues. Investments in certain sectors, including hospitality, location-based entertainment, retail, travel, leisure and events, and in certain geographies, office and residential, could be particularly negatively impacted, as was the case during the COVID-19 pandemic. Our funds’ portfolio companies may also face increased credit and liquidity risk due to volatility in financial markets, reduced revenue streams and limited access or higher cost of financing, which may result in potential impairment of our or our funds’ investments. In addition, borrowers of loans, notes and other credit instruments in our credit funds’ portfolios may be unable to meet their principal or interest payment obligations or satisfy financial covenants, and tenants leasing real estate properties owned by our funds may not be able to pay rents in a timely manner or at all, resulting in a decrease in value of our funds’ credit and real estate investments. In the event of significant credit market contraction as a result of a pandemic or similar global health crisis, certain of our funds may be limited in their ability to sell assets at attractive prices or in a timely manner in order to avoid losses and margin calls from credit providers. In our liquid and semi-liquid vehicles, such a contraction could cause investors to seek liquidity in the form of redemptions or repurchase of interests from our funds, adversely impacting management fees. Our management fees may also be negatively impacted if we experience a decline in the pace of capital deployment or fundraising.
A pandemic or global health crisis may also pose enhanced operational risks. For example, our employees may become sick or otherwise unable to perform their duties for an extended period, and extended public health restrictions and remote working arrangements may impact employee morale, integration of new employees and preservation of our culture. Remote working environments may also be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts. Moreover, our third-party service providers could be impacted by an inability to perform due to pandemic-related restrictions or by failures of, or attacks on, their technology platforms.Poor performance of our investment funds would cause a decline in our revenue, income and cash flow, may obligate us to repay Performance Allocations previously paid to us, and could adversely affect our ability to raise capital for future investment funds.In the event that any of our investment funds were to perform poorly, our revenue, income and cash flow would decline because the value of our assets under management would decrease, which would result in a reduction in management fees, and our investment returns would decrease, resulting in a reduction in the Performance Revenues we earn. Moreover, we could experience losses on our investments of our own principal as a result of poor investment performance by our investment funds. Furthermore, if, as a result of poor performance of later investments in a carry fund’s life, the fund does not achieve certain investment returns for the fund over its life, we will be obligated to repay the amount by which Performance Allocations that were previously distributed to us exceed the amount to which the relevant general partner is ultimately entitled. Similarly, certain of our vehicles’ terms require an offset of Performance Revenues related to past performance, often referred to as a “recoupment of loss carryforward.” If a recoupment of loss carryforward is triggered, including as a result of a meaningful decline in the vehicles’ revenues following a period of strong performance, such offset would serve to reduce the amount of future Performance Revenues to which we would be entitled in such vehicle. In the event that the offset is insufficient for the vehicle to fully recoup such loss carryforward, we may be required to make a cash payment after a certain period.
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In addition, in most cases, the companies in which our investment funds invest will have indebtedness or equity securities, or may be permitted to incur indebtedness or to issue equity securities, that rank senior to our investment, which may limit the ability of our investment funds to influence a company’s affairs and to take actions to protect their investments during periods of financial distress or following an insolvency.Poor performance of our investment funds could make it more difficult for us to raise new capital. Investors in funds might decline to invest in future investment funds we raise and investors in hedge funds or other investment funds might withdraw their investments as a result of poor performance of the investment funds in which they are invested. Investors and potential investors in our funds continually assess our investment funds’ performance, and our ability to raise capital for existing and future investment funds and avoid excessive redemption levels will depend on our investment funds’ continued satisfactory performance. Accordingly, poor fund performance may deter future investment in our funds and thereby decrease the capital invested in our funds and ultimately, our management fee revenue. Alternatively, in the face of poor fund performance, investors could demand lower fees or fee concessions for existing or future funds which would likewise decrease our revenue.Furthermore, from time to time, we may pursue new or different investment strategies and expand into geographic markets and businesses that may not perform as expected and result in poor performance by us and our investment funds. In addition to the risk of poor performance, such activity may subject us to a number of risks and uncertainties, including risks associated with (a) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, (b) the diversion of management’s attention from our core businesses, (c) known or unknown contingent liabilities, which could result in unforeseen losses for us and our funds, (d) the disruption of ongoing businesses and (e) compliance with additional regulatory requirements.The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in common stock.
The historical and potential future returns of the investment funds that we manage are not directly linked to returns on our common stock. Therefore, any continued positive performance of the investment funds that we manage will not necessarily result in positive returns on an investment in our common stock. However, poor performance of the investment funds that we manage would cause a decline in our revenue from such investment funds, and would therefore have a negative effect on our performance and in all likelihood the returns on an investment in our common stock. Moreover, with respect to the historical returns of our investment funds:•
we may create new funds in the future that reflect a different asset mix and different investment strategies (including funds whose management fees represent a more significant proportion of the fees than has historically been the case), as well as a varied geographic and industry exposure as compared to our present funds, and any such new funds could have different returns from our existing or previous funds,
•
the rates of returns of our carry funds reflect unrealized gains as of the applicable measurement date that may never be realized, which may adversely affect the ultimate value realized from those funds’ investments,
•
competition for investment opportunities resulting from, among other things, the increased amount of capital invested in alternative investment funds continues to increase,
•
our investment funds’ returns in some years benefited from investment opportunities and general market conditions that may not repeat themselves, our current or future investment funds might not be able to avail themselves of comparable investment opportunities or market conditions, and the circumstances under which our current or future funds may make future investments may differ significantly from those conditions prevailing in the past,
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newly established funds may generate lower returns during the period in which they initially deploy their capital and
•
the rates of return reflect our historical cost structure, which may vary in the future due to various factors enumerated elsewhere in this report and other factors beyond our control, including changes in laws.
The future internal rate of return for any current or future fund may vary considerably from the historical internal rate of return generated by any particular fund, or for our funds as a whole. In addition, future returns will be affected by the applicable risks described elsewhere in this Annual Report on Form 10-K, including risks of the industries and businesses in which a particular fund invests.Certain policies and procedures implemented to mitigate potential conflicts of interest and address certain regulatory requirements may reduce the synergies across our various businesses.Because of our various asset management businesses and our capital markets services business, we will be subject to a number of actual and potential conflicts of interest and subject to greater regulatory oversight and more legal and contractual restrictions than that to which we would otherwise be subject if we had just one line of business. To mitigate these conflicts and address regulatory, legal and contractual requirements across our various businesses, we have implemented certain policies and procedures (for example, information walls) that may reduce the positive synergies that we cultivate across these businesses for purposes of identifying and managing attractive investments. For example, certain regulatory requirements require us to restrict access by certain personnel in our funds to information about certain transactions or investments being considered or made by those funds. In addition, we may come into possession of confidential or material non-public information with respect to issuers in which we may be considering making an investment or issuers in which our affiliates may hold an interest. As a consequence of such policies and procedures, we may be precluded from providing such information or other ideas to our other businesses even where it might be of benefit to them.
Our failure to deal appropriately with conflicts of interest in our investment business could damage our reputation and adversely affect our businesses.
As we have expanded, and continue to expand, the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our funds’ investment activities. Investment manager conflicts of interest continue to be a significant area of focus for regulators and the media. Because of our size and the variety of businesses and investment strategies that we pursue, we may face a higher degree of scrutiny compared with investment managers that are smaller or focus on fewer asset classes. Certain of our funds may have overlapping investment objectives, including funds that have different fee structures and/or investment strategies that are more narrowly focused. Potential conflicts may arise with respect to allocation of investment opportunities among us, our funds and our affiliates, including to the extent that the fund documents do not mandate a specific investment allocation. For example, we may allocate an investment opportunity that is appropriate for two or more investment funds in a manner that excludes one or more funds or results in a disproportionate allocation based on factors or criteria that we determine, such as sourcing of the transaction, specific nature of the investment or size and type of the investment, among other factors. We may also decide to provide a co-investment opportunity to certain investors in lieu of allocating more of that investment to our funds. Moreover, the challenge of allocating investment opportunities to certain funds may be exacerbated as we expand our business to include more lines of business, including more public vehicles. Allocating investment opportunities appropriately frequently involves significant and subjective judgments. The risk that fund investors or regulators could challenge allocation decisions as inconsistent with our obligations under applicable law, governing fund agreements or our own policies cannot be eliminated. In addition, the perception of non-compliance with such requirements or policies could harm our reputation with fund investors.
54Table of ContentsWe may also cause different funds to invest in a single portfolio company, for example where the fund that made an initial investment no longer has capital available to invest. We may also cause different funds that we manage to purchase different classes of securities in the same portfolio company. For example, one of our CLO funds could acquire a debt security issued by the same company in which one of our private equity funds owns common equity securities. A direct conflict of interest could arise between the debt holders and the equity holders if such a company were to develop insolvency concerns, and we would have to carefully manage that conflict. A decision to acquire material non-public information about a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it results in our having to restrict the ability of other funds to take any action with respect to that company. Our affiliates or portfolio companies may be service providers or counterparties to our funds or portfolio companies and receive fees or other compensation for services that are not shared with our fund investors. In such instances, we may be incentivized to cause our funds or portfolio companies to purchase such services from our affiliates or portfolio companies rather than an unaffiliated service provider despite the fact that a third-party service provider could potentially provide higher quality services or offer them at a lower cost. In addition, conflicts of interest may exist in the valuation of our investments, as well as the personal trading of employees and the allocation of fees and expenses among us, our funds and their portfolio companies, and our affiliates. Lastly, in certain, infrequent instances we may purchase an investment alongside one of our investment funds or sell an investment to one of our investment funds and conflicts may arise in respect of the allocation, pricing and timing of such investments and the ultimate disposition of such investments. A failure to appropriately deal with these, among other, conflicts, could negatively impact our reputation and ability to raise additional funds or result in potential litigation or regulatory action against us. Further, rules recently issued by the SEC and other measures it takes to preclude or limit certain conflicts of interest may make it more difficult for our funds to pursue transactions that may otherwise be attractive to the fund and its investors, which may adversely impact fund performance.
Conflicts of interest may arise in our allocation of co-investment opportunities.
Potential conflicts will arise with respect to our decisions regarding how to allocate co-investment opportunities among investors and the terms of any such co-investments. As a general matter, our allocation of co-investment opportunities is within our discretion and there can be no assurance that co-investment opportunities of any particular type or amount will become available to any of our investors. We may take into account a variety of factors and considerations we deem relevant in allocating co-investment opportunities, including, without limitation, whether a potential co-investor has expressed an interest in evaluating co-investment opportunities, our assessment of a potential co-investor’s ability to invest an amount of capital that fits the needs of the investment and our assessment of a potential co-investor’s ability to commit to a co-investment opportunity within the required timeframe of the particular transaction.
Our fund documents typically do not mandate specific allocations with respect to co-investments. The investment advisers of our funds may have an incentive to provide potential co-investment opportunities to certain investors in lieu of others and/or in lieu of an allocation to our funds, including, for example, as part of an investor’s overall strategic relationship with us, or if such allocations are expected to generate relatively greater fees or Performance Allocations to us than would arise if such co-investment opportunities were allocated otherwise. Co-investment arrangements may be structured through one or more of our investment vehicles, and in such circumstances co-investors will generally bear the costs and expenses thereof (which may lead to conflicts of interest regarding the allocation of costs and expenses between such co-investors and investors in our funds). The terms of any such existing and future co-investment vehicles may differ materially, and in some instances may be more favorable to us, than the terms of certain of our funds or prior co-investment vehicles, and such different terms may create an incentive for us to allocate a greater or lesser percentage of an investment opportunity to such co-investment vehicles. There can be no assurance that any conflicts of interest will be resolved in favor of any particular investment funds or investors (including any applicable co-investors). As with our investment allocation decisions generally, there is a risk that regulators and/or investors could challenge our allocations of co-investment opportunities or fees and expenses.
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Valuation methodologies for certain assets in our funds can be subject to a significant degree of subjectivity and judgment, and the fair value of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds and the reduction of Management Fees and/or Performance Revenues.
Our investment funds make investments in illiquid investments or financial instruments for which there is little, if any, market activity. We determine the value of such investments and financial instruments on at least a quarterly basis based on the fair value of such investments as determined in accordance with GAAP. The fair value of such investments and financial instruments is generally determined using a primary methodology and corroborated by a secondary methodology. Methodologies are used on a consistent basis and described in Blackstone’s and the investment funds’ valuation policies and governing agreements.The determination of fair value using these methodologies takes into consideration a range of factors including, but not limited to, the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. These valuation methodologies involve a significant degree of subjective management judgment. For example, as to investments that we share with another sponsor, we may apply a different valuation methodology or factors or derive a different value than such other sponsor on the same investment. In addition, the valuations of our private investments may at times differ significantly from the valuations of publicly traded companies in similar sectors or with similar business models.
For example, valuations of our private investments do not have an observable market price and may take into account certain long-term financial projections or estimates, including those prepared by the management of a portfolio company or other investment. Such projections or estimates may not materialize and are based on significant judgments and assumptions at the time they are developed and may not be available to the public. Valuations of publicly traded companies, on the other hand, are based on the observable price in the reference market which are generally subject to a higher degree of market volatility. These differences, and the potential exercise of our subjective judgment, might cause some investors and/or regulators to question our valuations or methodologies. There can be no assurance that our policies will address all necessary valuation factors or completely eliminate potential conflicts of interest in such determinations. The SEC continues to focus on issues related to valuation of private funds, including consistent application of the methodology, disclosure, and conflicts of interest, in its enforcement, examination, and rulemaking activities. Further, variation in the underlying assumptions, estimates, methodologies and/or judgments we use in the determination of the value of certain investments and financial instruments could potentially produce materially different results. Valuation methodologies may also change from time to time. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation — Critical Accounting Policies” for an overview of our fair value policy and the significant judgment required in the application thereof.
Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid investments, the fair values of such investments as reflected in an investment fund’s net asset value do not necessarily reflect the prices that would actually be obtained by us on behalf of the investment fund when such investments are realized. Realizations at values lower than the values at which investments have been reflected in prior fund net asset values would result in reduced gains or losses for the applicable fund, a decline in certain asset management fees and the reduction in potential Performance Revenues. Changes in values of investments from quarter to quarter may result in volatility in our investment funds’ net asset value, our investment in, or fees from, those funds and the results of operations and cash flow that we report from period to period. Further, a situation where asset values turn out to be materially different than values reflected in prior fund net asset values could cause investors to lose confidence in us, which would in turn result in difficulty in raising additional funds or redemptions from funds where investors hold redemption rights.
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Our use of borrowings to finance our business exposes us to risks.We use borrowings to finance our business operations as a public company. We have numerous outstanding notes with various maturity dates as well as a revolving credit facility that matures on December 15, 2028. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources and Uses of Liquidity” for further information regarding our outstanding borrowings. As borrowings under the credit facility and our outstanding notes mature, we will be required to refinance or repay such borrowings. In order to do so, we may enter into a new facility or issue new notes, each of which could result in higher borrowing costs. We may also issue equity, which would dilute existing stockholders. Further, we may choose to repay such borrowings using cash on hand, cash provided by our continuing operations or cash from the sale of our assets, each of which could reduce the amount of cash available to facilitate the growth and expansion of our businesses, make repurchases under our share repurchase program and pay dividends to our stockholders, operating expenses and other obligations as they arise. In order to obtain new borrowings, or to extend or refinance existing borrowings, we are dependent on the willingness and ability of financial institutions such as global banks to extend credit to us on favorable terms or at all, and on our ability to access the debt and equity capital markets, which can be volatile. There is no guarantee that such financial institutions will continue to extend credit to us or that we will be able to access the capital markets to obtain new borrowings or refinance existing borrowings when they mature. In addition, the use of leverage to finance our business exposes us to the types of risk described in “— Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.”
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Table of ContentsDependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.Many of our funds’ investments rely heavily on the use of leverage, and our ability to achieve attractive rates of return on investments will depend on our ability to access sufficient sources of indebtedness at attractive rates. For example, in many private equity and real estate investments, indebtedness may constitute as much as 70% or more of a portfolio company’s or real estate asset’s total debt and equity capitalization, including debt that may be incurred in connection with the investment. The absence of available sources of sufficient senior debt financing for extended periods of time could therefore materially and adversely affect our private equity and real estate businesses. Furthermore, limits on the deductibility of corporate interest expense could make it more costly to use debt financing for our acquisitions or otherwise have an adverse impact on the cost structure of our transactions, and could therefore adversely affect the returns on our funds’ investments. See “— Changes in U.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 addition, an increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensive to finance those businesses’ investments. See “— High interest rates and challenging debt market conditions have negatively impacted and could continue to negatively impact the values of certain assets or investments and the ability of our funds and their portfolio companies to access the capital markets, which could adversely affect investment and realization opportunities, lead to lower-yielding investments and potentially decrease our net income.”Investments in highly leveraged entities are inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverse economic, market and industry developments. The incurrence of a significant amount of indebtedness by an entity could, among other things:•
give rise to an obligation to make mandatory pre-payments of debt using excess cash flow, which might limit the entity’s ability to respond to changing industry conditions to the extent additional cash is needed for the response, to make unplanned but necessary capital expenditures or to take advantage of growth opportunities,
•
limit the entity’s ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared to its competitors who have relatively less debt,
•
allow even moderate reductions in operating cash flow to render it unable to service its indebtedness, leading to a bankruptcy or other reorganization of the entity and a loss of part or all of the equity investment in it,
•
limit the entity’s ability to engage in strategic acquisitions that might be necessary to generate attractive returns or further growth and
•
limit the entity’s ability to obtain additional financing or increase the cost of obtaining such financing, including for capital expenditures, working capital or general corporate purposes.As a result, the risk of loss associated with a leveraged entity is generally greater than for companies with comparatively less debt.
When our funds’ existing portfolio investments reach the point when debt incurred to finance those investments matures in significant amounts and must be either repaid or refinanced, those investments may materially suffer if they have generated insufficient cash flow to repay maturing debt and there is insufficient capacity and availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or at all. If a limited availability of financing for such purposes were to persist for an extended period of time, when significant amounts of the debt incurred to finance our private equity and real estate funds’ existing portfolio investments came due, these funds could be materially and adversely affected.58
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Many of the hedge funds in which our funds of hedge funds invest, our credit-focused funds and or CLOs, may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. A fund may borrow money from time to time to purchase or carry securities or may enter into derivative transactions (such as total return swaps) with counterparties that have embedded leverage. The interest expense and other costs incurred in connection with such borrowing may not be recovered by appreciation in the securities purchased or carried and will be lost — and the timing and magnitude of such losses may be accelerated or exacerbated — in the event of a decline in the market value of such securities. Gains realized with borrowed funds may cause the fund’s net asset value to increase at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund’s net asset value could also decrease faster than if there had been no borrowings.Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.The due diligence process that we undertake in connection with investments by our investment funds may not reveal all facts and issues that may be relevant in connection with an investment.
When evaluating a potential business or asset for investment, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to such investment. When conducting due diligence, we may be required to evaluate important and complex issues, including but not limited to those related to business, financial, credit risk, tax, accounting, ESG, legal and regulatory and macroeconomic trends. With respect to ESG, the nature and scope of our diligence will vary based on the investment, but may include a review of, among other things: energy management, air and water pollution, land contamination, human capital management, human rights, employee health and safety, accounting standards and bribery and corruption. Selecting and evaluating such factors is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by Blackstone or a third-party specialist (if any) will reflect the policies or preferred practices of any particular investor or align with the practices of other asset managers or with market trends. The materiality of various risks and impact of such risks on an individual potential investment or portfolio as a whole depend on many factors, including the relevant industry, geography and asset class and the nature of the investment. Outside consultants, legal advisers, accountants and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts (including fraud) or risks that may be necessary or helpful in evaluating such investment opportunity and we may not identify or foresee future developments that could have a material adverse effect on an investment, including, for example, potential factors, such as technological disruption of a specific company or asset, or an entire industry.
Further, some matters covered by our diligence, such as ESG, are continuously evolving and we may not accurately or fully anticipate such evolution. The framework we may use to evaluate certain diligence considerations may not represent a universally recognized standard for assessing such considerations. For example, AIFMD requires us to identify, measure, manage and monitor sustainability risks relevant to the funds managed by our EU AIFMs and take into account sustainability risks when performing investment due diligence. Such requirements may make our funds less attractive to investors, and any non-compliance with such requirements may subject us to regulatory action. In addition, when conducting due diligence on investments, including with respect to investments made by our funds of hedge funds in third-party hedge funds, we rely on the resources available to us and information supplied by third parties, including information provided by the target of the investment (or, in the case of investments in a third-party hedge fund, information provided by such hedge fund or its service providers). The information we receive from third parties may not be accurate or complete and therefore we may not have all the relevant facts and information necessary to properly assess and monitor our funds’ investment.
59Table of ContentsWe may be unable to consummate or successfully integrate development opportunities, acquisitions or joint ventures that we pursue.
We may from time to time seek to engage in selective development or acquisition of asset management businesses or other businesses complementary to our business where we think we can add substantial value or generate substantial returns. We may not be able to identify or consummate such opportunities, including due to competition for such opportunities, our ability to accurately value such opportunities and the need to negotiate acceptable terms, and obtain requisite approvals and licenses from the relevant governmental authorities, for such opportunities. Moreover, even if we are able to identify and successfully complete an acquisition, we may encounter unexpected difficulties or incur unexpected costs associated with integrating and overseeing the operations of the new businesses.We and our affiliates from time to time are required to report specified dealings or transactions involving Iran or other sanctioned individuals or entities.
The Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) requires companies subject to SEC reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain OFAC sanctions, including, by way of example, the Russian Federal Security Service, engaged in by the reporting company or any of its affiliates during the period covered by the relevant periodic report. In some cases, ITRA requires companies to disclose these types of transactions even if they were permissible under U.S. law. Companies that currently may be or may have been at the time considered our affiliates have from time to time publicly filed and/or provided to us the disclosures reproduced on Exhibit 99.1 of our Quarterly Reports as well as Exhibit 99.1 of this annual report, which disclosure is hereby incorporated by reference herein. We do not independently verify or participate in the preparation of these disclosures. We are required to separately file with the SEC a notice when such activities have been disclosed in this report, and the SEC is required to post such notice of disclosure on its website and send the report to the President and certain U.S. Congressional committees. The President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation, determine whether sanctions should be imposed. Disclosure of such activity, even if such activity is not subject to sanctions under applicable law, and any sanctions actually imposed on us or our affiliates as a result of these activities, could harm our reputation and have a negative impact on our business, and any failure to disclose any such activities as required could additionally result in fines or penalties.
Our asset management activities involve investments in relatively illiquid assets, and we may fail to realize any profits from these activities for a considerable period of time.
Many of our investment funds invest in securities that are not publicly traded. In many cases, our investment funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Our investment funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available. The ability of many of our investment funds, particularly our private equity funds, to dispose of investments is heavily dependent on the public equity markets. For example, the ability to realize any value from an investment may depend upon the ability to complete an initial public offering of the portfolio company in which such investment is held. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial length of time, exposing the investment returns to risks of downward movement in market prices during the intended disposition period. Moreover, because the investment strategy of many of our funds, particularly our private equity and real estate funds, often entails our having representation on our funds’ public portfolio company boards, our
60Table of Contentsfunds may be restricted in their ability to effect such sales during certain time periods. Accordingly, under certain conditions, our investment funds may be forced to either sell securities at lower prices than they had expected to realize or defer — potentially for a considerable period of time — sales that they had planned to make.We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States.Many of our investment funds invest a significant portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States. International investments have increased and we expect will continue to increase as a proportion of certain of our funds’ portfolios in the future. Investments in non-U.S. securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to:
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currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another,
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less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity,
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the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation,
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changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments,
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a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance,
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heightened exposure to corruption risk in certain non-U.S. markets,
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political hostility to investments by foreign or private equity investors,
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reliance on a more limited number of commodity inputs, service providers and/or distribution mechanisms,
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more volatile or challenging market or economic conditions, including higher rates of inflation,
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higher transaction costs,
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difficulty in enforcing contractual obligations,
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fewer investor protections and less publicly available information about companies,
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certain economic and political risks, including potential exchange control regulations and restrictions on our non-U.S. investments and repatriation of profits on investments or of capital invested, the risks of war, terrorist attacks, political, economic or social instability, the possibility of expropriation or confiscatory taxation and adverse economic and political developments and
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the possible imposition of non-U.S. taxes or withholding on income and gains recognized with respect to such securities.
In addition, investments in companies that are based outside of the United States may be negatively impacted by restrictions on international trade or the recent or potential further imposition of tariffs. See “— Trade negotiations and related government actions may create regulatory uncertainty for our funds’ portfolio companies and our investment strategies and adversely affect the profitability of our funds’ portfolio companies.”
61Table of ContentsWe may not have sufficient cash to pay back “clawback” obligations if and when they are triggered under the governing agreements with our investors.In certain circumstances, at the end of the life of a carry fund (and earlier with respect to certain of our funds), we may be obligated to repay the amount by which Performance Allocations that were previously distributed to us exceed the amounts to which the relevant general partner is ultimately entitled on an after-tax basis. This includes situations in which the general partner receives in excess of the relevant Performance Allocations applicable to the fund as applied to the fund’s cumulative net profits over the life of the fund or, in some cases, the fund has not achieved investment returns that exceed the preferred return threshold. This obligation is known as a “clawback” obligation and is an obligation of any person who received such Performance Allocations, including us and other participants in our Performance Allocations plans. Although a portion of any dividends by us to our stockholders may include any Performance Allocations received by us, we do not intend to seek fulfillment of any clawback obligation by seeking to have our stockholders return any portion of such dividends attributable to Performance Allocations associated with any clawback obligation. To the extent we are required to fulfill a clawback obligation, however, our board of directors may determine to decrease the amount of our dividends to our stockholders. The clawback obligation operates with respect to a given carry fund’s own net investment performance only and performance of other funds are not netted for determining this contingent obligation.
Adverse economic conditions may increase the likelihood that one or more of our carry funds may be subject to clawback obligations. To the extent one or more clawback obligations were to occur for any one or more carry funds, we might not have available cash at the time such clawback obligation is triggered to repay the Performance Allocations and satisfy such obligation. If we were unable to repay such Performance Allocations, we would be in breach of the governing agreements with our investors and could be subject to liability. Moreover, although a clawback obligation is several, the governing agreements of most of our funds provide that to the extent another recipient of Performance Allocations (such as a current or former employee) does not fund his or her respective share, then we and our employees who participate in such Performance Allocations plans may have to fund additional amounts (generally an additional 50-70% beyond our pro-rata share of such obligations) beyond what we actually received in Performance Allocations. Although we retain the right to pursue any remedies that we have under such governing agreements against those Performance Allocations recipients who fail to fund their obligations, we may not be successful in recovering such amounts.Investors in a number of our vehicles may withdraw their investments, and investors in certain of our vehicles may have a right to terminate our management of, or cause the dissolution of, such vehicles, which would lead to a decrease in our revenues.We have a number of vehicles that permit investors in such vehicles to withdraw their investments and/or terminate our management of such capital, as applicable and in certain cases, subject to certain limitations. Investors in our hedge funds may generally redeem their investments on a periodic basis following, in certain cases, the expiration of a specified period of time when capital may not be withdrawn, subject to the applicable fund’s specific redemption provisions. In addition, in certain other open-ended and/or perpetual capital vehicles, including certain of our investment vehicles that are available to individual investors, such as BREIT, BCRED and BXPE, investors may request redemptions or repurchases of their interests on a periodic basis, subject to certain limitations. During periods of market volatility, investor subscriptions to such vehicles are likely to be reduced, and investor redemption or repurchase requests are likely to be elevated, which may negatively impact the fees we earn from such vehicles. In a declining market, our liquid or semi-liquid vehicles have and may continue to
62Table of Contentsexperience declines in value, which may be provoked and/or exacerbated by margin calls and forced selling of assets. Investors may also seek to redeem their interests due to changes in interest rates that make other investments more attractive, rebalancing of their asset allocations, changes in investor perception of us and our reputation, unhappiness with a fund’s performance or investment strategy, departures or changes in responsibilities of key investment professionals, and liquidity needs.
To the extent appropriate and permissible under a vehicle’s constituent documents, we have previously and may in the future limit or prorate redemptions or repurchases in such vehicle for a period of time. This may subject us to reputational harm, make such vehicles less attractive to investors in the future and negatively impact future subscriptions to such vehicles. This could have a material adverse effect on the revenues we derive from such vehicles. For example, market volatility drove a material increase in BREIT repurchase requests beginning in late 2022, and pursuant to the terms of the vehicle, BREIT began to prorate such requests beginning in November 2022. BREIT inflows also materially declined after proration was announced, which led to net outflows in BREIT. The inclusion of redemption features in investment vehicles creates heightened risk of operational error, including with respect to the calculation of net asset values, which could expose us to increased risk of litigation, regulatory action and reputational damage.In addition, we currently manage a significant portion of investor assets through separately managed accounts whereby we earn management and/or incentive fees, and we intend to continue to seek additional separately managed account mandates. The investment management agreements we enter into in connection with managing separately managed accounts on behalf of certain clients may be terminated by such clients on as little as 30 days’ prior written notice. In addition, the boards of directors of the investment management companies we manage could terminate our advisory engagement of those companies, on as little as 30 days’ prior written notice. In the case of any such terminations, the management and incentive fees we earn in connection with managing such account or company would immediately cease, which could result in a significant adverse impact on our revenues.The governing agreements of many of our investment funds provide that, subject to certain conditions, third-party investors in those funds have the right to remove the general partner of the fund or to accelerate the termination date of the investment fund without cause by a majority or supermajority vote, resulting in a reduction in management fees we would earn from such investment funds and a significant reduction in the amounts of Performance Revenues from those funds. Performance Revenues could be significantly reduced as a result of our inability to maximize the value of investments by an investment fund during the liquidation process or in the event of the triggering of a “clawback” obligation or a recoupment of loss carry forward amounts. In addition, the governing agreements of our investment funds provide that in the event certain “key persons” in our investment funds do not meet specified time commitments with regard to managing the fund, then investors in certain funds have the right to vote to terminate the investment period by a specified percentage (including, in certain cases, a simple majority) vote in accordance with specified procedures, accelerate the withdrawal of their capital on an investor-by-investor basis, or the fund’s investment period will automatically terminate and a specified percentage (including, in certain cases, a simple majority) vote of investors is required to restart it. In addition, the governing agreements of some of our investment funds provide that investors have the right to terminate, for any reason, the investment period by a vote of 75% of the investors in such fund. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our investment funds would likely result in significant reputational damage to us.
In addition, because our investment funds have advisers that are registered under the Advisers Act, an “assignment” of the management agreements of our investment funds (which may be deemed to occur in the event these advisers were to experience a change of control) would generally be prohibited without consent of the
63Table of Contentsinvestment fund, which may require investor consent. We cannot be certain that consents required for assignments of our investment management agreements will be obtained if a change of control occurs, which could result in the termination of such agreements and the corresponding loss of revenue. In addition, with respect to our 1940 Act registered funds, the continuance of each investment fund’s investment management agreement generally must be approved annually by the fund’s board of directors, including independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the fees we earn from such investment funds.Third-party investors in our investment funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested by us, which could adversely affect a fund’s operations and performance.Investors in all of our carry funds (and certain of our hedge funds) make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their obligations (for example, management fees) when due. A default by an investor may also limit a fund’s availability to incur borrowings and avail itself of what would otherwise have been available credit. We have not had investors default on capital calls to any meaningful extent. Any investor that did not fund a capital call would generally be subject to several possible penalties, including having a significant amount of its existing investment forfeited in that fund. However, the impact of the forfeiture penalty is directly correlated to the amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instance early in the life of the fund, then the forfeiture penalty may not be as meaningful. Third-party investors in carry funds typically use distributions from prior investments to meet future capital calls. In cases where valuations of investors’ existing investments fall and the pace of distributions slows, investors may be unable to make new commitments to third-party managed investment funds such as those advised by us. If investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, the operation and performance of those funds could be materially and adversely affected.Risk management activities may adversely affect the return on our funds’ investments.
When managing our exposure to market risks, we may (on our own behalf or on behalf of our funds) from time to time use forward contracts, options, swaps, caps, collars and floors or pursue other strategies or use other forms of derivative instruments to limit our exposure to changes in the relative values of investments that may result from market developments, including changes in prevailing interest rates, currency exchange rates and commodity prices. The use of derivative financial instruments and other risk management strategies may not be properly designed to hedge, manage or otherwise reduce the risks we have identified. In addition, we may not be able to identify, or may not have fully identified, all applicable material market risks to which we are exposed. We may also choose not to hedge, in whole or in part, any of the risks that have been identified. The success of any hedging or other derivatives transactions generally will depend on our ability to correctly predict market changes, the degree of correlation between price movements of a derivative instrument, the position being hedged, the creditworthiness of the counterparty and other factors, some of which may be beyond our ability to hedge. As a result, while we may enter into a transaction in order to reduce our exposure to market risks, the unintended market changes may result in poorer overall investment performance than if it had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged position increases.
While such hedging arrangements may reduce certain risks, such arrangements themselves may entail certain other risks. These arrangements may require the posting of cash collateral at a time when a fund has insufficient cash or illiquid assets such that the posting of the cash is either impossible or requires the sale of assets at prices that do not reflect their underlying value. In addition, if our derivative counterparties or clearinghouses fail to meet their obligations with respect to the posting of cash collateral, our efforts to mitigate certain risks may be ineffective. Moreover, these hedging arrangements may generate significant transaction costs, including potential tax costs, that reduce the returns generated by a fund.64Table of Contents
Finally, the regulation of derivatives and commodity interest transactions in the United States and other countries is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. Newly instituted and amended regulations could significantly increase the cost of entering into derivative contracts (including through requirements to post collateral, which could negatively impact available liquidity), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks, reduce our ability to restructure our existing derivative contracts and increase our exposure to less creditworthy counterparties. Furthermore, the CFTC may in the future require certain foreign exchange products to be subject to mandatory clearing, which could increase the cost of entering into currency hedges.Our real estate funds are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate.
Investments by our real estate funds will be subject to the risks inherent in the ownership and operation of real estate and real estate-related businesses and assets. Such investments are subject to the potential for deterioration of real estate fundamentals and the risk of adverse changes in local market and economic conditions, which may include changes in supply of and demand for competing properties in an area, increases in interest rates and borrowing costs, fluctuations in the average occupancy and room rates for hotel properties, changes in demand for commercial office properties (including as a result of an increased prevalence of remote work), changes in the financial resources of tenants, defaults by borrowers or tenants, depressed travel activity, and the lack of availability of mortgage funds, which may render the sale or refinancing of properties difficult or impracticable. In addition, investments in real estate and real estate-related businesses and assets may be subject to the risk of environmental liabilities, contingent liabilities upon disposition of assets, casualty or condemnations losses, energy and supply shortages, natural disasters, climate change related risks (including climate- related transition risks and acute and chronic physical risks), acts of god, terrorist attacks, war and other events that are beyond our control, and various uninsured or uninsurable risks. Further, investments in real estate and real estate-related businesses and assets are subject to changes in law and regulation, including in respect of building, environmental and zoning laws, rent control and other regulations impacting our residential real estate investments and changes to tax laws and regulations, including real property and income tax rates and the taxation of business entities and the deductibility of corporate interest expense. For example, we have seen an increasing focus toward rent regulation as a means to address residential affordability caused by undersupply of housing in certain markets in the U.S. and Europe, which may contribute to adverse operating performance in certain parts of our residential real estate portfolio, including by moderating rent growth in certain geographies and markets. In addition, if our real estate funds acquire direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non-income producing, they will be subject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoning and other regulatory or environmental approvals, the cost and timely completion of construction (including risks beyond the control of our fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms.Certain of our investment funds may invest in securities of companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Such investments are subject to a greater risk of poor performance or loss.Certain of our investment funds, especially our credit-focused funds, may invest in business enterprises involved in work-outs, liquidations, spin-offs, reorganizations, bankruptcies and similar transactions and may purchase high-risk receivables. An investment in such business enterprises entails the risk that the transaction in which such business enterprise is involved either will be unsuccessful, will take considerable time or will result in a distribution of cash or a new security the value of which will be less than the purchase price to the fund of the
65Table of Contentssecurity or other financial instrument in respect of which such distribution is received. In addition, if an anticipated transaction does not in fact occur, the fund may be required to sell its investment at a loss. Investments in troubled companies may also be adversely affected by U.S. federal and state laws relating to, among other things, fraudulent conveyances, voidable preferences, lender liability and a bankruptcy court’s discretionary power to disallow, subordinate or disenfranchise particular claims. Investments in securities and private claims of troubled companies made in connection with an attempt to influence a restructuring proposal or plan of reorganization in a bankruptcy case may also involve substantial litigation. Because there is substantial uncertainty concerning the outcome of transactions involving financially troubled companies, there is a potential risk of loss by a fund of its entire investment in such company. Moreover, a major economic recession could have a materially adverse impact on the value of such securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of securities rated below investment grade or otherwise adversely affect our reputation.
In addition, at least one federal Circuit Court has determined that an investment fund could be liable for ERISA Title IV pension obligations (including withdrawal liability incurred with respect to union multiemployer plans) of its portfolio companies, if such fund is a “trade or business” and the fund’s ownership interest in the portfolio company is significant enough to bring the investment fund within the portfolio company’s “controlled group.” While a number of cases have held that managing investments is not a “trade or business” for tax purposes, the Circuit Court in this case concluded the investment fund could be a “trade or business” for ERISA purposes based on certain factors, including the fund’s level of involvement in the management of its portfolio companies and the nature of its management fee arrangements. Litigation related to the Circuit Court’s decision suggests that additional factors may be relevant for purposes of determining whether an investment fund could face “controlled group” liability under ERISA, including the structure of the investment and the nature of the fund’s relationship with other affiliated investors and co-investors in the portfolio company. Moreover, regardless of whether an investment fund is determined to be a “trade or business” for purposes of ERISA, a court might hold that one of the fund’s portfolio companies could become jointly and severally liable for another portfolio company’s unfunded pension liabilities pursuant to the ERISA “controlled group” rules, depending upon the relevant investment structures and ownership interests as noted above.
Investments in energy, manufacturing, infrastructure, real estate and certain other assets may expose us to increased environmental liabilities that are inherent in the ownership of real assets.
Ownership of real assets in our funds or vehicles may increase our risk of direct and/or indirect liability under environmental laws that impose, regardless of fault, joint and several liability for the cost of remediating contamination and compensation for damages. In addition, changes in environmental laws or regulations (including climate change initiatives) or the environmental condition of an investment may create liabilities that did not exist at the time of acquisition. Even in cases where we are indemnified by a seller against liabilities arising out of violations of environmental laws and regulations, there can be no assurance as to the financial viability of the seller to satisfy such indemnities or our ability to achieve enforcement of such indemnities. See “— Climate change, climate and sustainability-related regulation and sustainability concerns could adversely affect our businesses and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.”Investments by our funds in the power and energy industries involve various operational, construction, regulatory and market risks.The development, operation and maintenance of power and energy generation facilities involves many risks, including, as applicable, labor issues, start-up risks, breakdown or failure of facilities, lack of sufficient capital to maintain the facilities and the dependence on a specific fuel source. Power and energy generation facilities in which our funds invest are also subject to risks associated with volatility in the price of fuel sources and the impact of unusual or adverse weather conditions or other natural events, such as droughts or wildfires, as well as the risk
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of performance below expected levels of output, efficiency or reliability. The occurrence of any such items could result in lost revenues and/or increased expenses. In turn, such developments could impair a portfolio company’s ability to repay its debt or conduct its operations. We may also choose or be required to decommission a power generation facility or other asset. The decommissioning process could be protracted and result in the incurrence of significant financial and/or regulatory obligations or other uncertainties.Our power and energy sector portfolio companies may also face construction risks typical for power generation and related infrastructure businesses. Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of construction activities once undertaken. Delays in the completion of any power project may result in lost revenues or increased expenses, including higher operation and maintenance costs related to such portfolio company.The power and energy sectors are the subject of substantial and complex laws, rules and regulation by various federal and state regulatory agencies. Failure to comply with applicable laws, rules and regulations could result in the prevention of operation of certain facilities or the prevention of the sale of such a facility to a third party, as well as the loss of certain rate authority, refund liability, penalties and other remedies, all of which could result in additional costs to a portfolio company and adversely affect the investment results. In addition, the increased scrutiny placed by regulators, elected officials and certain investors with respect to the incorporation of ESG factors in the investment process and the impact of certain investments made by our energy funds has negatively impacted and is likely to continue to negatively impact our ability to exit certain of our conventional energy investments on favorable terms. The current administration has focused on climate change policies and has re-joined the Paris Agreement, which includes commitments from countries to reduce their greenhouse gas emissions, among other commitments. Legislative efforts by the administration or the U.S. Congress to place additional limitations on coal and gas electric generation, mining and/or exploration could adversely affect our conventional energy investments. Conversely, certain investors have raised concerns as to whether the incorporation of ESG factors in the investment and portfolio management process may be inconsistent with the fiduciary duty to maximize returns for investors, which may result in such investors calling into question certain non-conventional energy investments made by our energy funds.In addition, the performance of the investments made by our credit and equity funds in the energy and natural resources markets are also subject to a high degree of market risk, as such investments are likely to be directly or indirectly substantially dependent upon prevailing prices of oil, natural gas and other commodities. Oil and natural gas prices are subject to wide fluctuation in response to factors beyond the control of us or our funds’ portfolio companies, including relatively minor changes in the supply and demand for oil and natural gas, market uncertainty, the level of consumer product demand, weather conditions, climate change initiatives, governmental regulation (including with respect to trade and economic sanctions), the price and availability of alternative fuels, political and economic conditions in oil producing countries, foreign supply of such commodities and overall domestic and foreign economic conditions. These factors make it difficult to predict future commodity price movements with any certainty.Our investments in infrastructure assets may expose us to increased risks that are inherent in the ownership of real assets.
Investments in infrastructure assets may expose us to increased risks that are inherent in the ownership of real assets. For example,
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Ownership of infrastructure assets may present risk of liability for personal and property injury or impose significant operating challenges and costs with respect to, for example, compliance with zoning, environmental or other applicable laws.
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Infrastructure asset investments may face construction risks including, without limitation: (a) labor disputes, shortages of material and skilled labor, or work stoppages, (b) slower than projected construction progress and the unavailability or late delivery of necessary equipment, (c) less than optimal coordination with public utilities in the relocation of their facilities, (d) adverse weather conditions and unexpected construction conditions, (e) accidents or the breakdown or failure of construction equipment or processes, and (f) catastrophic events such as explosions, fires, terrorist attacks and other similar events. These risks could result in substantial unanticipated delays or expenses (which may exceed expected or forecasted budgets) and, under certain circumstances, could prevent completion of construction activities once undertaken. Certain infrastructure asset investments may remain in construction phases for a prolonged period and, accordingly, may not be cash generative for a prolonged period. Recourse against the contractor may be subject to liability caps or may be subject to default or insolvency on the part of the contractor.
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The operation of infrastructure assets is exposed to potential unplanned interruptions caused by significant catastrophic or force majeure events. These risks could, among other effects, adversely impact the cash flows available from investments in infrastructure assets, cause personal injury or loss of life, damage property, or instigate disruptions of service. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged service interruptions may result in permanent loss of customers, litigation, or penalties for regulatory or contractual non-compliance. Force majeure events that are incapable of, or too costly to, cure may also have a permanent adverse effect on an investment.
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The management of the business or operations of an infrastructure asset may be contracted to a third-party management company unaffiliated with us. Although it would be possible to replace any such operator, the failure of such an operator to adequately perform its duties or to act in ways that are in our best interest, or the breach by an operator of applicable agreements or laws, rules and regulations, could have an adverse effect on the investment’s financial condition or results of operations. Infrastructure investments may involve the subcontracting of design and construction activities in respect of projects, and as a result our investments are subject to the risks that contractual provisions passing liabilities to a subcontractor could be ineffective, the subcontractor fails to perform services which it has agreed to perform and the subcontractor becomes insolvent.
Infrastructure investments often involve an ongoing commitment to a municipal, state, federal or foreign government or regulatory agencies. The nature of these obligations exposes us to a higher level of regulatory control than typically imposed on other businesses and may require us to rely on complex government licenses, concessions, leases or contracts, which may be difficult to obtain or maintain. Infrastructure investments may require operators to manage such investments and such operators’ failure to comply with laws, including prohibitions against bribing of government officials, may adversely affect the value of such investments and cause us serious reputational and legal harm. Revenues for such investments may rely on contractual agreements for the provision of services with a limited number of counterparties, and are consequently subject to counterparty default risk. The operations and cash flow of infrastructure investments are also more sensitive to inflation and, in certain cases, commodity price risk. Furthermore, services provided by infrastructure investments may be subject to rate regulations by government entities that determine or limit prices that may be charged. Similarly, users of applicable services or government entities in response to such users may react negatively to any adjustments in rates and thus reduce the profitability of such infrastructure investments.
Our investments in the life sciences industry may expose us to increased risks.Investments by BXLS may expose us to increased risks. For example,•
BXLS’s strategies include, among others, investments that are referred to as “corporate partnership” transactions. Corporate partnership transactions are risk-sharing collaborations with biopharmaceutical and medical device partners on drug and medical device development programs and investments in royalty streams of pre-commercial biopharmaceutical products. BXLS’s ability to source corporate
68Table of Contentspartnership transactions has been, and will continue to be, in part dependent on the ability of special purpose development companies to identify, diligence, negotiate and in many cases, take the lead in executing the agreed development plans with respect to, a corporate partnership transaction. Moreover, as such special purpose development companies are jointly owned by us or our affiliates and unaffiliated life sciences investors, we (and our funds) are not the sole beneficiaries of such sourcing strategies and capabilities of such special purpose development companies. In addition, payments to BXLS under such corporate partnerships (which can include future royalty or other milestone-based payments) are often contingent upon the achievement of certain milestones, including approvals of the applicable product candidate and/or product sales thresholds, over which BXLS may not have the ability to exercise meaningful control.
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Life sciences and healthcare companies are subject to extensive regulation by the U.S. Food and Drug Administration, similar foreign regulatory authorities and, to a lesser extent, other federal and state agencies. These companies are subject to the expense, delay and uncertainty of the product approval process, and there can be no guarantee that a particular product candidate will obtain regulatory approval. In addition, the current regulatory framework may change or additional regulations may arise at any stage during the product development phase of an investment, which may delay or prevent regulatory approval or impact applicable exclusivity periods. If a company in which our funds are invested is unable to obtain regulatory approval for a product candidate, or a product candidate in which our funds are invested does not obtain regulatory approval, in a timely fashion or at all, the value of our investment would be adversely impacted. In addition, in connection with certain corporate partnership transactions, our special purpose development companies will be contractually obligated to run clinical trials. Further, a clinical trial (including enrollment therein) or regulatory approval process for pharmaceuticals has and may in the future be delayed, otherwise hindered or abandoned as a result of epidemics (including COVID-19), which could have a negative impact on the ability of the investment to engage in trials or receive approvals, and thereby could adversely affect the performance of the investment. In the event such clinical trials do not comply with the complicated regulatory requirements applicable thereto, such special purpose development companies may be subject to regulatory actions.
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Intellectual property often constitutes an important part of a life sciences company’s assets and competitive strengths, particularly for royalty monetization transactions. To the extent such companies’ intellectual property positions with respect to products in which BXLS invests, whether through a royalty monetization or otherwise, are challenged, invalidated or circumvented, the value of BXLS’s investment may be impaired. The success of a life sciences investment depends in part on the ability of the biopharmaceutical or medical device companies in whose products BXLS invests to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of such products. The patent positions of such companies can be highly uncertain and often involve complex legal, scientific and factual questions.
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The commercial success of products could be compromised if governmental or third-party payers do not provide coverage and reimbursement, breach, rescind or modify their contracts or reimbursement policies or delay payments for such products. In both the U.S. and foreign markets, the successful sale of a life sciences company’s product depends on the ability to obtain and maintain adequate coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans. Governments and third-party payers continue to pursue aggressive initiatives to contain costs and manage drug utilization and are increasingly focused on the effectiveness, benefits and costs of similar treatments, which could result in lower reimbursement rates and narrower populations for whom the products in which BXLS invests will be reimbursed by third-party payers. For example, in the U.S., Federal legislation has passed that modifies coverage, reimbursement and pricing policies for certain products. Regulatory agencies have provided guidance on how they intend to implement certain components of the legislation. In general, as regulatory agencies and others continue to define and implement the legislation, such legislation may result in lower product prices, altered market dynamics, or the unavailability of adequate third-party payer reimbursement to enable BXLS to realize an appropriate return on its investment.
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Our funds may be forced to dispose of investments at a disadvantageous time.
Our funds may make investments of which they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration of such fund’s term or otherwise. Although we generally expect that our funds will dispose of investments prior to dissolution or that investments will be suitable for in-kind distribution at dissolution, we may not be able to do so. The general partners of our funds have only a limited ability to extend the term of the fund with the consent of fund investors or the advisory board of the fund, as applicable, and therefore, we may be required to sell, distribute or otherwise dispose of investments at a disadvantageous time prior to dissolution. This would result in a lower than expected return on the investments and, perhaps, on the fund itself.Hedge fund investments are subject to numerous additional risks.Investments by our funds of hedge funds in other hedge funds, as well as investments by our credit-focused, real estate debt and other hedge funds and similar products, are subject to numerous additional risks, including the following:
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Certain of the funds in which we invest are newly established funds without any operating history or are managed by management companies or general partners who may not have as significant track records as a more established manager.
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Generally, the execution of third-party hedge funds’ investment strategies is subject to the sole discretion of the management company or the general partner of such funds. As a result, we do not have the ability to control the investment activities of such funds, including with respect to the selection of investment opportunities, any deviation from stated or expected investment strategy, the liquidation of positions and the use of leverage to finance the purchase of investments, each of which may impact our ability to generate a successful return on our investment in such underlying fund.
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Hedge funds may engage in speculative trading strategies, including short selling, which is subject to the theoretically unlimited risk of loss because there is no limit on how much the price of a security may appreciate before the short position is closed out. A fund may be subject to losses if a security lender demands return of the lent securities and an alternative lending source cannot be found or if the fund is otherwise unable to borrow securities that are necessary to hedge or cover its positions.
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Hedge funds are exposed to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem or otherwise, thus causing the fund to suffer a loss. Counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the fund has concentrated its transactions with a single or small group of counterparties. Generally, hedge funds are not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with one counterparty. Moreover, the funds’ internal consideration of the creditworthiness of their counterparties may prove insufficient. The absence of a regulated market to facilitate settlement may increase the potential for losses.
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Credit risk may arise through a default by one of several large institutions that are dependent on one another to meet their liquidity or operational needs, so that a default by one institution causes a series of defaults by the other institutions. This “systemic risk” may adversely affect the financial intermediaries (such as clearing agencies, clearing houses, banks, securities firms and exchanges) with which the hedge funds interact on a daily basis.
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The efficacy of investment and trading strategies depends largely on the ability to establish and maintain an overall market position in a combination of financial instruments. A hedge fund’s trading orders may not be executed in a timely and efficient manner due to various circumstances, including systems failures or human error. In such event, the funds might only be able to acquire some but not all of the components of the position, or if the overall position were to need adjustment, the funds might not be able to make such adjustment. As a result, the funds would not be able to achieve the market position selected by the management company or general partner of such funds, and might incur a loss in liquidating their position.
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Hedge funds are subject to risks due to potential illiquidity of assets. Hedge funds may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely divestiture or sale of trading positions can be impaired by decreased trading volume, increased price volatility, concentrated trading positions, limitations on the ability to transfer positions in highly specialized or structured transactions to which they may be a party, and changes in industry and government regulations. It may be impossible or costly for hedge funds to liquidate positions rapidly in order to meet margin calls, withdrawal requests or otherwise, particularly if there are other market participants seeking to dispose of similar assets at the same time or the relevant market is otherwise moving against a position or in the event of trading halts or daily price movement limits on the market or otherwise. Any “gate” or similar limitation on withdrawals with respect to hedge funds may not be effective in mitigating such risk. Moreover, these risks may be exacerbated for our funds of hedge funds. For example, if one of our funds of hedge funds were to invest a significant portion of its assets in two or more hedge funds that each had illiquid positions in the same issuer, the illiquidity risk for our funds of hedge funds would be compounded. For example, in 2008 many hedge funds, including some of our hedge funds, experienced significant declines in value. In many cases, these declines in value were both provoked and exacerbated by margin calls and forced selling of assets. Moreover, certain of our funds of hedge funds were invested in third-party hedge funds that halted redemptions in the face of illiquidity and other issues, which precluded those funds of hedge funds from receiving their capital back on request.
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Hedge fund investments are subject to risks relating to investments in commodities, futures, options and other derivatives, the prices of which are highly volatile and may be subject to the theoretically unlimited risk of loss in certain circumstances, including if the fund writes a call option. Price movements of commodities, futures and options contracts and payments pursuant to swap agreements are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments and national and international political and economic events and policies. The value of futures, options and swap agreements also depends upon the price of the commodities underlying them and prevailing exchange rates. In addition, hedge funds’ assets are subject to the risk of the failure of any of the exchanges on which their positions trade or of their clearinghouses or counterparties. Most U.S. commodities exchanges limit fluctuations in certain commodity interest prices during a single day by imposing “daily price fluctuation limits” or “daily limits,” the existence of which may reduce liquidity or effectively curtail trading in particular markets.
As a result of their affiliation with us, our hedge funds may from time to time be restricted from trading in certain securities (e.g., publicly traded securities issued by our current or potential portfolio companies). This may limit their ability to acquire and/or subsequently dispose of investments in connection with transactions that would otherwise generally be permitted in the absence of such affiliation. In addition, the use of leverage by the hedge funds in which our funds of hedge funds invest poses additional risks, including those described in “— Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.”
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Table of ContentsWe are reliant on third-party service providers for certain aspects of our business, and are subject to risks in using prime brokers, custodians, counterparties, administrators and other agents.We are reliant on other third-party service providers for certain technology platforms that facilitate the continued operation of our business, including cloud-based services. We generally have less control over the delivery of such third-party services, and as a result, may face disruptions to our ability to operate our business as a result of interruptions of such services. A prolonged global failure of cloud services provided to us could result in cascading systems failures. In addition, we may not be able to adapt our information systems and technology to accommodate our growth, or the cost of maintaining such systems may increase materially from its current level, which could have a material adverse effect on us.Many of our funds depend on the services of prime brokers, custodians, counterparties, administrators and other agents, including to carry out certain securities and derivatives transactions. The terms of these contracts are often customized and complex, and many of these arrangements occur in markets or relate to products that are subject to limited or no regulatory oversight. Some of our funds utilize prime brokerage arrangements with a relatively limited number of counterparties, which has the effect of concentrating the transaction volume (and related counterparty default risk) of these funds with these counterparties. Our funds are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur suddenly and without notice to us. Moreover, if a counterparty defaults, we may be unable to take action to cover our exposure, either because we lack contractual recourse or because market conditions make it difficult to take effective action. This inability could occur in times of market stress, which is when defaults are most likely to occur.
In addition, our risk management process may not accurately anticipate the impact of market stress or counterparty financial condition, and as a result, we may not have taken sufficient action to reduce our risks effectively. Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate. In addition, concerns about, or a default by, one large participant could lead to significant liquidity problems for other participants, which may in turn expose us to significant losses. Although we have risk management processes to ensure that we are not exposed to a single counterparty for significant periods of time, given the large number and size of our funds, we often have large positions with a single counterparty. For example, most of our funds have credit lines. If the lender under one or more of those credit lines were to become insolvent, we may have difficulty replacing the credit line and one or more of our funds may face liquidity problems.In the event of a counterparty default, particularly a default by a major investment bank or a default by a counterparty to a significant number of our contracts, one or more of our funds may have outstanding trades that they cannot settle or are delayed in settling. As a result, these funds could incur material losses and the resulting market impact of a major counterparty default could harm our businesses, results of operation and financial condition. In addition, under certain local clearing and settlement regimes in Europe, we or our funds could be subject to settlement discipline fines. See “— Complex regulatory regimes and potential regulatory changes in jurisdictions outside the United States could adversely affect our business.”
In the event of the insolvency of a prime broker, custodian, counterparty or any other party that is holding assets of our funds as collateral, our funds might not be able to recover equivalent assets in full as they will rank among the prime broker’s, custodian’s or counterparty’s unsecured creditors in relation to the assets held as collateral. In addition, our funds’ cash held with a prime broker, custodian or counterparty generally will not be segregated from the prime broker’s, custodian’s or counterparty’s own cash, and our funds may therefore rank as unsecured creditors in relation thereto. If our derivatives transactions are cleared through a derivatives clearing organization, the CFTC has issued final rules regulating the segregation and protection of collateral posted by customers of cleared and uncleared swaps. The CFTC is also working to provide new guidance regarding prime broker arrangements and intermediation generally with regard to trading on swap execution facilities.
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Table of ContentsThe counterparty risks that we face have increased in complexity and magnitude over time. For example, in certain areas the number of counterparties we face has increased and may continue to increase, which may result in increased complexity and monitoring costs. Conversely, in certain other areas, the consolidation and elimination of counterparties has increased our concentration of counterparty risk and decreased the universe of potential counterparties, and our funds are generally not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with one counterparty. In addition, counterparties have in the past and may in the future react to market volatility by tightening underwriting standards and increasing margin requirements for all categories of financing, which may decrease the overall amount of leverage available and increase the costs of borrowing.Underwriting activities by our capital markets services business expose us to risks.Blackstone Securities Partners L.P. may act as an underwriter, syndicator or placement agent in securities offerings and, through affiliated entities, loan syndications. We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities or indebtedness we purchased or placed as an underwriter, syndicator or placement agent at the anticipated price levels or at all. As an underwriter, syndicator or placement agent, we also may be subject to liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings we underwrite, syndicate or place.Risks Related to Our Organizational StructureThe significant voting power of holders of our Series I preferred stock and Series II preferred stock may limit the ability of holders of our common stock to influence our business.Holders of our common stock are entitled to vote pursuant to Delaware law with respect to:•
A conversion of the legal entity form of Blackstone,
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A transfer, domestication or continuance of Blackstone to a foreign jurisdiction,
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Any amendment of our certificate of incorporation to change the par value of our common stock or the powers, preferences or special rights of our common stock in a way that would affect our common stock adversely,
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Any amendment of our certificate of incorporation that requires for action the vote of a greater number or portion of the holders of common stock than is required by any section of Delaware law, and
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Any amendment of our certificate of incorporation to elect to become a close corporation under Delaware law.In addition, our certificate of incorporation provides voting rights to holders of our common stock on the following additional matters:•
A sale, exchange or disposition of all or substantially all of our assets,
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A merger, consolidation or other business combination,
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Any amendment of our certificate of incorporation or bylaws enlarging the obligations of the common stockholders,
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Any amendment of our certificate of incorporation requiring the vote of the holders of a percentage of the voting power of the outstanding common stock and Series I preferred stock, voting together as a single class, to take any action in a manner that would have the effect of reducing such voting percentage and
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Any amendments of our certificate of incorporation that are not included in the specified set of amendments that the Series II Preferred Stockholder has the sole right to vote on.
73Table of ContentsFurthermore, our certificate of incorporation provides that the holders of at least 66 2/3% of the voting power of the outstanding shares of common stock and Series I preferred stock may vote to require the Series II Preferred Stockholder to transfer its shares of Series II preferred stock to a successor Series II Preferred Stockholder designated by the holders of at least a majority of the voting power of the outstanding shares of common stock and Series I preferred stock.
Other matters that are required to be submitted to a vote of the holders of our common stock generally require the approval of a majority of the voting power of our outstanding shares of common stock and Series I preferred stock, voting together as a single class, including certain sales, exchanges or other dispositions of all or substantially all of our assets, a merger, consolidation or other business combination, certain amendments to our certificate of incorporation and the designation of a successor Series II Preferred Stockholder. Holders of our Series I preferred stock, as such, will collectively be entitled to a number of votes equal to the aggregate number of Blackstone Holdings Partnership Units held by the limited partners of the Blackstone Holdings Partnerships on the relevant record date and will vote together with holders of our common stock as a single class. As of February 16, 2024, Blackstone Partners L.L.C., an entity owned by the senior managing directors of Blackstone and controlled by Mr. Schwarzman, owned the only share of Series I preferred stock outstanding, representing approximately 39.2% of the total combined voting power of the common stock and Series I preferred stock, taken together.Our certificate of incorporation and bylaws contain additional provisions affecting the holders of our common stock, including certain limits on the ability of the holders of our common stock to call meetings, to acquire information about our operations and to influence the manner or direction of our management. In addition, any person that beneficially owns 20% or more of the common stock then outstanding (other than the Series II Preferred Stockholder or its affiliates, a direct or subsequently approved transferee of the Series II Preferred Stockholder or its affiliates or a person or group that has acquired such stock with the prior approval of our board of directors) is unable to vote such stock on any matter submitted to such stockholders.We are not required to comply with certain provisions of U.S. securities laws relating to proxy statements and certain related matters.
We are not required to file proxy statements or information statements under Section 14 of the Exchange Act except in circumstances where a vote of holders of our common stock is required under our certificate of incorporation or Delaware law, such as a merger, business combination or sale of all or substantially all of our assets. In addition, we will generally not be subject to the “say-on-pay” and “say-on-frequency” provisions of the Dodd-Frank Act. As a result, our common stockholders do not have an opportunity to provide a non-binding vote on the compensation of our named executive officers. Moreover, holders of our common stock are not able to bring matters before our annual meeting of stockholders or nominate directors at such meeting, nor are they generally able to submit stockholder proposals under Rule 14a-8 of the Exchange Act.We are a controlled company and as a result qualify for some exceptions from certain corporate governance and other requirements of the New York Stock Exchange.
Because the Series II Preferred Stockholder holds more than 50% of the voting power for the election of directors, we are a “controlled company” and fall within exceptions from certain corporate governance and other requirements of the rules of the New York Stock Exchange. Pursuant to these exceptions, controlled companies may elect not to comply with certain corporate governance requirements of the New York Stock Exchange, including the requirements (a) that a majority of our board of directors consist of independent directors, (b) that we have a nominating and corporate governance committee that is composed entirely of independent directors, (c) that we have a compensation committee that is composed entirely of independent directors and (d) that the compensation committee be required to consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisers. While we currently have a majority independent board of directors, we have elected to avail ourselves of the other exceptions. Accordingly, our common stockholders generally do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.74
Table of ContentsPotential conflicts of interest may arise among the Series II Preferred Stockholder and the holders of our common stock.Blackstone Group Management L.L.C., an entity owned by senior managing directors of Blackstone and controlled by Mr. Schwarzman, is the sole holder of the Series II Preferred stock. As a result, conflicts of interest may arise among the Series II Preferred Stockholder, on the one hand, and us and our holders of our common stock, on the other hand. The Series II Preferred Stockholder has the ability to influence our business and affairs through its ownership of Series II Preferred stock, the Series II Preferred Stockholder’s general ability to appoint our board of directors, and provisions under our certificate of incorporation requiring Series II Preferred Stockholder approval for certain corporate actions (in addition to approval by our board of directors). If the holders of our common stock are dissatisfied with the performance of our board of directors, they have no ability to remove any of our directors, with or without cause.
Further, through its ability to elect our board of directors, the Series II Preferred Stockholder has the ability to indirectly influence the determination of the amount and timing of our investments and dispositions, cash expenditures, indebtedness, issuances of additional partnership interests, tax liabilities and amounts of reserves, each of which can affect the amount of cash that is available for distribution to holders of Blackstone Holdings Partnership Units.
In addition, conflicts may arise relating to the selection, structuring and disposition of investments and other transactions, declaring dividends and other distributions and other matters due to the fact that our senior managing directors hold their Blackstone Holdings Partnership Units directly or through pass-through entities that are not subject to corporate income taxation. See “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence” and “Part III. Item 10. Directors, Executive Officers and Corporate Governance.”
Our certificate of incorporation states that the Series II Preferred Stockholder is under no obligation to consider the separate interests of the other stockholders and contains provisions limiting the liability of the Series II Preferred Stockholder.
Subject to applicable law, our certificate of incorporation contains provisions limiting the duties owed by the holder of our Series II preferred stock and contains provisions allowing the Series II Preferred Stockholder to favor its own interests and the interests of its controlling persons over us and the holders of our common stock. Our certificate of incorporation contains provisions stating that the Series II Preferred Stockholder is under no obligation to consider the separate interests of the other stockholders (including, without limitation, the tax consequences to such stockholders) in deciding whether or not to authorize us to take (or decline to authorize us to take) any action as well as provisions stating that the Series II Preferred Stockholder shall not be liable to the other stockholders for damages for any losses, liabilities or benefits not derived by such stockholders in connection with such decisions. See “— Potential conflicts of interest may arise among the Series II Preferred Stockholder and the holders of our common stock.”
The Series II Preferred Stockholder will not be liable to Blackstone or holders of our common stock for any acts or omissions unless there has been a final and non-appealable judgment determining that the Series II Preferred Stockholder acted in bad faith or engaged in fraud or willful misconduct and we have also agreed to indemnify the Series II Preferred Stockholder to a similar extent.
Even if there is deemed to be a breach of the obligations set forth in our certificate of incorporation, our certificate of incorporation provides that the Series II Preferred Stockholder will not be liable to us or the holders of our common stock for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the Series II Preferred Stockholder or its officers and directors acted in bad faith or engaged in fraud or willful misconduct. These provisions are detrimental to the holders of our common stock because they restrict the remedies available to stockholders for actions of the Series II Preferred Stockholder.
75Table of ContentsIn addition, we have agreed to indemnify the Series II Preferred Stockholder and our former general partner and its controlling affiliates and any current or former officer or director of any of Blackstone or its subsidiaries, the Series II Preferred Stockholder or former general partner and certain other specified persons (collectively, the “Indemnitees”), to the fullest extent permitted by law, against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts incurred by any Indemnitee. We have agreed to provide this indemnification if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of Blackstone, and with respect to any alleged conduct resulting in a criminal proceeding against the Indemnitee, such person had no reasonable cause to believe that such person’s conduct was unlawful. We have also agreed to provide this indemnification for criminal proceedings.The Series II Preferred Stockholder may transfer its interest in the sole share of Series II preferred stock which could materially alter our operations.Without the approval of any other stockholder, the Series II Preferred Stockholder may transfer the sole outstanding share of our Series II preferred stock held by it to a third party upon receipt of approval to do so by our board of directors and satisfaction of certain other requirements. Further, the members or other interest holders of the Series II Preferred Stockholder may sell or transfer all or part of their outstanding equity or other interests in the Series II Preferred Stockholder at any time without our approval. A new holder of our Series II preferred stock or new controlling members of the Series II Preferred Stockholder may appoint directors to our board of directors who have a different philosophy and/or investment objectives from those of our current directors. A new holder of our Series II Preferred stock, new controlling members of the Series II Preferred Stockholder and/or the directors they appoint to our board of directors could also have a different philosophy for the management of our business, including the hiring and compensation of our investment professionals. If any of the foregoing were to occur, we could experience difficulty in forming new funds and other investment vehicles and in making new investments, and the value of our existing investments, our business, our results of operations and our financial condition could materially suffer.We intend to pay regular dividends to holders of our common stock, but our ability to do so may be limited by cash flow from operations and available liquidity, our holding company structure, applicable provisions of Delaware law and contractual restrictions.Our intention to pay to holders of common stock a quarterly dividend representing approximately 85% of Blackstone Inc.’s share of Distributable Earnings, subject to adjustment by amounts determined by Blackstone’s board of directors to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and our funds, to comply with applicable law, any of its debt instruments or other agreements, or to provide for future cash requirements such as tax-related payments, clawback obligations and dividends to stockholders for any ensuing quarter. 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 may change at any time, including, without limitation, to reduce such quarterly dividends or to eliminate such dividends entirely.Blackstone Inc. is a holding company and has no material assets other than the ownership of the partnership units in Blackstone Holdings held through wholly owned subsidiaries. Blackstone Inc. has no independent means of generating revenue. Accordingly, we intend to cause Blackstone Holdings to make distributions to its partners, including Blackstone Inc.’s wholly owned subsidiaries, to fund any dividends Blackstone Inc. may declare on our common stock.76
Table of ContentsOur ability to make dividends to our stockholders will depend on a number of factors, including among others general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, including the timing and extent of our realizations, working capital requirements and anticipated cash needs, contractual restrictions and obligations including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of dividends by us to holders of our common stock or payment of distributions by our subsidiaries to us and such other factors as our board of directors may deem relevant. Our ability to pay dividends is also subject to the availability of lawful funds therefor as determined in accordance with the Delaware General Corporation Law.The amortization of finite-lived intangible assets and non-cash equity-based compensation results in expenses that may increase the net loss we record in certain periods or cause us to record a net loss in periods during which we would otherwise have recorded net income.
As of December 31, 2023, we have $201.2 million of finite-lived intangible assets (in addition to $1.9 billion of goodwill), net of accumulated amortization. These finite-lived intangible assets are from our initial public offering (“IPO”) and subsequent business acquisitions. We are amortizing these finite-lived intangibles over their estimated useful lives, which range from three to twenty years, using the straight-line method, with a weighted-average remaining amortization period of 6.2 years as of December 31, 2023. We also record non-cash equity-based compensation from grants made in the ordinary course of business and in connection with other business acquisitions. The amortization of these finite-lived intangible assets and of this non-cash equity-based compensation will increase our expenses during the relevant periods. These expenses may increase the net loss we record in certain periods or cause us to record a net loss in periods during which we would otherwise have recorded net income. A substantial and sustained decline in our share price could result in an impairment of intangible assets or goodwill leading to a further reduction in net income or increase to net loss in the relevant period.
We are required to pay our senior managing directors for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up we received as part of the reorganization we implemented in connection with our IPO or receive in connection with future exchanges of our common stock and related transactions.
As part of the reorganization we implemented in connection with our IPO, we purchased interests in our business from our pre-IPO owners. In addition, holders of partnership units in Blackstone Holdings (other than Blackstone Inc.’s wholly owned subsidiaries), subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings Partnerships, may up to four times each year (subject to the terms of the exchange agreement) exchange their Blackstone Holdings Partnership Units for shares of Blackstone Inc.’s common stock on a one-for-one basis. A Blackstone Holdings limited partner must exchange one partnership unit in each of the Blackstone Holdings Partnerships to effect an exchange for a share of common stock. The purchase and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that we would otherwise be required to pay in the future, although the IRS may challenge all or part of that tax basis increase, and a court could sustain such a challenge.
We have entered into a tax receivable agreements with our senior managing directors and other pre-IPO owners that provides for the payment by us to the counterparties of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. This payment obligation is an obligation of Blackstone Inc. and/or its wholly owned subsidiaries and not of Blackstone Holdings. As such, the cash distributions
77Table of Contentsto public stockholders may vary from holders of Blackstone Holdings Partnership Units (held by Blackstone personnel and others) to the extent payments are made under the tax receivable agreements to selling holders of Blackstone Holdings Partnership Units. As the payments reflect actual tax savings received by Blackstone entities, there may be a timing difference between the tax savings received by Blackstone entities and the cash payments to selling holders of Blackstone Holdings Partnership Units. While the actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of our common stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that as a result of the size of the increases in the tax basis of the tangible and intangible assets of Blackstone Holdings, the payments that we may make under the tax receivable agreements will be substantial. The payments under a tax receivable agreement are not conditioned upon a tax receivable agreement counterparty’s continued ownership of us. We may need to incur debt to finance payments under the tax receivable agreement to the extent our cash resources are insufficient to meet our obligations under the tax receivable agreements as a result of timing discrepancies or otherwise.
Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the tax receivable agreement counterparties will not reimburse us for any payments previously made under the tax receivable agreement. As a result, in certain circumstances payments to the counterparties under the tax receivable agreement could be in excess of our actual cash tax savings. Our ability to achieve benefits from any tax basis increase, and the payments to be made under the tax receivable agreements, will depend upon a number of factors, as discussed above, including the timing and amount of our future income.If Blackstone Inc. were deemed an “investment company” under the 1940 Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.An entity will generally be deemed to be an “investment company” for purposes of the 1940 Act if: (a) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (b) absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We believe that we are engaged primarily in the business of providing asset management and capital markets services and not in the business of investing, reinvesting or trading in securities. We also believe that the primary source of income from each of our businesses is properly characterized as income earned in exchange for the provision of services. We hold ourselves out as an asset management and capital markets firm and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that Blackstone Inc. is an “orthodox” investment company as defined in section 3(a)(1)(A) of the 1940 Act and described in clause (a) in the first sentence of this paragraph. Furthermore, Blackstone Inc. does not have any material assets other than its equity interests in certain wholly owned subsidiaries, which in turn will have no material assets (other than intercompany debt) other than general partner interests in the Blackstone Holdings Partnerships. These wholly owned subsidiaries are the sole general partners of the Blackstone Holdings Partnerships and are vested with all management and control over the Blackstone Holdings Partnerships. We do not believe the equity interests of Blackstone Inc. in its wholly owned subsidiaries or the general partner interests of these wholly owned subsidiaries in the Blackstone Holdings Partnerships are investment securities. Moreover, because we believe that the capital interests of the general partners of our funds in their respective funds are neither securities nor investment securities, we believe that less than 40% of Blackstone Inc.’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis are comprised of assets that could be considered investment securities. Accordingly, we do not believe Blackstone Inc. is an inadvertent investment company by virtue of the 40% test in section 3(a)(1)(C) of the 1940 Act as described in clause (b) in the first sentence of this paragraph. In addition, we believe Blackstone Inc. is not an investment company under section 3(b)(1) of the 1940 Act because it is primarily engaged in a non-investment company business.
78Table of ContentsThe 1940 Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. We intend to conduct our operations so that Blackstone Inc. will not be deemed to be an investment company under the 1940 Act. If anything were to happen which would cause Blackstone Inc. to be deemed to be an investment company under the 1940 Act, requirements imposed by the 1940 Act, including limitations on our capital structure, ability to transact business with affiliates (including us) and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among Blackstone Inc., Blackstone Holdings and our senior managing directors, or any combination thereof, and materially adversely affect our business, financial condition and results of operations. In addition, we may be required to limit the amount of investments that we make as a principal or otherwise conduct our business in a manner that does not subject us to the registration and other requirements of the 1940 Act.Other anti-takeover provisions in our charter documents could delay or prevent a change in control.In addition to the provisions described elsewhere relating to the Series II Preferred Stockholder’s control, other provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable by, for example:
•
permitting our board of directors to issue one or more series of preferred stock,
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providing for the loss of voting rights for the common stock,
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requiring advance notice for stockholder proposals and nominations if they are ever permitted by applicable law,
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placing limitations on convening stockholder meetings,
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prohibiting stockholder action by written consent unless such action is consent to by the Series II Preferred Stockholder and
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imposing super-majority voting requirements for certain amendments to our certificate of incorporation.
These provisions may also discourage acquisition proposals or delay or prevent a change in control.Risks Related to Our Common Stock
The price of our common stock may decline due to the large number of shares of common stock eligible for future sale and for exchange.The market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market in the future or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell shares of common stock in the future at a time and at a price that we deem appropriate. We had a total of 714,644,445 shares of common stock outstanding as of February 16, 2024. Subject to the lock-up restrictions described below, we may issue and sell in the future additional shares of common stock. Limited partners of Blackstone Holdings owned an aggregate of 444,290,894 Blackstone Holdings Partnership Units outstanding as of February 16, 2024. In connection with our initial public offering, we entered into an exchange agreement with holders of Blackstone Holdings Partnership Units (other than Blackstone Inc.’s wholly owned subsidiaries) so that these holders, subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings Partnerships, may up to four times each year (subject to the terms of the exchange agreement) exchange their Blackstone Holdings Partnership Units for shares of Blackstone Inc. common stock on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. A Blackstone Holdings limited partner must exchange one partnership unit in each of the
79Table of ContentsBlackstone Holdings Partnerships to effect an exchange for a share of common stock. The common stock we issue upon such exchanges would be “restricted securities,” as defined in Rule 144 under the Securities Act, unless we register such issuances. However, we have entered into a registration rights agreement with the limited partners of the Blackstone Holdings Partnerships that requires us to register these shares of common stock under the Securities Act and we have filed registration statements that cover the delivery of common stock issued upon exchange of Blackstone Holdings Partnership Units. See “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence — Transactions with Related Persons — Registration Rights Agreement.” While the partnership agreements of the Blackstone Holdings Partnerships and related agreements contractually restrict the ability of Blackstone personnel to transfer the Blackstone Holdings Partnership Units or Blackstone Inc. common stock they hold and require that they maintain a minimum amount of equity ownership during their employ by us, these contractual provisions may lapse over time or be waived, modified or amended at any time.
As of February 16, 2024, we had granted 45,460,914 outstanding deferred restricted shares of common stock and 13,235,560 outstanding deferred restricted Blackstone Holdings Partnership Units to our non-senior managing director professionals and senior managing directors under the Blackstone Inc. Amended and Restated 2007 Equity Incentive Plan (“2007 Equity Incentive Plan”). The aggregate number of shares of common stock and Blackstone Holdings Partnership Units (together, “Shares”) covered by our 2007 Equity Incentive Plan is increased on the first day of each fiscal year during its term by a number of Shares equal to the positive difference, if any, of (a) 15% of the aggregate number of Shares outstanding on the last day of the immediately preceding fiscal year (excluding Blackstone Holdings Partnership Units held by Blackstone Inc. or its wholly owned subsidiaries) minus (b) the aggregate number of Shares covered by our 2007 Equity Incentive Plan as of such date (unless the administrator of the 2007 Equity Incentive Plan should decide to increase the number of Shares covered by the plan by a lesser amount). An aggregate of 171,729,750 additional Shares were available for grant under our 2007 Equity Incentive Plan as of February 16, 2024. We have filed a registration statement and intend to file additional registration statements on Form S-8 under the Securities Act to register common stock covered by the 2007 Equity Incentive Plan (including pursuant to automatic annual increases). Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, common stock registered under such registration statement will be available for sale in the open market.
In addition, the Blackstone Holdings partnership agreements authorize the wholly owned subsidiaries of Blackstone Inc. which are the general partners of those partnerships to issue an unlimited number of additional partnership securities of the Blackstone Holdings Partnerships with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the Blackstone Holdings Partnership Units, and which may be exchangeable for our shares of common stock.Our certificate of incorporation also provides us with a right to acquire all of the then outstanding shares of common stock under specified circumstances, which may adversely affect the price of our shares of common stock and the ability of holders of shares of common stock to participate in further growth in our stock price.
Our certificate of incorporation provides that, if at any time, less than 10% of the total shares of any class of our stock then outstanding (other than Series I preferred stock and Series II preferred stock) is held by persons other than the Series II Preferred Stockholder and its affiliates, we may exercise our right to call and purchase all of the then outstanding shares of common stock held by persons other than the Series II Preferred Stockholder or its affiliates or assign this right to the Series II Preferred Stockholder or any of its affiliates. As a result, a stockholder may have his or her shares of common stock purchased from him or her at an undesirable time or price and in a manner which adversely affects the ability of a stockholder to participate in further growth in our stock price.80
Table of ContentsOur amended and restated bylaws designate the Court of Chancery of the State of Delaware or the federal district courts of the United States of America, as applicable, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with Blackstone or our directors, officers or other employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a breach of fiduciary duty owed by any of our current or former directors, officers, stockholders or employees to us or our stockholders, (c) any action asserting a claim against us arising under the Delaware General Corporation Law (the “DGCL”), our certificate of incorporation or our amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (d) any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including, in each case, the applicable rules and regulations promulgated thereunder.Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provision in our amended and restated bylaws. This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for a specified class of disputes with Blackstone or our directors, officers, other stockholders or employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
FY 2025-12-31 (later)
Item 1A.
Risk Factors
Risks Related to Our Business
Difficult market, economic 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.Our business is materially affected by financial market and economic conditions and events throughout the world that are outside our control. We may not be able to or may choose not to manage our exposure to these conditions and/or events. Such conditions and/or events can adversely affect our business in many ways, including reducing the ability of our funds to raise or deploy capital, reducing the value or performance of our funds’ investments and making it more difficult for our funds to exit and realize value from existing investments. This could in turn materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition. In addition, in the face of a difficult market or economic environment, we may need to reduce our fixed costs and other expenses in order to maintain profitability. This may include cutting back or eliminating the use of certain services or service providers, or terminating the employment of a significant number of our personnel that, in each case, could be important to our business and without which our operating results could be adversely affected. A failure to manage or reduce our costs and other expenses within a time frame sufficient to match any decrease in profitability would adversely affect our operating performance.
Turmoil in the global financial markets can provoke significant volatility of equity and debt securities prices. This can have a material and rapid impact on our mark-to-market
valuations, particularly with respect to our public holdings and credit investments. As publicly traded equity securities have in recent years represented a meaningful proportion of the assets of many of our funds, stock market volatility, including a sharp decline in the stock market, may adversely affect our results, including our revenues and net income. Moreover, our public equity holdings have at times been concentrated in a few large positions, thereby making our unrealized mark-to-market
valuations particularly sensitive to sharp changes in the price of any of these positions. Further, although the equity markets are not the only means by which we exit investments, periods of challenging equity markets make it more difficult for our funds to realize value from investments.
Geopolitical concerns and other global events outside of our control have contributed and may continue to contribute to volatile global equity and debt markets. These concerns and events include, without limitation, trade conflict, civil unrest, threats to national security, and national and international security events (including war, terrorist acts or other hostilities). Geopolitical instability has been prevalent in recent years, and 2025 was a year of significant geopolitical events, including, among others, trade tensions resulting from U.S. tariff implementation and retaliatory tariffs by other countries and ongoing armed conflicts in the Middle East and Ukraine.
Additionally, the economic outlook for 2026 remains uncertain. Gradual decreases in interest rates during 2025, coupled with resilience in the U.S. economy, contributed to improved investor sentiment, stronger capital markets and increased transaction activity toward the end of 2025. Nevertheless, inflation has remained above the U.S. Federal Reserve’s target level, and interest rates remain elevated. Uncertainty regarding the further trajectory of inflation and interest rates creates the potential for volatility in debt and equity markets. Such volatility can contribute to economic deceleration or contraction in the rate of growth in certain industries, sectors or geographies, and in turn, poor financial results for our funds’ portfolio companies or assets and lower investment returns for our funds. The valuations of our funds’ real estate assets, and fundraising in certain of our real estate strategies targeting high-net-worth
investors, have been adversely impacted in recent years by elevated interest rates and a high, albeit declining, cost of capital. A slower-than-expected decrease in interest rates would continue to present a challenge to real estate valuations. Such factors are even more challenging in the life science office and traditional office market, as well as other properties with long-term leases that do not provide for short-term rent increases. This has adversely impacted, and may further adversely impact, the performance of certain of our real estate funds.
23Table of ContentsA period of economic slowdown, which may occur across one or more industries, sectors or geographies, creates operating performance challenges for certain of our funds’ investments, which could adversely affect our operating results and cash flows.Despite overall resilience in some geographies, many global economies have in recent years experienced periods of deceleration. Further economic deceleration or contraction in the rate of growth in certain industries, sectors or geographies may contribute to poor financial results for our funds’ portfolio companies or assets, which may result in lower investment returns for our funds. For example, periods of economic weakness have contributed and may in the future contribute to a decline in commodity prices and decreased consumer demand for certain goods and services, and/or volatility in the oil and natural gas markets, each of which would have an adverse effect on our energy and consumer investments. In addition, slowing growth in certain markets and real estate sectors with excess near-term supply, such as life science office and U.S. multifamily, has negatively impacted and may continue to negatively impact the valuations of assets in such sectors in the near term. In addition, the governing agreements of our funds contain only limited requirements, if any, regarding diversification of fund investments (by, for example, sector or geographic region). Accordingly, to the extent our funds’ investments are concentrated in sectors or geographies that experience more challenging fundamentals, the impact on our funds may be exacerbated. Further, to the extent our funds’ investments are concentrated in sectors or geographies that have historically experienced strong fundamentals, an adverse shift in such fundamentals may make it more difficult for such funds to replicate their historic performance. For example, our real estate and infrastructure funds have in recent years substantially increased their exposure to digital infrastructure investments, which has supported strong performance for such funds. Such performance would be difficult to replicate if demand for digital infrastructure were substantially reduced, including as a result of economic slowdown or regulatory impediments. This could impact our ability to raise new funds, and adversely impact our operating results and cash flows.
Sustained periods of high interest rates and challenging debt market conditions negatively impact the values of certain assets or investments and the ability of our funds and their portfolio companies to access capital markets, which could adversely affect investment and realization opportunities, lead to lower-yielding investments and potentially decrease our net income.
Following three consecutive rate cuts, the U.S. Federal Reserve held interest rates steady in January 2026 and noted, among other matters, that it would continue to assess and monitor incoming information in considering additional adjustments. Accordingly, uncertainty remains regarding the timing and extent of future interest rate decreases. Elevated interest rates have in recent years created downward pressure on the value of certain assets owned by our funds, including, among others, real estate and fixed-rate debt. A slower-than-expected decrease in interest rates would continue to present a challenge for the valuations of such assets, as well as for fundraising in certain of our strategies targeting high-net-worth
investors. Relatedly, slower-than-expected interest rate decreases have adversely impacted, and may continue to adversely impact, the ability to realize value from certain investments, such as in certain real estate sectors, given the potential adverse impact on equity prices and caution on the part of potential acquirers. Conversely, in recent periods the performance of certain of our credit funds has benefited from elevated interest rates as a substantial majority of the portfolio is floating rate. Accordingly, a decline in interest rates and/or widening of credit spreads would make it more difficult for such funds to replicate such strong performance.
In addition, elevated interest rates increase the cost of debt financing for the transactions our funds pursue. A significant contraction or weakening in the market for debt financing or other adverse change relating to the terms of debt financing (such as, for example, higher equity requirements and/or more restrictive covenants), particularly in the area of acquisition financings for private equity and real estate transactions, could have a material adverse effect on our business. For example, a portion of the indebtedness used to finance certain fund investments often includes high-yield debt securities issued in the capital markets. Availability of capital from the high-yield debt markets is subject to significant volatility, and there may be times when we might not be able to access those markets at attractive rates, or at all, when completing an investment.
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A decline in the pace or size of investments made by our funds may adversely affect our revenues.
The revenues that we earn are driven in part by the pace at which our funds make investments and the size of those investments, and a decline in the pace or the size of such investments may reduce our revenues. In particular, in recent years we have meaningfully increased the number of perpetual capital vehicles we offer and the assets under management in such vehicles. This has also resulted in a substantial amount of capital available for deployment, including in such vehicles, and for which we must identify attractive deployment opportunities. The fees we earn from our perpetual capital vehicles represent a significant and growing portion of our overall revenues. If our funds, including our perpetual capital vehicles, are unable to deploy capital at a sufficient pace, our revenues would be adversely impacted. Many factors could cause a decline in the pace of investment, including a market environment characterized by high prices, the inability of our investment professionals to identify attractive investment opportunities, competition for such opportunities among other potential acquirers, decreased availability of financing on attractive terms or at all or decreased availability of investor capital, including as a result of a challenging fundraising environment or heightened investor requests for repurchases in certain vehicles. A number of our funds have invested and intend to continue to invest in large transactions or transactions that otherwise have substantial business, regulatory or legal complexity and may be more difficult to execute successfully than smaller or less complex investments.
We may also fail to consummate identified investment opportunities because of regulatory or legal complexities or uncertainty and adverse developments in the U.S. or global economy, financial markets or geopolitical conditions. Additionally, our ability to deploy capital in certain countries may be adversely impacted by U.S. and foreign government policy changes and regulations. Any potential time delay associated with approval may make it more difficult for our funds to deploy capital, as well as to exit and realize value from investments.
Further, U.S. and state legislative and regulatory bodies may impose restrictions on private funds’ investments in certain types of assets or industries, which could affect our funds’ ability to find attractive and diversified investments and to complete such investments in a timely manner. For example, certain states have, and others may in the future, increased state regulatory review measures of investments by private equity into the patient-facing healthcare industry. The U.S. Presidential administration issued an executive order in January 2026 seeking to restrict institutional investor ownership of single-family homes, and certain states have considered, and others may seek to enact, legislation aimed at doing so. Such policies and laws may impact the ability of our funds to invest in certain assets or sectors. In addition, the ability to deploy capital in China has been adversely impacted by policies and regulations in the U.S., which may be exacerbated prospectively. See “—Laws and regulations on foreign direct investment applicable to us and our funds’ portfolio companies, both within and outside the U.S., may make it more difficult for us to deploy capital in certain jurisdictions or to sell assets to certain buyers.”
Our revenue, earnings, net income and cash flow can all vary materially due to our reliance on Performance Revenues, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of our common stock to decline.
Our revenue, earnings, net income and cash flow can all vary materially due to our reliance on Performance Revenues. We may experience fluctuations in our results, including our revenue and net income, from quarter to quarter due to a number of other factors. These include the timing of realizations, changes in the valuations of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses and the degree to which we encounter competition. Each of these factors may be impacted by economic and market conditions. Achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn lead to large adverse movements or general increased volatility in the price of our common stock.25
Table of ContentsFor a number of our perpetual capital vehicles that have in recent years become increasingly large contributors to our earnings, incentive income is paid to us in varying frequencies, ranging from quarterly to every five years. This contributes to the volatility of our cash flow. Furthermore, we earn this incentive income only if the net asset value of a vehicle has increased or, in the case of certain vehicles, increased beyond a particular return threshold, or if the vehicle has earned a net profit. Certain of these vehicles also have “high water marks” whereby we do not earn incentive income during a particular period even though the vehicle had positive returns in such period as a result of losses in prior periods. If one of these vehicles experiences losses, we will not earn incentive income from it until it surpasses the previous high-water mark. The incentive income we earn is therefore dependent on the net asset value or the net profit of the vehicle, which could lead to significant volatility in our results.
For our carry funds, we receive Performance Allocations only when investments are realized and achieve a certain preferred return. This also contributes to the volatility of our cash flow. Performance Allocations depend on our carry funds’ performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to realize the cash value (or other proceeds) of an investment. Even if an investment proves to be profitable, it may be a number of years before any profits can be realized, particularly if market conditions are unaccommodating. We cannot predict when, or if, any realization of investments will occur. In addition, the valuations of, and realization opportunities for, investments made by our funds, could also be subject to high volatility as a result of uncertainty or potential changes to governmental policy with respect to, among other things, tax, trade, immigration, healthcare, labor, infrastructure and energy.
Prior to our receiving any Performance Allocations in respect of realization of a profitable investment, 100% of the proceeds of that investment must generally be paid to the investors in that carry fund until they have recovered certain fees and expenses and achieved a certain return on all realized investments by that carry fund as well as a recovery of any unrealized losses. A particular realization event may have a significant impact on our results for that particular quarter that may not be replicated in subsequent quarters. We recognize revenue on investments in our investment funds based on our allocable share of realized and unrealized gains (or losses) reported by such investment funds. A decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue and possibly cash flow. This could further increase the volatility of our quarterly results. Because our carry funds have preferred return thresholds to investors that need to be met prior to our receiving any Performance Allocations, substantial declines in the carrying value of the investment portfolios of a carry fund can significantly delay or eliminate any Performance Allocations paid to us in respect of that fund because the value of the assets in the fund would need to recover to their aggregate cost basis plus the preferred return over time before we would be entitled to receive any Performance Allocations from that fund.
The timing and receipt of Performance Allocations also varies with the life cycle of our carry funds. During periods in which a relatively large portion of our assets under management is attributable to carry funds and investments in their “harvesting” period, our carry funds would make larger distributions than in the fundraising or investment periods that precede harvesting. During periods in which a significant portion of our assets under management is attributable to carry funds that are not in their harvesting periods, we may receive substantially lower Performance Allocations.26
Table of ContentsAdverse economic and market conditions may adversely affect the amount of cash generated by our businesses, the value of our principal investments, and in turn, our ability to pay dividends to our stockholders.
We primarily use cash to, without limitation (a) provide capital to facilitate the growth of our existing businesses, including funding our general partner and co-investment
commitments to our funds and warehousing investments for our funds, (b) provide capital for business expansion, (c) pay operating expenses, including cash compensation to our employees, and other obligations as they arise, including servicing our debt and (d) pay dividends to our stockholders, make distributions to the holders of Blackstone Holdings Partnership Units and make repurchases under our share repurchase program. Our principal sources of cash are: (a) cash we received in connection with our prior bond offerings and other borrowings, (b) management fees, (c) realized incentive fees, (d) realized performance allocations and (e) $4.325 billion revolving credit facility with a final maturity date of October 16, 2030 (the “Revolving Credit Facility”). Our long-term debt totaled $12.4 billion in borrowings from our prior bond issuances. As of December 31, 2025, we had no borrowings outstanding under the Revolving Credit Facility. In February 2026, we drew $900.0 million under the Revolving Credit Facility. As of December 31, 2025, we had $2.6 billion in Cash and Cash Equivalents, $359.7 million invested in Corporate Treasury Investments and $7.1 billion in Other Investments.
If growth of the global economy decelerates, or conditions in the financing markets were challenged, the investment performance of our funds could suffer, resulting in, for example, the payment of decreased or no Performance Allocations to us. This could materially and adversely affect the amount of cash we have on hand, which could in turn require us to rely on other sources of cash. A decrease in the amount of cash we have on hand, or the unavailability of other sources of liquidity, such as debt capital markets or the Revolving Credit Facility, could also materially and adversely affect our ability to pay dividends to our stockholders and make repurchases under our share repurchase program. As a result, our uses of cash may exceed our sources of cash, thereby affecting our liquidity position. In addition, we have made and expect to continue to make significant principal investments in our current and future investment funds. We may lose some or the entire principal amount of these investments, including, without limitation, as a result of poor investment performance in a challenging economic and market environment.
Our business depends in large part on our ability to raise capital from third-party investors. A failure to raise capital from third-party investors on attractive fee terms or at all, would impact our ability to collect management fees or deploy such capital into investments and potentially collect Performance Revenues, which would materially reduce our revenue and cash flow and adversely affect our financial condition.
Our ability to raise capital from third-party
investors depends on a number of factors, such as economic, market (including the level of interest rates and stock market performance) and geopolitical conditions, and the asset allocation rules or investment policies to which such third-party
investors are subject. These factors could inhibit or restrict the ability of third-party
investors to make investments in our funds or make investment in certain asset classes or geographies less attractive to such investors. Market or currency volatility or perceived economic or geopolitical uncertainty or instability may contribute to decreased interest on the part of investors in allocating capital to certain asset classes or geographies in which our funds operate. Lawmakers across a number of states have put forth proposals or expressed intent to take steps to reduce or minimize the ability of their state pension funds to invest in alternative asset classes, including by proposing to increase the reporting or other obligations applicable to their state pension funds that invest in such asset classes. Such proposals or actions would potentially discourage investment by such state pension funds in alternative asset classes by imposing meaningful compliance burdens and costs on them, which could adversely affect our ability to raise capital from such state pension funds. Other states could potentially take similar actions, which may further impair our access to capital from an investor base that has historically represented a significant portion of our fundraising.
In addition, volatility in the valuations of investments, has in the past and may in the future affect our ability to raise capital from third-party
investors. To the extent periods of volatility are coupled with a lack of realizations from investors’ existing portfolios, such investors may be left with disproportionately outsized remaining commitments to a number of investment funds. This significantly limits such investors’ ability to make new commitments to third-party
managed investment funds such as those managed by us. Further, during periods of market volatility, investor subscription requests may be reduced and investor redemption or repurchase requests may be elevated in products that permit redemption or repurchase of investor interests. See “—Investors in a number of our vehicles may withdraw their investments, and investors in certain of our vehicles may have a right to terminate our management of, or cause the dissolution of, such vehicles, which would lead to a decrease in our27
Table of Contentsrevenues.” Conversely, in periods of positive market environments and low volatility, investors may favor passive investment strategies such as index funds over our actively managed investment vehicles. Similarly, during periods of high interest rates, investors may favor investments that are generally viewed as producing a risk-free return, such as treasury bonds, over investments in our products, particularly if the spread between the products declines. In addition, certain of our investment vehicles that are available to individual investors are subject to state registration requirements that impose limits on the proportion of such investors’ net worth that can be invested in our products. These restrictions may limit such investors’ ability or willingness to allocate capital to such products and adversely affect our fundraising in the retail channel. In addition, our ability to raise capital from third parties outside of the United States could be limited to the extent that other countries impose restrictions or limitations on outbound foreign investment. A failure to successfully raise capital could materially reduce our revenue and cash flow and adversely affect our financial condition.
In connection with raising new funds or making further investments in existing funds, we negotiate terms for such funds and investments with investors. The outcome of such negotiations could result in our agreement to terms that are materially less favorable to us than for prior funds we have managed or funds managed by our competitors, including with respect to management fees, incentive fees and/or carried interest, which could have an adverse impact on our revenues. Such terms could also add additional expenses and obligations for us in managing the fund or increase our potential liabilities, which could ultimately decrease our revenues. In addition, such terms could restrict our ability to raise investment funds with investment objectives or strategies that compete with existing funds, which could adversely impact our ability to expand our assets under management.
The continued expansion of the number and types of investment products we offer in the individual investor channel may make it more difficult to fundraise from the institutional investor channel to the extent institutional investors have concerns regarding such expansion, including with respect to potential or perceived conflicts of interest. In addition, certain institutional investors may seek to condition a drawdown fund commitment on the imposition of limits on the ability of our individual investor channel-targeted funds to invest alongside such drawdown funds. Certain institutional investors, including sovereign wealth funds and public pension funds, have demonstrated an increased preference for alternatives to the traditional investment fund structure, such as managed accounts, smaller funds and co-investment
vehicles. There can be no assurance that such alternatives will be as profitable for us as the traditional investment fund structure, or as to the impact such a trend could have on the cost of our operations or profitability if we were to implement these alternative investment structures.
Although we have no obligation to modify any of our fees with respect to our existing funds, we may experience pressure to do so, including in response to regulatory focus by the SEC on the quantum and types of fees and expenses charged by private funds. We have confronted and expect to continue to confront requests from a variety of investors and groups representing investors to decrease fees, which could result in a reduction in the fees and Performance Revenues we earn.
The asset management business is intensely competitive.
Our asset management business competes with a number of private funds, specialized investment funds, funds structured for individual investors, hedge funds, funds of hedge funds and other sponsors managing pools of capital, as well as corporate buyers, traditional asset managers, commercial banks, investment banks and other financial institutions (including sovereign wealth funds). We expect that competition will continue to increase. For example, certain traditional asset managers have developed their own private equity and private wealth platforms and are marketing other asset allocation strategies as alternatives to hedge fund investments. A number of factors serve to increase our competitive risks:
• a number of our competitors have greater financial, technical, research, marketing and other resources and more personnel than we do,
• some of our funds may not perform as well as competitors’ funds or other available investment products,28
Table of Contents• several of our competitors have significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that many alternative investment strategies seek to exploit,
• some of our competitors, particularly strategic competitors, may have a lower cost of capital, which may be exacerbated by limits on the deductibility of interest expense,
• some of our competitors may have access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to investment opportunities,
• some of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain businesses or investments than we can and/or bear less compliance cost than we do,
• some of our competitors may have more flexibility than us in raising certain types of investment funds under the investment management contracts they have negotiated with their investors,
• some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make or to seek exit opportunities through different channels,
• some of our competitors may be more successful than we are in the development of new or customized products to address investor demand for new or different investment strategies and/or regulatory changes, including with respect to private credit products and products that are developed for individual investors or that target insurance capital,
• in order to broaden distribution of their private wealth products, some of our competitors may be willing to pay higher placement, servicing or other forms of distributor fees or offer revenue shares, which may adversely impact the amount of capital we are able to raise in the private wealth channel,
• there are relatively few barriers to entry impeding new alternative asset managers, and the successful efforts of new entrants, including former “star” portfolio managers at large diversified financial institutions as well as such institutions themselves, is expected to continue to result in increased competition,
• some of our competitors may have better expertise or be regarded by investors as having better expertise in a specific asset class or geographic region than we do,
• corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage relative to us when bidding for an investment,
• some investors may prefer to invest with an asset manager that is not publicly traded or is smaller, with a more limited number of investment products and
• other industry participants will from time to time seek to recruit our investment professionals and other employees away from us.
Additionally, technological innovation, including the use of artificial intelligence, has the potential to disrupt the financial industry and change the way financial institutions, including asset managers, do business. Some of our competitors may be more successful than we are in the development and implementation of new technologies, including services and platforms based on artificial intelligence, to address investor demand or improve operations. If we are unable to adequately advance our capabilities in these areas, or do so at a slower pace than others in our industry, we may be at a competitive disadvantage.
We may lose investment opportunities if we do not match investment prices, structures and terms offered by competitors. Alternatively, we may experience decreased rates of return and increased risks of loss if we match investment prices, structures and terms offered by competitors. Moreover, if we are forced to compete with other29
Table of Contentsalternative asset managers on the basis of price, we may not be able to maintain our current fund fee and carried interest terms. We have historically competed primarily on the performance of our funds, and not on the level of our fees or carried interest relative to those of our competitors. However, there is a risk that fees and carried interest in the alternative investment management industry will decline, without regard to the historical performance of a manager. Further, as part of a shift in the distribution arrangements in the private wealth industry, certain third-party
intermediaries have sought to revise existing or implement new fee arrangements that align their fees with the initial amount or ongoing net asset value of capital invested through the intermediary in the applicable vehicle. While the extent of this shift going forward is uncertain, the costs associated with the distribution of certain of our private wealth perpetual products have increased and there may be further increases in distribution costs for these and future products. The reduction of net management fees or performance allocations we receive, including as a result of new fee arrangements, or the incurrence of higher costs in connection with product distribution, without corresponding decreases in our cost structure, would adversely affect the profitability of impacted products. Certain of the third-party
intermediaries on whom we rely to distribute our investment products also sell their own competing proprietary investment products, which could limit the distribution of our products.
Regulatory measures aimed at reducing burden on U.S. banks, such as less onerous bank regulatory capital requirements, may create additional competition for certain of our credit strategies. See “—Financial regulatory changes in the United States could adversely affect our business.”
These competitive pressures could adversely affect our ability to make successful investments and limit our ability to raise future investment funds, either of which would adversely impact our business, revenue, results of operations and cash flow.
We are increasingly undertaking business initiatives to increase the number and type of investment products we offer to individual investors, which could expose us to new and greater levels of risk.
Although individual investors have been part of our historic distribution efforts, we are increasingly undertaking business initiatives to increase the number and type of investment products we offer to high-net-worth
individuals, family offices and mass affluent investors in the U.S. and other jurisdictions around the world. Specifically, we create investment products designed for investment by individual investors in the U.S., some of whom are not accredited investors, or similar investors in non-U.S.
jurisdictions, including in some markets in Europe and Asia Pacific. In some cases, our funds are distributed to such investors indirectly through third-party
managed vehicles sponsored by brokerage firms, private banks or third-party
feeder providers, and in other cases directly to the clients of private banks, independent investment advisors and brokers.
Accessing individual investors and offering products directed at such investors exposes us to greater levels of risk, including heightened litigation and regulatory enforcement, an increased compliance burden, and more complex administration and accounting operations. We may be subject to claims related to matters such as the adequacy of disclosures, appropriateness of fees, suitability and board of directors’ oversight, each of which could result in civil lawsuits, regulatory penalties and enforcement actions. Our registered investment advisers could also be subject to direct or derivative claims from a fund’s investors or board of directors for alleged mismanagement of the fund. In addition, regulatory requirements imposing limitations on the ability of affiliates of certain of our vehicles to engage in certain transactions may limit our funds’ ability to engage in otherwise attractive investment opportunities.
To the extent distribution of such products is through new channels and markets, including through an increasing number of distributors with whom we engage, we may not be able to effectively monitor or control the manner of their distribution. This could result in litigation or regulatory action against us, including with respect to, among other things, claims that products distributed through such channels are distributed to investors for whom they are unsuitable, claims related to conflicts of interest or the adequacy of disclosure to investors or claims that30
Table of Contentsthe products are distributed in a manner inconsistent with our regulatory requirements or otherwise inappropriate manner. In addition, regulation applicable to our arrangements with such distributors and channels increases the compliance burden associated with onboarding new distributors or pursuing new distribution channels, resulting in increased cost and complexity. Although we engage in due diligence and onboarding procedures that seek to uncover issues relating to the third-party channels through which individual investors access our investment products, we do not control and have limited information regarding many of these third-party channels. Therefore, we are exposed to the risks of reputational damage, regulatory scrutiny and legal liability to the extent such third parties improperly sell our products to investors. This risk is heightened by the continuing increase in the number of third parties that distribute our investment products around the world and that we do not control. For example, in certain cases, we may be viewed by a regulator as responsible for the content of materials prepared by third parties.
Similarly, there is a risk that Blackstone employees involved in the direct distribution of our products, or employees who engage with independent advisors, brokerage firms and other third parties around the world involved in distributing our products, do not follow our compliance and supervisory procedures. In addition, the distribution of such products, including through new channels whether directly or through market intermediaries, could expose us to allegations of improper conduct and/or actions by state and federal regulators in the U.S. and regulators in jurisdictions outside of the U.S. Such allegations or actions may be with respect to, among other things, product suitability, distributor eligibility, investor classification, compliance with securities laws, conflicts of interest and the adequacy of disclosure to investors to whom our products are distributed through those channels.
As we expand the distribution of products to individual investors outside of the United States, we are increasingly exposed to risks in non-U.S.
jurisdictions. In addition to risks similar to those that we face in the U.S., securities laws and other applicable regulatory regimes can be extensive, complex and vary by jurisdiction. In addition, the distribution of products to individual investors outside of the U.S. may involve complex structures (such as distributor-sponsored
feeder funds or nominee/omnibus investors) and market practices that vary by local jurisdiction. As a result, this expansion subjects us to additional complexity, litigation and regulatory risk.
Our initiatives to expand our individual investor base, including marketing, creating and maintaining the types of products and vehicles that individual investors may invest in, may not be successful. Such initiatives include the hiring of additional personnel and the implementation of new operational, technological, compliance and other systems and processes, each of which require significant time, effort and resources. Further, in light of the August 2025 Executive Order on Democratizing Access to Alternative Assets for 401(k) Investors, there may be significant future opportunity for the alternative asset management industry to increase the distribution of products to individual investors. Accordingly, we are likely to face significant competition in addressing such opportunity, which will require us to spend substantial time, effort and resources, and may not ultimately be successful in increasing distribution of our products in this channel.
We depend on our co-founder
and other key senior managing directors and personnel, and the loss of their services would have a material adverse effect on our business, results and financial condition.
We depend on the efforts, skill, reputations and business contacts of our co-founder,
Stephen A. Schwarzman, our President, Jonathan D. Gray, and other key senior managing directors and personnel, the information and deal flow they generate during the normal course of their activities and the synergies among the diverse fields of expertise and knowledge held by our professionals. Accordingly, our success will depend on the continued service of these individuals, who are not obligated to remain employed with us. Several key personnel have left the firm in the past and others may do so in the future, and we cannot predict the impact that the departure of any key personnel will have on our ability to achieve our investment objectives. For example, the governing agreements of many of our funds generally provide investors with the ability to terminate the investment period in the event that certain “key persons” in the fund do not meet the specified time commitment to the fund or our firm ceases to control the general partner. The loss of the services of any key personnel could have a material adverse effect on31
Table of Contentsour revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future. Our senior managing directors and other key personnel possess substantial experience and expertise and have strong business relationships with our investors and other members of the business community. As a result, the loss of these personnel could jeopardize our relationships with such parties and result in the reduction of assets under management or fewer investment opportunities.
We have historically relied in part on the interests of these professionals in the investment funds’ carried interest and incentive fees to discourage them from leaving the firm. However, to the extent our investment funds perform poorly, thereby reducing the potential for carried interest and incentive fees, their interests in carried interest and incentive fees become less valuable to them and become less effective as incentives for them to continue to be employed at Blackstone. We might not be able to provide future key personnel with interests in our business to the same extent or with the same tax consequences from which our existing personnel previously benefited. For example, U.S. federal income tax law currently imposes a three-year
holding period requirement for carried interest to be treated as long-term
capital gains. The holding period requirement may result in some of the carried interest received by such individuals being treated as ordinary income, which would materially increase the amount of taxes that such key personnel would be required to pay. The current U.S. Presidential administration’s stated tax priorities include changes to the tax treatment of carried interest that, if implemented, would materially increase the amount of taxes many of our key personnel would be required to pay. The tax treatment of carried interest continues to be an area of focus for policymakers and government officials. The levying of additional taxes on carried interest, or increases in state or local taxes applicable to our personnel, along with changing opinions regarding living in some geographies where we have offices due to, among other factors, local policies, may adversely affect our ability to recruit, retain and motivate our current and future professionals.
There is no guarantee that the non-competition
and non-solicitation
agreements to which our senior managing directors and other key personnel are subject, together with our other arrangements with them, will prevent them from leaving, joining our competitors or otherwise competing with us. Such agreements also expire after a certain period of time, at which point such personnel would be free to compete against us and solicit our clients and employees. In addition, such agreements may not be enforceable in all cases, particularly as legislatures or regulators enact legislation or adopt rules aimed at effectively prohibiting non-competition
agreements. For example, legislation that would prohibit post-employment non-competition
agreements except in limited circumstances has been introduced in New York.
We strive to maintain a work environment that reinforces our culture of collaboration, motivation and alignment of interests with investors. If we do not continue to develop and implement the right processes and tools to maintain this culture, particularly in light of rapid and significant growth in our scale, global presence and employee population, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations.
Changes in U.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.
Our effective tax rate and tax liability is based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex, and the manner which they apply to us and our funds is sometimes open to interpretation. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Although management believes its application of current laws, regulations and treaties to be correct and sustainable upon examination by tax authorities, tax authorities have challenged and could challenge in the future our interpretation of such laws, regulations and treaties or our taking of certain tax positions on the basis of such interpretation. This has and could in the future result in penalties, interest payments and/or additional tax liability or adjustment to our income tax provision that could increase our effective tax rate.32
Table of ContentsPast and future changes to tax laws and regulations may have an adverse impact on us. Such changes could materially change the amount and/or timing of tax we and our portfolio companies may be required to pay and may increase tax-related
regulatory and compliance costs. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the “OBBBA”), which makes significant changes to the U.S. Internal Revenue Code and other federal tax laws. Among other changes, the OBBBA extends or reinstates many of the provisions enacted by the Tax Cuts and Jobs Act of 2017, including the tax rate brackets for individuals and capital expensing provisions, and significantly curtails many of the clean energy subsidies enacted by the Inflation Reduction Act of 2022. How the OBBBA will be implemented will depend on future administrative guidance and court rulings. The U.S. Congress may also pass additional tax reform legislation in the future. The timing and details of any such guidance, rulings and legislation, and the impact on us, our personnel, and our funds’ portfolio companies, is uncertain.
In addition, the U.S. Congress, the Organization for Economic Co-operation
and Development (“OECD”) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD, which represents a coalition of member countries, has been working on a two-pillar
initiative, which is aimed at (a) shifting taxing rights to the jurisdiction of the consumer (“Pillar One”) and (b) ensuring all companies pay a global minimum tax (“Pillar Two”). Under Pillar Two, certain entities within a multinational group will be subject to top-up
taxes where the overall tax paid on the group’s profit in any jurisdiction falls below the minimum 15% effective tax rate. The EU, among other regions implementing or intending to implement these rules, adopted Pillar Two and required that all EU member states adopt local legislation to implement such rules beginning December 31, 2023. However, on June 28, 2025, the Group of Seven (“G7”) countries announced a shared understanding for a “side-by-side”
system under which U.S.-parented groups would be exempt from certain of the Pillar Two proposals. While the details of such “side-by-side”
system remain the subject of ongoing discussions among the G7 and the OECD, Pillar One and Pillar Two could result in increased effective tax rates, possible denial of deductions, withholding taxes and/or profits being allocated differently and increased complexity, burden and cost of tax compliance for us and our funds’ portfolio companies. Given the ongoing design, implementation, administration and interpretation of Pillar One and Pillar Two, the timing, scope and impact of any relevant domestic legislation or multilateral conventions remain uncertain.
Cybersecurity and data protection risks could result in the loss of data, interruptions in our business, and damage to our reputation, and subject us to regulatory actions, increased costs and financial losses, each of which could have a material adverse effect on our business and results of operations.
Our operations are highly dependent on our technology platforms and we rely heavily on our analytical, financial, accounting, communications and other data processing systems. Our systems face ongoing cybersecurity threats and attacks, which could result in the loss of confidentiality, integrity or availability of such systems and the data held by such systems. Attacks on our systems could involve, and in some instances have in the past involved, attempts intended to obtain unauthorized access to our proprietary information, destroy data or disable, degrade or sabotage our systems, or divert or otherwise steal funds, including through the introduction of computer viruses, “phishing” attempts and other forms of social engineering. Attacks on our systems could also involve ransomware or other forms of cyber extortion. Cyberattacks and other data security threats could originate from a wide variety of external sources, including cyber criminals, nation state hackers, hacktivists and other outside parties. Cyberattacks and other security threats could also originate from the malicious or accidental acts of insiders, such as employees, consultants, independent contractors or other service providers.
There has been an increase in the frequency and sophistication of the cyber and data security threats we face, with attacks ranging from those common to businesses generally to those that are more advanced and persistent. In addition, the risk of cyber and data security threats to us is exacerbated with the advancement of artificial intelligence, which malicious third parties are using to create new, sophisticated and more frequent attacks. As an alternative asset management firm, we face a heightened risk of such an attack because we hold a significant amount of confidential and sensitive information about our investors, our funds’ portfolio companies and potential33
Table of Contentsinvestments. Measures we take to ensure the integrity of our systems may not provide adequate protection, especially because cyberattack techniques are continually evolving, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack on Blackstone, our investors, our portfolio companies or potential investments. If our systems or those of third-party service providers are compromised either as a result of malicious activity or through inadvertent transmittal or other loss of data, do not operate properly or are disabled, or we fail to provide the appropriate regulatory or other notifications in a timely manner, we could suffer financial loss, increased costs, a disruption of our businesses, liability to our counterparties, investment funds or fund investors, regulatory intervention or reputational damage. The costs related to cyber or other data security threats or disruptions may not be fully insured or indemnified by other means.
We are reliant on third-party service providers for certain aspects of our business, including the administration of certain funds, as well as for certain technology platforms, including cloud-based services. These third-party service providers also face ongoing cybersecurity threats and compromises of their systems. These cybersecurity threats and compromises could occur as a result of threat actors impersonating Blackstone or its employees, including through the use of artificial intelligence technologies. Such technologies could make such impersonation more likely to occur or appear more credible. As a result, unauthorized individuals could gain, and in some past instances have gained, access to certain confidential data through third-party service providers. In addition, we could also suffer losses in connection with updates to, or the failure to timely update, the third-party technology platforms on which we rely.
Cybersecurity, privacy and data protection have become top priorities for regulators in the United States and around the world. Many jurisdictions in which we operate have laws and regulations relating to privacy, data protection and cybersecurity, including the Gramm-Leach-Bliley Act (“GLBA”) (including recent amendments to Regulation S-P),
the General Data Protection Regulation (“GDPR”), the U.K. Data Protection Act, and the California Privacy Rights Act (“CPRA”). Some jurisdictions have also enacted or proposed laws requiring companies to notify individuals and/or government agencies of data security breaches involving certain types of personal data or involving certain thresholds of potential harm to impacted individuals. In light of the focus of federal regulators on cybersecurity, SEC enforcement and examination activity has increased in recent years and may increase further. Although we maintain cybersecurity controls designed to prevent cyber incidents from occurring, no security is impenetrable to cyberattacks. It is possible that current and future cyber enforcement activity will target practices that we believe are compliant, but our regulator deem otherwise. See “—Rapidly developing and changing global data security and privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.”
Breaches in our security or in the security of third-party
service providers, whether malicious in nature or through inadvertent transmittal or other loss of data, could potentially jeopardize our, our employees’ or our fund investors’ or counterparties’ confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks or that of our third-party service providers. Breaches could also potentially cause interruptions or malfunctions in our, our employees’, our fund investors’, our counterparties’ or third parties’ business and operations, which could result in significant financial losses, increased costs, liability to our fund investors and other counterparties, regulatory intervention and reputational damage. Furthermore, if we fail to comply with the relevant laws and regulations or fail to provide the appropriate regulatory or other notifications of breach in a timely manner, it could result in regulatory investigations and penalties, which could lead to negative publicity and reputational harm and may cause our fund investors and clients to lose confidence in the effectiveness of our security measures and Blackstone more generally.
Our funds’ portfolio companies also rely on data processing systems and the secure processing, storage and transmission of information, including payment and health information, which in some instances are provided by third parties. A disruption or compromise of these systems could have a material adverse effect on the value of these businesses. Our funds may invest in strategic assets having a national or regional profile or in digital or other infrastructure, the nature of which could expose them to a greater risk of being subject to a terrorist attack or a security breach than other assets or businesses. Such an event may have material adverse consequences on our investment or assets of the same type or may require portfolio companies to increase preventative security measures or expand insurance coverage.34
Table of ContentsOur and our funds’ portfolio companies’ technology platforms, data and intellectual property are also subject to a heightened risk of theft or compromise as a result of operations outside the United States, in particular in those jurisdictions that do not have comparable levels of protection of proprietary information and assets such as intellectual property, trademarks, trade secrets, know-how
and customer information and records. In addition, we and our funds’ portfolio companies may be required to compromise protections or forego rights to technology, data and intellectual property in order to operate in or access markets in a foreign jurisdiction. Any such direct or indirect compromise of these assets could have a material adverse impact on us and our funds’ portfolio companies.
Rapidly developing and changing global data security and privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.
We and our funds’ portfolio companies are subject to various risks and costs associated with the collection, storage, transmission and other processing of personal data. This personal data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties. Any inability, or perceived inability, by us to adequately address privacy concerns, or comply with applicable data security or privacy laws, regulations, policies, industry standards, or related contractual obligations, even if unfounded, could result in regulatory and third-party
liability, increased costs, disruptions to business and operations, and reputational damage. Furthermore, any such inability or perceived inability of our funds’ portfolio companies, even if unfounded, could result in reputational damage to us.
Data security and privacy compliance obligations to which we are subject impose compliance costs on us, which could increase significantly as laws and regulations evolve globally. Our compliance obligations include those relating to U.S. laws and regulations, including, without limitation, state regulations such as the CPRA, which provides for enhanced consumer protections for California residents, a private right of action for data breaches and statutory fines and damages for data breaches or other California Consumer Privacy Act (“CCPA”) violations, as well as a requirement of “reasonable” cybersecurity. At the U.S. federal level, the SEC has adopted amendments to Regulation S-P
that took effect in 2025. These amendments impose operationally challenging data breach notification requirements and deadlines as well as obligations to implement written policies and procedures to govern oversight of service providers that will likely increase associated compliance costs. The U.S. Department of Justice issued a rule, effective in 2025, that prohibits or restricts certain transactions involving the transfer of, and access to, bulk sensitive personal data to foreign persons connected with certain designated countries of concern, including China. While we expect this development will increase compliance burdens and associated costs, this rule may also impact the way we conduct business, including the ability of employees in countries of concern to access certain information.
Our compliance obligations also include those relating to foreign data collection and privacy laws, including, for example, the GDPR and U.K. Data Protection Act, as well as laws in many other jurisdictions globally, including Switzerland, Japan, Hong Kong, Singapore, India, China, Australia, Canada and Brazil. Global laws in this area are rapidly increasing in the scale and depth of their requirements, and are also often extra-territorial
in nature. In addition, a wide range of regulators and private actors are seeking to enforce these laws across regions and borders. Furthermore, we frequently have privacy compliance requirements as a result of our contractual obligations with counterparties. These legal, regulatory and contractual obligations heighten our data protection and privacy obligations in the ordinary course of conducting our business in the U.S. and internationally.35
Table of ContentsAny inability, or perceived inability, by us or our funds’ portfolio companies to adequately address data protection or privacy concerns, or comply with applicable laws, regulations, policies, industry standards and guidance, contractual obligations, or other legal obligations, even if unfounded, could result in significant legal, regulatory and third-party
liability, increased costs, disruption of our and our funds’ portfolio companies’ business and operations, and a loss of client (including investor) confidence and other reputational damage. Many regulators have indicated an intention to take more aggressive enforcement actions regarding data security and privacy matters, and private litigation resulting from such matters is increasing and resulting in progressively larger judgments and settlements. Specifically, the SEC’s stated 2026 examination priorities include an intended focus on adviser’s policies and practices as it relates to the prevention of interruptions to mission-critical services and protection of investor information, records and assets. Furthermore, as new data protection and privacy-related laws and regulations are implemented, the time and resources needed for us and our
funds’ portfolio companies to comply with such laws and regulations continues to increase and become a significant compliance workstream.
Technological developments in artificial intelligence could disrupt the markets in which we and our portfolio companies operate and subject us and our portfolio companies to increased competition, legal and regulatory risks and compliance costs.
Technological developments in artificial intelligence, including machine learning technology and generative artificial intelligence (“AI Technology” and, collectively, “AI Technologies”) and their current and potential future applications, including in the private investment and financial sectors as well as across sectors in which our portfolio companies operate, are rapidly changing. The legal and regulatory frameworks related to such current and potential future applications are also evolving. The full extent of current or future risks related thereto is not possible to predict and we and our portfolio companies may not be able to anticipate, prevent, mitigate or remediate all of the potential risks, challenges or impacts of such changes. AI Technologies could significantly disrupt the business models, investment strategies, operational processes, and markets in which we operate. Similarly, AI Technologies could significantly disrupt our portfolio companies’ businesses and markets. This could subject us and our portfolio companies to increased competition, legal and regulatory risks and compliance costs, and adversely impact our or our portfolio companies’ growth prospects. These impacts could have a material adverse effect on our business, financial condition and results of operations. Advancements in computing and AI Technologies, including efficiency improvements, without related increases in the adoption and development of such technologies, could also negatively impact demand for, and the valuation of, digital infrastructure assets, a sector to which certain of our investment strategies have significant exposure.
Through our use of AI Technologies, we avail ourselves of the potential benefits, insights and efficiencies resulting from these technologies. For example, our employees can utilize internal generative AI-powered
applications to help summarize, search or translate documents or gather information on a wide variety of topics. However, these technologies also present a number of potential risks that cannot be fully mitigated. If the data we, or third parties whose services we rely on, use in connection with the possible development or deployment of AI Technologies is incomplete, inadequate or biased in some way, the performance of our products, services, and businesses could suffer. Data in models that AI Technologies utilize are likely to contain a degree of inaccuracy and error, which could result in flawed algorithms. This could reduce the effectiveness of AI Technologies and adversely impact us and our operations to the extent we rely on the work product of such AI Technologies in such operations. The volume and reliance on data and algorithms also make AI Technologies, and in turn us and our portfolio companies and investments, more susceptible to cybersecurity threats, including the compromise of underlying models, training data, or other intellectual property. We, our funds, our portfolio companies and our funds’ investments could be exposed to risks to the extent third-party
service providers or any counterparties use AI Technologies in their business activities. There is also a risk that AI Technologies may be misused or misappropriated by our employees and/or third parties engaged by us. For example, a user may input confidential information, including material non-public
information or personal identifiable information, into AI Technology applications, resulting in such information becoming part of a dataset that is accessible by third-party
AI Technology applications and users, including our competitors. Such actions could subject us to legal and regulatory36
Table of Contentsinvestigations and/or actions. In addition, we may not be able to control how third-party
AI Technologies that we choose to use are developed or maintained, or how data we input is used or disclosed, even where we have sought contractual protections with respect to these matters. We may be subject to legal and regulatory investigations and/or actions related to our use of AI Technologies, including as related to alleged misuse or misappropriation of our data. This could also have an adverse impact on our reputation. We may also communicate externally regarding AI Technology-related
initiatives, including our development and use of AI Technologies, which subjects us to the risk of being accused of making inaccurate or misleading statements regarding our ability to avail ourselves of the potential benefits of AI Technology.
Regulations related to AI Technologies may also impose on us certain obligations and costs related to monitoring and compliance. Regulators are increasing scrutiny of, and enacting or considering enacting regulations regarding, the use of AI Technologies, including the use of “big data,” diligence of data sets and oversight of data vendors. The use of AI Technologies by us and our vendors may require compliance with legal and regulatory frameworks that are not fully developed or tested, and we may face litigation and regulatory actions related to our use of, or our engagement of vendors that use, AI Technologies. In April 2023, the Federal Trade Commission, U.S. Department of Justice, Consumer Financial Protection Bureau, and U.S. Equal Employment Opportunity Commission released a joint statement on artificial intelligence demonstrating interest in monitoring the development and use of automated systems and enforcement of their respective laws and regulations. In October 2023, an executive order established new standards for AI safety and security. In addition to the U.S. regulatory framework, the EU adopted the Artificial Intelligence Act in 2024, which applies to certain AI Technologies and the data used to train, test and deploy them, which may create additional compliance burdens, higher administrative costs and significant penalties should we fail to comply or be perceived to fail to comply.
Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus could result in additional burdens on our business.
Our business is subject to extensive regulation, including periodic examinations, inquiries and investigations, by governmental agencies and self-regulatory
organizations in the jurisdictions in which we operate around the world. These authorities have regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities. Many of these regulators, including U.S. and foreign government agencies and self-regulatory
organizations, as well as state securities commissions in the United States, are also empowered to conduct examinations, inquiries, investigations and administrative proceedings that can result in fines, suspensions of personnel, changes in policies, procedures or disclosures or other sanctions, including censure, the issuance of cease-and-desist
orders, the suspension or expulsion of a broker-dealer
or investment adviser from registration or memberships or the commencement of a civil or criminal lawsuit against us or our personnel.
The financial services industry is frequently the subject of heightened scrutiny, and the SEC has specifically focused on private equity and the private funds industry in recent years. In that connection, in recent years the SEC’s stated examination priorities and published observations from examinations have included, among other things, private equity firms’ collection of fees and allocation of expenses, their marketing and valuation practices, allocation of investment opportunities, investor side letter terms, consistency of firms’ practices with disclosures, handling of material non-public
information and insider trading, disclosures of investment risk, conflicts of interest, adherence to notice, consent and other contractual requirements regarding limited partnership advisory committees, fiduciary standards of conduct, financial technologies, and compliance with the SEC’s recently adopted rules, including those referenced herein.
In recent years, the SEC has proposed, and in some instances, adopted, a number of rules related to private funds and private fund advisors that impact our business and operations, including by increasing our operational and compliance costs to comply effectively. The SEC and other of our regulators can be expected to continue to propose rules that impact our operations, including by increasing compliance burdens and costs, enhancing the risk of regulatory action, which could adversely impact our reputation and our fundraising efforts, and imposing limitations on our operations or investing activities.37
Table of ContentsWe regularly are subject to requests for information, inquiries and informal or formal investigations by the SEC and other regulatory authorities, with which we routinely cooperate, and which have included review of historical practices that were previously examined. Such investigations have previously and may in the future result in penalties and other sanctions. SEC actions and initiatives can have an adverse effect on our financial results, including as a result of the imposition of a sanction, a limitation on our or our personnel’s activities, or changing our historic practices. Even if an investigation or proceeding did not result in a sanction, or the sanction imposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing clients or fail to gain new clients. In addition, certain states and other regulatory authorities have required investment managers to register as lobbyists, and we have registered as such in a number of jurisdictions. Other states or municipalities may consider similar legislation or adopt regulations or procedures with similar effect. These registration requirements impose significant compliance obligations on registered lobbyists and their employers, which may include annual registration fees, periodic disclosure reports and internal recordkeeping.
We are subject to scrutiny from regulators, elected officials, stockholders, investors and other stakeholders with respect to sustainability matters, which may adversely impact our ability to raise capital from certain investors, constrain capital deployment opportunities for our funds and harm our reputation.
We, our funds and their portfolio companies are subject to scrutiny from regulators, elected officials, stockholders, investors and other stakeholders with respect to sustainability matters. In recent years, alternative asset managers have become subject to competing demands from different investors and other stakeholder groups with divergent views on sustainability matters, including the role of such matters in the investment process. Certain investors, including public pension funds, have placed increasing importance on the impacts of investments made by the private funds to which they commit capital, including with respect to climate change, among other aspects of sustainability. At times, investors, including public pension funds, have limited participation in certain investment opportunities, such as hydrocarbons, and/or conditioned future capital commitments to certain funds on the implementation of screens or other sector-specific
investment guidelines. Conversely, certain investors have raised concerns as to whether the incorporation of sustainability factors in the investment and portfolio management process may be inconsistent with the fiduciary duty to maximize return for investors, or may result in the subordination of the interests of investors based solely or in part on sustainability considerations. Investors, including public pension funds, which represent a significant portion of our funds’ investor bases, may decide to withdraw previously committed capital (where such withdrawal is permitted) or not commit capital to future fundraises based on their assessment of how we approach and consider the sustainability cost of investments and whether the return-driven
objectives of our funds align with their sustainability priorities. This divergence increases the risk that any action or lack thereof with respect to sustainability matters will be perceived negatively by at least some stakeholders and adversely impact our reputation and business. If we do not successfully manage sustainability-related
expectations across the varied interests of our stakeholders, including existing or potential investors, our ability to access and deploy capital may be adversely impacted. In addition, a failure to successfully manage sustainability-related
expectations may negatively impact our reputation and erode stakeholder trust.
Certain investors also have begun to request or require data from their asset managers and/or use third-party
benchmarks and ratings to allow them to monitor the sustainability impact of their investments. Regulatory initiatives that require investors to make disclosures to their stakeholders regarding sustainability matters have become increasingly common in certain jurisdictions, which may further increase the number and type of investors who place importance on these issues and who demand certain types of reporting from us or our funds. In addition, government authorities of certain U.S. states have requested information from and scrutinized certain asset managers with respect to whether such managers have adopted sustainability policies that consider non-pecuniary
factors in the investment process or would restrict such asset managers from investing in certain industries or sectors, such as conventional energy. These authorities have indicated that asset managers they view to have adopted such policies may lose opportunities to manage money belonging to these states and their pension funds.38
Table of ContentsThere has been increased regulatory focus on sustainability-related
practices by asset managers and the accuracy of statements made regarding such practices, including whether such statements are inaccurate or misleading, either because they overstate (often referred to as “greenwashing”) or understate the extent to which such asset managers are engaging in sustainability-related
practices. Regulators have commenced enforcement actions against several investment advisers relating to sustainability disclosures and policies and procedures failures. Any perception or accusation that we are overstating, or, conversely, understating our engagement in sustainability-related
practices could damage our reputation, result in litigation or regulatory actions, and adversely impact our ability to raise capital and attract new investors. Outside of the United States, the European regulatory environment for alternative investment fund managers and financial services firms continues to evolve and increase in complexity, making compliance more costly and time-consuming.
See “—Climate change, climate and sustainability-related
regulation and sustainability concerns could adversely affect our businesses and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.”
We may also communicate certain initiatives regarding environmental, human capital management, and other sustainability-related
matters in our SEC filings or in other disclosures by us or our funds. These initiatives could be difficult and expensive to implement, the personnel, processes and technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we may not be able to accomplish them within the timelines we announce or at all. We could, for example, determine that it is not feasible or practical to implement or complete certain of such initiatives based on cost, timing or other considerations.
Furthermore, we could be criticized for the accuracy, adequacy or completeness of the disclosure related to our or our funds’ sustainability-related
policies, practices and initiatives (and progress on those initiatives), which disclosure may be based on frameworks and standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope or nature of such initiatives, or for any revisions to these initiatives. Further, as part of our sustainability practices, we rely from time to time on third-party
data, services and methodologies and such services, data and methodologies could prove to be incomplete or inaccurate. If our or such third parties’ sustainability-related
data, processes or reporting are incomplete or inaccurate, or if we fail to achieve progress on a timely basis, or at all, we may be subject to enforcement action and our reputation could be adversely affected, particularly if in connection with such matters we were to be accused of greenwashing.
Climate change, climate and sustainability-related
regulation and sustainability concerns could adversely affect our businesses and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.
We, our funds and our funds’ portfolio companies face risks associated with climate change including risks related to the impact of climate-
and sustainability-related
legislation and regulation (both domestically and internationally), risks related to business trends related to climate change and technology (such as the process of transitioning to a lower-carbon
economy), and risks stemming from the physical impacts of climate change.
Climate and sustainability-related regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us, our funds and our funds’ portfolio companies and materially increase the regulatory burden and cost of compliance. For example, in recent years the EU has adopted and the Corporate Sustainability Reporting Directive (“CSRD”), the Sustainable Finance Disclosure Regulation (“SFDR”) and its corresponding Taxonomy Regulation, and the Corporate Sustainability Due Diligence Directive (“CSDDD”), while the U.K. has implemented rules for its Sustainability Disclosure Requirements and investment39
Table of Contentslabels regime (“SDR”) and an anti-greenwashing rule. In June 2024, BELL began reporting certain U.K.-law
required climate-related financial information in line with the Task Force on Climate-Related Financial Disclosure’s recommendations. Several U.S. states are also at various stages of seeking to regulate climate-related disclosures. For example, California has enacted, and legislators in New York and other states have introduced, climate disclosure laws that could require us to report on, among other matters, greenhouse gas emissions and climate-related risks. These frameworks have detailed disclosure requirements that would impact us and/or certain of our funds and may conflict with certain of our other regulatory obligations, such as limitations on general solicitation for private funds. As a consequence, we may be unable to fully comply with some requirements of these new regimes, which could result in regulatory actions against us. In addition, the current U.S. Presidential administration or the U.S. Congress have and may continue to modify policies or regulations of the prior administration, including limitations on coal and gas electric generation, mining and/or exploration, as well as various tax incentives under the Inflation Reduction Act and other policies, programs, and offices intended to spur clean energy investment. While certain of our funds’ portfolio companies and investments may benefit from such policies, certain other portfolio companies and investments focused on renewables or other forms of green or renewable energy may be adversely impacted.
Moreover, collecting, measuring and reporting the information and metrics required under various existing regulations has imposed administrative burden and increased cost on us. Such burden and cost are likely to increase if new or proposed regulations are enacted, particularly if the requirements imposed on us by various regulations lack harmonization on a global basis. We may also communicate certain climate-related
initiatives, commitments and goals in our SEC filings or in other disclosures, which subjects us to additional risks, including the risk of being accused of greenwashing.
Certain of our funds’ portfolio companies operate in sectors that could face transition risk. For certain of our funds’ portfolio companies, business trends related to climate change may require capital expenditures, product or service redesigns, and changes to operations and supply chains to meet changing customer expectations. While this can create opportunities, not addressing these changed expectations could create business risks for portfolio companies, which could negatively impact the value of such companies and the returns in our funds. For example, significant chronic or acute physical effects of climate change, including extreme weather events such as hurricanes, floods, or wildfires, can have an adverse impact on certain of our funds’ portfolio companies and investments, especially our real asset investments and portfolio companies that rely on physical factories, plants, stores or other assets located in the affected areas, or that focus on tourism or recreational travel. As the effects of climate change increase, we expect the frequency and impact of weather-
and climate-related
events and conditions to increase as well.
In addition, our reputation and fundraising may be harmed if certain stakeholders, such as our limited partners or stockholders, believe that we are not adequately or appropriately responding to climate change or, conversely, are focusing on climate change in a way that is inconsistent with our fiduciary duty obligations, including through the way in which we operate our business, the composition of our funds’ existing portfolios, the new investments made by our funds, or the decisions we make to continue to conduct or change our activities in response to climate change considerations. Moreover, we face business trends related to climate change risks, such as, for example, the increased attention to sustainability considerations by our fund investors, including in connection with their determination of whether to invest in our funds. See “—We are subject to scrutiny from regulators, elected officials, stockholders, investors and other stakeholders with respect to sustainability matters, which may adversely impact our ability to raise capital from certain investors, constrain capital deployment opportunities for our funds and harm our reputation.”40
Table of ContentsFinancial regulatory changes in the United States could adversely affect our business.
The financial services industry continues to be the subject of heightened regulatory scrutiny in the United States. There has been active debate over the appropriate extent of regulation and oversight of private investment funds and their managers. Our business may be adversely affected by new or revised regulations imposed by the SEC or other U.S. governmental regulatory authorities or self-regulatory
organizations that supervise the financial markets. Our business also may be adversely affected by changes in the interpretation or enforcement of existing laws and regulations by these governmental authorities and self-regulatory
organizations. Further, new regulations or interpretations of existing laws may result in enhanced disclosure obligations, including with respect to climate matters, which could materially increase the regulatory burden imposed on us, our funds or our funds’ portfolio companies.
The Dodd-Frank
Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”), enacted in July 2010, imposed significant changes on almost every aspect of the U.S. financial services industry, including aspects of our business. The Dodd-Frank
Act created the FSOC, an interagency body charged with identifying and monitoring systemic risk to financial markets. The FSOC can designate certain financial companies as nonbank financial companies subject to supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). If we were to be designated as such by the FSOC, or if any of our business activities were to be identified by the FSOC as warranting enhanced regulation or supervision by certain regulators, we could be subject to a materially greater regulatory burden. This could adversely impact our compliance and other costs, the implementation of certain of our investment strategies and our profitability.
In addition, under the Dodd-Frank
Act, whistleblowers who voluntarily provide original information to the SEC can receive compensation and protection, including payment equal to between 10% and 30% of certain monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower. Whistleblower claims have been substantial since the enactment of these provisions. Addressing such claims could generate significant expenses and take up significant management time for us and our funds’ portfolio companies, even if such claims are frivolous or without merit.
Rule 206(4)-5
under the Advisers Act regulates “pay to play” practices by investment advisers involving campaign contributions and other payments to elected state and local officials who have the ability to, directly or indirectly, influence the hiring of an investment adviser by a government entity. The rule prohibits investment advisers from providing advisory services for compensation to a government plan investor for two years, subject to limited exceptions, after the investment adviser, its senior executives or certain other “covered associates” make a disqualifying political contribution or payment to any such government official. There are also similar rules at the state level. Any failure on our part to comply with such rules could result in enforcement action, expose us to significant penalties and reputational damage and disqualify us from relying on private offering securities exemptions pursuant to which we raise a material portion of our investor capital.
In addition, the SEC’s “Regulation Best Interest” imposes a “best interest” standard of care for broker-dealers when recommending certain securities transactions to a customer. Regulation Best Interest requires such broker-dealers to evaluate available alternatives, including those that may have lower expenses and/or lower investment risk than our investment funds. The continued regulatory focus on Regulation Best Interest may negatively impact whether certain broker-dealers and their associated persons are willing to recommend investment products, including certain of our funds, to retail customers, which may adversely impact our ability to distribute our products to certain investors. Furthermore, the U.S. Department of Labor as well as several states have proposed regulations or taken other actions pertaining to conduct standards for investment advisers and broker-dealers that may result in additional requirements related to our business. Additionally, the SEC has instituted and settled multiple actions against investment advisers for violating its 2022 amended marketing rule, which imposed more prescriptive requirements on fund marketing.41
Table of ContentsThe potential for governmental policy and/or legislative changes and regulatory reform may create regulatory uncertainty for our investment strategies, may make it more difficult to operate our business, and may adversely affect the profitability of our funds’ portfolio companies.
Governmental policy and/or legislative changes and regulatory reform could make it more difficult for us to operate our business, including by impeding fundraising or making certain investments or investment strategies unattractive or less profitable. In addition, our ability to identify business and other risks associated with new investments depends in part on our ability to anticipate and accurately assess regulatory, legislative and other changes that may have a material impact on our funds’ investments. Anticipating policy changes and reforms may be particularly difficult during periods of heightened partisanship at the federal, state and local levels, including due to the divisiveness surrounding populist movements, political disputes and socioeconomic issues. The failure to accurately anticipate the possible outcome of such changes and/or reforms could have a material adverse effect on the returns generated from our funds’ investments and our revenues.
In addition, policy changes impacting the financial services industry could impose additional costs, require significant attention of our senior management and personnel or requires to change, or limit, the manner in which we conduct business. There has been recurring consideration amongst regulators and intergovernmental institutions regarding the role of nonbank institutions in providing credit and, particularly, so-called
“shadow banking,” a term generally taken to refer to financial intermediation involving entities and activities outside the regulated banking system. Federal regulatory bodies, such as the FSOC, and international organizations, such as the Financial Stability Board, regularly assess financial stability-related risks associated with, among other things, nonbank lending and certain types of open-ended funds. At this time, whether any rules or regulations related thereto will be proposed is unclear. If nonbank financial intermediation became subject to regulations or oversight standards similar to those applicable to traditional banks, certain of our business activities, including nonbank lending, would be adversely affected and the regulatory burden on us would materially increase, which could adversely impact the implementation of our investment strategy and our returns.
In addition, the FSOC has the authority to designate nonbank financial companies as systemically important financial institutions (“SIFIs”) subject to supervision by the Federal Reserve Board. Currently, there are no nonbank financial companies with a nonbank SIFI designation. The FSOC has, however, designated certain nonbank financial companies as SIFIs in the past, and additional nonbank financial companies, which may include large asset management companies such as us, may be designated as SIFIs in the future. If we were designated as a nonbank SIFI, including as a result of our asset management or nonbank lending activities, we could become subject to direct supervision by the Federal Reserve Board, and could become subject to enhanced prudential, capital, supervisory and other requirements, such as risk-based capital requirements, leverage limits, liquidity requirements, resolution plan and credit exposure report requirements, concentration limits, a contingent capital requirement, enhanced public disclosures, short-term debt limits and overall risk management requirements. Requirements such as these, which were designed to regulate banking institutions, would likely need to be modified to be applicable to an asset manager, although no proposals have been made indicating how such measures would be adapted for asset managers.
In addition, future reviews by the FSOC of nonbank financial companies for designation as SIFIs may focus on other types of products and activities, such as nonbank lending activities conducted by certain of our businesses. If any of our activities were identified by the FSOC as posing potential risks to U.S. financial stability, such activities could be subject to modified or enhanced regulation or supervision by U.S. regulators with jurisdiction over such activities, although no proposals have been made indicating how such measures would be applied to any such identified activities.42
Table of ContentsTrade negotiations and related government actions may create regulatory uncertainty for our funds’ portfolio companies and our investment strategies and adversely affect the profitability of our funds’ portfolio companies.
In recent years, the U.S. government has taken substantial actions with respect to international trade policy, including seeking to renegotiate certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries. The U.S. government has also imposed, and may in the future impose further, tariffs on certain foreign goods, such as steel and aluminum, from various countries, including China, Canada and Mexico. Some foreign governments, including China, Canada, and Mexico, have threatened or instituted retaliatory tariffs on certain U.S. goods. In February 2026, the U.S. Supreme Court ruled that many of the tariffs recently imposed by the U.S. government exceeded its authority, thereby invalidating many, but not all, of such tariffs. Subsequent to the U.S. Supreme Court’s ruling, the U.S. Presidential administration raised potential alternative means through which the administration could impose tariffs and subsequently imposed a global tariff under a different law. The outlook on further trade policy actions, including trade agreements and potential retaliatory tariffs is unclear. Increased tariffs on goods imported from China, Canada, Mexico and other countries could further increase, costs, decrease margins and reduce the competitiveness of products and services offered by our portfolio companies. This has and could further adversely impact the revenues and profitability of select companies that have substantial sales of physical goods in the U.S. or whose businesses rely on goods imported from countries that are subject to significant tariffs. Further governmental actions related to the imposition of tariffs or other trade barriers or changes to international trade agreements or policies in respect of other jurisdictions could also have a similar adverse impact.
The U.S. has also implemented a number of economic sanctions programs and export controls that specifically target Chinese entities and nationals on national security grounds, including, for example, with respect to China’s response to political demonstrations in Hong Kong and China’s conduct concerning the treatment of Uyghurs and other ethnic minorities in its Xinjiang province. Moreover, the U.S. has implemented additional sanctions against entities participating in China’s military industrial complex and providing support to the country’s military, intelligence, and surveillance apparatuses. These sanctions impose certain restrictions on U.S. persons and entities buying or selling publicly traded securities of these designated entities. Further escalation of the “trade war” between the U.S. and China, the countries’ inability to reach further trade agreements, or the continued use of reciprocal sanctions by each country, may negatively impact opportunities for investment as well as the rate of global growth, particularly in China, which has and continues to exhibit signs of slowing growth. Such slowing growth could adversely affect the revenues and profitability of our funds’ portfolio companies.
There is uncertainty as to further actions that may be taken under the current U.S. Presidential administration with respect to U.S. trade policy, including in response to the U.S. Supreme Court’s February 2026 ruling. See “—Laws and regulations on foreign direct investment applicable to us and our funds’ portfolio companies, both within and outside the U.S., may make it more difficult for us to deploy capital in certain jurisdictions or to sell assets to certain buyers.”
Our provision of products and services to insurance companies subjects us to a variety of risks and uncertainties.
We have increasingly undertaken initiatives to deliver to insurance companies customizable and diversified portfolios of Blackstone products and strategies across asset classes, including investment grade and non-investment
grade credit, with a focus on real estate, corporate, asset based and private credit. Our insurance initiatives include partial or full management of insurance companies’ general account or reinsurance assets. This strategy has in recent years contributed to meaningful growth in our Assets Under Management, including in Perpetual Capital Assets Under Management. BXCI’s insurance platform currently manages assets for a number of insurance companies and certain of their respective affiliates pursuant to several investment management agreements. Our insurance platform also manages or sub-manages
assets for certain insurance-dedicated funds and special purpose vehicles, and has developed, and may continue to develop, other capital-efficient products for insurance companies.
The continued success of our insurance platform will depend in large part on further developing investment partnerships with insurance company clients and maintaining existing asset management arrangements, including those described above. If we fail to deliver or originate high-quality,
high-performing
products, strategies or assets that help our insurance company clients meet long-term
policyholder obligations, we may not be successful in retaining existing investment partnerships, developing new investment partnerships or originating or selling capital-efficient
assets or products. Such failure may have a material adverse effect on our business, results and financial condition.43
Table of ContentsThe U.S. and non-U.S.
insurance industries are subject to significant regulatory oversight. Regulatory authorities in many relevant jurisdictions have broad regulatory (including through certain regulatory support organizations), administrative, and in some cases discretionary, authority with respect to insurance companies and/or their investment advisors, which may include, among other things, the investments insurance companies may acquire and hold, marketing practices, affiliate transactions, reserve requirements and capital adequacy. These requirements are primarily concerned with the protection of policyholders, and regulatory authorities often have wide discretion in applying the relevant restrictions and regulations to insurance companies, which may indirectly affect us. We may be the target or subject of, or may have indemnification obligations related to, litigation (including class action litigation by policyholders), enforcement investigations or regulatory scrutiny. Regulators and other authorities generally have the power to bring administrative or judicial proceedings against insurance companies, which could result in, among other things, suspension or revocation of licenses, cease-and-desist
orders, fines, civil penalties, criminal penalties or other disciplinary action. To the extent we are involved in such regulatory actions, our reputation could be harmed, we may become liable for indemnification obligations and we could potentially be subject to enforcement actions, fines and penalties.
In recent years, insurance regulatory authorities and regulatory support organizations have increased scrutiny of private equity and private credit managers’ involvement in the insurance industry, including with respect to the ownership by such managers or their affiliated funds of, and/or the management of assets on behalf of, insurance companies. For example, insurance regulators, including the National Association of Insurance Commissioners (“NAIC”), the U.S. standard-setting
and regulatory support organization for the insurance industry, have increasingly focused on the terms and structure of investment management agreements. This has included focus on whether such agreements are at arms’ length, establish a control relationship with the insurance company, grant the asset manager excessive authority or oversight over the investment strategy of the insurance company or provide for management fees that are not fair and reasonable or termination provisions that make it difficult or costly for the insurer to terminate the agreement. Non-U.S.
regulators (including in Europe, Asia-Pacific, Bermuda and the Cayman Islands, among others) and the International Association of Insurance Supervisors, an international insurance standard-setting organization comprised of over 200 jurisdictions, have similarly focused on each of these topics.
Regulators have also increasingly focused on the risk profile of certain investments held by insurance companies (including, without limitation, all or certain tranches of collateralized loan obligations and other structured securities), appropriateness of investment ratings (including private ratings) and potential conflicts of interest, including affiliated investments, and potential misalignment of incentives and any potential risks from these and other aspects of an insurance company’s relationship with alternative or private credit asset managers that may impact the insurance company’s risk profile. This enhanced scrutiny may increase the risk of regulatory actions against us and could result in new or amended regulations that limit our ability, or make it more burdensome or costly, to enter into new investment management agreements with insurance companies and thereby grow our insurance strategy. Some of the arrangements we have or will develop with insurance companies involve complex U.S. and non-U.S.
tax structures for which no clear precedent or authority may be available. Such structures may be subject to potential regulatory, legislative, judicial or administrative change or scrutiny and differing interpretations and any adverse regulatory, legislative, judicial or administrative changes, scrutiny or interpretations may result in substantial costs to insurance companies or us.
Insurance company investment portfolios are often subject to internal and regulatory requirements governing the categories and ratings of investment products and assets they may acquire and hold. Many of the investment products and strategies we originate or develop for, or other assets or investments we include in, insurance company portfolios will be rated and a ratings downgrade or any other negative action by a rating agency or the44
Table of ContentsNAIC’s Securities Valuation Office (“SVO”), as applicable, with respect to such products, assets or investments could make them less attractive and limit our ability to offer such products to, or invest or deploy capital on behalf of, insurers. Furthermore, insurance companies are subject to certain minimum capital and surplus requirements that vary by the jurisdiction where the insurance company is domiciled and are generally subject to change over time. Our insurance company clients are subject to capital and solvency standards in their applicable jurisdictions, including, those imposed by U.S. state laws, Bermuda laws and U.K. laws, among others. New statutory accounting guidance or changes or clarifications in interpretations of existing guidance may adversely impact our ability to originate, or invest in, appropriate assets on behalf of our insurance company clients or cause our clients to increase their required capital in respect of such assets, thus making such assets less attractive to insurers, which may adversely affect our business. Certain proposals or exposure drafts released by insurance regulatory authorities, including the NAIC or the SVO, may result in changes to the risk-based
capital treatment and/or ratings or re-ratings
processes of certain assets or investments that are, or may be, held by our insurance company clients. For example, in 2024, the NAIC increased the applicable capital charge of residual tranches or equity securities of asset-based
securitizations from 30% to 45% in respect of life insurers. This increase in the applicable RBC charge of such assets (or similar future changes in respect of other types of assets or tranches) could potentially make such assets or investments less attractive to insurers and limit our ability to originate, or invest in, such assets on behalf of insurers.We rely on complex exemptions from statutes in conducting our asset management activities.We regularly rely on exemptions from various requirements of the U.S. Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act, the 1940 Act, the Commodity Exchange Act and the U.S. Employee Retirement Income Security Act of 1974, as amended, in conducting our asset management activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. These exemptions may become unavailable to us for a variety of reasons, including, for example, if we or certain “covered persons” were to become the subject of a criminal, regulatory or court order or other “disqualifying event” under Rule 506 of Regulation D under the Securities Act that were not otherwise waived. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third-party
claims and our business could be materially and adversely affected.Complex regulatory regimes and potential regulatory changes in jurisdictions outside the United States could adversely affect our business.Similar to the United States, our business and operations in the jurisdictions outside the United States, in particular Europe, are subject to extensive laws and regulation. Governmental regulators and other authorities in Europe have proposed or implemented a number of initiatives, rules and regulations that could adversely affect our business, including by imposing additional compliance and administrative burdens and increasing the costs of doing business in such jurisdictions. Increasingly, the rules and regulations in the financial sector in Europe are becoming more prescriptive. Rules and regulations in other jurisdictions are often informed by key features of U.S. and European rules and regulations and, as a result, our businesses in all jurisdictions, including across Asia, may become subject to increased regulation in the future.
In Europe we are subject to, among others, the EU Alternative Investment Fund Managers Directive (“AIFMD”), the EU regulation on over-the-counter
(“OTC”) derivative transactions, central counterparties and trade repositories (“EMIR”), the EU Central Securities Depositories Regulation (“CSDR”) and the Markets in Financial Instruments Directive 2014 (2014/65/EU) (“MiFID II”). These regimes and regulations involve enhanced internal governance, disclosure and reporting requirements, create significant compliance and administrative burdens, and may require meaningful changes to the ways in which we conduct our business and operations. In addition, certain changes to AIFMD that comes into effect in 2026 may limit the use of leverage in certain funds, which could impact their fund returns, as well as may restrict certain alternative investment funds from marketing in specific EEA jurisdictions, which may impact our ability to raise capital from EEA investors. We additionally have regulatory capital and liquidity adequacy requirements for certain of our entities licensed under MiFID, as well as remuneration requirements of certain senior staff. Additional regulation around remuneration may make it harder for us to attract and retain talent, compared to competitors not subject to the same rules.
45Table of ContentsCertain regulatory requirements in the EU and U.K. intended to enhance protection for retail investors and impose additional obligations on the distribution of certain products to retail investors may lead to increased costs and limit our ability to access capital from retail investors in certain jurisdictions. These include EU and U.K. rules requiring that retail investors in packaged retail investment and insurance products receive key information documents and U.K. rules enhancing duties related to distribution of financial products to retail investors. Furthermore, in May 2023, the European Commission announced its Retail Investment Strategy, which could result in new regulation that could impact our ability to offer our funds to retail investors in the EU. Data protection authorities have significant audit and investigatory powers to probe how personal data is being used and processed and breaches of these regulations can lead to significant fines, regulatory action and reputational risk. See “—Rapidly developing and changing global data security and privacy laws and regulations could increase compliance costs and subject us to enforcement risks and reputational damage.” European regulators, including the U.K. FCA and CSSF in Luxembourg are increasing their attention on greenwashing and rapidly developing and implementing regimes focused on sustainability within the financial services sector, which could adversely affect our business and the operations of our funds’ portfolio companies in various ways. See “—Climate change, climate and sustainability-related
regulation and sustainability concerns could adversely affect our businesses and the operations of our funds’ portfolio companies, and any actions we take or fail to take in response to such matters could damage our reputation.”Laws and regulations on foreign direct investment applicable to us and our funds’ portfolio companies, both within and outside the U.S., may make it more difficult for us to deploy capital in certain jurisdictions or to sell assets to certain buyers.A number of jurisdictions, including the U.S., have restrictions on foreign direct investment pursuant to which their respective heads of state and/or regulatory bodies have the authority to block or impose conditions with respect to certain transactions, such as investments, acquisitions and divestitures, if such transaction threatens to impair national security. In addition, many jurisdictions restrict foreign investment in assets important to national security by taking steps including, but not limited to, placing limitations on foreign equity investment, implementing investment screening or approval mechanisms, and restricting the employment of foreigners as key personnel. These U.S. and foreign laws could limit our funds’ ability to invest in certain businesses or entities or impose burdensome notification requirements, operational restrictions or delays in pursuing and consummating transactions. For example, the Committee on Foreign Investment in the United States (“CFIUS”) has the authority to review transactions that could result in potential control of, or certain types of non-controlling
investments in, a U.S. business or U.S. real estate by a foreign person. In recent years, legislation has expanded the scope of CFIUS’ jurisdiction to cover more types of transactions and empower CFIUS to scrutinize more closely investments in certain transactions. CFIUS may recommend that the President block, unwind or impose conditions or terms on such transactions, certain of which may adversely affect the ability of the fund to execute on its investment strategy with respect to such transaction as well as limit our flexibility in structuring or financing certain transactions. Additionally, CFIUS or any non-U.S.
equivalents thereof may seek to impose limitations on one or more such investments that may prevent us from maintaining or pursuing investment opportunities that we otherwise would have maintained or pursued, which could make it more difficult for us to deploy capital in certain of our funds.
In August 2023, an executive order established an outbound investment screening regime (the “Outbound Order”), which was intended to regulate or prohibit certain investments by U.S. persons in advanced technology sectors in jurisdictions that may be designated as a “country of concern.” In January 2025, the current U.S. Presidential administration signed an Annex to the Outbound Order that identified China, along with the Special Administrative Regions of Hong Kong and Macau, as a “country of concern.” Similarly, in February 2025, the U.S. Presidential administration issued a memorandum to various regulatory agencies regarding enhanced restrictions
46Table of Contentson outbound investments into China, as well as on Chinese investments into the U.S. These actions could negatively impact our ability to raise capital from and to deploy capital in such jurisdictions, including if the administration seeks to expand such limitations to apply to a broader range of activities. Further, a number of U.S. states are passing and implementing state laws prohibiting or otherwise restricting the acquisition of interests in real property located in the state by foreign persons. Other jurisdictions, including the EU, may adopt similar outbound investment restrictions in the future. These laws may also impact the ability of certain non-U.S.
limited partners to participate in certain of our investment strategies.
Our funds’ investments outside of the United States may face delays, limitations, or restrictions as a result of notifications made under and/or compliance with these legal regimes and rapidly changing agency practices. Other countries continue to establish and/or strengthen their own national security investment clearance regimes, which could have a corresponding effect of limiting our ability to make investments in such countries. Heightened scrutiny of foreign direct investment worldwide may also make it more difficult for us to identify suitable buyers for investments upon exit and may constrain the universe of exit opportunities for an investment in a portfolio company. As a result of such regimes, we may incur significant delays and costs, be altogether prohibited from making a particular investment or impede or restrict syndication or sale of certain assets to certain buyers, all of which could adversely affect the performance of our funds and in turn, materially reduce our revenues and cash flow. Complying with these laws imposes potentially significant costs and complex additional burdens, and any failure by us or our funds’ portfolio companies to comply with them could expose us to significant penalties, sanctions, loss of future investment opportunities, additional regulatory scrutiny, and reputational harm.We are subject to substantial risk of litigation and regulatory proceedings and may face significant liabilities and damage to our reputation as a result of allegations of improper conduct and negative publicity.From time to time we, our funds and our funds’ portfolio companies have been and may be subject to litigation, including class action lawsuits by stockholders, or those that challenge or attempt to enjoin our acquisition or sale transactions. For a discussion of certain legal proceedings to which we are a party, see “Part II. Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — 18. Commitments and Contingencies — Contingencies — Litigation.” Any private lawsuits or regulatory actions brought against us and resulting in a finding of substantial legal liability could materially adversely affect our business, financial condition or results of operations. In addition, such actions, even if resulting in a favorable outcome to us, could result in significant reputational harm, which could seriously harm our business.
In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against the financial services industry in general have been increasing. The investment decisions we make in our asset management business and the activities of our investment professionals (including in connection with portfolio companies and investment advisory activities) may subject us, our funds and our funds’ portfolio companies to the risk of third-party
litigation or regulatory proceedings arising from investor dissatisfaction with the performance of those investment funds, alleged conflicts of interest, the suitability or manner of distribution of our products, including to retail investors, the activities of our funds’ portfolio companies and a variety of other claims.
In addition, to the extent investors in our investment funds suffer losses resulting from fraud, gross negligence, willful misconduct or other similar misconduct, investors may have remedies against us, our investment funds, our senior managing directors or our affiliates under the federal securities law and/or state law. While the general partners and investment advisers to our investment funds, including their directors, officers, other employees and affiliates, are generally indemnified to the fullest extent permitted by law with respect to their conduct in connection with the management of the business and affairs of our investment funds, such indemnity does not extend beyond as permitted by law or to actions determined to have involved fraud, gross negligence, willful misconduct or other similar misconduct. The activities of our capital markets services business may also subject us to the risk of liabilities to our clients and third parties, including our clients’ stockholders, under securities or other
47Table of Contentslaws in connection with transactions in which we participate. See “—Underwriting activities by our capital markets services business expose us to risks.” We depend to a large extent on our business relationships and our reputation for integrity and high-caliber
professional services to attract and retain investors and to pursue investment opportunities for our funds. As a result, allegations by private actors, regulators, or employees of improper conduct by us, even if unfounded, as well as negative publicity and press speculation about us, may harm our reputation. This could adversely impact our relationships with clients and our fundraising. In recent years, there has been increased activity on the part of certain activist and other organized groups, with respect to investments made by private funds. Such groups have at times contacted and otherwise sought to engage with government and regulatory bodies and fund investors, including public pension funds, on our funds’ investments, which has led to negative publicity that could harm our reputation. The pervasiveness of social media and public focus on the externalities of business activities could lead to wider dissemination of adverse or inaccurate information about us, making remediation more difficult and magnifying reputational risk.Employee misconduct could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm. Fraud, deceptive practices or other misconduct at portfolio companies or service providers could similarly subject us to liability and reputational damage and also harm performance.Our employees could engage in misconduct that adversely affects our business. We are subject to a number of obligations and standards arising from our asset management business and our authority over the assets managed by our asset management business. The violation of these obligations and standards by any of our employees would adversely affect our clients and us. Our business often requires that we deal with confidential matters of great significance to companies in which we may invest. If our employees were to improperly use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and future business relationships. Detecting or deterring employee misconduct is not always possible, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases.
We are subject to U.S. and foreign anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, as amended (“FCPA”), as well as anti-money laundering laws. Any determination that we have violated the FCPA, the EU and U.K. anti-money laundering regimes, the U.K. anti-bribery and anti-fraud laws or other applicable anti-corruption, anti-bribery, anti-fraud or anti-money laundering laws could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence. Any one of these could adversely affect our business prospects, financial position or the price of our common stock. Such laws have attracted significant regulatory focus in recent years, including outside of the U.S. For example, the SEC will be responsible for examining investment advisers’ compliance with a U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) rule currently scheduled to go into effect January 2028 that requires certain investment advisers and to, among other measures, adopt an anti-money laundering and countering the financing of terrorism (“AML/CFT”) program, file certain reports with FinCEN and to maintain records related to such activities. The application of these rules would impose significant compliance costs on us. The EU and the U.K. are similarly revising and expanding their respective anti-money laundering regimes. While we have policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and anti-money laundering and other applicable laws, such policies and procedures may not be effective in all instances to prevent violations. In addition, other asset managers, particularly those who, unlike us, are not subject to the anti-corruption and anti-money laundering laws of multiple jurisdictions, may have anti-corruption or anti-money laundering policies that provide such managers access to investment opportunities that may not be available to us because of our current policies and procedures.
Furthermore, we may also be adversely affected if there is misconduct by personnel of our funds’ portfolio companies or by such companies’ service providers. For example, financial fraud or other deceptive practices at our funds’ portfolio companies, or failures by personnel at our funds’ portfolio companies to comply with anti-corruption, anti-bribery,
anti-fraud,
anti-money laundering, trade and economic sanctions, export controls, anti-harassment,
48Table of Contentsanti-discrimination
or other legal and regulatory requirements, could subject us to, among other things, civil and criminal penalties or material fines, profit disgorgement, injunctions on future conduct and securities litigation, and could also cause significant reputational and business harm to us. Such misconduct may undermine our due diligence efforts with respect to such portfolio companies and could negatively affect the valuations of the investments by our funds in such portfolio companies. Losses to our funds and us could also result from misconduct or other actions by service providers, such as administrators, consultants or other advisors, if such service providers improperly use or disclose confidential information, misappropriate funds, or violate legal or regulatory obligations. Moreover, we may face an increased risk of such misconduct to the extent our funds’ investment in non-U.S.
markets, particularly emerging markets, increases.Poor performance of our investment funds would cause a decline in our revenue, income and cash flow, may obligate us to repay Performance Allocations previously paid to us, and could adversely affect our ability to raise capital for future investment funds.In the event that any of our investment funds were to perform poorly, our revenue, income and cash flow would decline because the value of our assets under management would decrease, which would result in a reduction in management fees, and our investment returns would decrease, resulting in a reduction in the Performance Revenues we earn. Moreover, we could experience losses on our investments of our own principal as a result of poor investment performance by our investment funds. Furthermore, if a carry fund does not achieve certain investment returns over its life as a result of poor performance of later investments, we will be obligated to repay the excess Performance Allocations that were previously distributed to us above the amount to which the relevant general partner is ultimately entitled. Similarly, certain of our vehicles’ terms require an offset of Performance Revenues related to past performance, often referred to as a “recoupment of loss carryforward.” If a recoupment of loss carryforward is triggered, including as a result of a meaningful decline in the vehicle’s revenues following a period of strong performance, such offset would serve to reduce the amount of future Performance Revenues to which we would be entitled in such vehicle. In the event that the offset is insufficient for the vehicle to fully recoup such loss carryforward, we may be required to make a cash payment after a certain period.Poor performance of our investment funds could make it more difficult for us to raise new capital. Investors in funds might decline to invest in future investment funds we raise and investors in hedge funds or other investment funds might withdraw their investments as a result of poor performance of the investment funds in which they are invested. Investors and potential investors in our funds continually assess our investment funds’ performance, and our ability to raise capital for existing and future investment funds and avoid excessive redemption levels will depend on our investment funds’ continued satisfactory performance. Accordingly, poor fund performance may deter future investment in our funds and thereby decrease the capital invested in our funds and ultimately, our management fee revenue. Alternatively, in the face of poor fund performance, investors could demand lower fees or fee concessions for existing or future funds which would likewise decrease our revenue.Furthermore, our organizational documents do not limit our ability to enter into new lines or business, and, from time to time, we may pursue new or different investment strategies and expand into geographic markets and businesses that may not perform as expected and result in poor performance by us and our investment funds. In addition to the risk of poor performance, such activity may subject us to a number of risks and uncertainties, including risks associated with (a) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk, (b) the diversion of management’s attention from our core businesses, (c) known or unknown contingent liabilities, which could result in unforeseen losses for us and our funds, (d) the disruption of ongoing businesses, (e) the ability to properly manage conflicts of interest and (f) compliance with additional regulatory requirements.
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Our equity investments and some of our debt investments rank junior to investments made by others, exposing us to a greater risk of losing our fund’s investment.
In many cases, the companies in which our funds invest will have indebtedness or equity securities, or may be permitted to incur indebtedness or to issue equity securities, that rank senior to our fund’s investment. By their terms, such instruments may provide that their holders are entitled to receive payments of distributions, interest or principal on or before the dates on which payments are to be made in respect of our fund’s investment. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a company in which an investment is made, holders of securities ranking senior to our fund’s investment would typically be entitled to receive payment in full before distributions could be made in respect of our fund’s investment. In addition, debt investments made by our funds in our portfolio companies may be equitably subordinated to the debt investments made by third parties in our portfolio companies. After repaying senior security holders, the company may not have any remaining assets to use for repaying amounts owed in respect of our fund’s investment. To the extent any assets remain, holders of claims that rank equally with our fund’s investment would be entitled to share on an equal and ratable basis in distributions that are made out of those assets. Under such circumstances, the ability of our funds to influence a company’s affairs and to take actions to protect their investments during periods of financial distress or following an insolvency may be limited, exposing them to a greater risk of losing their investment.The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in common stock.
The historical and potential future returns of the investment funds that we manage are not directly linked to returns on our common stock. Therefore, any continued positive performance of the investment funds that we manage will not necessarily result in positive returns on an investment in our common stock. However, poor performance of the investment funds that we manage would cause a decline in our revenue from such investment funds, and would therefore have a negative effect on our performance and in all likelihood the returns on an investment in our common stock. Moreover, with respect to the historical returns of our investment funds:• we may create new funds in the future that reflect a different asset mix and different investment strategies (including funds whose management fees represent a more significant proportion of the fees than has historically been the case), as well as a varied geographic and industry exposure as compared to our present funds, and any such new funds could have different returns from our existing or previous funds,
• the rates of returns of our carry funds reflect unrealized gains as of the applicable measurement date that may never be realized, which may adversely affect the ultimate value realized from those funds’ investments,
• competition for investment opportunities continues to increase as a result of, among other things, the increased amount of capital invested in alternative investment funds,
• our investment funds’ returns in some years benefited from investment opportunities and general market conditions that may not repeat themselves, our current or future investment funds might not be able to avail themselves of comparable investment opportunities or market conditions, and the circumstances under which our current or future funds may make future investments may differ significantly from those conditions prevailing in the past,
• newly established funds may generate lower returns during the period in which they initially deploy their capital, which may result in little or no carried interest due to performance hurdles and
• the rates of return reflect our historical cost structure, which may vary in the future due to various factors enumerated elsewhere in this report and other factors beyond our control, including changes in laws.
50Table of ContentsThe future internal rate of return for any current or future fund may vary considerably from the historical internal rate of return generated by any particular fund, or for our funds as a whole. In addition, future returns will be affected by the applicable risks described elsewhere in this Annual Report on Form 10-K,
including risks of the industries and businesses in which a particular fund invests.Certain policies and procedures implemented to mitigate potential conflicts of interest and address certain regulatory requirements may reduce the synergies across our various businesses.Because of our various asset management businesses and our capital markets services business, we will be subject to a number of actual and potential conflicts of interest and subject to greater regulatory oversight and more legal and contractual restrictions than that to which we would otherwise be subject if we had just one line of business. To mitigate these conflicts and address regulatory, legal and contractual requirements across our various businesses, we have implemented certain policies and procedures (for example, information walls) that may reduce the positive synergies that we cultivate across these businesses for purposes of identifying and managing attractive investments. For example, we may come into possession of confidential or material non-public
information with respect to issuers in which we may be considering making an investment or issuers in which our affiliates may hold an interest; however, certain regulatory requirements and our policies and procedures require us to restrict access by certain personnel in our funds to such information. As a consequence of such policies and procedures, we may be precluded from providing such information or other ideas to our other businesses even where it might be of benefit to them.
Our failure to deal appropriately with conflicts of interest in our asset management business could damage our reputation and adversely affect our businesses.
As we have expanded, and continue to expand, the number and scope of our businesses, as well as the investor channels through which our products are offered, we increasingly confront potential conflicts of interest relating to our funds’ investment activities. Asset manager conflicts of interest continue to be a significant area of focus for regulators and the media. We may face a higher degree of scrutiny compared with asset managers that are smaller than we are or focus on fewer asset classes or narrower investor channels than we do. Certain of our funds may have overlapping investment objectives, including funds that have different fee structures and/or investment strategies that are more narrowly focused. Potential conflicts may arise with respect to allocation of investment opportunities among us, our funds and our affiliates, including to the extent that the fund documents do not mandate a specific investment allocation. For example, we may allocate an investment opportunity that is appropriate for two or more investment funds in a manner that excludes one or more funds or results in a disproportionate allocation based on factors or criteria that we determine, such as sourcing of the transaction, specific nature of the investment or size and type of the investment, and ability to execute quickly among other factors. We may also decide to provide a co-investment
opportunity to certain investors in lieu of allocating more of that investment to our funds or vice-versa.
Moreover, the challenge of allocating investment opportunities to certain funds may be exacerbated as we expand our business to include more lines of business, including more public vehicles. Allocating investment opportunities appropriately frequently involves significant and subjective judgments. The risk that fund investors or regulators could challenge allocation decisions as inconsistent with our obligations under applicable law, governing fund agreements or our own policies cannot be eliminated. In addition, the perception of non-compliance
with such requirements or policies could harm our reputation with fund investors.
We may also cause different funds to invest in a single portfolio company, for example where the fund that made an initial investment no longer has capital available to invest. We may also cause different funds that we manage to purchase different classes of securities in the same portfolio company. For example, one of our CLO funds could acquire a debt security issued by the same company in which one of our private equity funds owns common equity securities. A direct conflict of interest could arise between the debt holders and the equity holders if such a company were to develop insolvency concerns, and we would have to carefully manage that conflict.
51Table of ContentsA decision to acquire material non-public
information about a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it results in our having to restrict the ability of other funds to take any action with respect to that company. Our affiliates or portfolio companies may be service providers or counterparties to our funds or portfolio companies and receive fees or other compensation for services that are not shared with our fund investors. In such instances, we may be incentivized to cause our funds or portfolio companies to purchase such services from our affiliates or portfolio companies rather than an unaffiliated service provider despite the fact that a third-party
service provider could potentially provide higher quality services or offer them at a lower cost. In addition, conflicts of interest may exist in the valuation of our funds’ investments, as well as the personal trading or investment activities of employees and the allocation of fees and expenses among us, our funds and their portfolio companies, and our affiliates. Lastly, in certain, infrequent instances we may purchase an investment alongside one of our investment funds or sell an investment to one of our investment funds and conflicts may arise in respect of the allocation, pricing and timing of such investments and the ultimate disposition of such investments. A failure to appropriately deal with these, among other, conflicts, could negatively impact our reputation and ability to raise additional funds or result in potential litigation or regulatory action against us. Further, rules proposed or adopted by the SEC and other measures it takes to preclude or limit certain conflicts of interest may make it more difficult for our funds to pursue transactions that may otherwise be attractive to the fund and its investors, which may adversely impact fund performance.
Conflicts of interest may arise in our allocation of co-investment
opportunities.
Potential conflicts will arise with respect to our decisions regarding how to allocate co-investment
opportunities among investors and the terms of any such co-investments.
As a general matter, our allocation of co-
investment opportunities is within our discretion and there can be no assurance that co-investment
opportunities of any particular type or amount will become available to any of our investors. We may take into account a variety of factors and considerations we deem relevant in allocating co-investment
opportunities, including, without limitation, whether a potential co-investor
has expressed an interest in evaluating co-investment
opportunities, our assessment of a potential co-investor’s
ability to invest an amount of capital that fits the needs of the investment and our assessment of a potential co-investor’s
ability to commit to a co-investment
opportunity within the required timeframe of the particular transaction.
Our fund documents typically do not mandate specific allocations with respect to co-investments.
The investment advisers of our funds may have an incentive to provide potential co-investment
opportunities to certain investors in lieu of others and/or in lieu of an allocation to our funds, including, for example, as part of an investor’s overall strategic relationship with us, or if such allocations are expected to generate relatively greater fees or Performance Allocations to us than would arise if such co-investment
opportunities were allocated otherwise. At the same time, we may have an incentive to offer co-investment
opportunities to our funds in lieu of (or to an extent that reduces the amount available to) co-investors, particularly as we expand the number and type of private wealth products we offer.
As a general matter, co-investors
generally bear different fees and expenses than our funds. As a result, there may be conflicts of interest regarding the allocation of costs and expenses, such as expenses associated with broken deals, between co-investors
and investors in our funds. In certain instances, co-investment
arrangements may be structured through one or more of our investment vehicles. The terms of any such existing and future co-investment
vehicles may differ materially, and in some instances may be more favorable to us, than the terms of certain of our funds or prior co-investment
vehicles. Such different terms may create an incentive for us to allocate a greater or lesser percentage of an investment opportunity to such co-investment
vehicles. There can be no assurance that any conflicts of interest will be resolved in favor of any particular investment funds or investors (including any applicable co-investors).
As with our investment allocation decisions generally, there is a risk that regulators and/or investors could challenge our allocations of co-investment
opportunities or fees and expenses.
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Valuation methodologies for certain assets in our funds can be subject to a significant degree of subjectivity and judgment, and the fair value of assets established pursuant to such methodologies may never be realized, which could result in significant losses for our funds and the reduction of Management Fees and/or Performance Revenues.
Our investment funds make investments in illiquid investments or financial instruments for which there is little, if any, market activity. We determine the value of such investments and financial instruments on at least a quarterly basis based on the fair value of such investments as determined in accordance with GAAP. The fair value of such investments and financial instruments is generally determined using a primary methodology and corroborated by a secondary methodology. Methodologies are used on a consistent basis and described in Blackstone’s and the investment funds’ valuation policies and governing agreements.The determination of fair value using these methodologies takes into consideration a range of factors including, but not limited to, the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, comparable market transactions, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. These valuation methodologies involve a significant degree of subjective management judgment. For example, as to investments that we share with another sponsor, we may apply a different valuation methodology or factors or derive a different value than such other sponsor on the same investment. In addition, the valuations of our private investments may at times differ significantly from the valuations of publicly traded companies in similar sectors or with similar business models.
For example, our private investments do not have observable market prices and valuations of such investments may take into account certain long-term financial projections or estimates, including those prepared by the management of a portfolio company or other investment. Such projections or estimates may not materialize and are based on significant judgments and assumptions at the time they are developed and may not be available to the public. Valuations of publicly traded companies, on the other hand, are based on the observable price in the reference market which are generally subject to a higher degree of market volatility. These differences and the potential exercise of our subjective judgment might cause some investors and/or regulators to question our valuations or methodologies, which may be particularly exacerbated for funds with monthly or daily valuations. There can be no assurance that our policies will address all necessary valuation factors or completely eliminate potential conflicts of interest in such determinations. The SEC continues to focus on issues related to valuation of private funds, including consistent application of the methodology, disclosure, and conflicts of interest. Further, variation in the underlying assumptions, estimates, methodologies and/or judgments we use in the determination of the value of certain investments and financial instruments could potentially produce materially different results. Valuation methodologies may also change from time to time. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation — Critical Accounting Policies” for an overview of our fair value policy and the significant judgment required in the application thereof.
Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid investments, the fair values of such investments as reflected in an investment fund’s net asset value do not necessarily reflect the prices that would actually be obtained by us on behalf of the investment fund when such investments are realized. Realizations at values lower than the values at which investments have been reflected in prior fund net asset values would result in reduced gains or losses for the applicable fund, a decline in certain asset management fees and the reduction in potential Performance Revenues. Changes in values of investments from quarter to quarter may result in volatility in our investment funds’ net asset values, fees from those funds and the results of operations and cash flow that we report from period to period. Further, a situation where asset values turn out to be materially different than values reflected in prior funds’ net asset values could cause investors to lose confidence in us, which in turn could result in difficulty raising additional funds or redemptions from funds where investors hold redemption rights.
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Our use of borrowings to finance our business exposes us to risks.We use borrowings to finance our business operations as a public company and facilitate growth and expansion of our businesses, including warehousing investments for our funds. We have numerous outstanding notes with various maturity dates as well as other borrowings, including under the Revolving Credit Facility and in connection with such warehousing. As our borrowings mature, we will be required to refinance or repay such borrowings. In order to do so, we may enter into a new facility, use asset based financing arrangements or issue new notes, each of which could result in higher borrowing costs. We may also issue equity, which would dilute existing stockholders. Further, we may choose to repay such borrowings using cash on hand, cash provided by our continuing operations or cash from the sale of our assets, each of which could reduce the amount of cash available to facilitate the growth and expansion of our businesses, make repurchases under our share repurchase program and pay dividends to our stockholders, operating expenses and other obligations as they arise.
In order to obtain new borrowings, or to extend or refinance existing borrowings, we are dependent on the willingness and ability of financial institutions such as global banks to extend credit to us on favorable terms or at all, and on our ability to access the debt and equity capital markets, which can be volatile. There is no guarantee that such financial institutions will continue to extend credit to us or that we will be able to access the capital markets to obtain new borrowings or refinance existing borrowings when they mature. In addition, the use of leverage to finance our business exposes us to the types of risk described in “—Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.”
We or our funds have and may in the future also enter into “margin loans” whereby we or our funds borrow money from a bank and pledge the equity of the underlying portfolio company or real estate asset as collateral for the loan. The use of margin borrowings results in certain additional risks to the borrower. For example, should the securities pledged to brokers to secure our margin borrowings decline in value, we or our funds could be subject to a “margin call,” pursuant to which we or our funds must either deposit additional funds or securities with the broker, or suffer mandatory liquidation of the pledged securities to compensate for the decline in value. In the event of a sudden drop in the value of our assets, we or our funds might not be able to liquidate assets quickly enough to satisfy margin requirements. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources and Uses of Liquidity” for further information regarding our outstanding borrowings.Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.Many of our funds’ investments rely heavily on the use of leverage, and our ability to achieve attractive rates of return on investments will depend on our ability to access sufficient sources of indebtedness at attractive rates. For example, in many private equity and real estate investments, indebtedness may constitute as much as 70% or more of a portfolio company’s or real estate asset’s total debt and equity capitalization, including debt that may be incurred in connection with the investment. The absence of available sources of sufficient senior debt financing for extended periods of time could therefore materially and adversely affect our private equity and real estate businesses. Furthermore, limits on the deductibility of corporate interest expense could make it more costly to use debt financing for our acquisitions or otherwise have an adverse impact on the cost structure of our transactions, and could therefore adversely affect the returns on our funds’ investments.
In addition, an increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensive to finance those businesses’ investments. See “—Sustained periods of high interest rates and challenging debt market conditions negatively impact the values of certain assets or investments and the ability of our funds and their portfolio companies to access capital markets, which could adversely affect investment and realization opportunities, lead to lower-yielding investments and potentially decrease our net income.”
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Table of ContentsInvestments in highly leveraged entities are inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverse economic, market and industry developments. The incurrence of a significant amount of indebtedness by an entity could, among other things:• give rise to an obligation to make mandatory pre-payments
of debt using excess cash flow, which might limit the entity’s ability to respond to changing industry conditions to the extent additional cash is needed for the response, to make unplanned but necessary capital expenditures or to take advantage of growth opportunities,
• limit the entity’s ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared to its competitors who have relatively less debt,
• allow even moderate reductions in operating cash flow to render it unable to service its indebtedness, leading to a bankruptcy or other reorganization of the entity and a loss of part or all of the equity investment in it,
• limit the entity’s ability to engage in strategic acquisitions that might be necessary to generate attractive returns or further growth and
• limit the entity’s ability to obtain additional financing or increase the cost of obtaining such financing, including for capital expenditures, working capital or general corporate purposes.As a result, the risk of loss associated with a leveraged entity is generally greater than for companies with comparatively less debt.
When our funds’ existing portfolio investments reach the point when debt incurred to finance those investments matures in significant amounts and must be either repaid or refinanced, those investments may materially suffer if they have generated insufficient cash flow to repay maturing debt and there is insufficient capacity and availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or at all. If a limited availability of financing for such purposes were to persist for an extended period of time, when significant amounts of the debt incurred to finance our private equity and real estate funds’ existing portfolio investments came due, these funds could be materially and adversely affected.Many of the hedge funds in which our funds of hedge funds invest, our credit-focused
funds and or CLOs, may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. A fund may borrow money from time to time to purchase or carry securities or may enter into derivative transactions (such as total return swaps) with counterparties that have embedded leverage. The interest expense and other costs incurred in connection with such borrowing may not be recovered by appreciation in the securities purchased or carried and will be lost -
and the timing and magnitude of such losses may be accelerated or exacerbated -
in the event of a decline in the market value of such securities. Gains realized with borrowed funds may cause the fund’s net asset value to increase at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund’s net asset value could also decrease faster than if there had been no borrowings.Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.55Table of ContentsThe due diligence process that we undertake in connection with investments by our funds may not reveal all facts and issues that may be relevant in connection with an investment.
When evaluating a potential business or asset for investment, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to such investment. When conducting due diligence, we may be required to evaluate important and complex issues, including but not limited to those related to business, financial, credit risk, tax, accounting, sustainability, legal and regulatory and macroeconomic trends. Selecting and evaluating such factors is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by Blackstone or a third-party
specialist (if any) will reflect the policies or preferred practices of any particular investor or align with the practices of other asset managers or with market trends. The materiality of various risks and impact of such risks on an individual potential investment or portfolio as a whole depend on many factors, including the relevant industry, geography and asset class and the nature of the investment. The due diligence investigation that we will carry out with respect to any investment opportunity may not reveal or highlight all relevant facts (including fraud) or risks that may be necessary or helpful in evaluating such investment opportunity. In addition, we may not identify or foresee future developments that could have a material adverse effect on an investment, including, for example, rapidly changing fundamentals in a certain sector, geography or asset class, or technological disruption of a specific company or asset, or an entire industry, including as a result of the rapid development and implementation of AI Technologies.We may be unable to consummate or successfully integrate development opportunities, acquisitions or joint ventures that we pursue.
We may from time to time seek to engage in selective development or acquisition of asset management businesses or other businesses complementary to our business where we think we can add substantial value or generate substantial returns. We may not be able to identify or consummate such opportunities, including due to competition for such opportunities, our ability to accurately value such opportunities and the need to negotiate acceptable terms, and obtain requisite approvals and licenses from the relevant governmental authorities, for such opportunities. Moreover, even if we are able to identify and successfully complete an acquisition, we may encounter unexpected difficulties or incur unexpected costs associated with integrating and overseeing the operations of the new businesses.We and our affiliates have reported in the past and may be required to report in the future specified dealings or transactions involving Iran or other sanctioned individuals or entities.
The Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) requires companies subject to SEC reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain OFAC sanctions, including, by way of example, the Russian Federal Security Service, engaged in by the reporting company or any of its affiliates during the period covered by the relevant periodic report. In some cases, ITRA requires companies to disclose these types of transactions even if they were permissible under U.S. law, including companies that are or may be at the time considered our affiliates. We do not independently verify or participate in the preparation of these disclosures. We have been in the past and may be in the future be required to separately file with the SEC a notice when such activities have been disclosed in our periodic reports, and the SEC is required to post such notice of disclosure on its website and send the report to the President and certain U.S. Congressional committees. The President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation, determine whether sanctions should be imposed. Disclosure of such activity, even if such activity is not subject to sanctions under applicable law, and any sanctions actually imposed on us or our affiliates as a result of these activities, could harm our reputation and have a negative impact on our business, and any failure to disclose any such activities as required could additionally result in fines or penalties.
56Table of ContentsOur asset management activities involve investments in relatively illiquid assets, and we may fail to realize any profits from these activities for a considerable period of time.
Many of our investment funds invest in securities that are not publicly traded. In many cases, our investment funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Our investment funds will generally not be able to sell these securities publicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available. The ability of many of our investment funds, particularly our private equity funds, to dispose of investments is heavily dependent on the public equity markets. For example, the ability to realize any value from an investment may depend upon the ability to complete an initial public offering of the portfolio company in which such investment is held. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial length of time, exposing the investment returns to risks of downward movement in market prices during the intended disposition period. Moreover, because the investment strategy of many of our funds, particularly our private equity and real estate funds, often entails our having representation on our funds’ public portfolio company boards, our funds may be restricted in their ability to effect such sales during certain time periods. Accordingly, under certain conditions, our investment funds may be forced to either sell securities at lower prices than they had expected to realize or defer -
potentially for a considerable period of time -
sales that they had planned to make.We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States.Many of our investment funds invest a significant portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States. International investments have increased and we expect will continue to increase as a proportion of certain of our funds’ portfolios in the future. Investments in non-U.S.
securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to:
• currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another,
• less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity,
• the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation,
• changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our funds’ investments,
• a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance,
• heightened exposure to corruption risk and/or economic sanctions risk in certain non-U.S.
markets,
• political hostility to investments by foreign or private equity investors,
• reliance on a more limited number of commodity inputs, service providers and/or distribution mechanisms,
• more volatile or challenging market or economic conditions, including higher rates of inflation,
• higher transaction costs,
• difficulty in enforcing contractual obligations,
• fewer investor protections and less publicly available information about companies,
57Table of Contents• certain economic and political risks, including potential exchange control regulations and restrictions on our non-U.S.
investments and repatriation of profits on investments or of capital invested, the risks of war, terrorist attacks, political, economic or social instability, the possibility of expropriation or confiscatory taxation and adverse economic and political developments and
• the possible imposition of non-U.S.
taxes or withholding on income and gains recognized with respect to such securities.
In addition, investments in companies that are based outside of the United States may be negatively impacted by restrictions on international trade or the imposition of tariffs (and any resulting reciprocal tariffs), which have been an area of focus for the current U.S. Presidential administration. See “—Trade negotiations and related government actions may create regulatory uncertainty for our funds’ portfolio companies and our investment strategies and adversely affect the profitability of our funds’ portfolio companies.”We may not have sufficient cash to pay back “clawback” obligations if and when they are triggered under the governing agreements with our investors.In certain circumstances, at the end of the life of a carry fund (and earlier with respect to certain of our funds), we may be obligated to repay the amount by which Performance Allocations that were previously distributed to us exceed the amounts to which the relevant general partner is ultimately entitled on an after-tax
basis. This includes situations in which the general partner receives in excess of the relevant Performance Allocations applicable to the fund as applied to the fund’s cumulative net profits over the life of the fund or, in some cases, the fund has not achieved investment returns that exceed the preferred return threshold. This obligation is known as a “clawback” obligation and is an obligation of any person who received such Performance Allocations, including us and other participants in our Performance Allocations plans. Although a portion of any dividends by us to our stockholders may include any Performance Allocations received by us, we do not intend to seek fulfillment of any clawback obligation by seeking to have our stockholders return any portion of such dividends attributable to Performance Allocations associated with any clawback obligation. To the extent we are required to fulfill a clawback obligation, however, our board of directors may determine to decrease the amount of our dividends to our stockholders. The clawback obligation operates with respect to a given carry fund’s own net investment performance only and performance of other funds are not netted for determining this contingent obligation.
Adverse economic conditions may increase the likelihood that one or more of our carry funds may be subject to clawback obligations. To the extent one or more clawback obligations were to occur for any one or more carry funds, we might not have available cash at the time such clawback obligation is triggered to repay the Performance Allocations and satisfy such obligation. If we were unable to repay such Performance Allocations, we would be in breach of the governing agreements with our investors and could be subject to liability. Moreover, although a clawback obligation is several, the governing agreements of most of our funds provide that to the extent another recipient of Performance Allocations (such as a current or former employee) does not fund his or her respective share, then we and our employees who participate in such Performance Allocations plans may have to fund additional amounts (generally an additional 50-70%
beyond our pro-rata
share of such obligations) beyond what we actually received in Performance Allocations. Although we retain the right to pursue any remedies that we have under such governing agreements against those Performance Allocations recipients who fail to fund their obligations, we may not be successful in recovering such amounts.Investors in a number of our vehicles may withdraw their investments, and investors in certain of our vehicles may have a right to terminate our management of, or cause the dissolution of, such vehicles, which would lead to a decrease in our revenues.We have a number of vehicles that permit investors in such vehicles to withdraw their investments and/or terminate our management of such capital, as applicable and in certain cases, subject to certain limitations. Investors in our hedge funds may generally redeem their investments on a periodic basis following, in certain cases, the expiration of a specified period of time when capital may not be withdrawn, subject to the applicable fund’s specific redemption provisions. In addition, in many of our other open-ended and/or perpetual capital vehicles,
58Table of Contentsincluding those that are available to individual investors, investors may request redemptions or repurchases of their interests on a periodic basis, subject to certain limitations. During periods of market volatility, investor subscriptions to such vehicles are likely to be reduced, and investor redemption or repurchase requests are likely to be elevated, which may negatively impact the fees we earn from such vehicles. Investor subscriptions to certain of such vehicles have also at times been, and may in the future be, reduced, and investor redemptions or repurchase requests elevated, in the face of negative media or public sentiment with respect to the asset classes of such vehicles. In addition, in a declining market, our liquid or semi-liquid vehicles have and may continue to experience declines in value, which may be provoked and/or exacerbated by margin calls and forced selling of assets. Investors may also seek to redeem their interests due to changes in interest rates that make other investments more attractive, rebalancing of their asset allocations, changes in investor perception of us and our reputation, unhappiness with a fund’s performance or investment strategy, departures or changes in responsibilities of key investment professionals, and liquidity needs.
To the extent appropriate and permissible under a vehicle’s constituent documents, we have previously and may in the future limit or prorate redemptions or repurchases in such vehicle for a period of time. This has, and may in the future, make such vehicles less attractive to investors and negatively impact subscriptions to such vehicles for a period of time, which could have a material adverse effect on the revenues we derive from such vehicles. For example, market volatility drove a material increase in BREIT repurchase requests beginning in late 2022, and pursuant to the terms of the vehicle, BREIT began to prorate such requests beginning in November 2022. BREIT inflows also materially declined after proration was announced, which led to net outflows in BREIT. The inclusion of redemption features in investment vehicles creates heightened risk of operational error, including with respect to the calculation of net asset values, which could expose us to increased risk of litigation, regulatory action and reputational damage.In addition, we currently manage a significant portion of investor assets through separately managed accounts whereby we earn management and/or incentive fees, and we intend to continue to seek additional separately managed account mandates. The investment management agreements we enter into in connection with managing separately managed accounts on behalf of certain clients may be terminated by such clients on as little as 30 days’ prior written notice. In addition, the boards of directors of the investment management companies we manage could terminate our advisory engagement of those companies, on as little as 30 days’ prior written notice. In the case of any such terminations, the management and incentive fees we earn in connection with managing such account or company would immediately cease, which could result in a significant adverse impact on our revenues.The governing agreements of many of our investment funds provide that, subject to certain conditions, third-
party investors in those funds have the right to remove the general partner of the fund or to accelerate the termination date of the investment fund without cause by a majority or supermajority vote, resulting in a reduction in management fees we would earn from such investment funds and a significant reduction in the amounts of Performance Revenues from those funds. Performance Revenues could be significantly reduced as a result of our inability to maximize the value of investments by an investment fund during the liquidation process or in the event of the triggering of a “clawback” obligation or a recoupment of loss carry forward amounts. In addition, the governing agreements of our investment funds provide that in the event certain “key persons” in our investment funds do not meet specified time commitments with regard to managing the fund, then investors in certain funds have the right to vote to terminate the investment period by a specified percentage (including, in certain cases, a simple majority) vote in accordance with specified procedures, accelerate the withdrawal of their capital on an investor-by-investor
basis, or the fund’s investment period will automatically terminate and a specified percentage (including, in certain cases, a simple majority) vote of investors is required to restart it. In addition, the governing agreements of some of our investment funds provide that investors have the right to terminate, for any reason, the investment period by a vote of 75% of the investors in such fund. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our investment funds would likely result in significant reputational damage to us.
59Table of ContentsIn addition, because our investment funds have advisers that are registered under the Advisers Act, an “assignment” of the management agreements of our investment funds (which may be deemed to occur in the event these advisers were to experience a change of control) would generally be prohibited without consent of the investment fund, which may require investor consent. We cannot be certain that consents required for assignments of our investment management agreements will be obtained if a change of control occurs, which could result in the termination of such agreements and the corresponding loss of revenue. In addition, with respect to our 1940 Act registered funds, the continuance of each investment fund’s investment management agreement generally must be approved annually by the fund’s board of directors, including independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the fees we earn from such investment funds.Third-party investors in our investment funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested by us, which could adversely affect a fund’s operations and performance.We depend on investors in our carry funds (and certain of our hedge funds) to fulfill their capital commitments in order for those funds to consummate investments, and otherwise pay their obligations (for example, management fees) when due. A default by an investor may also limit a fund’s availability to incur borrowings and avail itself of what would otherwise have been available credit. We have not had investors default on capital calls to any meaningful extent. Third-party investors in carry funds typically use distributions from prior investments to meet future capital calls. In cases where valuations of investors’ existing investments fall and the pace of distributions slows, investors may be unable to make new commitments to third-party managed investment funds such as those advised by us. If investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, the operation and performance of those funds could be materially and adversely affected.Risk management activities may adversely affect the return on our funds’ investments.
When managing our exposure to market risks, we may (on our own behalf or on behalf of our funds) from time to time use forward contracts, options, swaps, caps, collars and floors or pursue other strategies or use other forms of derivative instruments to limit our exposure to changes in the relative values of investments that may result from market developments, including changes in prevailing interest rates, currency exchange rates and commodity prices. The use of derivative financial instruments and other risk management strategies may not be properly designed to hedge, manage or otherwise reduce the risks we have identified. In addition, we may not be able to identify, or may not have fully identified, all applicable material market risks to which we are exposed. We may also choose not to hedge, in whole or in part, any of the risks that have been identified. The success of any hedging or other derivatives transactions generally will depend on our ability to correctly predict market changes, the degree of correlation between price movements of a derivative instrument, the position being hedged, the creditworthiness of the counterparty and other factors, some of which may be beyond our ability to hedge. As a result, while we may enter into a transaction in order to reduce our exposure to market risks, the unintended market changes may result in poorer overall investment performance than if it had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged position increases.
While such hedging arrangements may reduce certain risks, such arrangements themselves may entail certain other risks. These arrangements may require the posting of cash collateral at a time when a fund has insufficient cash or illiquid assets such that the posting of the cash is either impossible or requires the sale of assets at prices that do not reflect their underlying value. In addition, if our derivative counterparties or clearinghouses fail to meet their obligations with respect to the posting of cash collateral, our efforts to mitigate certain risks may be ineffective. Moreover, these hedging arrangements may generate significant transaction costs, including potential tax costs, that reduce the returns generated by a fund.60Table of Contents
Finally, the regulation of derivatives and commodity interest transactions in the United States and other countries is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. Newly instituted and amended regulations could significantly increase the cost of entering into derivative contracts (including through requirements to post collateral, which could negatively impact available liquidity), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks, reduce our ability to restructure our existing derivative contracts and increase our exposure to less creditworthy counterparties. Furthermore, the CFTC may in the future require certain foreign exchange products to be subject to mandatory clearing, which could increase the cost of entering into currency hedges.Certain of our investment funds may invest in securities of companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Such investments are subject to a greater risk of poor performance or loss.Business enterprises in certain of our investment funds, especially our credit-focused funds, may be involved in or experience work-outs, liquidations, spin-offs, reorganizations, bankruptcies and similar transactions and may purchase high-risk receivables. An investment in such business enterprises entails the risk that the transaction in which such business enterprise is involved either will be unsuccessful, will take considerable time or will result in a distribution of cash or a new security the value of which will be less than the purchase price to the fund of the security or other financial instrument in respect of which such distribution is received. In addition, if an anticipated transaction does not in fact occur, the fund may be required to sell its investment at a loss. Investments in troubled companies may also be adversely affected by U.S. federal and state laws relating to, among other things, fraudulent conveyances, voidable preferences, lender liability and a bankruptcy court’s discretionary power to disallow, subordinate or disenfranchise particular claims. Investments in securities and private claims of troubled companies made in connection with an attempt to influence a restructuring proposal or plan of reorganization in a bankruptcy case may also involve substantial litigation. Because there is substantial uncertainty concerning the outcome of transactions involving financially troubled companies, there is a potential risk of loss by a fund of its entire investment in such company. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of securities rated below investment grade or otherwise adversely affect our reputation.
In addition, at least one federal Circuit Court has determined that an investment fund could be liable for ERISA Title IV pension obligations (including withdrawal liability incurred with respect to union multiemployer plans) of its portfolio companies, if such fund is a “trade or business” and the fund’s ownership interest in the portfolio company is significant enough to bring the investment fund within the portfolio company’s “controlled group.” While a number of cases have held that managing investments is not a “trade or business” for tax purposes, the Circuit Court in this case concluded the investment fund could be a “trade or business” for ERISA purposes based on certain factors, including the fund’s level of involvement in the management of its portfolio companies and the nature of its management fee arrangements. Litigation related to the Circuit Court’s decision suggests that additional factors may be relevant for purposes of determining whether an investment fund could face “controlled group” liability under ERISA, including the structure of the investment and the nature of the fund’s relationship with other affiliated investors and co-investors
in the portfolio company. Moreover, regardless of whether an investment fund is determined to be a “trade or business” for purposes of ERISA, a court might hold that one of the fund’s portfolio companies could become jointly and severally liable for another portfolio company’s unfunded pension liabilities pursuant to the ERISA “controlled group” rules, depending upon the relevant investment structures and ownership interests as noted above.
61Table of ContentsInvestments by our funds in the power and energy industries involve various operational, construction, regulatory and market risks.The development, operation and maintenance of power and energy generation facilities involves many risks, including, as applicable, labor issues, start-up
risks, breakdown or failure of facilities, lack of sufficient capital to maintain the facilities and the dependence on a specific fuel source. Power and energy generation facilities in which our funds invest are also subject to risks associated with volatility in the price of fuel sources and the impact of unusual or adverse weather conditions or other natural events, such as droughts, wildfires or hurricanes, as well as the risk of performance below expected levels of output, efficiency or reliability. The occurrence of any such items could result in lost revenues and/or increased expenses. In turn, such developments could impair a portfolio company’s ability to repay its debt or conduct its operations. We may also choose or be required to decommission a power generation facility or other asset. The decommissioning process could be protracted and result in the incurrence of significant financial and/or regulatory obligations or other uncertainties.Our power and energy sector portfolio companies may also face construction risks typical for power generation and related infrastructure businesses. Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of construction activities once undertaken. Delays in the completion of any power project may result in lost revenues or increased expenses, including higher operation and maintenance costs related to such portfolio company.The power and energy sectors are the subject of substantial and complex laws, rules and regulation by various federal and state regulatory agencies. These include environmental laws that may expose our investments to increased environmental liabilities, including those that did not exist at the time of acquisition. Failure to comply with applicable laws, rules and regulations could result in the prevention of operation of certain facilities or the prevention of the sale of such a facility to a third party, as well as the loss of certain rate authority, refund liability, penalties and other remedies. Each of these could result in additional costs to a portfolio company and adversely affect investment results. In addition, the increased scrutiny placed by regulators, elected officials and certain investors with respect to the incorporation of sustainability factors in the investment process and the impact of certain investments made by our energy funds has negatively impacted and is likely to continue to negatively impact our ability to exit certain of our conventional energy investments on favorable terms. For instance, OBBBA significantly reduced or accelerated the phase out of many existing clean tax credits established by the Inflation Reduction Act of 2022. Legislative efforts by either party to overturn or modify policies or regulations enacted by the prior U.S. presidential administration could adversely affect certain investments, including our alternative energy investments. Additionally, certain investors have raised concerns as to whether the incorporation of sustainability factors in the investment and portfolio management process may be inconsistent with the fiduciary duty to maximize returns for investors, which may result in such investors calling into question certain non-conventional
energy investments made by our energy funds.In addition, the performance of the investments made by our credit and equity funds in the energy and natural resources markets are also subject to a high degree of market risk, as such investments are likely to be directly or indirectly substantially dependent upon prevailing prices of oil, natural gas and other commodities. Oil and natural gas prices are subject to wide fluctuation in response to factors beyond the control of us or our funds’ portfolio companies, including relatively minor changes in the supply and demand for oil and natural gas, market uncertainty, the level of consumer product demand, weather conditions, climate change initiatives, governmental regulation (including with respect to trade and economic sanctions), the price and availability of alternative fuels, political and economic conditions in oil producing countries, foreign supply of such commodities and overall domestic and foreign economic conditions. These factors make it difficult to predict future commodity price movements with any certainty.62Table of ContentsOur funds’ investments in real estate and infrastructure assets, including digital infrastructure, may expose us to increased risks that are inherent in the ownership of such assets.
Investments in real estate and infrastructure assets may expose us to increased risks that are inherent in the development and ownership of real assets. For example:
• Ownership of real estate and infrastructure assets may present risks of liabilities for personal and property injury or impose significant operating challenges and costs with respect to compliance with zoning or environmental laws, among others. This may expose our investments to increased environmental liabilities, including those that did not exist at the time of acquisition.
• Real estate and infrastructure and asset investments are subject to various construction risks that could result in unanticipated delays or expenses or prevent the completion of construction once undertaken. These include, without limitation: (a) labor disputes, shortages of material and skilled labor, or work stoppages, (b) delays in construction caused by adverse weather conditions, materials delays, insufficient power sources or equipment failure, (c) less than optimal coordination with public utilities in the relocation of their facilities and (d) catastrophic events such as explosions, fires or terrorist attacks. Recourse against the contractor may be subject to liability caps or may be subject to default or insolvency on the part of the contractor.
• The operation of real estate and infrastructure and assets is exposed to potential unplanned interruptions caused by significant events, including natural disasters, terrorist attacks, war, pandemics and other severe public health events, as well as other uninsured or uninsurable risks. These risks could adversely impact the cash flows available from such assets, cause personal injury or loss of life, damage property, or instigate disruptions of service. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged service interruptions may result in permanent loss of customers, litigation, or penalties for regulatory or contractual non-compliance.
• The management of the business or operations of real estate and infrastructure assets may be contracted to a third-party management company unaffiliated with us. Although it may be possible to replace any such operator, the failure of such an operator to adequately perform its duties or to act in ways that are in our best interest, or the breach by an operator of applicable agreements or laws, rules and regulations, including prohibitions against bribing of government officials, could have an adverse effect on the investment’s financial condition or results of operations or cause us serious reputational and legal harm. Investments may involve the subcontracting of design and construction activities in respect of projects, and, as a result, are subject to the risks that contractual provisions passing liabilities to a subcontractor are ineffective, a subcontractor fails to perform services which it has agreed to perform and a subcontractor becomes insolvent.
• To the extent our real estate or infrastructure funds acquire direct or indirect interests in undeveloped land or underdeveloped real property, including in connection with digital infrastructure investments, such land and property is often non-income
producing and will therefore be particularly exposed to a number of the risks outlined above.
In addition, real estate and infrastructure investments are subject to extensive laws and regulations, including the risk of changes thereto. In real estate, we have seen an increased focus toward rent regulation as a means to address residential affordability caused by undersupply of housing in certain markets in the U.S. and Europe. Such regulation has contributed to adverse operating performance in certain parts of our residential real estate portfolio, including by moderating rent growth in certain geographies and markets. With respect to infrastructure assets, services provided by such assets may be subject to rate regulations by government entities that determine or limit prices that may be charged. In addition, users of applicable services or government entities in response to such users may react negatively to any adjustments in rates and thus reduce the profitability of such infrastructure investments. Infrastructure investments also often involve an ongoing commitment to municipal, state, federal or
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foreign government or regulatory agencies. The nature of these obligations exposes us to a higher level of regulatory control than typically imposed on other businesses and may require us to rely on complex government licenses, concessions, leases or contracts, which may be difficult to obtain or maintain. Such licenses, concessions, leases or contracts may also be terminated for convenience without adequate compensation. Further, many of our funds’ infrastructure investments are in critical infrastructure sectors, such as transportation systems, energy and digital infrastructure, which are generally subject to heightened regulatory scrutiny at the time of investment and ongoing compliance requirements. Such requirements are likely to expand our compliance burdens, costs and enforcement risks.
Our real estate and infrastructure funds have in recent years substantially increased their exposure to digital infrastructure investments, which, in addition to being subject to many of the risks outlined above, are subject to additional risks. The increase in exposure to digital infrastructure has supported strong performance for our real estate and infrastructure funds. Such performance would be difficult to replicate if demand for digital infrastructure were substantially reduced, including as a result of economic slowdown, regulatory impediments or changes in the needs or strategies of a relatively small number of key customers on behalf of which our funds have undertaken development. Digital infrastructure demand is highly concentrated in a small number of large counterparties. Such concentration makes the value of digital infrastructure assets particularly susceptible to the risk of financial distress, consolidation or change in capital and expenditure trends of a single or small number of tenants. Digital infrastructure requires significant upfront and ongoing capital expenditure for land, power, construction and equipment, as well as access to reliable power sources, which may be constrained in key markets. An increase in the price of such inputs can increase build and operating costs and reduce the profitability of such investments. The inability to access sufficient power could constrain our ability to develop land acquired for digital infrastructure or to deliver the levels of power required by tenants, each of which could negatively impact the value of our funds’ investments. Given the long-term nature of many of the tenant leases at our funds’ digital infrastructure assets, a prolonged period of high interest rates could also negatively impact the valuation of such assets to the extent the contractual rent escalators in such leases are insufficient to offset increased costs. In addition, advancements in computing and AI Technologies, including efficiency improvements (without related increases in the adoption and development of such technologies), as well as technological changes that render existing data center designs less competitive or require significant redevelopment, could negatively impact demand for, and the valuation of, our digital infrastructure assets. The digital infrastructure sector is also highly competitive, with pressure from various data center operators and hyperscalers building their own facilities. In addition, digital infrastructure assets have recently faced and continue to face increasing opposition from local communities and organizations. These factors may make it more difficult to deploy additional capital and continue to grow our investments in the sector.
Our funds’ investments in the life sciences industry may expose us to increased risks.Investments by BXLS may expose us to increased risks. For example,• BXLS’s strategies include, among others, investments that are referred to as “corporate partnership” transactions. Corporate partnership transactions are risk-sharing
collaborations with biopharmaceutical and medical device partners on drug and medical device development programs and investments in royalty streams of pre-commercial
biopharmaceutical products. BXLS’s ability to source corporate partnership transactions has been, and will continue to be, in part dependent on the ability of special purpose development companies to identify, diligence, negotiate and in many cases, take the lead in executing the agreed development plans. Moreover, as such special purpose development companies are jointly owned by us or our affiliates and unaffiliated life sciences investors, we (and our funds) are not the sole beneficiaries of such sourcing strategies and capabilities of such special purpose development companies. In addition, payments to BXLS under such corporate partnerships (which can include future royalty or other milestone-based
payments) are often contingent upon the achievement of certain milestones, including approvals of the applicable product candidate and/or product sales thresholds, over which BXLS may not have the ability to exercise meaningful control.
64Table of Contents• Life sciences and healthcare companies are subject to extensive regulation by the U.S. Food and Drug Administration, similar foreign regulatory authorities and, to a lesser extent, other federal and state agencies. If a company in which our funds are invested is unable to obtain regulatory approval for a product candidate, or a product candidate in which our funds are invested does not obtain regulatory approval, in a timely fashion or at all, including as a result of a delayed, hindered or abandoned clinical trial
s, the value of our fund’s investment would be adversely impacted.
• To the extent our BXLS portfolio companies’ intellectual property positions are challenged, invalidated or circumvented, the value of BXLS’s investment or BXLS’ rights in a termination event may be impaired. The success of a life sciences investment depends in part on the ability of the biopharmaceutical or medical device companies to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of such products. The patent positions of such companies often involve complex legal, scientific and factual questions, which can leave them open to challenge or interpretation.
• The value of BXLS’ pre-commercial
investments is tied to the anticipated commercial success of the product being developed. In both the U.S. and foreign markets, the successful sale of a life sciences company’s product depends on the ability to obtain and maintain adequate coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans. Governments and third-party payers continue to pursue aggressive initiatives to contain costs and manage drug utilization and are increasingly focused on the effectiveness, benefits and costs of similar treatments, which could result in lower reimbursement rates and narrower populations for whom the products will be reimbursed by third-party payers. In addition, U.S. regulatory agencies have implemented and may continue to implement substantial policy changes with respect to certain types of life sciences products. Such policy changes and any related legislation may create challenging market dynamics, including lower consumer demand, for certain products. This would make identifying new investments and realizing an appropriate return on investments more difficult for BXLS.Hedge fund investments are subject to numerous additional risks.Investments by our funds of hedge funds in other hedge funds, as well as investments by our credit-focused,
real estate debt and other hedge funds and similar products, are subject to numerous additional risks, including the following:
• Certain of the funds in which we invest are newly established without any operating history or are managed by less established management companies or general partners.
• Generally, the execution of third-party hedge funds’ investment strategies is subject to the sole discretion of the management company or the general partner of such funds. As a result, we do not have the ability to control the funds’ investment activities, including investment selection, any deviation from investment strategy, the liquidation of positions and the use of leverage, each of which may impact our ability to generate a successful return.
• Hedge funds may engage in speculative trading strategies, including short selling. A fund may be subject to substantial losses if a security lender demands return of the lent securities and an alternative lending source cannot be found or if the fund is otherwise unable to borrow securities that are necessary to hedge or cover its positions.
• Hedge funds are exposed to counterparty risk, including that a counterparty may dispute and not settle a transaction in accordance with its terms and conditions, thus causing the fund to suffer a loss. Counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the fund has concentrated its transactions with a single or small group of counterparties. Moreover, the funds’ internal consideration of the creditworthiness of their counterparties may prove insufficient. The absence of a regulated market to facilitate settlement may increase the potential for losses.
65Table of Contents• Large financial institutions are dependent on one another to meet their liquidity or operational needs, such that a default by one may cause a series of defaults by the others. This “systemic risk” may adversely affect the financial intermediaries (such as clearing agencies, clearing houses, banks, securities firms and exchanges) with which the hedge funds interact on a daily basis.
• The efficacy of investment and trading strategies depends largely on the ability to establish and maintain an overall market position in a combination of financial instruments. A hedge fund’s trading orders may not be executed in a timely and efficient manner due to various circumstances, including systems failures or human error. In such event, the funds might not be able to acquire all components of the position, or the funds might not be able to make a needed adjustment to the overall position. As a result, the funds would not be able to achieve the desired market position, and might incur a loss in liquidating their position.
• Hedge funds are subject to risks due to potential illiquidity of assets. Timely divestiture or sale of trading positions can be impaired by decreased trading volume, increased price volatility and concentrated or difficult-to-transfer
trading positions. It may be impossible or costly for hedge funds to liquidate positions rapidly in order to meet margin calls or withdrawal requests, particularly if other market participants are seeking to dispose of similar assets, the relevant market is otherwise moving against a position or a trading halt or daily limit is imposed by an exchange. Any “gate” or similar limitation on withdrawals with respect to hedge funds may not be effective in mitigating illiquidity risk. Moreover, these risks may be exacerbated for our funds of hedge funds to the extent multiple funds in which they invest hold illiquid positions in the same issuer.
• The prices of commodities, futures, options and other derivatives are highly volatile and may be subject to the theoretically unlimited risk of loss in certain circumstances, including if the hedge fund writes a call option. Price movements are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and governmental and geopolitical policies. The value of futures, options and swap agreements also depends upon the price of the commodities underlying them and prevailing exchange rates. In addition, hedge funds’ assets are subject to the risk of the failure of any of the exchanges on which their positions trade or of their clearinghouses or counterparties. Most U.S. commodities exchanges limit fluctuations in certain commodity interest prices during a single day by imposing “daily price fluctuation limits” or “daily limits,” the existence of which may reduce liquidity or effectively curtail trading in particular markets. As a result of their affiliation with us, our hedge funds may from time to time be restricted from trading in certain securities (e.g., publicly traded securities issued by our current or potential portfolio companies). This may limit their ability to acquire and/or subsequently dispose of certain investments. In addition, the use of leverage poses additional risks, including those described in “—Dependence on significant leverage in investments by our funds could adversely affect our ability to achieve attractive rates of return on those investments.”We are reliant on third-party service providers for certain aspects of our business, and are subject to risks in using prime brokers, custodians, counterparties, administrators and other agents.We are reliant on other third-party
service providers for certain technology platforms that facilitate the continued operation of our business, including cloud-based
services. We generally have less control over the delivery of such third-party
services, and as a result, may face disruptions to our ability to operate our business as a result of interruptions of such services. In addition, a failure to adequately monitor a third-party service provider’s compliance with a service level agreement or regulatory or legal requirements could result in economic and reputational harm to us. A prolonged global failure of cloud services provided to us could result in cascading systems failures. In addition, we may not be able to adapt our information systems and technology to accommodate our growth, or the cost of maintaining such systems may increase materially from its current level, which could have a material adverse effect on us.
66
Table of ContentsMany of our funds depend on the services of prime brokers, custodians, counterparties, administrators and other agents, including to carry out certain securities and derivatives transactions. The terms of these contracts are often customized and complex, and many of these arrangements occur in markets or relate to products that are subject to limited or no regulatory oversight. Some of our funds utilize prime brokerage arrangements with a relatively limited number of counterparties, which has the effect of concentrating the transaction volume (and related counterparty default risk) of these funds with these counterparties. Our funds are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur suddenly and without notice to us. Moreover, if a counterparty defaults, we may be unable to take action to cover our exposure, either because we lack contractual recourse or because market conditions make it difficult to take effective action. This inability could occur in times of market stress, which is when defaults are most likely to occur.
In addition, our risk management process may not accurately anticipate the impact of market stress or counterparty financial condition, and as a result, we may not have taken sufficient action to reduce our risks effectively. Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate. In addition, concerns about, or a default by, one large participant could lead to significant liquidity problems for other participants, which may in turn expose us to significant losses. Although we have risk management processes to ensure that we are not exposed to a single counterparty for significant periods of time, given the large number and size of our funds, we often have large positions with a single counterparty. For example, most of our funds have credit lines. If the lender under one or more of those credit lines were to become insolvent, we may have difficulty replacing the credit line and one or more of our funds may face liquidity problems.In the event of a counterparty default, particularly a default by a major investment bank or a default by a counterparty to a significant number of our contracts, one or more of our funds may have outstanding trades that they cannot settle or are delayed in settling. As a result, these funds could incur material losses and the resulting market impact of a major counterparty default could harm our businesses, results of operations and financial condition. In addition, under certain local clearing and settlement regimes in Europe, we or our funds could be subject to settlement discipline fines. See “—Complex regulatory regimes and potential regulatory changes in jurisdictions outside the United States could adversely affect our business.”
In the event of the insolvency of a prime broker, custodian, counterparty or any other party that is holding assets of our funds as collateral, our funds might not be able to recover equivalent assets in full as they will rank among the prime broker’s, custodian’s or counterparty’s unsecured creditors in relation to the assets held as collateral. In addition, our funds’ cash held with a prime broker, custodian or counterparty generally will not be segregated from the prime broker’s, custodian’s or counterparty’s own cash, and our funds may therefore rank as unsecured creditors in relation thereto. If our derivatives transactions are cleared through a derivatives clearing organization, the CFTC has issued final rules regulating the segregation and protection of collateral posted by customers of cleared and uncleared swaps.The counterparty risks that we face have increased in complexity and magnitude over time. For example, in certain areas the number of counterparties we face has increased and may continue to increase, which may result in increased complexity and monitoring costs. Conversely, in certain other areas, the consolidation and elimination of counterparties has increased our concentration of counterparty risk and decreased the universe of potential counterparties, and our funds are generally not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with one counterparty. In addition, counterparties have in the past and may in the future react to market volatility by tightening underwriting standards and increasing margin requirements for all categories of financing, which may decrease the overall amount of leverage available and increase the costs of borrowing.67
Table of ContentsUnderwriting activities by our capital markets services business expose us to risks.Blackstone Securities Partners L.P. acts as an underwriter, syndicator or placement agent in securities offerings and, through affiliated entities, loan syndications. We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities or indebtedness we purchased or placed as an underwriter, syndicator or placement agent at the anticipated price levels or at all. As an underwriter, syndicator or placement agent, we also may be subject to liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings we underwrite, syndicate or place.Risks Related to Our Organizational StructureWe are not required to comply with certain provisions of U.S. securities laws relating to proxy statements and certain related matters. This, coupled with the significant voting power of holders of our Series I preferred stock and Series II preferred stock, may limit the ability of holders of our common stock to influence our business.Holders of our common stock are entitled to vote pursuant to Delaware law with respect to:• A conversion of the legal entity form of Blackstone,
• A transfer, domestication or continuance of Blackstone to a foreign jurisdiction,
• Any amendment of our certificate of incorporation to change the par value of our common stock or the powers, preferences or special rights of our common stock in a way that would affect our common stock adversely,
• Any amendment of our certificate of incorporation that requires for action the vote of a greater number or portion of the holders of common stock than is required by any section of Delaware law, and
• Any amendment of our certificate of incorporation to elect to become a close corporation under Delaware law.In addition, our certificate of incorporation provides voting rights to holders of our common stock on the following additional matters:• A sale, exchange or disposition of all or substantially all of our assets,
• A merger, consolidation or other business combination,
• Any amendment of our certificate of incorporation or bylaws enlarging the obligations of the common stockholders,
• Any amendment of our certificate of incorporation requiring the vote of the holders of a percentage of the voting power of the outstanding common stock and Series I preferred stock, voting together as a single class, to take any action in a manner that would have the effect of reducing such voting percentage and
• Any amendments of our certificate of incorporation that are not included in the specified set of amendments that the Series II Preferred Stockholder has the sole right to vote on.
These matters generally require the approval of a majority of the outstanding shares of common stock and Series I preferred stock, voting together as a single class. Furthermore, our certificate of incorporation provides that the holders of at least 66 2/3% of the voting power of the outstanding shares of common stock and Series I preferred stock may vote to require the Series II Preferred Stockholder to transfer its shares of Series II preferred stock to a successor Series II Preferred Stockholder designated by the holders of at least a majority of the voting power of the outstanding shares of common stock and Series I preferred stock.
68Table of ContentsHolders of our Series I preferred stock will collectively be entitled to a number of votes equal to the aggregate number of Blackstone Holdings Partnership Units held by the limited partners of the Blackstone Holdings Partnerships on the relevant record date and will vote together with holders of our common stock as a single class. As of February 20, 2026, Blackstone Partners L.L.C., an entity owned by the senior managing directors of Blackstone and controlled by Mr. Schwarzman, owned the only share of Series I preferred stock outstanding, representing approximately 37.5% of the total combined voting power of the common stock and Series I preferred stock, taken together.Our certificate of incorporation and bylaws contain additional provisions affecting the holders of our common stock, including certain limits on the ability of the holders of our common stock to call meetings, to acquire information about our operations and to influence the manner or direction of our management. In addition, any person that beneficially owns 20% or more of the common stock then outstanding (other than the Series II Preferred Stockholder or its affiliates, a direct or subsequently approved transferee of the Series II Preferred Stockholder or its affiliates or a person or group that has acquired such stock with the prior approval of our board of directors) is unable to vote such stock on any matter submitted to such stockholders.Moreover, we are not required to file proxy statements or information statements under Section 14 of the Exchange Act except in circumstances where a vote of holders of our common stock is required under our certificate of incorporation or Delaware law. In addition, we will generally not be subject to the “say-on-pay”
and “say-on-frequency”
provisions of the Dodd-Frank
Act. As a result, our common stockholders do not have an opportunity to provide a non-binding
vote on the compensation of our named executive officers. Moreover, holders of our common stock are not able to bring matters before our annual meeting of stockholders or nominate directors at such meeting, nor are they generally able to submit stockholder proposals under Rule 14a-8
of the Exchange Act.
As a result, the holders of our common stock may be limited in their ability to influence our business. See “—Potential conflicts of interest may arise among the Series II Preferred Stockholder and the holders of our common stock.”We are a controlled company and as a result qualify for some exceptions from certain corporate governance and other requirements of the New York Stock Exchange.
Because the Series II Preferred Stockholder holds more than 50% of the voting power for the election of directors, we are a “controlled company” and fall within exceptions from certain corporate governance and other requirements of the rules of the New York Stock Exchange. Pursuant to these exceptions, controlled companies may elect not to comply with certain corporate governance requirements of the New York Stock Exchange, including the requirements (a) that a majority of our board of directors consist of independent directors, (b) that we have a nominating and corporate governance committee that is composed entirely of independent directors, (c) that we have a compensation committee that is composed entirely of independent directors and (d) that the compensation committee be required to consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisers. While we currently have a majority independent board of directors, we have elected to avail ourselves of the other exceptions. Accordingly, our common stockholders generally do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.Potential conflicts of interest may arise among the Series II Preferred Stockholder and the holders of our common stock.Blackstone Group Management L.L.C., an entity owned by senior managing directors of Blackstone and controlled by Mr. Schwarzman, is the sole holder of the Series II Preferred stock. As a result, conflicts of interest may arise among the Series II Preferred Stockholder, on the one hand, and us and our holders of our common stock, on the other hand. The Series II Preferred Stockholder has the ability to influence our business and affairs through its ownership of Series II Preferred stock, the Series II Preferred Stockholder’s general ability to appoint our
69Table of Contentsboard of directors, and provisions under our certificate of incorporation requiring Series II Preferred Stockholder approval for certain corporate actions (in addition to approval by our board of directors). If the holders of our common stock are dissatisfied with the performance of our board of directors, they have no ability to remove any of our directors, with or without cause. In addition, our certificate of incorporation contains provisions stating that the Series II Preferred Stockholder is under no obligation to consider the separate interests of the other stockholders (including, without limitation, the tax consequences to such stockholders) in its decisions and shall not be liable to the other stockholders for damages for any losses, liabilities or benefits not derived by such stockholders in connection with such decisions.
Further, through its ability to elect our board of directors, the Series II Preferred Stockholder has the ability to indirectly influence the determination of the amount and timing of our funds’ investments and dispositions, cash expenditures, indebtedness, issuances of additional partnership interests, tax liabilities and amounts of reserves, each of which can affect the amount of cash that is available for distribution to holders of Blackstone Holdings Partnership Units.
In addition, conflicts may arise relating to the selection, structuring and disposition of investments and other transactions, declaring dividends and other distributions and other matters due to the fact that our senior managing directors hold their Blackstone Holdings Partnership Units directly or through pass-through
entities that are not subject to corporate income taxation. See “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence” and “Part III. Item 10. Directors, Executive Officers and Corporate Governance.”
The Series II Preferred Stockholder will not be liable to Blackstone or holders of our common stock for any acts or omissions unless there has been a final and non-appealable
judgment determining that the Series II Preferred Stockholder acted in bad faith or engaged in fraud or willful misconduct and we have also agreed to indemnify the Series II Preferred Stockholder to a similar extent.
Even if there is deemed to be a breach of the obligations set forth in our certificate of incorporation, our certificate of incorporation provides that the Series II Preferred Stockholder will not be liable to us or the holders of our common stock for any acts or omissions unless there has been a final and non-appealable
judgment by a court of competent jurisdiction determining that the Series II Preferred Stockholder or its officers and directors acted in bad faith or engaged in fraud or willful misconduct. These provisions are detrimental to the holders of our common stock because they restrict the remedies available to stockholders for actions of the Series II Preferred Stockholder.
In addition, we have agreed to indemnify the Series II Preferred Stockholder and our former general partner and its controlling affiliates and any current or former officer or director of any of Blackstone or its subsidiaries, the Series II Preferred Stockholder or former general partner and certain other specified persons (collectively, the “Indemnitees”), to the fullest extent permitted by law, against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts incurred by an Indemnitee. We have agreed to provide this indemnification if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of Blackstone, and with respect to any alleged conduct resulting in a criminal proceeding against the Indemnitee, such person had no reasonable cause to believe that such person’s conduct was unlawful. We have also agreed to provide this indemnification for criminal proceedings.The Series II Preferred Stockholder may transfer its interest in the sole share of Series II preferred stock which could materially alter our operations.Without the approval of any other stockholder, the Series II Preferred Stockholder may transfer its sole outstanding share of Series II preferred stock to a third party with the approval of our board of directors and satisfaction of certain other requirements. Further, the members or other interest holders of the Series II Preferred Stockholder may sell or transfer all or part of their outstanding equity or other interests in the Series II Preferred
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Stockholder at any time without our approval. A new holder of our Series II preferred stock or new controlling members of the Series II Preferred Stockholder may appoint directors to our board who have different objectives or a different philosophy for the management of our business, including the hiring and compensation of our investment professionals, from those of our current directors. If any of the foregoing were to occur, we could experience a material change in our operations which could adversely impact our business, results of operations and financial condition.We intend to pay regular dividends to holders of our common stock, but our ability to do so may be limited by cash flow from operations and available liquidity, our holding company structure, applicable provisions of Delaware law and contractual restrictions.Our intention is to pay to holders of common stock a quarterly dividend representing approximately 85% of Blackstone Inc.’s share of Distributable Earnings, subject to adjustment by amounts determined by Blackstone’s board of directors to be necessary or appropriate under our dividend policy. 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 may change at any time, including, without limitation, to reduce such quarterly dividends or to eliminate such dividends entirely.Blackstone Inc. is a holding company and has no material assets other than the ownership of the partnership units in Blackstone Holdings held through wholly owned subsidiaries. Blackstone Inc. has no independent means of generating revenue. Accordingly, we intend to cause Blackstone Holdings to make distributions to its partners, including Blackstone Inc.’s wholly owned subsidiaries, to fund any dividends Blackstone Inc. may declare on our common stock.Our ability to make dividends to our stockholders will depend on a number of factors, including among others general economic and business conditions, our strategic plans and prospects, our business and investment opportunities, our financial condition and operating results, including the timing and extent of our realizations, working capital requirements and anticipated cash needs, contractual restrictions and obligations including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of dividends by us to holders of our common stock or payment of distributions by our subsidiaries to us and such other factors as our board of directors may deem relevant. Our ability to pay dividends is also subject to the availability of lawful funds therefor as determined in accordance with the Delaware General Corporation Law.We are required to pay our senior managing directors for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up
we received as part of the reorganization we implemented in connection with our IPO or receive in connection with future exchanges of our common stock and related transactions.
As part of the reorganization we implemented in connection with our IPO, we purchased interests in our business from our pre-IPO
owners. In addition, holders of partnership units in Blackstone Holdings (other than Blackstone Inc.’s wholly owned subsidiaries), subject to the vesting and minimum retained ownership requirements and transfer restrictions set forth in the partnership agreements of the Blackstone Holdings Partnerships, may up to four times each year (subject to the terms of the exchange agreement) exchange their Blackstone Holdings Partnership Units for shares of Blackstone Inc.’s common stock on a one-for-one
basis. A Blackstone Holdings limited partner must exchange one partnership unit in each of the Blackstone Holdings Partnerships to effect an exchange for a share of common stock. The purchase and subsequent exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Blackstone Holdings that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce the amount of tax that we would otherwise be required to pay in the future, although the IRS may challenge all or part of that tax basis increase, and a court could sustain such a challenge.
71Table of ContentsWe have entered into tax receivable agreements with our senior managing directors and other pre-IPO
owners that provides for the payment by us to the counterparties of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the tax receivable agreements, including tax benefits attributable to payments under the tax receivable agreements. This payment obligation is an obligation of Blackstone Inc. and/or its wholly owned subsidiaries and not of Blackstone Holdings. As such, the cash distributions to public stockholders may vary from holders of Blackstone Holdings Partnership Units (held by Blackstone personnel and others) to the extent payments are made under the tax receivable agreements to selling holders of Blackstone Holdings Partnership Units. As the payments reflect actual tax savings received by Blackstone entities, there may be a timing difference between the tax savings received by Blackstone entities and the cash payments to selling holders of Blackstone Holdings Partnership Units. While the actual increase in tax basis, as well as the amount and timing of any payments under these agreements, will vary depending upon a number of factors, including the timing of exchanges, the price of our common stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of our income, we expect that as a result of the size of the increases in the tax basis of the tangible and intangible assets of Blackstone Holdings, the payments that we may make under the tax receivable agreements will be substantial. The payments under a tax receivable agreement are not conditioned upon a tax receivable agreement counterparty’s continued ownership of us. We may need to incur debt to finance payments under the tax receivable agreements to the extent our cash resources are insufficient to meet our obligations under the tax receivable agreements as a result of timing discrepancies or otherwise.
Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the tax receivable agreement counterparties will not reimburse us for any payments previously made under the tax receivable agreements. As a result, in certain circumstances payments to the counterparties under the tax receivable agreements could be in excess of our actual cash tax savings. Our ability to achieve benefits from any tax basis increase, and the payments to be made under the tax receivable agreements, will depend upon a number of factors, as discussed above, including the timing and amount of our future income.If Blackstone Inc. were deemed an “investment company” under the 1940 Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.An entity will generally be deemed to be an “investment company” for purposes of the 1940 Act if: (a) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (b) absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We hold ourselves out as engaging, and believe that we are engaged primarily in, the business of providing asset management and capital markets services and not in the business of investing, reinvesting or trading in securities. We also believe that the primary source of income from each of our businesses is properly characterized as income earned in exchange for the provision of services. Accordingly, we do not believe that Blackstone Inc. is an “orthodox” investment company as described in clause (a) in the first sentence of this paragraph. Furthermore, Blackstone Inc. does not have any material assets other than its general partner interests in the Blackstone Holdings Partnerships and its equity interests in certain wholly owned subsidiaries (which in turn have no material assets other than intercompany debt). These wholly owned subsidiaries are the sole general partners of the Blackstone Holdings Partnerships and are vested with all management and control over the Blackstone Holdings Partnerships. We do not believe these assets are investment securities. Moreover, because we believe that the capital interests of the general partners of our funds in their respective funds are neither securities nor investment securities, we believe that less than 40% of Blackstone Inc.’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis are comprised of assets that could be considered investment securities. Accordingly, we do not believe Blackstone Inc. is an inadvertent investment company by virtue of the 40% test described in clause (b) in the first sentence of this paragraph. In addition, we believe Blackstone Inc. is not an investment company under Section 3(b)(1) of the 1940 Act because it is primarily engaged in a non-investment
company business.
72Table of ContentsThe 1940 Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. Accordingly, Blackstone Inc. conducts its operations so that it will not be deemed to be an investment company under the 1940 Act. If Blackstone Inc. were deemed to be an investment company under the 1940 Act, it would have to comply with rules thereunder, which could impose limitations on our capital structure, ability to transact business with affiliates and compensate key employees. This could make it impractical to continue our business as currently conducted, impair the agreements and arrangements between and among Blackstone Inc., Blackstone Holdings and our senior managing directors, or any combination thereof, and materially adversely affect our business, financial condition and results of operations.Other anti-takeover provisions in our charter documents could delay or prevent a change in control.In addition to the provisions described elsewhere relating to the Series II Preferred Stockholder’s control, other provisions in our certificate of incorporation and bylaws may discourage, delay or prevent a change in control or a merger or acquisition that a stockholder may consider favorable by, for example:
• permitting our board of directors to issue one or more series of preferred stock,
• providing for the loss of voting rights for the common stock,
• requiring advance notice for stockholder proposals and nominations if they are ever permitted by applicable law,
• placing limitations on convening stockholder meetings,
• prohibiting stockholder action by written consent unless such action is consented to by the Series II Preferred Stockholder and
• imposing super-majority
voting requirements for certain amendments to our certificate of incorporation.Risks Related to Our Common Stock
The price of our common stock may decline due to the large number of shares of common stock eligible for future sale and for exchange.The market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market in the future or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell shares of common stock in the future at a time and at a price that we deem appropriate. In connection with our initial public offering, we entered into an exchange agreement with holders of Blackstone Holdings Partnership Units (other than Blackstone Inc.’s wholly owned subsidiaries) so that these holders, subject to vesting and minimum retained ownership requirements, transfer restrictions and other terms, may up to four times each year exchange their Blackstone Holdings Partnership Units for shares of Blackstone Inc. common stock on a one-for-one
basis We have entered into a registration rights agreement with such limited partners that requires us to register these shares of common stock under the Securities Act and we have filed registration statements that cover the delivery of common stock issued upon exchange of Blackstone Holdings Partnership Units. See “Part III. Item 13. Certain Relationships and Related Transactions, and Director Independence — Transactions with Related Persons — Registration Rights Agreement.” While the Blackstone Holdings partnership agreements and related agreements restrict the ability of Blackstone personnel to transfer Blackstone Holdings Partnership Units or Blackstone Inc. common stock and require that they maintain a minimum amount of equity ownership during their employ by us, these contractual provisions may lapse over time or be waived, modified or amended at any time. In addition, the Blackstone Holdings partnership agreements authorize Blackstone to issue an unlimited number of additional partnership securities with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the Blackstone Holdings Partnership Units, and which may be exchangeable for our shares of common stock.
73Table of ContentsWe additionally have and may in the future grant deferred restricted shares of common stock and deferred restricted Blackstone Holdings Partnership Units to our non-senior
managing director professionals and senior managing directors under the Blackstone Inc. Amended and Restated 2007 Equity Incentive Plan (“2007 Equity Incentive Plan”). We have filed and intend to file additional registration statements on Form S-8
under the Securities Act to register common stock covered by the 2007 Equity Incentive Plan (including pursuant to automatic annual increases). Any such Form S-8
registration statement will automatically become effective upon filing. Moreover, we have filed a registration statement on Form S-3
under the Securities Act to register common stock, among other securities, for future offerings. Accordingly, common stock registered under such registration statement will be available for sale in the open market.Our certificate of incorporation also provides us with a right to acquire all of the then outstanding shares of common stock under specified circumstances, which may adversely affect the price of our shares of common stock and the ability of holders of shares of common stock to participate in further growth in our stock price.
Our certificate of incorporation provides that, if at any time, less than 10% of the total shares of any class of our stock then outstanding (other than Series I preferred stock and Series II preferred stock) is held by persons other than the Series II Preferred Stockholder and its affiliates, we may exercise our right to call and purchase all of the then outstanding shares of common stock held by persons other than the Series II Preferred Stockholder or its affiliates or assign this right to the Series II Preferred Stockholder or any of its affiliates. As a result, a stockholder may have his or her shares of common stock purchased from him or her at an undesirable time or price and in a manner which adversely affects the ability of a stockholder to participate in further growth in our stock price.Our amended and restated bylaws designate the Court of Chancery of the State of Delaware or the federal district courts of the United States of America, as applicable, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with Blackstone or our directors, officers or other employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a breach of fiduciary duty owed by any of our current or former directors, officers, stockholders or employees to us or our stockholders, (c) any action asserting a claim against us arising under the Delaware General Corporation Law (the “DGCL”), our certificate of incorporation or our amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (d) any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including, in each case, the applicable rules and regulations promulgated thereunder.Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provision in our amended and restated bylaws. This choice-of-forum
provision may limit a stockholder’s ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for a specified class of disputes with Blackstone or our directors, officers, other stockholders or employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated bylaws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
Item 7 · Management's Discussion & Analysis
+1008 paragraphs −2062 paragraphs ~1008 changed
FY 2023-12-31 (earlier)
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with Blackstone Inc.’s consolidated financial statements and the related notes included within this Annual Report on Form 10-K.This section of this Form 10-K generally discusses 2023 and 2022 items and year to year comparisons between 2023 and 2022. For the discussion of 2022 compared to 2021 see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Blackstone’s Annual Report on Form 10-K for the year ended December 31, 2022, which specific discussion is incorporated herein by reference.Our BusinessBlackstone is the world’s largest alternative asset manager. Our business is organized into four segments: Real Estate, Private Equity, Credit & Insurance and Hedge Fund Solutions. For more information about our business segments, see “Part I. Item 1. Business — Business Segments.”
We generate revenue primarily from fees earned pursuant to contractual arrangements with funds and investors, and 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 investments, the industries in which they operate, the overall economy and other market conditions.Business EnvironmentBlackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S., Europe, Asia and, to a lesser extent, elsewhere in the world.
2023 was a volatile year for global markets, driven by historic movements in U.S. Treasury bond yields, geopolitical instability, including in the Middle East and economic uncertainty. Major central banks globally continued monetary policy tightening in the context of historically elevated inflation. In the U.S., the Federal Reserve increased the federal funds target range four times over the course of 2023, which reached 5.25%-5.50% in July — the highest level in 22 years. Accordingly, inflation in the U.S. decelerated throughout the year, with the U.S. consumer price index decreasing from 6.4% annual growth in January 2023 to 3.4% in December 2023, at which time the Federal Reserve signaled that a reduction in the federal funds target range could be appropriate in 2024. Similarly, in the Eurozone economy, the European Central bank raised its deposit facility rate by 200 basis points in 2023. Consequently, Eurozone inflation slowed from 8.6% annual growth in January 2023 to 2.9% at year end.
Nevertheless, the U.S. economy continued to show resiliency in 2023, underpinned by a strong labor market. The Bureau of Economic Analysis’ advance estimate of U.S. real GDP indicated growth of 2.5% year-over-year in 2023, up from 1.9% in 2022. The U.S. unemployment rate remained largely stable with pre-pandemic levels at 3.7% in both December 2023 and subsequent to year end in January 2024. U.S. retail sales increased 3.2% year-over-year in 2023, driven in part by higher prices. In manufacturing, however, the Institute for Supply Management
86Table of ContentsPurchasing Managers’ Index decreased moderately to 47.4 in December 2023, compared to 48.4 in December 2022, signaling a continued contraction in the U.S. manufacturing sector. Growth in major economies outside of the U.S. was mixed in 2023. In Europe, Eurozone real GDP growth contracted to 0.1% year-over-year in the fourth quarter from 1.8% in the fourth quarter of 2022. In China, real GDP growth increased to 5.2% year over year in 2023, up from 3% in 2022, but below the yearly average of 6% over the last ten years.
In the fourth quarter of 2023, major equity markets rallied sharply on increasing expectations that the current cycle of monetary policy tightening was at or nearing its end. The S&P 500 rose 12% in the fourth quarter and increased 26% for the full year. Most sectors gained during the year, led by information technology, which rose 58%. Oil prices declined during the year, with the price of West Texas Intermediate crude oil down 11% in 2023 to $72 per barrel. The Henry Hub Natural Gas spot price decreased 44% in 2023 to $2.51. Capital markets activity declined, with global initial public offering volumes down 31% and global announced merger and acquisition volumes down 16% compared to 2022.
In credit markets, the S&P leveraged loan index increased 13% in 2023, while the Credit Suisse high yield bond index rose 14%. High yield spreads tightened 135 basis points in 2023, while issuance increased 64% year-over-year. Base rates were highly volatile during the year, with the ten-year Treasury yield increasing 114 basis points from the beginning of 2023 to an intraday high of 5.02% in October — representing a 16-year high — but ended the year lower at 3.88%. Short-term rates, however, increased in 2023 with three-month SOFR up 74 basis points to 5.33% at year end.
Moderating inflation and economic resiliency in the U.S. have led to an increase in investor confidence in recent months. However, the potential for sustained high interest rates and decelerating economic growth may contribute to continued market volatility in the U.S. and globally.Notable TransactionsOn December 15, 2023, Blackstone entered into an amended and restated $4.325 billion revolving credit facility. The amendment and restatement, among other things, increased the amount of available borrowings and extended the maturity date to December 15, 2028.
For additional information see Note 13. “Borrowings” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.”
87Table of Contents
Organizational Structure
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.
Key Financial Measures and IndicatorsWe 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 Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See “— Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 2. Summary of Significant Accounting Policies” and “— Critical Accounting Policies.” Our key non-GAAP financial measures and operating indicators and metrics are discussed below.Distributable EarningsDistributable Earnings is derived from Blackstone’s segment reported results. Distributable Earnings is used to assess performance and amounts available for dividends to Blackstone stockholders, 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 (Loss) Before Provision (Benefit) for Taxes. See “— Non-GAAP Financial Measures” for our reconciliation of Distributable Earnings.
88Table of Contents
Net Interest and Dividend Income (Loss) is presented on a segment basis and is equal to Interest and Dividend Revenue less Interest Expense, adjusted for the impact of consolidation of Blackstone Funds, and interest expense associated with the Tax Receivable Agreement.Taxes and Related Payables represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) 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 and Non-Recurring Items 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 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 stockholders.Segment Distributable EarningsSegment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. Blackstone believes it is useful to stockholders to review the measure that management uses in assessing segment performance. 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 and Non-Recurring Items. Transaction-Related and Non-Recurring Items arise from corporate actions including acquisitions, divestitures, Blackstone’s initial public offering and non-recurring gains, losses, or other charges, if any. 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, gains or losses associated with these corporate actions and non-recurring gains, losses or other charges that affect period-to-period comparability and are not reflective of Blackstone’s operational performance. 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 (Loss) Before Provision (Benefit) for Taxes. See “— Non-GAAP Financial Measures” for our reconciliation of Segment Distributable Earnings.
Effective September 30, 2023, Blackstone redefined Segment Distributable Earnings to exclude the impact of non-recurring gains, losses or other charges that affect period-to-period comparability and are not reflective of Blackstone’s operational performance. Blackstone believes the exclusion of such amounts is useful to investors as it assists in the comparison of Blackstone’s operational performance across different periods. The updated definition had no impact to the current or any previously reported period.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).89Table of ContentsRealized 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. In the year ended December 31, 2023, Realized Performance Compensation was increased by an aggregate of $65.0 million and Fee Related Compensation was decreased by a corresponding amount. In the year ended December 31, 2022, Realized Performance Compensation was increased by an aggregate of $77.0 million and Fee Related Compensation decreased by a corresponding amount. These changes to Realized Performance Compensation and Fee Related Compensation reduced Net Realizations, increased Fee Related Earnings and had a neutral impact to Income Before Provision (Benefit) for Taxes and Distributable Earnings in the years ended December 31, 2023 and December 31, 2022.Fee Related EarningsFee 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. Blackstone believes Fee Related Earnings is useful to stockholders as it provides insight into the profitability of the portion of Blackstone’s business that is not dependent on realization activity. 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 (Loss) 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 from Perpetual 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 AmortizationAdjusted 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 (Loss) Before Provision (Benefit) for Taxes. See “— Non-GAAP Financial Measures” for our reconciliation of Adjusted EBITDA.
90
Table of ContentsNet Accrued Performance RevenuesNet Accrued Performance Revenues is a non-GAAP financial measure Blackstone believes is useful to stockholders 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 Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” for additional information on the calculation of Investments — Accrued Performance Allocations.Operating MetricsThe 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. We believe this measure is useful to stockholders as it represents the total capital for which we provide investment management services. 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-investment entities 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 Hedge Fund 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 and BDCs,
(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, Credit & Insurance and Hedge Fund Solutions segments generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually, quarterly or monthly), typically with 2 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. In our Perpetual Capital vehicles where redemption rights exist, Blackstone has the ability
91Table of Contentsto 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 Credit & Insurance and Hedge Fund Solutions segments, excluding our separately managed accounts in our insurance platform, may generally be terminated by an investor on 30 to 90 days’ notice. Separately managed accounts in our insurance platform 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. We believe this measure is useful to stockholders as it provides insight into the capital base upon which we can earn management fees and/or performance revenues. Our Fee-Earning Assets Under Management equals the sum of:
(a)
for our Private Equity segment funds, Real Estate segment carry funds including certain BREDS funds and certain 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 and BDCs.
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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Table of ContentsPerpetual CapitalPerpetual 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 into Perpetual Capital. We believe this measure is useful to stockholders as it represents capital we manage that has a longer duration and the ability to generate recurring revenues in a different manner than traditional fund structures.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. We believe this measure is useful to stockholders as it provides insight into the extent to which capital is available for Blackstone to deploy capital into investment opportunities as they arise.Invested Performance Eligible Assets Under ManagementInvested Performance Eligible Assets Under Management represents 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. We believe Invested Performance Eligible Assets Under Management is useful to stockholders as it provides insight into the capital deployed that has the potential to generate performance revenues.Recent Tax DevelopmentsOn October 8, 2021, the OECD and Group of 20 (“G20”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (“Framework”), which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. On December 20, 2021, the OECD released Pillar Two Model Rules, which contemplate a global 15% minimum tax rate. The OECD continues to release additional guidance, including administrative guidance on interpretation and application of Pillar Two, and many countries are passing legislation to comply with Pillar Two. The Framework calls for law enactment by OECD and G20 members to take effect in 2024 and 2025. The changes contemplated by Pillar Two, when enacted by various countries in which we do business, may increase our taxes in such countries. Based on available guidance, currently we do not believe the impact of Pillar Two to our business would be material. For further discussion of potential consequences of changes in tax regulations, please see “— Item 1A. Risk Factors — Risks Related to our Business — Changes in U.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.”Consolidated Results of OperationsFollowing 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 and Non-Recurring Items) in these periods, see “— Segment Analysis” below.
93Table of ContentsThe following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the years ended December 31, 2023, 2022 and 2021:Year Ended December 31,2023 vs. 2022
2022 vs. 202120232022
2021$
%
$
%
(Dollars in Thousands)
Revenues
Management and Advisory Fees, Net$
6,671,260
$
6,303,315
$
5,170,707
$
367,945
6%
$
1,132,608
22%Incentive Fees695,171
525,127
253,991
170,044
32%
271,136
107%Investment Income (Loss)
Performance Allocations
Realized2,223,841
5,381,640
5,653,452
(3,157,799
)
-59%
(271,812
)
-5%Unrealized(1,691,668
)
(3,435,056
)
8,675,246
1,743,388
-51%
(12,110,302
)
n/mPrincipal Investments
Realized303,823
850,327
1,003,822
(546,504
)
-64%
(153,495
)
-15%Unrealized(603,154
)
(1,563,849
)
1,456,201
960,695
-61%
(3,020,050
)
n/mTotal Investment Income232,842
1,233,062
16,788,721
(1,000,220
)
-81%
(15,555,659
)
-93%Interest and Dividend Revenue516,497
271,612
160,643
244,885
90%
110,969
69%Other(92,929
)
184,557
203,086
(277,486
)
n/m
(18,529
)
-9%Total Revenues8,022,841
8,517,673
22,577,148
(494,832
)
-6%
(14,059,475
)
-62%Expenses
Compensation and Benefits
Compensation2,785,447
2,569,780
2,161,973
215,667
8%
407,807
19%Incentive Fee Compensation281,067
207,998
98,112
73,069
35%
109,886
112%Performance Allocations Compensation
Realized900,859
2,225,264
2,311,993
(1,324,405
)
-60%
(86,729
)
-4%Unrealized(654,403
)
(1,470,588
)
3,778,048
816,185
-56%
(5,248,636
)
n/mTotal Compensation and Benefits3,312,970
3,532,454
8,350,126
(219,484
)
-6%
(4,817,672
)
-58%General, Administrative and Other1,117,305
1,092,671
917,847
24,634
2%
174,824
19%Interest Expense431,868
317,225
198,268
114,643
36%
118,957
60%Fund Expenses118,987
30,675
10,376
88,312
288%
20,299
196%Total Expenses4,981,130
4,973,025
9,476,617
8,105
-
(4,503,592
)
-48%Other Income (Loss)
Change in Tax Receivable Agreement Liability(27,196
)
22,283
(2,759
)
(49,479
)
n/m
25,042
n/mNet Gains (Losses) from Fund Investment Activities(56,801
)
(105,142
)
461,624
48,341
-46%
(566,766
)
n/mTotal Other Income (Loss)(83,997
)
(82,859
)
458,865
(1,138
)
1%
(541,724
)
n/mIncome Before Provision for Taxes2,957,714
3,461,789
13,559,396
(504,075
)
-15%
(10,097,607
)
-74%Provision for Taxes513,461
472,880
1,184,401
40,581
9%
(711,521
)
-60%Net Income2,444,253
2,988,909
12,374,995
(544,656
)
-18%
(9,386,086
)
-76%
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities
(245,518
)
(142,890
)
5,740
(102,628
)
72%
(148,630
)
n/mNet Income Attributable to Non-Controlling Interests in Consolidated Entities224,155
107,766
1,625,306
116,389
108%
(1,517,540
)
-93%Net Income Attributable to Non-Controlling Interests in Blackstone Holdings1,074,736
1,276,402
4,886,552
(201,666
)
-16%
(3,610,150
)
-74%Net Income Attributable to Blackstone Inc.$
1,390,880
$
1,747,631
$
5,857,397
$
(356,751
)
-20%
$
(4,109,766
)
-70%n/m Not meaningful.94Table of ContentsYear Ended December 31, 2023 Compared to Year Ended December 31, 2022RevenuesRevenues were $8.0 billion for the year ended December 31, 2023, a decrease of $494.8 million, compared to $8.5 billion for the year ended December 31, 2022. The decrease in Revenues was primarily attributable to a decrease of $1.0 billion in Investment Income, which was composed of a decrease of $3.7 billion in Realized Investment Income and an increase of $2.7 billion in Unrealized Investment Income, partially offset by an increase of $367.9 million in Management and Advisory Fees, Net.
The $3.7 billion decrease in Realized Investment Income was primarily attributable to lower realized gains in our Real Estate segment.
The $2.7 billion increase in Unrealized Investment Income was primarily attributable to lower net unrealized depreciation of investments in the year ended December 31, 2023 compared to the year ended December 31, 2022. Principal drivers were:
•
An increase of $1.8 billion in our Private Equity segment, primarily attributable to net unrealized appreciation of investments in Corporate Private Equity in the year ended December 31, 2023 compared to net unrealized depreciation of investments in the year ended December 31, 2022. The carrying value of Corporate Private Equity increased 12.1% in the year ended December 31, 2023 compared to a decrease of 0.6% in the year ended December 31, 2022.
•
An increase of $1.1 billion in our Credit & Insurance segment, primarily attributable to lower net unrealized depreciation of investments in our insurance platform in the year ended December 31, 2023 compared to the year ended December 31, 2022.
•
A decrease of $524.1 million in our Real Estate segment, primarily attributable to lower appreciation in BREP and Core+ real estate in the year ended December 31, 2023 compared to the year ended December 31, 2022 and an unrealized loss on the liability related to the strategic ventures with UC Investments (defined herein). The carrying values of BREP and Core+ real estate decreased 6.3% and 4.3%, respectively, in the year ended December 31, 2023 compared to an increase of 7.1% and 10.3%, respectively, in the year ended December 31, 2022.
The $367.9 million increase in Management and Advisory Fees, Net was primarily due to increases in our Real Estate and Credit & Insurance segments of $220.3 million and $116.2 million, respectively. The increase in our Real Estate segment was primarily due to Fee-Earning Assets Under Management growth in BREP. The increase in our Credit & Insurance segment was primarily due to inflows from Fee-Earning Assets Under Management in direct lending.ExpensesExpenses were $5.0 billion for the year ended December 31, 2023, an increase of $8.1 million, compared to the year ended December 31, 2022. The increase was primarily attributable to increases of $114.6 million in Interest Expense and $88.3 million in Fund Expenses, partially offset by a decrease of $219.5 million in Total Compensation and Benefits, which is primarily composed of a decrease of $508.2 million in Performance Allocations Compensation and an increase of $215.7 million in Compensation. The increase in Interest Expense was primarily due to an increase in borrowings. The increase in Fund Expenses was primarily due to an increase in interest expense in a consolidated private equity fund. 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.
95
Table of ContentsOther Income (Loss)Other Income (Loss) was $(84.0) million for the year ended December 31, 2023, a decrease of $1.1 million, compared to $(82.9) million for the year ended December 31, 2022. The decrease in Other Income (Loss) was due to a decrease of $49.5 million in Change in Tax Receivable Agreement Liability, partially offset by an increase of $48.3 million in Net Gains (Losses) from Fund Investment Activities.
Changes to the Tax Receivable Agreement Liability are driven by the required remeasurement of the liability as a result of changes in expected future tax rates.
The increase in Net Gains (Losses) from Fund Investment Activities was principally driven by increases of $203.7 million and $121.7 million in our Private Equity and Hedge Fund Solutions segments, respectively, partially offset by a decrease of $300.2 million in our Real Estate segment. The increases in our Private Equity and Hedge Fund Solutions segments were primarily due to unrealized appreciation of investments in our consolidated Private Equity and Hedge Fund Solutions funds. The decrease in our Real Estate segment was primarily due to realized losses and unrealized depreciation of investments in our consolidated funds.
Provision (Benefit) for Taxes
Blackstone’s Provision for Taxes for the year ended December 31, 2023 was $513.5 million, an increase of $40.6 million, compared to $472.9 million for the year ended December 31, 2022. This resulted in an effective tax rate of 17.4% and 13.7% based on our Income Before Provision for Taxes of $3.0 billion and $3.5 billion for the years ended December 31, 2023 and 2022, respectively.
The increase in Blackstone’s effective tax rate for the year ended December 31, 2023, compared to the year ended December 31, 2022, resulted primarily from an out-of-period adjustment recorded in December 31, 2022 to revise the book investment basis used to calculate deferred tax assets and the deferred tax provision.
Blackstone had a corporate alternative minimum tax (“CAMT”) liability for the year ended December 31, 2023 as calculated pursuant to the Inflation Reduction Act. Blackstone will continue to assess the overall impact to its Provision for Income Tax upon the issuance of applicable additional guidance by the U.S. Treasury Department related to interpretations of CAMT. For the year ended December 31, 2023 there is no meaningful CAMT impact reflected in the Provision for Income Taxes given current year tax payments made under CAMT are permitted to be carried forward and used as credits in future years resulting in a deferred tax benefit.
On December 27, 2023, New York State finalized regulations with respect to various areas of its tax reform. The impact of the legislation has been considered and incorporated in the computation of the tax provision for the year ended December 31, 2023.
Additional information regarding our income taxes can be found in “— Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 15. Income Taxes” of this filing.
Non-Controlling Interests in Consolidated Entities
The Net Income Attributable to Redeemable Non-Controlling Interests in Consolidated Entities and Net Income Attributable to Non-Controlling Interests in Consolidated Entities is attributable to the consolidated Blackstone Funds. The amounts of these items vary directly with the performance of the consolidated Blackstone Funds and largely eliminate the amount of Other Income (Loss) — Net Gains (Losses) from Fund Investment Activities from the Net Income (Loss) Attributable to Blackstone Inc.
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings is derived from the Income Before Provision (Benefit) for Taxes at the Blackstone 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 of Blackstone Holdings and Blackstone after considering any contractual arrangements that govern the allocation of income such as fees allocable to Blackstone.
96Table of ContentsFor the years ended December 31, 2023 and 2022, the Net Income Before Taxes allocated to Blackstone personnel and others who are limited partners of Blackstone Holdings was 39.2% and 39.7%, respectively. The decrease of 0.5% was primarily due to the conversion of Blackstone Holdings Partnership Units to shares of common stock and the vesting of shares of common stock.The Other Income (Loss) — Change in Tax Receivable Agreement Liability was entirely allocated to Blackstone Inc.
Operating MetricsTotal 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 years ended December 31, 2023, 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.”
97Table of Contents
Note: Totals may not add due to rounding.98Table of Contents
Year Ended December 31,2023
2022Real Estate
Private
EquityCredit &
Insurance
Hedge Fund SolutionsTotal
Real Estate
Private
Equity
Credit & InsuranceHedge Fund SolutionsTotal
(Dollars in Thousands)Fee-Earning Assets Under ManagementBalance, Beginning of Period$
281,967,153
$
167,082,852
$
198,162,931
$
71,173,952
$
718,386,888
$
221,476,699
$
156,556,959
$
197,900,832
$
74,034,568
$
649,969,058Inflows (a)60,404,380
8,354,796
43,049,516
7,543,408
119,352,100
98,569,361
20,408,720
43,116,181
10,175,526
172,269,788Outflows (b)(18,176,929
)
(737,831
)
(13,525,080
)
(9,422,647
)
(41,862,487
)
(20,168,572
)
(3,799,650
)
(22,426,317
)
(11,698,834
)
(58,093,373
)
Net Inflows (Outflows)
42,227,451
7,616,965
29,524,436
(1,879,239
)
77,489,613
78,400,789
16,609,070
20,689,864
(1,523,308
)
114,176,415Realizations (c)(20,266,342
)
(8,693,829
)
(13,454,682
)
(3,186,119
)
(45,600,972
)
(22,661,825
)
(9,111,472
)
(8,644,654
)
(1,988,241
)
(42,406,192
)Market Activity (d)(g)(5,038,787
)
2,614,557
9,611,399
5,145,204
12,332,373
4,751,490
3,028,295
(11,783,111
)
650,933
(3,352,393
)Balance, End of Period (e)$
298,889,475
$
168,620,545
$
223,844,084
$
71,253,798
$
762,607,902
$
281,967,153
$
167,082,852
$
198,162,931
$
71,173,952
$
718,386,888Increase (Decrease)$
16,922,322
$
1,537,693
$
25,681,153
$
79,846
$
44,221,014
$
60,490,454
$
10,525,893
$
262,099
$
(2,860,616
)
$
68,417,830Increase (Decrease)6
%
1
%
13
%
—
6
%
27
%
7
%
—
-4
%
11
%
Annualized Base Management Fee Rate (f)
0.97
%
1.08
%
0.64
%
0.74
%
0.88
%
0.97
%
1.10
%
0.62
%
0.77
%
0.88
%Year Ended December 31,2021Real EstatePrivate
Equity
Credit &
Insurance
Hedge Fund SolutionsTotal
(Dollars in Thousands)Fee-Earning Assets Under ManagementBalance, Beginning of Period$
149,121,461
$
129,539,630
$
116,645,413
$
74,126,610
$
469,433,114Inflows (a)73,051,751
37,527,024
103,311,869
10,656,310
224,546,954Outflows (b)(3,092,934
)
(3,693,890
)
(11,948,060
)
(14,704,010
)
(33,438,894
)Net Inflows (Outflows)69,958,817
33,833,134
91,363,809
(4,047,700
)
191,108,060Realizations (c)(14,210,387
)
(13,187,981
)
(12,775,234
)
(1,569,057
)
(41,742,659
)Market Activity (d)(g)16,606,808
6,372,176
2,666,844
5,524,715
31,170,543Balance, End of Period (e)$
221,476,699
$
156,556,959
$
197,900,832
$
74,034,568
$
649,969,058
Increase (Decrease)
$
72,355,238
$
27,017,329
$
81,255,419
$
(92,042
)
$
180,535,944Increase49
%
21
%
70
%
—
38
%
Annualized Base Management Fee Rate (f)
1.09
%
1.10
%
0.55
%
0.86
%
0.92
%
99Table of Contents
Year Ended December 31,2023
2022Real Estate
Private
EquityCredit &
Insurance
Hedge Fund SolutionsTotal
Real Estate
Private
EquityCredit &
Insurance
Hedge Fund SolutionsTotal
(Dollars in Thousands)Total Assets Under ManagementBalance, Beginning of Period$
326,146,904
$
288,902,142
$
279,908,030
$
79,716,001
$
974,673,077
$
279,474,105
$
261,471,007
$
258,622,467
$
81,334,141
$
880,901,720Inflows (a)53,922,506
23,797,324
62,498,168
8,300,415
148,518,413
90,199,877
52,706,725
72,038,472
11,094,365
226,039,439Outflows (b)(15,642,086
)
(3,085,260
)
(17,213,852
)
(9,776,780
)
(45,717,978
)
(13,577,103
)
(3,989,728
)
(22,995,061
)
(11,499,687
)
(52,061,579
)
Net Inflows (Outflows)
38,280,420
20,712,064
45,284,316
(1,476,365
)
102,800,435
76,622,774
48,716,997
49,043,411
(405,322
)
173,977,860Realizations (c)(18,744,078
)
(23,228,649
)
(20,368,540
)
(3,349,572
)
(65,690,839
)
(37,061,836
)
(24,235,386
)
(18,352,741
)
(2,117,677
)
(81,767,640
)Market Activity (d)(h)(8,743,150
)
17,652,664
14,091,870
5,408,390
28,409,774
7,111,861
2,949,524
(9,405,107
)
904,859
1,561,137Balance, End of Period (e)$
336,940,096
$
304,038,221
$
318,915,676
$
80,298,454
$
1,040,192,447
$
326,146,904
$
288,902,142
$
279,908,030
$
79,716,001
$
974,673,077Increase (Decrease)$
10,793,192
$
15,136,079
$
39,007,646
$
582,453
$
65,519,370
$
46,672,799
$
27,431,135
$
21,285,563
$
(1,618,140
)
$
93,771,357Increase (Decrease)3
%
5
%
14
%
1
%
7
%
17
%
10
%
8
%
-2
%
11
%Year Ended December 31,2021Real Estate
Private
Equity
Credit & InsuranceHedge Fund SolutionsTotal
(Dollars in Thousands)Total Assets Under ManagementBalance, Beginning of Period$
187,191,247
$
197,549,222
$
154,393,590
$
79,422,869
$
618,556,928Inflows (a)75,257,777
53,858,227
129,433,685
11,921,965
270,471,654Outflows (b)(5,145,881
)
(2,969,032
)
(13,411,898
)
(14,562,917
)
(36,089,728
)Net Inflows (Outflows)70,111,896
50,889,195
116,021,787
(2,640,952
)
234,381,926Realizations (c)(19,490,016
)
(36,616,307
)
(19,475,414
)
(1,627,766
)
(77,209,503
)Market Activity (d)(h)41,660,978
49,648,897
7,682,504
6,179,990
105,172,369Balance, End of Period (e)$
279,474,105
$
261,471,007
$
258,622,467
$
81,334,141
$
880,901,720Increase$
92,282,858
$
63,921,785
$
104,228,877
$
1,911,272
$
262,344,792Increase49
%
32
%
68
%
2
%
42
%
100Table of Contents(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 Fee Rate represents annualized year to date Base 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 year ended December 31, 2023, the impact to Fee-Earning Assets Under Management from foreign exchange rate fluctuations was $1.6 billion, $102.4 million, $1.0 billion, $231.2 million, and $3.0 billion for the Real Estate, Private Equity, Credit & Insurance, Hedge Fund Solutions and Total segments, respectively. For the year ended December 31, 2022, the impact to Fee-Earning Assets Under Management from foreign exchange rate fluctuations was $(3.5) billion, $(123.5) million, $(1.7) billion, $(573.2) million and $(5.9) billion for the Real Estate, Private Equity, Credit & Insurance, Hedge Fund Solutions and Total segments, respectively. For the year ended December 31, 2021, such impact was $(2.1) billion, $(1.1) billion and $(3.2) billion for the Real Estate, Credit & Insurance and Total segments, respectively.
(h)
For the year ended December 31, 2023, the impact to Total Assets Under Management from foreign exchange rate fluctuations was $2.2 billion, $1.1 billion, $1.1 billion, $241.2 million, and $4.6 billion for the Real Estate, Private Equity, Credit & Insurance, Hedge Fund Solutions and Total segments, respectively. For the year ended December 31, 2022, the impact to Total Assets Under Management from foreign exchange rate fluctuations was $(6.6) billion, $(1.5) billion, $(2.1) billion, $(571.4) million and $(10.8) billion for the Real Estate, Private Equity, Credit & Insurance, Hedge Fund Solutions and Total segments, respectively. For the year ended December 31, 2021, such impact was $(3.2) billion, $(1.2) billion, $(1.2) billion and $(5.6) billion for the Real Estate, Private Equity, Credit & Insurance and Total segments, respectively.
Fee-Earning Assets Under Management
Fee-Earning Assets Under Management were $762.6 billion at December 31, 2023, an increase of $44.2 billion compared to $718.4 billion at December 31, 2022. The net increase was due to:
•
In our Real Estate segment, an increase of $16.9 billion from $282.0 billion at December 31, 2022 to $298.9 billion at December 31, 2023. The net increase was due to inflows of $60.4 billion, offset by realizations of $20.3 billion, outflows of $18.2 billion and market depreciation of $5.0 billion.
o
Inflows were driven by $33.0 billion from BREDS, $15.8 billion from BREIT and $9.1 billion from BREP and co-investment. BREDS inflows primarily related to $17.3 billion from a fee-paying joint venture with the Federal Deposit Insurance Corporation to acquire the Signature Bank commercial senior mortgage loan portfolio (the “Signature transaction”) and $12.5 billion from allocations of insurance capital. BREIT inflows included $4.5 billion from the Regents of the University of California (“UC Investments”) in the first quarter of 2023. BREP and co-investment inflows were primarily driven by the commencement of the investment period for the seventh European opportunistic fund.
o
Realizations were driven by $9.9 billion from BREIT, $4.8 billion from BREDS, $3.5 billion from BREP and co-investment and $2.0 billion from BPP and co-investment.
101Table of Contentso
Outflows were driven by $13.3 billion from BREIT, reflecting repurchases, and $3.6 billion from BREP and co-investment, due to remaining uninvested reserves at the end of BREP Europe VI’s investment period.
o
Market depreciation was driven by depreciation of $5.0 billion primarily from BPP and co-investment (which reflected $1.1 billion of foreign exchange appreciation).
Fee-Earning Assets Under Management inflows and outflows in BREP exceeds the Total Assets Under Management inflows and outflows due to the commencement of the investment period for the seventh European opportunistic fund and the termination of the investment period for BREP Europe VI in September 2023. Fee-Earning Assets Under Management inflows are reported when a fund’s investment period commences, whereas Total Assets Under Management inflows are reported at each fund closing. Fee-Earning Assets Under Management outflows include the change in fee base within BREP Europe VI from committed capital to invested capital.
Fee-Earning Assets Under Management inflows in BREDS exceeds the Total Assets Under Management inflows due to the impact of the Signature transaction. Fee-Earning Assets Under Management inflows include the gross outstanding principal balance of the investments in the Signature transaction, whereas Total Assets Under Management inflows include each joint venture partner’s ownership interest at fair value.
•
In our Private Equity segment, an increase of $1.5 billion from $167.1 billion at December 31, 2022 to $168.6 billion at December 31, 2023. The net increase was due to inflows of $8.4 billion and market appreciation of $2.6 billion, offset by realizations of $8.7 billion and outflows of $737.8 million.
o
Inflows were driven by $3.6 billion from BIP, $2.6 billion from Tactical Opportunities and $2.0 billion from Strategic Partners.
o
Market appreciation was driven by appreciation of $2.5 billion from BIP (which reflected $111.1 million of foreign exchange appreciation).
o
Realizations were driven by $3.6 billion from Corporate Private Equity, $2.0 billion from Tactical Opportunities and $1.9 billion from Strategic Partners.
o
Outflows were driven by $441.5 million from BTAS and $259.0 million from Tactical Opportunities.
•
In our Credit & Insurance segment, an increase of $25.7 billion from $198.2 billion at December 31, 2022 to $223.8 billion at December 31, 2023. The net increase was due to inflows of $43.0 billion and market appreciation of $9.6 billion, offset by outflows of $13.5 billion and realizations of $13.5 billion.
o
Inflows were driven by $15.1 billion from liquid credit strategies, $15.1 billion from direct lending and $4.2 billion from asset based finance.
o
Market appreciation was driven by appreciation of $4.6 billion from liquid credit strategies (which reflected $814.2 million of foreign exchange appreciation) and $4.2 billion from direct lending (which reflected $227.7 million of foreign exchange appreciation).
o
Outflows were driven by $7.0 billion from liquid credit strategies and $4.2 billion from direct lending.
o
Realizations were driven by $5.3 billion from direct lending, $3.4 billion from liquid credit strategies and $1.9 billion from mezzanine funds.
102
Table of Contents
•
In our Hedge Fund Solutions segment, a increase of $79.8 million from $71.2 billion at December 31, 2022 to $71.3 billion at December 31, 2023. The net increase was due to inflows of $7.5 billion and market appreciation of $5.1 billion, offset by outflows of $9.4 billion and realizations of $3.2 billion.
o
Inflows were driven by $4.3 billion from liquid and specialized solutions, $2.8 billion from customized solutions and $468.8 million from commingled products.
o
Market appreciation was driven by appreciation of $2.4 billion from customized solutions (which reflected $41.4 million of foreign exchange depreciation), $1.9 billion from liquid and specialized solutions (which reflected $7.1 million of foreign exchange appreciation) and $889.9 million from commingled products (which reflected $265.5 million of foreign exchange appreciation).
o
Outflows were driven by $3.6 billion from customized solutions, $3.0 billion from commingled products and $2.7 billion from liquid and specialized solutions.
o
Realizations were driven by $3.1 billion from liquid and specialized solutions.Total Assets Under ManagementTotal Assets Under Management were $1,040.2 billion at December 31, 2023, an increase of $65.5 billion compared to $974.7 billion at December 31, 2022. The net increase was due to:
•
In our Real Estate segment, an increase of $10.8 billion from $326.1 billion at December 31, 2022 to $336.9 billion at December 31, 2023. The net increase was due to inflows of $53.9 billion, offset by realizations of $18.7 billion, outflows of $15.6 billion and market depreciation of $8.7 billion.
o
Inflows were driven by $28.3 billion from BREDS, $15.8 billion from BREIT and $8.5 billion from BREP and co-investment. BREDS inflows were primarily related to $10.5 billion from the Signature transaction and $13.1 billion from allocations of insurance capital. BREIT inflows included $4.5 billion from UC Investments. BREP and co-investment inflows were driven by fundraising for the seventh European opportunistic fund and BREP X.
o
Realizations were driven by $9.9 billion from BREIT, $3.4 billion from BREDS, $3.3 billion from BREP and co-investment and $2.0 billion from BPP and co-investment.
o
Outflows were driven by $13.3 billion from BREIT, reflecting repurchases.
o
Market depreciation was driven by depreciation of $5.3 billion from BPP and co-investment (which reflected $1.2 billion of foreign exchange appreciation) and depreciation of $3.8 billion from BREP and co-investment (which reflected $759.0 million of foreign exchange appreciation), partially offset by appreciation of $983.5 million from BREDS (which reflected $66.1 million of foreign exchange appreciation).
•
In our Private Equity segment, an increase of $15.1 billion from $288.9 billion at December 31, 2022 to $304.0 billion at December 31, 2023. The net increase was due to inflows of $23.8 billion and market appreciation of $17.7 billion, offset by realizations of $23.2 billion and outflows of $3.1 billion.
o
Inflows were driven by $9.2 billion from Corporate Private Equity, $5.8 billion from Strategic Partners, $3.8 billion from Tactical Opportunities and $3.4 billion from BIP.
o
Market appreciation was driven by appreciation of $10.6 billion from Corporate Private Equity (which reflected $750.2 million of foreign exchange appreciation) and $3.2 billion from BIP (which reflected $116.1 million of foreign exchange appreciation).
o
Realizations were driven by $12.4 billion from Corporate Private Equity and $5.3 billion from Strategic Partners.
o
Outflows were driven by $1.7 billion from Strategic Partners, $558.8 million from Corporate Private Equity and $417.1 million from Tactical Opportunities.
103Table of Contents•
In our Credit & Insurance segment, an increase of $39.0 billion from $279.9 billion at December 31, 2022 to $318.9 billion at December 31, 2023. The net increase was due to inflows of $62.5 billion and market appreciation of $14.1 billion, offset by realizations of $20.4 billion and outflows of $17.2 billion.
o
Inflows were driven by $24.6 billion from direct lending, $15.2 billion from liquid credit strategies, $9.6 billion from our insurance platform and $6.1 billion from asset based finance.
o
Market appreciation was driven by appreciation of $5.5 billion from direct lending (which reflected $228.4 million of foreign exchange appreciation), $4.8 billion from liquid credit strategies (which reflected $829.2 million of foreign exchange appreciation) and $1.1 billion from MLP strategies.
o
Realizations were driven by $8.7 billion from direct lending, $3.4 billion from mezzanine funds and $3.4 billion from liquid credit strategies.
o
Outflows were driven by $7.8 billion from liquid credit strategies and $5.5 billion from direct lending.
•
In our Hedge Fund Solutions segment, an increase of $582.5 million from $79.7 billion at December 31, 2022 to $80.3 billion at December 31, 2023. The net increase was due to inflows of $8.3 billion and market appreciation of $5.4 billion, offset by outflows of $9.8 billion and realizations of $3.3 billion.
o
Inflows were driven by $4.8 billion from liquid and specialized solutions, $2.9 billion from customized solutions and $546.2 million from commingled products.
o
Market appreciation was driven by appreciation of $2.3 billion from customized solutions (which reflected $42.7 million of foreign exchange depreciation), $2.0 billion from liquid and specialized solutions (which reflected $8.7 million of foreign exchange appreciation) and $1.1 billion from commingled products (which reflected $275.3 million of foreign exchange appreciation).
o
Outflows were driven by $3.7 billion from customized solutions, $3.2 billion from commingled products and $2.9 billion from liquid and specialized solutions.
o
Realizations were driven by $3.2 billion from liquid and specialized solutions.
Total Assets Under Management inflows in Corporate Private Equity exceed the Fee-Earning Assets Under Management inflows primarily due to the closings of BCP IX and BETP IV and capital raised in co-investments in the year ended December 31, 2023. Fee-Earning Assets Under Management inflows are reported when a fund’s investment period commences or fee-earning co-investment capital is raised, whereas Total Assets Under Management activity is reported at each fund closing or when co-investment capital is raised.
Total Assets Under Management realizations in our BREP and co-investment funds and our Private Equity segment generally represents the total proceeds and typically exceeds the Fee-Earning Assets Under Management realizations. Fee-Earning Assets Under Management generally represents only the invested capital.
Fee-Earning Assets Under Management in Corporate Private Equity is reported based on committed or remaining invested capital, whereas Total Assets Under Management is reported based on fair value and remaining available capital. Total Assets Under Management market activity therefore exceeds Fee-Earning Assets Under Management market activity.
Total Assets Under Management inflows in our Credit & Insurance segment direct lending funds exceed the Fee-Earning Assets Under Management inflows because Total Assets Under Management inflows are reported at their gross value while, for certain funds, Fee-Earning Assets Under Management are reported as net assets, which is the basis on which fees are charged.
104Table of ContentsDry Powder
The following presents our Dry Powder as of December 31 of each year:
Note: Totals may not add due to rounding.(a)
Represents illiquid drawdown funds, a component of Perpetual Capital and fee-paying co-investments; includes fee-paying third party capital as well as general partner and employee capital that does not earn fees. Amounts are reduced by outstanding capital commitments, for which capital has not yet been invested.Net Accrued Performance RevenuesThe following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as of December 31, 2023 and 2022. Net Accrued Performance Revenues presented do not include clawback amounts, if any, which are disclosed in Note 19. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing. See “— Non-GAAP Financial Measures” for our reconciliation of Net Accrued Performance Revenues.
105Table of Contents
December 31,2023
2022(Dollars in Millions)
Real EstateBREP IV
$
2
$
6
BREP V
4
4
BREP VI
1
21
BREP VII
—
115
BREP VIII
572
749
BREP IX
744
1,011
BREP Europe IV
5
48
BREP Europe V
—
44
BREP Europe VI
104
49
BREP Asia I
92
108
BREP Asia II
—
119BPP129
633BREDS32
11
BTAS
2
25Total Real Estate (a)1,687
2,944Private EquityBCP IV
—
6
BCP V
17
20
BCP VI
340
459
BCP VII
839
870
BCP VIII
366
256
BCP Asia I
149
144
BCP Asia II
32
—
BEP I
25
37
BEP II
78
27
BEP III
203
136
BCEP I
234
205Tactical Opportunities229
234
Strategic Partners
478
512
BIP
333
193
BXLS
82
25
BTAS/Other
173
174Total Private Equity (a)3,581
3,298Credit & Insurance286
312
Hedge Fund Solutions
281
282Total Blackstone Net Accrued Performance Revenues$
5,835
$
6,835Note: Totals may not add due to rounding.(a)
Real Estate and Private Equity include co-investments, as applicable
For the year ended December 31, 2023, Net Accrued Performance Revenues receivable decreased due to net realized distributions of $1.8 billion, partially offset by Net Performance Revenues of $765.7 million.
106Table of Contents
Invested Performance Eligible Assets Under Management
The following presents our Invested Performance Eligible Assets Under Management as of December 31 of each year:
Note: Totals may not add due to rounding.107Table of Contents
Perpetual Capital
The following presents our Perpetual Capital Total Assets Under Management as of December 31 of each year:
Note: Totals may not add due to rounding.Perpetual Capital Total Assets Under Management were $396.3 billion as of December 31, 2023, an increase of $25.2 billion, compared to $371.1 billion as of December 31, 2022. Perpetual Capital Total Assets Under Management in our Credit & Insurance and Private Equity segments increased $22.2 billion and $6.6 billion, respectively. Principal drivers of these increases were:
•
In our Credit & Insurance segment, growth in insurance capital and BCRED resulted in increases of $14.8 billion and $5.9 billion, respectively.
•
In our Private Equity segment, growth in BIP resulted in an increase of $5.6 billion.
108Table of Contents
Investment RecordsFund returns information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.
The following tables present the investment record of our significant carry/drawdown funds and selected perpetual capital strategies from inception through December 31, 2023:
109Table of Contents
Carry/Drawdown Funds
Fund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
Net IRRs (d)
Beginning Date / Ending Date) (a)
Capital
Capital (b)
Value
MOIC (c)
% Public
Value
MOIC (c)
Value
MOIC (c)
Realized
Total
(Dollars/Euros in Thousands, Except Where Noted)
Real Estate
Pre-BREP$
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
—
1,983
n/a
—
4,666,129
1.7x
4,668,112
1.7x
12
%
12
%BREP V (Dec 2005 / Feb 2007)5,539,418
—
6,226
n/a
—
13,463,448
2.3x
13,469,674
2.3x
11
%
11
%BREP VI (Feb 2007 / Aug 2011)11,060,122
—
5,797
n/a
—
27,758,980
2.5x
27,764,777
2.5x
13
%
13
%BREP VII (Aug 2011 / Apr 2015)13,502,690
1,284,421
2,000,250
0.6x
—
28,399,471
2.3x
30,399,721
1.9x
20
%
14
%BREP VIII (Apr 2015 / Jun 2019)16,601,896
2,126,652
12,577,721
1.5x
1
%
21,833,202
2.4x
34,410,923
1.9x
25
%
14
%BREP IX (Jun 2019 / Aug 2022)21,346,598
3,379,621
24,992,884
1.4x
1
%
8,549,345
2.2x
33,542,229
1.5x
59
%
17
%*BREP X (Aug 2022 / Feb 2028)30,498,731
28,234,499
2,477,931
1.1x
32
%
—
n/a
2,477,931
1.1x
n/
m
n/
mTotal Global BREP$
103,990,618
$
35,025,193
$
42,062,792
1.3x
3
%
$
112,205,493
2.3x
$
154,268,285
1.9x
17
%
15
%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)3,205,420
393,185
159,016
0.3x
—
5,856,192
2.4x
6,015,208
2.0x
18
%
13
%BREP Europe IV (Sep 2013 / Dec 2016)6,674,949
1,280,424
1,084,235
0.8x
—
9,982,474
1.9x
11,066,709
1.7x
19
%
12
%BREP Europe V (Dec 2016 / Oct 2019)7,979,853
1,121,512
4,589,558
0.9x
—
6,696,771
3.9x
11,286,329
1.6x
41
%
9
%BREP Europe VI (Oct 2019 / Sep 2023)10,033,576
3,387,193
7,974,065
1.2x
—
3,427,886
2.6x
11,401,951
1.4x
72
%
16
%*BREP Europe VII (Sep 2023 / Mar 2029)5,097,875
4,730,274
367,601
1.0x
—
—
n/a
367,601
1.0x
n/
a
n/
aTotal BREP Europe
€35,445,593
€
10,912,588
€
14,174,475
1.0x
—
€
29,919,525
2.3x
€
44,094,000
1.6x
17
%
11
%continued...110Table of ContentsFund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
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)$
4,262,075
$
898,228
$
1,640,959
1.6x
24
%
$
7,018,318
1.9x
$
8,659,277
1.9x
16
%
12
%BREP Asia II (Dec 2017 / Mar 2022)7,354,782
1,310,674
6,783,639
1.2x
4
%
1,670,209
1.9x
8,453,848
1.3x
32
%
6
%*BREP Asia III (Mar 2022 / Sep 2027)8,225,044
6,877,915
1,241,164
1.0x
—
—
n/a
1,241,164
1.0x
n/
a
-21
%Total BREP Asia19,841,901
9,086,817
9,665,762
1.2x
7
%
8,688,527
1.9x
18,354,289
1.5x
17
%
9
%
BREP Co-Investment (f)
7,308,836
40,457
918,951
2.0x
—
15,219,149
2.2x
16,138,100
2.2x
16
%
16
%Total BREP$
172,853,680
$
56,150,637
$
68,646,642
1.2x
3
%
$
172,689,772
2.3x
$
241,336,414
1.8x
17
%
14
%*BREDS High-Yield (Various) (g)24,060,116
8,065,536
5,916,743
1.0x
—
18,862,743
1.4x
24,779,486
1.2x
10
%
9
%Private Equity
Corporate Private Equity
BCP I (Oct 1987 / Oct 1993)$
859,081
$
—
$
—
n/a
—
$
1,741,738
2.6x
$
1,741,738
2.6x
19
%
19
%BCP II (Oct 1993 / Aug 1997)1,361,100
—
—
n/a
—
3,268,627
2.5x
3,268,627
2.5x
32
%
32
%BCP III (Aug 1997 / Nov 2002)3,967,422
—
—
n/a
—
9,228,707
2.3x
9,228,707
2.3x
14
%
14
%BCOM (Jun 2000 / Jun 2006)2,137,330
24,575
113
n/a
—
2,995,106
1.4x
2,995,219
1.4x
6
%
6
%BCP IV (Nov 2002 / Dec 2005)6,773,182
195,824
231
n/a
—
21,720,334
2.9x
21,720,565
2.9x
36
%
36
%BCP V (Dec 2005 / Jan 2011)21,009,112
1,035,259
69,929
n/a
100
%
38,790,444
1.9x
38,860,373
1.9x
8
%
8
%BCP VI (Jan 2011 / May 2016)15,195,265
1,341,048
4,731,061
2.1x
21
%
28,090,440
2.2x
32,821,501
2.2x
14
%
12
%BCP VII (May 2016 / Feb 2020)18,857,164
1,693,962
18,921,082
1.6x
21
%
15,928,343
2.5x
34,849,425
1.9x
29
%
13
%
*BCP VIII (Feb 2020 / Feb 2026)
25,658,729
11,117,449
19,868,056
1.4x
7
%
1,506,944
2.5x
21,375,000
1.4x
n/
m
11
%
BCP IX (TBD)
17,852,339
17,852,339
—
n/a
—
—
n/a
—
n/a
n/
a
n/
aEnergy I (Aug 2011 / Feb 2015)2,441,558
174,492
479,698
1.5x
55
%
4,174,235
2.0x
4,653,933
1.9x
14
%
11
%Energy II (Feb 2015 / Feb 2020)4,917,864
864,501
3,829,333
1.7x
62
%
3,937,288
1.7x
7,766,621
1.7x
11
%
8
%
*Energy III (Feb 2020 / Feb 2026)
4,371,917
1,579,382
4,867,811
1.8x
16
%
1,307,128
2.4x
6,174,939
1.9x
55
%
34
%
Energy Transition IV (TBD)
2,642,347
2,642,347
—
n/a
—
—
n/a
—
n/a
n/
a
n/
aBCP Asia I (Dec 2017 / Sep 2021)2,438,028
418,459
3,317,476
1.8x
31
%
1,787,587
4.9x
5,105,063
2.3x
96
%
28
%*BCP Asia II (Sep 2021 / Sep 2027)6,656,718
4,910,184
2,208,855
1.5x
10
%
25
n/a
2,208,880
1.5x
n/
a
22
%Core Private Equity I (Jan 2017 / Mar 2021) (h)4,761,597
1,167,697
7,426,538
2.0x
—
2,482,074
4.5x
9,908,612
2.3x
57
%
18
%*Core Private Equity II (Mar 2021 / Mar 2026) (h)8,205,237
5,690,657
3,469,156
1.4x
—
68,770
n/a
3,537,926
1.5x
n/
a
16
%Total Corporate Private Equity$
150,105,990
$
50,708,175
$
69,189,339
1.6x
16
%
$
137,027,790
2.2x
$
206,217,129
2.0x
16
%
15
%continued...111Table of ContentsFund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
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)$
30,971,115
$
15,765,172
$
12,385,194
1.2x
9
%
$
23,023,393
1.8x
$
35,408,587
1.6x
15
%
11
%
*Tactical Opportunities Co-Investment and Other (Various)
10,043,477
1,427,711
4,690,499
1.6x
7
%
9,205,600
1.6x
13,896,099
1.6x
19
%
16
%Total Tactical Opportunities$
41,014,592
$
17,192,883
$
17,075,693
1.3x
8
%
$
32,228,993
1.8x
$
49,304,686
1.6x
16
%
12
%Growth*BXG I (Jul 2020 / Jul 2025)
$
5,056,267
$
1,222,437
$
3,503,415
1.0x
2
%
$
497,131
2.7x
$
4,000,546
1.0x
n/
m
-2
%
BXG II (TBD)
4,093,732
4,093,732
—
n/a
—
—
n/a
—
n/a
n
/a
n/
aTotal Growth$
9,149,999
$
5,316,169
$
3,503,415
1.0x
2
%
$
497,131
2.7x
$
4,000,546
1.0x
n/
m
-2
%Strategic Partners (Secondaries)Strategic Partners I-V (Various) (i)
11,035,527
139,647
15,736
n/a
—
16,776,139
n/a
16,791,875
1.7x
n
/a
13
%Strategic Partners VI (Apr 2014 / Apr 2016) (i)4,362,772
611,267
816,248
n/a
—
4,237,948
n/a
5,054,196
1.7x
n
/a
14
%Strategic Partners VII (May 2016 / Mar 2019) (i)7,489,970
1,570,496
4,164,820
n/a
—
6,551,800
n/a
10,716,620
1.9x
n
/a
17
%Strategic Partners Real Assets II (May 2017 / Jun 2020) (i)1,749,807
471,876
1,204,611
n/a
—
1,113,866
n/a
2,318,477
1.7x
n
/a
16
%Strategic Partners VIII (Mar 2019 / Oct 2021) (i)10,763,600
4,348,349
8,023,258
n/a
—
6,060,532
n/a
14,083,790
1.8x
n
/a
29
%*Strategic Partners Real Estate, SMA and Other (Various) (i)7,055,590
2,436,365
1,994,397
n/a
—
2,001,796
n/a
3,996,193
1.6x
n
/a
14
%
*Strategic Partners Infrastructure III (Jun 2020 / Jul 2024) (i)
3,250,100
870,479
1,961,697
n/a
—
249,542
n/a
2,211,239
1.4x
n
/a
32
%*Strategic Partners IX (Oct 2021 / Jan 2027) (i)19,492,126
11,482,287
5,386,344
n/a
—
662,344
n/a
6,048,688
1.3x
n
/a
18
%*Strategic Partners GP Solutions (Jun 2021 / Dec 2026) (i)2,045,211
850,868
714,059
n/a
—
—
n/a
714,059
1.0x
n
/a
-3
%Total Strategic Partners (Secondaries)$
67,244,703
$
22,781,634
$
24,281,170
n/a
—
$
37,653,967
n/a
$
61,935,137
1.7x
n
/a
15
%Life Sciences
Clarus IV (Jan 2018 / Jan 2020)910,000
81,728
773,667
1.9x
—
369,363
1.1x
1,143,030
1.5x
-4
%
9
%
*BXLS V (Jan 2020 / Jan 2025)
4,948,559
2,989,827
2,654,776
1.6x
5
%
361,841
1.1x
3,016,617
1.5x
n/
m
13
%continued...112Table of ContentsFund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
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
$
97,114
$
—
n/a
—
$
4,809,113
1.6x
$
4,809,113
1.6x
n/a
17%Mezzanine / Opportunistic II (Nov 2011 / Nov 2016)4,120,000
993,179
179,941
0.2x
—
6,591,362
1.6x
6,771,303
1.4x
n/a
10%Mezzanine / Opportunistic III (Sep 2016 / Jan 2021)6,639,133
1,106,840
2,309,594
1.0x
—
7,572,576
1.6x
9,882,170
1.4x
n/a
10%
*Mezzanine / Opportunistic IV (Jan 2021 / Jan 2026)
5,016,771
2,381,115
3,613,613
1.1x
—
792,732
1.8x
4,406,345
1.2x
n/a
13%Stressed / Distressed I (Sep 2009 / May 2013)3,253,143
—
—
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
196,970
0.3x
—
5,387,034
1.2x
5,584,004
1.1x
n/a
1%Stressed / Distressed III (Dec 2017 / Dec 2022)7,356,380
1,279,457
3,052,396
1.2x
—
3,243,803
1.2x
6,296,199
1.2x
n/a
9%
Energy I (Nov 2015 / Nov 2018)
2,856,867
1,154,846
331,416
0.8x
—
3,206,611
1.6x
3,538,027
1.5x
n/a
10%
Energy II (Feb 2019 / Jun 2023)
3,616,081
1,547,033
1,815,358
1.1x
—
1,792,881
1.6x
3,608,239
1.3x
n/a
17%
*Green Energy III (May 2023 / May 2028)
6,477,000
5,813,477
670,209
1.0x
—
14,159
n/a
684,368
1.0x
n/a
n/mEuropean Senior Debt I (Feb 2015 / Feb 2019)
€1,964,689
€
140,688
€
511,139
0.7x
—
€
2,673,875
1.3x
€
3,185,014
1.2x
n/a
2%European Senior Debt II (Jun 2019 / Jun 2023) (j)€4,088,344
€
969,353
€
4,391,907
1.0x
—
€
1,992,593
2.2x
€
6,384,500
1.2x
n/a
10%
Total Credit Drawdown Funds (k)
$
53,366,033
$
16,146,706
$
17,573,818
1.0x
—
$
44,574,003
1.5x
$
62,147,821
1.3x
n/a
10%
113Table of ContentsSelected Perpetual Capital Strategies (l)Strategy (Inception Year) (a)
Investment Strategy
Total Assets Under ManagementTotal Net Return (m)(Dollars in Thousands, Except Where Noted)
Real EstateBPP—Blackstone Property Partners Platform (2013) (n)Core+ Real Estate$
65,917,602
7%BREIT—Blackstone Real Estate Income Trust (2017) (o)
Core+ Real Estate
60,728,619
10
%
BREIT—Class I (p)
Core+ Real Estate
11
%
BXMT—Blackstone Mortgage Trust (2013) (q)
Real Estate Debt
6,385,586
7
%Private EquityBIP—Blackstone Infrastructure Partners (2019) (r)
Infrastructure
31,835,343
15%
CreditBXSL—Blackstone Secured Lending Fund (2018) (s)U.S. Direct Lending11,250,141
11
%
BCRED—Blackstone Private Credit Fund (2021) (t)
U.S. Direct Lending
64,469,21010
%BCRED—Class I (u)
U.S. Direct Lending10
%Hedge Fund Solutions
BSCH—Blackstone Strategic Capital Holdings (2014) (v)
GP Stakes
9,396,234
11
%The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.n/m
Not meaningful generally due to the limited time since initial investment.
n/a
Not applicable.
SMA
Separately managed account.
*
Represents funds that are currently in their investment period.
(a)
Excludes investment vehicles where Blackstone does not earn fees.
(b)
Available Capital represents total investable capital commitments, including side-by-side, adjusted for certain expenses and expired or recallable capital and may include leverage, less invested capital. This amount is not reduced by outstanding commitments to investments.
(c)
Multiple of Invested Capital (“MOIC”) represents carrying value, before 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 December 31, 2023 IRR on total invested 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’s realized 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)
Blackstone Core Equity Partners is a core private equity strategy which invests with a more modest risk profile and longer hold period than traditional private equity.
(i)
Strategic Partners’ Unrealized Investment Value, Realized Investment Value, Total Investment Value, Total MOIC and Total Net IRRs are reported on a three-month lag and therefore do not include the impact of economic and market activities in the current quarter. Prior to June 30, 2023, the calculation of such metrics also incorporated investor cash flow information from the current quarter to the extent available.
114Table of ContentsEffective June 30, 2023, such current quarter cash flow information is no longer incorporated. Committed Capital and Available Capital continue to be presented as of the current quarter. We believe the updated presentation is more reflective of the Strategic Partners’ investor experience. Realizations are treated as returns of capital until fully recovered and therefore Unrealized and Realized MOICs and Realized Net IRRs are not applicable. Effective June 30, 2023, Strategic Partners I-V and Strategic Partners Real Estate, SMA and Other exclude investment vehicles where Blackstone does not earn fees, which were previously included.
(j)
European Senior Debt II Levered has a net return of 16%, European Senior Debt II Unlevered has a net return of 8%.
(k)
Funds presented represent the flagship credit drawdown funds only. The Total Credit Net IRR is the combined IRR of the credit drawdown funds presented.
(l)
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) perpetual capital assets managed for certain insurance clients, and (3) investment vehicles where Blackstone does not earn fees.
(m)
Unless otherwise indicated, Total Net Return represents the annualized inception to December 31, 2023 IRR on total invested capital based on 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.
(n)
BPP represents the aggregate Total Assets Under Management and Total Net Return of the BPP Platform, which comprises over 30 funds, co-investment and separately managed account vehicles. It includes certain vehicles managed as part of the BPP Platform but not classified as Perpetual Capital. As of December 31, 2023, these vehicles represented $2.7 billion of Total Assets Under Management.
(o)
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. This return is not representative of the return experienced by any particular investor or share class. Total Net Return is presented on an annualized basis and is from January 1, 2017.
(p)
Represents the Total Net Return for BREIT’s Class I shares, its largest share class. Performance varies by share class. Class I Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BREIT, Class I Total Net Return is presented on an annualized basis and is from January 1, 2017.
(q)
The BXMT Total Net Return reflects annualized market return of a shareholder invested in BXMT since inception, May 22, 2013, assuming reinvestment of all dividends received during the period.
(r)
Including co-investment vehicles, BIP Total Assets Under Management is $40.8 billion.
(s)
The BXSL Total Assets Under Management and Total Net Return are presented as of September 30, 2023. Refer to BXSL public filings for current quarter results. BXSL Total Net Return reflects the change in Net Asset Value (“NAV”) per share, plus distributions per share (assuming dividends and distributions are reinvested in accordance with BXSL’s dividend reinvestment plan) divided by the beginning NAV per share. Total Net Returns are presented on an annualized basis and are from November 20, 2018.
(t)
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. This return is not representative of the return experienced by any particular investor or share class. Total Net Return is presented on an annualized basis and is from January 7, 2021. 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 December 31, 2023 was $28.5 billion.
(u)
Represents the Total Net Return for BCRED’s Class I shares, its largest share class. Performance varies by share class. Class I Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BCRED. Class I Total Net Return is presented on an annualized basis and is from January 7, 2021.
115Table of Contents(v)
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 $10.4 billion.Segment Analysis
Discussed below is our Segment Distributable Earnings for each of our segments. This information is reflected in the manner utilized by our senior management to make operating decisions, assess performance and allocate resources. References to “our” sectors or investments may also refer to portfolio companies and investments of the underlying funds that we manage.
Real Estate
The following table presents the results of operations for our Real Estate segment:
Year Ended December 31,2023 vs. 2022
2022 vs. 202120232022
2021$
%
$
%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$
2,794,232
$
2,462,179
$
1,895,412
$
332,053
13
%
$
566,767
30
%Transaction and Other Fees, Net78,483
171,424
160,395
(92,941
)
-54
%
11,029
7
%Management Fee Offsets(29,357
)
(10,538
)
(3,499
)
(18,819
)
179
%
(7,039
)
201
%Total Management Fees, Net2,843,358
2,623,065
2,052,308
220,293
8
%
570,757
28
%Fee Related Performance Revenues294,240
1,075,424
1,695,019
(781,184
)
-73
%
(619,595
)
-37
%Fee Related Compensation(675,880
)
(1,039,125
)
(1,161,349
)
363,245
-35
%
122,224
-11
%Other Operating Expenses(325,050
)
(315,331
)
(234,505
)
(9,719
)
3
%
(80,826
)
34
%Fee Related Earnings2,136,668
2,344,033
2,351,473
(207,365
)
-9
%
(7,440
)
—Realized Performance Revenues244,358
2,985,713
1,119,612
(2,741,355
)
-92
%
1,866,101
167
%Realized Performance Compensation(123,299
)
(1,168,045
)
(443,220
)
1,044,746
-89
%
(724,825
)
164
%Realized Principal Investment Income7,628
150,790
196,869
(143,162
)
-95
%
(46,079
)
-23
%Net Realizations128,687
1,968,458
873,261
(1,839,771
)
-93
%
1,095,197
125
%Segment Distributable Earnings$
2,265,355
$
4,312,491
$
3,224,734
$
(2,047,136
)
-47
%
$
1,087,757
34
%
n/m
Not meaningful.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Segment Distributable Earnings were $2.3 billion for the year ended December 31, 2023, a decrease of $2.0 billion, compared to $4.3 billion for the year ended December 31, 2022. The decrease in Segment Distributable Earnings was attributable to decreases of $207.4 million in Fee Related Earnings and $1.8 billion in Net Realizations.
Our global opportunistic and Core+ real estate portfolios’ concentration in high-conviction sectors where we see favorable long-term fundamentals helped support performance in a challenging market environment in 2023. Notably, strong demand drove operating performance in key sectors, including digital infrastructure, logistics and student housing. Notwithstanding this strength, the real estate market has been characterized by divergent performance across sectors. Growth has slowed and may moderate further in certain sectors with elevated near-term supply, including U.S. multifamily and life sciences office, which has negatively impacted valuations of such assets. Weak fundamentals persisted in the U.S. office market, where traditional office buildings remained
116Table of Contentsparticularly challenged. Traditional U.S. office, however, represents less than 2% of the aggregate net asset value of our global opportunistic and Core+ real estate portfolios. Additionally, in 2023, higher interest rates negatively impacted real estate valuations, which would continue to be challenged if interest rates remain at high levels for an extended period. Coupled with a more constrained financing market, the high interest rate environment has also contributed to lower realizations, which are likely to remain muted until market conditions improve. The steep decline in future new supply in certain sectors and the anticipated moderation of cost of capital in 2024, however, should be positive for real estate valuations over time. We also believe we are entering a supportive environment for deployment activity and that our real estate segment funds are well positioned to capitalize on opportunities that arise.
Fundraising in our real estate segment in 2023 remained positive overall despite a challenging market backdrop. In our perpetual capital strategies, BREIT repurchase requests were elevated, but decreased over the course of 2023, down 76% in January 2024 from their peak in January 2023. While a worsening of the current environment could adversely affect net inflows in perpetual capital strategies, we believe the long-term growth trajectory remains positive and that strong investment performance and investor under-allocation to such strategies should drive flows over the long-term.Fee Related EarningsFee Related Earnings were $2.1 billion for the year ended December 31, 2023, a decrease of $207.4 million, compared to $2.3 billion for the year ended December 31, 2022. The decrease in Fee Related Earnings was primarily attributable to a decrease of $781.2 million in Fee Related Performance Revenues, partially offset by a decrease of $363.2 million in Fee Related Compensation and an increase of $220.3 million in Management Fees, Net.
Fee Related Performance Revenues were $294.2 million for the year ended December 31, 2023, a decrease of $781.2 million, compared to $1.1 billion for the year ended December 31, 2022. The decrease was primarily due to lower Fee Related Performance Revenues in BREIT.
Fee Related Compensation was $675.9 million for the year ended December 31, 2023, a decrease of $363.2 million, compared to $1.0 billion for the year ended December 31, 2022. The decrease was primarily due to a decrease in Fee Related Performance Revenues, partially offset by an increase in Management Fees, Net, both of which impact Fee Related Compensation.
Management Fees, Net were $2.8 billion for the year ended December 31, 2023, an increase of $220.3 million, compared to $2.6 billion for the year ended December 31, 2022, primarily driven by an increase in Base Management Fees, partially offset by a decrease in Transaction and Other Fees, Net. Base Management Fees increased $332.1 million primarily due to Fee-Earning Assets Under Management growth in in BREP. Transaction and Other Fees, Net decreased $92.9 million primarily due to a decrease in acquisition fees paid to the advisor of certain funds.Net RealizationsNet Realizations were $128.7 million for the year ended December 31, 2023, a decrease of $1.8 billion, compared to $2.0 billion for the year ended December 31, 2022. The decrease in Net Realizations was primarily attributable to a decrease of $2.7 billion in Realized Performance Revenues, partially offset by a decrease of $1.0 billion in Realized Performance Compensation.
Realized Performance Revenues were $244.4 million for the year ended December 31, 2023, a decrease of $2.7 billion, compared to $3.0 billion for the year ended December 31, 2022. The decrease was primarily due to lower Realized Performance Revenues in BREP.
117
Table of Contents
Realized Performance Compensation was $123.3 million for the year ended December 31, 2023, a decrease of $1.0 billion, compared to $1.2 billion for the year ended December 31, 2022. The decrease was primarily due to the decrease in Realized Performance Revenues.Fund ReturnsFund 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:
Year Ended December 31,December 31, 2023Inception to Date20232022
2021Realized
Total
Fund (a)
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
NetBREP VII
-32%
-27%
4%
2%
44%
36%
27%
20%
21%
14%BREP VIII-10%
-9%
8%
6%
57%
46%
32%
25%
20%
14%BREP IX-6%
-6%
18%
13%
84%
63%
87%
59%
24%
17%
BREP Europe IV (b)
-22%
-20%
-14%
-13%
2%
—
26%
19%
18%
12%BREP Europe V (b)-14%
-13%
-1%
-2%
37%
29%
51%
41%
14%
9%BREP Europe VI (b)10%
6%
10%
6%
71%
51%
97%
72%
26%
16%
BREP Asia I
5%
3%
-1%
-2%
37%
29%
23%
16%
18%
12%BREP Asia II-2%
-1%
2%
1%
31%
21%
47%
32%
10%
6%BREP Asia III-4%
-19%
n/m
n/m
n/a
n/a
n/a
n/a
-5%
-21%
BREP Co-Investment (c)
1%
1%
26%
25%
77%
70%
18%
16%
18%
16%BPP (d)-8%
-8%
11%
9%
20%
17%
n/a
n/a
8%
7%BREIT (e)n/a
-1%
n/a
8%
n/a
30%
n/a
n/a
n/a
10%BREIT - Class I (f)n/a
-1%
n/a
8%
n/a
30%
n/a
n/a
n/a
11%BREDS High-Yield (g)12%
8%
3%
—
18%
13%
14%
10%
13%
9%BXMT (h)n/a
13%
n/a
-24%
n/a
20%
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. Excludes investment vehicles where Blackstone does not earn fees.
(b)
Euro-based internal rates of return.
(c)
BREP Co-Investment represents co-investment capital raised for various BREP investments. The Net IRR reflected is calculated by aggregating each co-investment’s realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues.
(d)
The BPP platform, which comprises over 30 funds, co-investment and separately managed account vehicles, represents the Core+ real estate funds which invest with a more modest risk profile and lower leverage.
118Table of Contents(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 the returns experienced by any particular investor or share class. Inception to date returns are presented on an annualized basis and are from January 1, 2017.
(f)
Represents the Total Net Return for BREIT’s Class I shares, its largest share class. Performance varies by share class. Class I Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BREIT. Inception to date return is from January 1, 2017.
(g)
BREDS High-Yield represents the flagship real estate debt drawdown funds only. Inception to date returns are from July 1, 2009.
(h)
Reflects annualized return of a shareholder invested in BXMT as of the beginning 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 May 22, 2013.
Funds With Closed Investment Periods
The Real Estate segment has fourteen funds with closed investment periods as of December 31, 2023: BREP IX, BREP VIII, BREP VII, BREP VI, BREP V, BREP IV, BREP Europe VI, BREP Europe V, BREP Europe IV, BREP Europe III, BREP Asia II, BREP Asia I, BREDS IV and BREDS III. As of December 31, 2023, BREP VII, BREP VI, BREP V, BREP IV, BREP Europe IV, BREP Europe III and BREP Asia I 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 VI, BREP Europe V, BREDS IV and BREDS III were above their carried interest thresholds as of December 31, 2023, and BREP Asia II was below its carried interest threshold. 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.
119Table of Contents
Private Equity
The following table presents the results of operations for our Private Equity segment:
Year Ended December 31,2023 vs. 2022
2022 vs. 202120232022
2021$
%
$
%
(Dollars in Thousands)
Management and Advisory Fees, Net
Base Management Fees$
1,807,906
$
1,786,923
$
1,521,273
$
20,983
1%
$
265,650
17%Transaction, Advisory and Other Fees, Net105,640
97,876
174,905
7,764
8%
(77,029
)
-44%Management Fee Offsets(5,182
)
(56,062
)
(33,247
)
50,880
-91%
(22,815
)
69%Total Management and Advisory Fees, Net1,908,364
1,828,737
1,662,931
79,627
4%
165,806
10%Fee Related Performance Revenues—
(648
)
212,128
648
-100%
(212,776
)
n/mFee Related Compensation(595,669
)
(575,194
)
(662,824
)
(20,475
)
4%
87,630
-13%Other Operating Expenses(316,741
)
(304,177
)
(264,468
)
(12,564
)
4%
(39,709
)
15%Fee Related Earnings995,954
948,718
947,767
47,236
5%
951
—Realized Performance Revenues1,268,483
1,191,028
2,263,099
77,455
7%
(1,072,071
)
-47%Realized Performance Compensation(558,645
)
(544,229
)
(943,199
)
(14,416
)
3%
398,970
-42%Realized Principal Investment Income67,133
139,767
263,368
(72,634
)
-52%
(123,601
)
-47%Net Realizations776,971
786,566
1,583,268
(9,595
)
-1%
(796,702
)
-50%Segment Distributable Earnings$
1,772,925
$
1,735,284
$
2,531,035
$
37,641
2%
$
(795,751
)
-31%
n/m
Not meaningful.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Segment Distributable Earnings were $1.8 billion for the year ended December 31, 2023, an increase of $37.6 million, compared to $1.7 billion for the year ended December 31, 2022. The increase in Segment Distributable Earnings was attributable to an increase of $47.2 million in Fee Related Earnings, partially offset by a decrease of $9.6 million in Net Realizations.
Despite a challenging market environment, our Private Equity segment demonstrated resilient performance across nearly all of its strategies in 2023. Our thematic investments, including those in digital infrastructure, life sciences, and energy transition, were substantial drivers of appreciation in the segment in 2023. In Corporate Private Equity, our operating companies saw resilient revenue growth overall in 2023, along with margin strength in the overall portfolio as input and wage costs continued to abate. Nonetheless, economic uncertainty, negative market sentiment and a volatile backdrop for asset values throughout a significant portion of 2023 contributed to muted realizations, which are likely to remain muted until market conditions improve. Investors’ ability to allocate to private equity strategies amidst difficult market conditions and lower realizations have contributed to an already demanding fundraising environment, and these near-term headwinds have made fundraising for our flagship corporate private equity fund more difficult. Nevertheless, we believe that the long-term fundraising trajectory in our Private Equity segment remains positive.
120
Table of ContentsFee Related EarningsFee Related Earnings were $996.0 million for the year ended December 31, 2023, an increase of $47.2 million, compared to $948.7 million for the year ended December 31, 2022. The increase in Fee Related Earnings was primarily attributable to an increase of $79.6 million in Management and Advisory Fees, Net, partially offset by an increase of $20.5 million in Fee Related Compensation.
Management and Advisory Fees, Net were $1.9 billion for the year ended December 31, 2023, an increase of $79.6 million, compared to $1.8 billion for the year ended December 31, 2022, primarily driven by a decrease in Management Fee Offsets and an increase in Base Management Fees. Management Fee Offsets decreased $50.9 million primarily due to a reduction in Management Fee Offsets in Strategic Partners IX. Base Management Fees increased $21.0 million primarily due to Fee-Earning Assets Under Management Growth in BIP.
Fee Related Compensation was $595.7 million for the year ended December 31, 2023, an increase of $20.5 million, compared to $575.2 million for the year ended December 31, 2022. The increase was primarily due to an increase in Management Fees, Net, on which a portion of Fee Related Compensation is based.Net RealizationsNet Realizations were $777.0 million for the year ended December 31, 2023, a decrease of $9.6 million, compared to $786.6 million for the year ended December 31, 2022. The decrease in Net Realizations was attributable to a decrease of $72.6 million in Realized Principal Investment Income and an increase of $14.4 million in Realized Performance Compensation, partially offset by an increase of $77.5 million in Realized Performance Revenues.
Realized Principal Investment Income was $67.1 million for the year ended December 31, 2023, a decrease of $72.6 million, compared to $139.8 million for the year ended December 31, 2022. The decrease was primarily due to the segment’s allocation of the gain recognized in connection with sales of interests in Pátria Investments Limited and Pátria Investimentos Ltda. (collectively, “Pátria”) in the third quarter of 2022, partially offset by higher Realized Principal Investment Income in Corporate Private Equity.
Realized Performance Compensation was $558.6 million for the year ended December 31, 2023, an increase of $14.4 million, compared to $544.2 million for the year ended December 31, 2022. The increase was primarily due to higher Realized Performance Revenues in Corporate Private Equity, partially offset by lower Realized Performance Revenues in Tactical Opportunities and Strategic Partners.
Realized Performance Revenues were $1.3 billion for the year ended December 31, 2023, an increase of $77.5 million, compared to $1.2 billion for the year ended December 31, 2022. The increase was primarily due to higher Realized Performance Revenues in Corporate Private Equity, partially offset by lower Realized Performance Revenues in Tactical Opportunities and Strategic Partners.Fund ReturnsFund 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.
121Table of Contents
The following table presents the internal rates of return of our significant private equity funds:
Year Ended December 31,December 31, 2023Inception to Date20232022
2021Realized
Total
Fund (a)
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
BCP VI7%
6%
12%
11%
19%
16%
19%
14%
17%
12%BCP VII13%
10%
-12%
-11%
44%
36%
38%
29%
19%
13%BCP VIII12%
6%
4%
—
n/a
n/a
n/m
n/m
21%
11%
BEP I
-15%
-13%
57%
46%
78%
59%
18%
14%
15%
11%
BEP II
12%
8%
36%
33%
56%
53%
14%
11%
12%
8%
BEP III
28%
20%
42%
31%
86%
56%
77%
55%
52%
34%BCP Asia I16%
13%
-38%
-35%
193%
158%
128%
96%
40%
28%BCP Asia II62%
23%
n/m
n/m
n/a
n/a
n/a
n/a
67%
22%
BCEP I (b)
2%
2%
—
—
55%
50%
62%
57%
21%
18%
BCEP II (b)
31%
24%
14%
9%
n/a
n/a
n/a
n/a
22%
16%Tactical Opportunities9%
5%
-2%
-4%
37%
28%
19%
15%
15%
11%
Tactical Opportunities Co-Investment and Other
7%
7%
—
4%
67%
57%
20%
19%
19%
16%
BXG I
-2%
-5%
-13%
-13%
50%
29%
n/m
n/m
2%
-2%
Strategic Partners VI (c)
-2%
-3%
-10%
-11%
53%
49%
n/a
n/a
18%
14%
Strategic Partners VII (c)
1%
—
-4%
-5%
68%
61%
n/a
n/a
22%
17%
Strategic Partners Real Assets II (c)
19%
16%
13%
12%
26%
22%
n/a
n/a
20%
16%
Strategic Partners VIII (c)
-1%
-3%
3%
2%
144%
128%
n/a
n/a
37%
29%
Strategic Partners Real Estate, SMA and Other (c)
-6%
-7%
35%
32%
30%
20%
n/a
n/a
15%
14%
Strategic Partners Infrastructure III (c)
15%
11%
58%
45%
134%
85%
n/a
n/a
48%
32%
Strategic Partners IX (c)
15%
7%
n/m
n/m
n/a
n/a
n/a
n/a
32%
18%
Strategic Partners GP Solutions (c)
-16%
-11%
39%
29%
n/m
n/m
n/a
n/a
2%
-3%
BIP
13%
10%
26%
20%
41%
33%
n/a
n/a
20%
15%Clarus IV-3%
-4%
4%
2%
34%
26%
6%
-4%
15%
9%BXLS V43%
27%
10%
2%
13%
-4%
n/m
n/m
26%
13%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. Excludes investment vehicles where Blackstone does not earn fees.
(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)
Gross and net returns are reported on a three-month lag and therefore do not include the impact of economic and market activities in the current quarter. Prior to June 30, 2023, the calculation of such metrics also incorporated investor cash flow information from the current quarter to the extent available. Effective June 30, 2023, such current quarter cash flow information is no longer incorporated. We believe the updated presentation is more reflective of the Strategic Partners’ investor experience. Prior periods have been recast. Realizations are treated as returns of capital until fully recovered and therefore Realized IRRs are not applicable. Effective June 30, 2023, Strategic Partners Real Estate, SMA and Other exclude investment vehicles where Blackstone does not earn fees, which were previously included.
122Table of ContentsFunds 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 of December 31, 2023, 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, BEP II, 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.
The Tactical Opportunities funds within the Private Equity segment have various funds with closed investment periods, including but not limited to: BTOF-POOL, BTOF-POOL II, and BTOF-POOL III, which are each above their carried interest thresholds based on aggregate fund position. Strategic Partners funds within the Private Equity segment have various funds with closed investment periods, including but not limited to: Strategic Partners Real Assets II, Strategic Partners VIII and Strategic Partners Real Estate VII, which are above their respective carried interest thresholds based on aggregate fund position. Certain Strategic Partners funds with closed investment periods do not generate carried interest for Blackstone as agreed to at the time the Strategic Partners business was acquired. The Blackstone Life Sciences funds within the Private Equity segment has one fund with a closed investment period: Clarus IV, which was above its carried interest threshold.
123Table of Contents
Credit & Insurance
The following table presents the results of operations for our Credit & Insurance segment:
Year Ended December 31,2023 vs. 2022
2022 vs. 202120232022
2021$
%
$
%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$
1,335,408
$
1,230,710
$
765,905
$
104,698
9%
$
464,805
61%Transaction and Other Fees, Net44,560
34,624
44,868
9,936
29%
(10,244
)
-23%Management Fee Offsets(3,907
)
(5,432
)
(6,653
)
1,525
-28%
1,221
-18%Total Management Fees, Net1,376,061
1,259,902
804,120
116,159
9%
455,782
57%Fee Related Performance Revenues564,287
374,721
118,097
189,566
51%
256,624
217%Fee Related Compensation(640,190
)
(529,784
)
(367,322
)
(110,406
)
21%
(162,462
)
44%Other Operating Expenses(327,734
)
(264,181
)
(199,912
)
(63,553
)
24%
(64,269
)
32%Fee Related Earnings972,424
840,658
354,983
131,766
16%
485,675
137%Realized Performance Revenues317,760
147,413
209,421
170,347
116%
(62,008
)
-30%Realized Performance Compensation(140,490
)
(63,846
)
(94,450
)
(76,644
)
120%
30,604
-32%Realized Principal Investment Income21,897
80,993
70,796
(59,096
)
-73%
10,197
14%Net Realizations199,167
164,560
185,767
34,607
21%
(21,207
)
-11%Segment Distributable Earnings$
1,171,591
$
1,005,218
$
540,750
$
166,373
17%
$
464,468
86%
n/m
Not meaningful.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Segment Distributable Earnings were $1.2 billion for the year ended December 31, 2023, an increase of $166.4 million, compared to $1.0 billion for the year ended December 31, 2022. The increase in Segment Distributable Earnings was attributable to increases of $131.8 million in Fee Related Earnings and $34.6 million in Net Realizations.
Our credit funds demonstrated strong performance in 2023, driven by a higher interest rate environment and the concentration of our portfolios in floating rate debt. Longer-term structural shifts in the lending market, combined with a more constrained financing market, have contributed and are likely to continue to contribute to attractive and sizeable deployment opportunities for our credit funds as banks and other originators seek to preserve liquidity and meet capital requirements and borrowers seek alternative financing sources. Additionally, we continue to see opportunities for growth in our insurance and energy transition strategies. In the broader market, a higher cost of capital as a result of historically high interest rates has negatively impacted the free cash flow and credit quality of certain borrowers. Nevertheless, default rates across corporate issuers in our credit funds’ portfolios remained low in 2023 relative to our historical levels. A sustained period of high interest rates, however, increases the potential for defaults. Conversely, a material decline in interest rates and/or widening of credit spreads would make it more difficult for our credit funds to replicate their 2023 performance. In addition, a period of significant market dislocation could limit the liquidity of certain assets traded in the credit markets. This would impact our funds’ ability to sell such assets at attractive prices or in a timely manner.
Fundraising in our Credit & Insurance segment, including in our perpetual capital strategies, has been positively impacted by the long-term structural shifts in the lending market and a more constraining financing market. In our perpetual capital strategies, compelling private credit fundamentals contributed to a significant increase in BCRED inflows in 2023. We believe the long-term growth trajectory remains positive and that strong investment performance and investor under-allocation to such private wealth strategies should continue to drive flows over the long-term.
124Table of ContentsFee Related EarningsFee Related Earnings were $972.4 million for the year ended December 31, 2023, an increase of $131.8 million, compared to $840.7 million for the year ended December 31, 2022. The increase in Fee Related Earnings was attributable to increases of $189.6 million in Fee Related Performance Revenues and $116.2 million in Management Fees, Net, partially offset by increases of $110.4 million in Fee Related Compensation and $63.6 million in Other Operating Expenses.
Fee Related Performance Revenues were $564.3 million for the year ended December 31, 2023, an increase of $189.6 million, compared to $374.7 million for the year ended December 31, 2022. The increase was primarily due to performance and higher Fee-Earning Assets Under Management in BCRED.
Management Fees, Net were $1.4 billion for the year ended December 31, 2023, an increase of $116.2 million, compared to $1.3 billion for the year ended December 31, 2022, primarily driven by an increase in Base Management Fees. Base Management Fees increased $104.7 million primarily due to inflows from Fee-Earning Assets Under Management in direct lending.
Fee Related Compensation was $640.2 million for the year ended December 31, 2023, an increase of $110.4 million, compared to $529.8 million for the year ended December 31, 2022. The increase was primarily due to increases in Fee Related Performance Revenues and Management Fees, Net, both of which impact Fee Related Compensation.
Other Operating Expenses were $327.7 million for the year ended December 31, 2023, an increase of $63.6 million, compared to $264.2 million for the year ended December 31, 2022. The increase was primarily due to occupancy costs, market data and technology-related expenses and professional fees.Net RealizationsNet Realizations were $199.2 million for the year ended December 31, 2023, an increase of $34.6 million, compared to $164.6 million for the year ended December 31, 2022. The increase in Net Realizations was attributable to increases of $170.3 million in Realized Performance Revenues, partially offset by an increase of $76.6 million in Realized Performance Compensation and a decrease of $59.1 million in Realized Principal Investment Income.
Realized Performance Revenues were $317.8 million for the year ended December 31, 2023, an increase of $170.3 million, compared to $147.4 million for the year ended December 31, 2022. The increase was primarily due to higher Realized Performance Revenues in our direct lending and mezzanine funds.
Realized Performance Compensation was $140.5 million for the year ended December 31, 2023, an increase of $76.6 million, compared to $63.8 million for the year ended December 31, 2022. The increase was primarily due to the increase in Realized Performance Revenues.
Realized Principal Investment Income was $21.9 million for the year ended December 31, 2023, a decrease of $59.1 million, compared to $81.0 million for the year ended December 31, 2022. The decrease was primarily due to the segment’s allocation of the gain recognized in connection with sales of interests in Pátria in the first and third quarters of 2022 and a realized loss related to insurance platform investments during the year ended December 31, 2023.
125
Table of ContentsComposite 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:
Year Ended December 31,Inception to
December 31, 202320232022
2021Total
Composite (a)
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Private Credit (b)16
%
12
%
7
%
4
%
22
%
16
%
12
%
8
%Liquid Credit (b)13
%
12
%
-3
%
-3
%
5
%
5
%
5
%
5
%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 $100 million of fair value at the beginning of each respective quarter-end are included. Funds in liquidation, funds investing primarily in investment grade corporate credit and asset based finance funds are excluded. Blackstone Funds that were contributed to BXC as part of Blackstone’s acquisition of BXC in March 2008 and the pre-acquisition date performance for funds and vehicles acquired by BXC subsequent to March 2008, are also excluded. Private Credit and Liquid Credit’s inception to date returns are from December 31, 2005.Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance
Eligible Assets Under
ManagementEstimated % Above High Water Mark/Hurdle (a)December 31,
December 31,20232022
202120232022
2021(Dollars in Thousands)
Credit & Insurance (b)$
89,508,377
$
87,175,669
$
66,350,185
97
%
93
%
94
%
(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.
126Table of Contents(b)
For the Credit & Insurance managed funds, at December 31, 2023, the incremental appreciation needed for the 3% of Invested Performance Eligible Assets Under Management below their respective High Water Marks/Hurdles to reach their respective High Water Marks/Hurdles was $2.1 billion, an increase of $122.9 million, compared to $2.0 billion at December 31, 2022. Of the Invested Performance Eligible Assets Under Management below their respective High Water Marks/Hurdles as of December 31, 2023, 13% were within 5% of reaching their respective High Water Mark.
Hedge Fund Solutions
The following table presents the results of operations for our Hedge Fund Solutions segment:Year Ended December 31,2023 vs. 2022
2022 vs. 202120232022
2021$
%
$
%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$
528,301
$
565,226
$
636,685
$
(36,925
)
-7%
$
(71,459
)
-11%Transaction and Other Fees, Net7,209
6,193
11,770
1,016
16%
(5,577
)
-47%Management Fee Offsets(49
)
(177
)
(572
)
128
-72%
395
-69%Total Management Fees, Net535,461
571,242
647,883
(35,781
)
-6%
(76,641
)
-12%Fee Related Compensation(176,371
)
(186,672
)
(156,515
)
10,301
-6%
(30,157
)
19%Other Operating Expenses(114,808
)
(105,334
)
(94,792
)
(9,474
)
9%
(10,542
)
11%Fee Related Earnings244,282
279,236
396,576
(34,954
)
-13%
(117,340
)
-30%Realized Performance Revenues230,501
137,184
290,980
93,317
68%
(153,796
)
-53%Realized Performance Compensation(73,583
)
(37,977
)
(76,701
)
(35,606
)
94%
38,724
-50%
Realized Principal Investment Income
14,274
24,706
56,733
(10,432
)
-42%
(32,027
)
-56%Net Realizations171,192
123,913
271,012
47,279
38%
(147,099
)
-54%Segment Distributable Earnings$
415,474
$
403,149
$
667,588
$
12,325
3%
$
(264,439
)
-40%n/m Not meaningful.Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Segment Distributable Earnings were $415.5 million for the year ended December 31, 2023, an increase of $12.3 million, compared to $403.1 million for the year ended December 31, 2022. The increase in Segment Distributable Earnings was attributable to an increase of $47.3 million in Net Realizations, partially offset by a decrease of $35.0 million in Fee Related Earnings.
Strategies across our Hedge Fund Solutions segment produced resilient performance in a year of market volatility. The majority of such strategies exhibited positive performance in 2023, with significantly less volatility than the broader markets. Segment Distributable Earnings in the Hedge Fund Solutions segment would likely be negatively impacted, however, by a significant or sustained weak market environment or decline in asset prices, including as a result of concerns over macroeconomic factors. In addition, while certain of our strategies are designed to benefit from a high interest rate environment, a period of sustained high interest rates combined with weak equity markets would make it difficult for funds in certain of our strategies to exceed interest rate-based performance hurdles to which such funds are subject. This would negatively impact our Segment Distributable Earnings. In addition, if interest rates remain at sustained high levels for an extended period, certain investors may seek to reallocate capital away from traditional hedge fund strategies in favor of fixed income investments. Conversely, outperformance by our Hedge Fund Solutions strategies in a weak market environment has in some cases resulted in such strategies representing an increasing portion of the value of certain investors’ portfolios, which may limit such investors’ ability to allocate additional capital to certain funds in the segment, or result in
127
Table of Contents
such investors seeking to withdraw capital from such funds. The 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, however, 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.Fee Related EarningsFee Related Earnings were $244.3 million for the year ended December 31, 2023, a decrease of $35.0 million, compared to $279.2 million for the year ended December 31, 2022. The decrease in Fee Related Earnings was primarily attributable to a decrease of $35.8 million in Management Fees, Net, partially offset by a decrease of $10.3 million in Fee Related Compensation.
Management Fees, Net were $535.5 million for the year ended December 31, 2023, a decrease of $35.8 million, compared to $571.2 million for the year ended December 31, 2022, primarily driven by a decrease in Base Management Fees. Base Management Fees decreased $36.9 million primarily due to a decrease in Fee-Earning Assets Under Management in commingled products.
Fee Related Compensation was $176.4 million for the year ended December 31, 2023, a decrease of $10.3 million, compared to $186.7 million for the year ended December 31, 2022. The decrease was primarily due to a decrease in Management Fees, Net, on which a portion of Fee Related Compensation is based.Net RealizationsNet Realizations were $171.2 million for the year ended December 31, 2023, an increase of $47.3 million, compared to $123.9 million for the year ended December 31, 2022. The increase in Net Realizations was primarily attributable to an increase of $93.3 million in Realized Performance Revenues, partially offset by an increase of $35.6 million in Realized Performance Compensation.
Realized Performance Revenues were $230.5 million for the year ended December 31, 2023, an increase of $93.3 million, compared to $137.2 million for the year ended December 31, 2022. The increase was primarily due to increased Realized Performance Revenues in liquid and specialized solutions, offset by a decrease in customized solutions.
Realized Performance Compensation was $73.6 million for the year ended December 31, 2023, an increase of $35.6 million, compared to $38.0 million for the year ended December 31, 2022. 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.128
Table of Contents
The following table presents the return information of the BAAM Principal Solutions Composite:Average Annual Returns (a)Periods Ended December 31, 2023One Year
Three Year
Five Year
Historical
Composite
Gross
Net
Gross
Net
Gross
Net
Gross
NetBAAM Principal Solutions Composite (b)
8
%
7
%
7
%
6
%
7
%
6
%
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 September 1990. The BPS 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.Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance
Eligible Assets Under
ManagementEstimated % Above
High Water
Mark/Benchmark (a)December 31,
December 31,20232022
202120232022
2021(Dollars in Thousands)Hedge Fund Solutions Managed Funds (b)
$
52,912,929
$
50,664,202
$
47,639,865
95
%
85
%
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 their respective 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 December 31, 2023, the incremental appreciation needed for the 5% of Invested Performance Eligible Assets Under Management below their respective High Water Marks/Benchmarks to reach their respective High Water Marks/Benchmarks was $578.3 million, a decrease of $(179.3) million, compared to $757.7 million at December 31, 2022. Of the Invested Performance Eligible Assets Under Management below their respective High Water Marks/ Benchmarks as of December 31, 2023, 9% were within 5% of reaching their respective High Water Mark.
129Table of ContentsNon-GAAP Financial Measures
These non-GAAP financial measures are presented without the consolidation of any Blackstone Funds that are consolidated into the Consolidated Financial Statements. Consequently, all non-GAAP financial measures exclude the assets, liabilities and operating results related to the Blackstone Funds. See “— Key Financial Measures and Indicators” for our definitions of Distributable Earnings, Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA.
130
Table of Contents
The following table is a reconciliation of Net Income Attributable to Blackstone Inc. to Distributable Earnings, Total Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA:Year Ended December 31,20232022
2021(Dollars in Thousands)
Net Income Attributable to Blackstone Inc.$
1,390,880
$
1,747,631
$
5,857,397
Net Income Attributable to Non-Controlling Interests in Blackstone Holdings
1,074,736
1,276,402
4,886,552
Net Income Attributable to Non-Controlling Interests in Consolidated Entities
224,155
107,766
1,625,306
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities
(245,518
)
(142,890
)
5,740Net Income2,444,253
2,988,909
12,374,995Provision for Taxes513,461
472,880
1,184,401Net Income Before Provision for Taxes2,957,714
3,461,789
13,559,396
Transaction-Related and Non-Recurring Items (a)
25,981
57,133
144,038Amortization of Intangibles (b)33,457
60,481
68,256Impact of Consolidation (c)21,363
35,124
(1,631,046
)Unrealized Performance Revenues (d)1,691,788
3,436,978
(8,675,246
)Unrealized Performance Allocations Compensation (e)(654,403
)
(1,470,588
)
3,778,048Unrealized Principal Investment (Income) Loss (f)593,301
1,235,529
(679,767
)Other Revenues (g)93,083
(183,754
)
(202,885
)Equity-Based Compensation (h)959,474
782,090
559,537Administrative Fee Adjustment (i)9,707
9,866
10,188Taxes and Related Payables (j)(670,510
)
(791,868
)
(759,682
)Distributable Earnings5,060,955
6,632,780
6,170,837Taxes and Related Payables (j)670,510
791,868
759,682Net Interest and Dividend (Income) Loss (k)(106,120
)
31,494
33,588Total Segment Distributable Earnings5,625,345
7,456,142
6,964,107Realized Performance Revenues (l)(2,061,102
)
(4,461,338
)
(3,883,112
)Realized Performance Compensation (m)896,017
1,814,097
1,557,570Realized Principal Investment Income (n)(110,932
)
(396,256
)
(587,766
)Fee Related Earnings$
4,349,328
$
4,412,645
$
4,050,799Adjusted EBITDA Reconciliation
Distributable Earnings$
5,060,955
$
6,632,780
$
6,170,837Interest Expense (o)429,521
316,569
196,632Taxes and Related Payables (j)670,510
791,868
759,682Depreciation and Amortization (p)94,124
69,219
52,187Adjusted EBITDA$
6,255,110
$
7,810,436
$
7,179,338
(a)
This adjustment removes Transaction-Related and Non-Recurring Items, which are excluded from Blackstone’s segment presentation. Transaction-Related and Non-Recurring Items arise from corporate actions including acquisitions, divestitures, Blackstone’s initial public offering and non-recurring gains, losses, or other charges, if any. 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, gains or losses associated with these corporate actions and non-recurring gains, losses or other charges that affect period-to-period comparability and are not reflective of Blackstone’s operational performance.
131Table of Contents(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 Revenues on a segment basis. The Segment Adjustment represents the add back of performance revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.Year Ended December 31,20232022
2021(Dollars in Thousands)
GAAP Unrealized Performance Allocations$
(1,691,668
)
$
(3,435,056
)
$
8,675,246Segment Adjustment(120
)
(1,922
)
—Unrealized Performance Revenues$
(1,691,788
)
$
(3,436,978
)
$
8,675,246
(e)
This adjustment removes Unrealized Performance Allocations Compensation.
(f)
This adjustment removes Unrealized Principal Investment Income 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.Year Ended December 31,20232022
2021(Dollars in Thousands)
GAAP Unrealized Principal Investment Income (Loss)$
(603,154
)
$
(1,563,849
)
$
1,456,201Segment Adjustment9,853
328,320
(776,434
)Unrealized Principal Investment Income (Loss)$
(593,301
)
$
(1,235,529
)
$
679,767
(g)
This adjustment removes Other Revenues on a segment basis. The Segment Adjustment represents (1) the add back of Other Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of certain Transaction-Related and Non-Recurring Items.Year Ended December 31,20232022
2021(Dollars in Thousands)
GAAP Other Revenue$
(92,929
)
$
184,557
$
203,086Segment Adjustment(154
)
(803
)
(201
)Other Revenues$
(93,083
)
$
183,754
$
202,885
(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 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.
132Table of Contents(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. 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.Year Ended December 31,20232022
2021(Dollars in Thousands)
Taxes$
580,925
$
693,443
$
703,075Related Payables89,585
98,425
56,607Taxes and Related Payables$
670,510
$
791,868
$
759,682
(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.Year Ended December 31,20232022
2021(Dollars in Thousands)
GAAP Interest and Dividend Revenue$
516,497
$
271,612
$
160,643Segment Adjustment19,144
13,463
2,401Interest and Dividend Revenue535,641
285,075
163,044GAAP Interest Expense431,868
317,225
198,268Segment Adjustment(2,347
)
(656
)
(1,636
)Interest Expense429,521
316,569
196,632Net Interest and Dividend Income (Loss)$
106,120
$
(31,494
)
$
(33,588
)
(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.
133Table of Contents
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:
December 31,2023
2022(Dollars in Thousands)
Investments of Consolidated Blackstone Funds$
4,319,483
$
5,136,966Equity Method Investments
Partnership Investments5,924,275
5,530,419Accrued Performance Allocations10,775,355
12,360,684Corporate Treasury Investments803,870
1,053,540Other Investments4,323,639
3,471,642Total GAAP Investments$
26,146,622
$
27,553,251Accrued Performance Allocations - GAAP$
10,775,355
$
12,360,684Due from Affiliates - GAAP (a)313,838
269,987Less: Net Realized Performance Revenues (b)(552,249
)
(282,730
)Less: Accrued Performance Compensation - GAAP (c)(4,702,363
)
(5,512,796
)Net Accrued Performance Revenues$
5,834,581
$
6,835,145
(a)
Represents GAAP accrued performance revenue recorded within Due from Affiliates.
(b)
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.
(c)
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
GeneralBlackstone’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 or invested capital of investors in our investment vehicles 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 stockholders and distributions to holders of Holdings Units.
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. The majority economic ownership interests of such consolidated Blackstone Funds are reflected as Redeemable Non-Controlling Interests in Consolidated Entities, and Non-Controlling Interests in Consolidated Entities in the 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 non-consolidated Blackstone Funds, additional investments and redemptions of such interests in the non-consolidated Blackstone Funds and the collection of receivables related to management and advisory fees.
134Table of ContentsTotal Assets were $40.3 billion as of December 31, 2023, a decrease of $2.2 billion from December 31, 2022. The decrease in Total Assets was principally due to a decrease of $1.5 billion in total assets attributable to consolidated operating partnerships. The decrease in total assets attributable to consolidated operating partnerships was primarily due to decreases of $1.3 billion in Cash and Cash Equivalents and $641.4 million in Investments, partially offset by an increase of $312.3 million in Due from Affiliates. The decrease in Cash and Cash Equivalents was primarily due to ongoing operating activities, including the payoff at maturity of Blackstone’s 4.750% senior note due February 15, 2023. The decrease in Investments was primarily due to unrealized depreciation across our Real Estate segment and net sales of investments within Corporate Treasury Investments, partially offset by unrealized appreciation in our Private Equity segment. The increase in Due from Affiliates was primarily due to an increase in management fees, performance revenues and reimbursable expenses due from non-consolidated Blackstone Funds.
Total Liabilities were $22.2 billion as of December 31, 2023, a decrease of $630.8 million, from December 31, 2022. The decrease in Total Liabilities was principally due to decreases of $305.5 million and $274.8 million in total liabilities attributable to consolidated Blackstone Funds and total liabilities attributable to consolidated operating partnerships, respectively. The decrease in total liabilities attributable to consolidated Blackstone Funds was primarily due to a decrease of $762.9 million in Loans Payable, partially offset by an increase of $365.3 million in Accounts Payable, Accrued Expenses and Other Liabilities. The decrease in Loans Payable was primarily due to the deconsolidation of one fund, including its borrowings, during the year ended December 31, 2023, partially offset by the consolidation of three CLOs during the year ended December 31, 2023. The increase in Accounts Payable, Accrued Expenses and Other Liabilities was primarily due to the consolidation of two CLOs, including their unsettled trade liabilities during the year ended December 31, 2023. The decrease in total liabilities attributable to consolidated operating partnerships was primarily due to a decrease of $854.0 million in Accrued Compensation and Benefits, partially offset by an increase of $660.1 million in Accounts Payable, Accrued Expenses and Other Liabilities. The decrease in Accrued Compensation and Benefits was primarily due to a decrease in performance compensation. The increase in Accounts Payable, Accrued Expenses and Other Liabilities was primarily due to an increase in derivative liabilities.Sources and Uses of LiquidityWe 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 committed revolving credit facility. On December 15, 2023, Blackstone amended and restated its revolving credit facility to, among other things, increase available borrowings from $4.135 billion to $4.325 billion and to extend the maturity date from June 3, 2027 to December 15, 2028. As of December 31, 2023, Blackstone had $3.0 billion in Cash and Cash Equivalents, $803.9 million invested in Corporate Treasury Investments and $4.3 billion in Other Investments (which included $4.0 billion of liquid investments), against $10.7 billion in borrowings from our bond issuances, and no borrowings outstanding under our revolving credit facility.
In addition to the cash we receive from our notes offerings and availability under our revolving credit facility, we expect to receive (a) cash generated from operating activities, (b) Performance Revenue 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.
135Table of ContentsWe 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 stockholders 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 CommitmentsOur own capital commitments to our funds, the funds we invest in and our investment strategies as of December 31, 2023 consisted of the following:Blackstone and
General Partner (a)Senior Managing Directors and Certain Other Professionals (b)Fund
Original Commitment
Remaining Commitment
Original Commitment
Remaining Commitment
(Dollars in Thousands)
Real Estate
BREP VII300,000
28,469
100,000
9,490BREP VIII300,000
39,823
100,000
13,274BREP IX300,000
47,296
100,000
15,765BREP X300,000
279,054
100,000
93,018BREP Europe III100,000
11,257
35,000
3,752BREP Europe IV130,000
22,477
43,333
7,492BREP Europe V150,000
22,292
43,333
6,440BREP Europe VI130,000
44,690
43,333
14,897BREP Europe VII130,000
109,910
43,333
36,637BREP Asia I50,392
10,342
16,797
3,447BREP Asia II70,707
12,877
23,569
4,292BREP Asia III81,078
66,892
27,026
22,297BREDS III50,000
13,499
16,667
4,500BREDS IV50,000
15,919
49,113
15,636BREDS V50,000
50,000
48,070
48,070BPP312,773
28,682
—
—Other (c)30,636
9,767
—
—Total Real Estate2,535,586
813,246
789,574
299,007
continued...
136
Table of Contents
Blackstone and
General Partner (a)
Senior Managing Directors and Certain Other Professionals (b)
Fund
Original Commitment
Remaining Commitment
Original Commitment
Remaining Commitment
(Dollars in Thousands)Private Equity
BCP V629,356
30,642
—
—BCP VI719,718
81,400
250,000
28,275BCP VII500,000
36,635
225,000
16,486BCP VIII500,000
211,102
225,000
94,996BCP IX500,000
500,000
225,000
225,000BEP I50,000
4,728
—
—BEP II80,000
12,018
26,667
4,006BEP III80,000
27,907
26,667
9,302BETP IV52,847
52,847
17,616
17,616
BCEP I
117,747
27,016
18,992
4,358
BCEP II
160,000
112,965
32,640
23,045BCP Asia I40,000
5,869
13,333
1,956BCP Asia II100,000
74,993
33,333
24,998Tactical Opportunities491,315
228,369
163,772
76,123
Strategic Partners
1,266,162
728,425
1,181,976
683,061BIP338,785
70,891
—
—
BXLS
142,057
85,065
37,353
26,477
BXG
162,381
106,641
53,959
35,536Other (c)290,209
39,547
—
—Total Private Equity6,220,577
2,437,060
2,531,308
1,271,235Credit & Insurance
Mezzanine / Opportunistic II120,000
29,182
110,101
26,774Mezzanine / Opportunistic III130,783
38,258
96,614
28,262Mezzanine / Opportunistic IV122,000
67,933
115,602
64,370European Senior Debt I63,000
5,084
56,882
4,590European Senior Debt II92,661
34,805
89,599
33,679European Senior Debt III21,838
21,834
7,279
7,278
Stressed / Distressed II
125,000
51,612
119,878
49,497
Stressed / Distressed III
151,000
93,835
146,682
91,152Energy I80,000
36,785
75,445
34,691Energy II150,000
104,262
148,577
103,273Energy III127,000
123,190
117,935
114,397Credit Alpha Fund52,102
19,752
50,670
19,209Credit Alpha Fund II25,500
12,550
24,385
12,001Other (c)178,823
82,366
47,229
12,810Total Credit & Insurance1,439,707
721,448
1,206,878
601,983continued...137Table of Contents
Blackstone and
General Partner (a)Senior Managing Directors and Certain Other Professionals (b)Fund
Original Commitment
Remaining Commitment
Original Commitment
Remaining Commitment
(Dollars in Thousands)Hedge Fund Solutions
Strategic Alliance II
50,000
1,482
—
—Strategic Alliance III22,000
17,283
—
—Strategic Alliance IV15,000
13,548
—
—
Strategic Holdings I
154,610
21,924
—
—
Strategic Holdings II
50,000
21,316
—
—
Horizon
100,000
27,765
—
—Dislocation20,000
12,274
—
—Other (c)7,481
2,397
—
—
Total Hedge Fund Solutions
419,091
117,989
—
—Other
Treasury (d)1,110,932
874,955
—
—
$
11,725,893
$
4,964,698
$
4,527,760
$
2,172,225
(a)
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. Additionally, 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.
(b)
Includes the full portion of our commitments (i) required to be funded by senior managing directors and certain other professionals and (ii) that are elected by such individuals to be funded for the life of a fund, where such fund permits such election. Excludes amounts that are elected by such individuals to be funded on an annual basis and certain de minimis commitments funded by such individuals in certain carry funds.
(c)
Represents capital commitments to a number of other funds in each respective segment.
(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”.138Table of Contents
BorrowingsAs of December 31, 2023, 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”):Senior Notes (a)
Aggregate Principal Amount (Dollars/Euros in Thousands)2.000%, Due 5/19/2025
€
300,0001.000%, Due 10/5/2026
€
600,000
3.150%, Due 10/2/2027$
300,0005.900%, Due 11/3/2027$
600,0001.625%, Due 8/5/2028$
650,0001.500%, Due 4/10/2029
€
600,000
2.500%, Due 1/10/2030$
500,0001.600%, Due 3/30/2031$
500,0002.000%, Due 1/30/2032$
800,0002.550%, Due 3/30/2032$
500,0006.200%, Due 4/22/2033$
900,0003.500%, Due 6/1/2034
€
500,0006.250%, Due 8/15/2042$
250,0005.000%, Due 6/15/2044$
500,0004.450%, Due 7/15/2045$
350,0004.000%, Due 10/2/2047$
300,0003.500%, Due 9/10/2049$
400,0002.800%, Due 9/30/2050$
400,0002.850%, Due 8/5/2051$
550,0003.200%, Due 1/30/2052$
1,000,000
$
10,707,800
(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, in whole 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 $4.325 billion unsecured revolving credit facility (the “Credit Facility”) with Citibank, N.A., as administrative agent with a maturity date of December 15, 2028. Borrowings may also be made in U.K. sterling, euros, Swiss francs, Japanese yen or Canadian dollars, in each case subject to certain sub-limits. The Credit Facility contains customary representations, covenants and events of default. Financial covenants consist of a maximum net leverage ratio and a requirement to keep a minimum amount of fee-earning assets under management, each tested quarterly.
139Table of ContentsFor a tabular presentation of the payment timing of principal and interest due on Blackstone’s issued notes and the Credit Facility see “— Contractual Obligations”.Contractual ObligationsThe following table sets forth information relating to our contractual obligations as of December 31, 2023 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:Contractual Obligations2024
2025-20262027-2028Thereafter
Total
(Dollars in Thousands)
Operating Lease Obligations (a)$
161,106
$
339,275
$
327,978
$
577,044
$
1,405,403Purchase Obligations128,176
130,592
33,120
1,890
293,778Blackstone Operating Borrowings (b)17
1,007,780
1,575,662
8,164,290
10,747,749Interest on Blackstone Operating Borrowings (c)348,391
689,955
623,548
3,268,270
4,930,164Borrowings of Consolidated Blackstone Funds—
—
—
858,133
858,133Interest on Borrowings of Consolidated Blackstone Funds—
101,005
101,005
97,819
299,829Blackstone Funds Capital Commitments to Investee Funds (d)364,357
—
—
—
364,357
Due to Certain Non-Controlling Interest Holders in Connection with Tax Receivable Agreements (e)
87,508
191,701
233,349
1,169,085
1,681,643Unrecognized Tax Benefits, Including Interest and Penalties (f)—
—
—
—
—Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (g)4,964,698
—
—
—
4,964,698Consolidated Contractual Obligations6,054,253
2,460,308
2,894,662
14,136,531
25,545,754Borrowings of Consolidated Blackstone Funds—
—
—
(858,133
)
(858,133
)Interest on Borrowings of Consolidated Blackstone Funds—
(101,005
)
(101,005
)
(97,819
)
(299,829
)Blackstone Funds Capital Commitments to Investee Funds (d)(364,357
)
—
—
—
(364,357
)Blackstone Operating Entities Contractual Obligations$
5,689,896
$
2,359,303
$
2,793,657
$
13,180,579
$
24,023,435
(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.
(b)
Represents the principal amounts due on our senior notes and secured borrowings. For our senior notes, we assume no pre-payments and the borrowings are held until their final maturity. For our secured borrowings we project prepayments based on the performance of the underlying assets and principal may be paid down in full prior to their stated maturity. As of December 31, 2023, we had no borrowings outstanding under our revolver.
140Table of Contents(c)
Represents interest to be paid over the maturity of our senior notes and secured borrowings. For our senior notes, we assume no pre-payments and the borrowings are held until their final maturity. For our secured borrowings, we project pre-payments based on the performance of the underlying assets with interest payments based on the estimated principal outstanding, inclusive of projected pre-payments. These amounts include commitment fees for unutilized borrowings under our revolver.
(d)
These obligations represent commitments of the consolidated Blackstone Funds to make capital contributions to investee funds and portfolio companies. These amounts are generally due on demand and are therefore presented in the less than one year category.
(e)
Represents obligations by Blackstone’s corporate subsidiary to make payments under the Tax Receivable Agreements to certain non-controlling interest holders for the tax savings realized from the taxable purchases of their interests in connection with the reorganization at the time of Blackstone’s IPO in 2007 and subsequent purchases. The obligation represents the amount of the payments currently expected to be made, which are dependent on the tax savings actually realized as determined annually without discounting for the timing of the payments. As required by GAAP, the amount of the obligation included in the Consolidated Financial Statements and shown in Note 18. “Related Party Transactions” (see “— Item 8. Financial Statements and Supplementary Data”) differs to reflect the net present value of the payments due to certain non-controlling interest holders.
(f)
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 $210.8 million and interest of $60.8 million as of December 31, 2023; 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.GuaranteesBlackstone and certain of its consolidated funds provide financial guarantees. The amounts and nature of these guarantees are described in Note 19. “Commitments and Contingencies — Contingencies — Guarantees” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.IndemnificationsIn 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 Consolidated Financial Statements as of December 31, 2023.
Clawback Obligations
Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceed 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 19. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.
141Table of ContentsShare Repurchase ProgramOn 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.
During the year ended December 31, 2023, Blackstone repurchased 3.7 million shares of common stock at a total cost of $351.3 million. As of December 31, 2023, the amount remaining available for repurchases under the program was $756.8 million.DividendsOur intention is to pay to holders of common stock a quarterly dividend representing approximately 85% of Blackstone 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 stockholders 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 stockholders 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 stockholder’s basis.The following graph shows fiscal quarterly and annual per common stockholder dividends for 2023, 2022 and 2021. Dividends are declared and paid in the quarter subsequent to the quarter in which they are earned.
142Table of ContentsWith respect to fiscal year 2023, we paid to stockholders of our common stock a dividend of $0.82, $0.79, $0.80 and $0.94 per share in respect of the first, second, third and fourth quarters, respectively, aggregating to $3.35 per share of common stock. With respect to fiscal years 2022 and 2021, we paid stockholders of our common stock aggregate dividends of $4.40 per share and $4.06 per share, respectively.LeverageWe may under certain circumstances use leverage opportunistically and over time to create the most efficient capital structure for Blackstone and our stockholders. In addition to the borrowings from our notes issuances and our revolving credit facility, we may use reverse repurchase agreements, repurchase agreements and securities sold, not yet purchased. Reverse repurchase agreements are entered into primarily to take advantage of opportunistic yields otherwise absent in the overnight markets and also to use the collateral received to cover securities sold, not yet purchased. Repurchase agreements are entered into primarily to opportunistically yield higher spreads on purchased securities. The balances held in these financial instruments fluctuate based on Blackstone’s liquidity needs, market conditions and investment risk profiles.
143Table of ContentsThe following table presents information regarding these financial instruments which are included in Accounts Payable, Accrued Expenses and Other Liabilities in our Consolidated Statements of Financial Condition:Repurchase AgreementsSecurities Sold, Not Yet Purchased(Dollars in Millions)Balance, December 31, 2023
$
—
$
3.9
Balance, December 31, 2022
$
89.9
$
3.8
Year Ended December 31, 2023Average Daily Balance$
24.7
$
3.8Maximum Daily Balance$
90.1
$
4.0Critical Accounting PoliciesWe prepare our Consolidated Financial Statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates and/or judgments. For a description of our accounting policies, see Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.Principles of ConsolidationFor a description of our accounting policy on consolidation, see Note 2. “Summary of Significant Accounting Policies — Consolidation” and Note 9. “Variable Interest Entities” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” for detailed information on Blackstone’s involvement with VIEs. The following discussion is intended to provide supplemental information about how the application of consolidation principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.
The determination that Blackstone holds a controlling financial interest in a Blackstone Fund or investment vehicle significantly changes the presentation of our consolidated financial statements. In our Consolidated Statements of Financial Position included in this filing, we present 100% of the assets and liabilities of consolidated VIEs along with a non-controlling interest which represents the portion of the consolidated vehicle’s interests held by third parties. However, assets of our consolidated VIEs can only be used to settle obligations of the consolidated VIE and are not available for general use by Blackstone. Further, the liabilities of our consolidated VIEs do not have recourse to the general credit of Blackstone. In the Consolidated Statements of Operations, we eliminate any management fees, Incentive Fees, or Performance Allocations received or accrued from consolidated VIEs as they are considered intercompany transactions. We recognize 100% of the consolidated VIE’s investment income (loss) and allocate the portion of that income (loss) attributable to third party ownership to non-controlling interests in arriving at Net Income Attributable to Blackstone Inc.The assessment of whether we consolidate a Blackstone Fund or investment vehicle we manage requires the application of significant judgment. These judgments are applied both at the time we become involved with the VIE and on an ongoing basis and include, but are not limited to:144Table of Contents•
Determining whether our management fees, Incentive Fees or Performance Allocations represent variable interests — We make judgments as to whether the fees we earn are commensurate with the level of effort required for those fees and at market rates. In making this judgment, we consider, among other things, the extent of third party investment in the entity and the terms of any other interests we hold in the VIE.
•
Determining whether kick-out rights are substantive — We make judgments as to whether the third party investors in a partnership entity have the ability to remove the general partner, the investment manager or its equivalent, or to dissolve (liquidate) the partnership entity, through a simple majority vote. This includes an evaluation of whether barriers to exercise these rights exist.
•
Concluding whether Blackstone has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE — As there is no explicit threshold in GAAP to define “potentially significant,” management must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.Revenue RecognitionFor a description of our accounting policy on revenue recognition, see Note 2. “Summary of Significant Accounting Policies — Revenue Recognition” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.” For an additional description of the nature of our revenue arrangements, including how management fees, Incentive Fees, and Performance Allocations are generated, please refer to “Part I. Item 1. Business — Fee Structure/Incentive Arrangements.” The following discussion is intended to provide supplemental information about how the application of revenue recognition principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.Management and Advisory Fees, Net— Blackstone earns base management fees from its customers at a fixed percentage of a calculation base which is typically assets under management, net asset value, gross asset value, total assets, committed capital or invested capital. The range of management fee rates and the calculation base from which they are earned, generally, are as follows:
On private equity, real estate, and certain of our hedge fund solutions and credit-focused funds:
•
0.25% to 1.75% of committed capital or invested capital during the investment period,
•
0.25% to 1.50% of invested capital, committed capital or investment fair value subsequent to the investment period for private equity and real estate funds, and
•
1.00% to 1.75% of invested capital or net asset value subsequent to the investment period for certain of our hedge fund solutions and credit-focused
funds.
On real estate and credit-focused funds structured like hedge funds:
•
0.50% to 1.00% of net asset value.
On credit separately managed accounts:
•
0.20% to 1.35% of net asset value or total assets.
On real estate separately managed accounts:
•
0.35% to 2.00% of invested capital, net operating income or net asset value.
145Table of ContentsOn insurance separately managed accounts and investment vehicles:
•
0.25% to 1.00% of net asset value.
On funds of hedge funds, certain hedge funds and separately managed accounts invested in hedge funds:
•
0.20% to 1.50% of net asset value.
On CLO vehicles:
•
0.20% to 0.50% of the aggregate par amount of collateral assets, including principal cash.
On credit-focused registered and non-registered investment companies:
•
0.25% to 1.25% of total assets or net asset value.
The investment adviser of BXMT receives annual management fees based on 1.50% of BXMT’s net proceeds received from equity offerings and accumulated “distributable earnings” (which is generally equal to its GAAP net income excluding certain non-cash and other items), subject to certain adjustments. The investment advisers of BREIT and BEPIF receive a management fee of 1.25% per annum of net asset value, payable monthly.
Management fee calculations based on committed capital or invested capital are mechanical in nature and therefore do not require the use of significant estimates or judgments. Management fee calculations based on net asset value, total assets, or investment fair value depend on the fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used as well as economic conditions. See “— Fair Value” below for further discussion of the judgment required for determining the fair value of the underlying investments.Investment Income (Loss)
— Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. Blackstone has concluded that investments made alongside its limited partners in a partnership which entitle Blackstone to a Performance Allocation represent equity method investments that are not in the scope of the GAAP guidance on accounting for revenues from contracts with customers. Blackstone accounts for these arrangements under the equity method of accounting. Under the equity method, Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period Blackstone calculates the accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results.The change in the fair value of the investments held by certain Blackstone Funds is a significant input into the accrued Performance Allocation calculation and accrual for potential repayment of previously received Performance Allocations. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds. See “— Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments.Fair ValueBlackstone uses fair value throughout the reporting process. For a description of our accounting policies related to valuation, see Note 2. “Summary of Significant Accounting Policies — Fair Value of Financial Instruments” and “Summary of Significant Accounting Policies — Investments at Fair Value” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing. The following discussion is intended to provide supplemental information about how the application of fair value principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.
146Table of ContentsThe fair value of the investments held by Blackstone Funds is the primary input to the calculation of certain of our management fees, Incentive Fees, Performance Allocations and the related Compensation we recognize. Generally, Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Audit and Accounting Guide, Investment Companies
, and in accordance with the GAAP guidance on investment companies and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. In the absence of observable market prices, we utilize valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For investments where little market activity exists management’s determination of fair value is based on the best information available in the circumstances, which may incorporate management’s own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks.Blackstone has also elected the fair value option for certain instruments it owns directly, including loans and receivables, investments in private debt securities and other proprietary investments. Blackstone is required to measure certain financial instruments at fair value, including debt instruments, equity securities and freestanding derivatives.
Fair Value of Investments or Instruments that are Publicly TradedSecurities that are publicly traded and for which a quoted market exists will be valued at the closing price of such securities in the principal market in which the security trades, or in the absence of a principal market, in the most advantageous market on the valuation date. When a quoted price in an active market exists, no block discounts or control premiums are permitted regardless of the size of the public security held. In some cases, securities will include legal and contractual restrictions limiting their purchase and sale for a period of time. A discount to publicly traded price may be appropriate in instances where a legal restriction is a characteristic of the security, such as may be required under SEC Rule 144. The amount of the discount, if taken, shall be determined based on the time period that must pass before the restricted security becomes unrestricted or otherwise available for sale.Fair Value of Investments or Instruments that are not Publicly Traded
Investments for which market prices are not observable include private investments in the equity or debt of operating companies or real estate properties. Our primary methodology for determining the fair values of such investments is generally the income approach which provides an indication of fair value based on the present value of cash flows that a business, security, or property is expected to generate in the future. The most widely used methodology under the income approach is the discounted cash flow method which includes significant assumptions about the underlying investment’s projected net earnings or cash flows, discount rate, capitalization rate and exit multiple. Our secondary methodology, generally used to corroborate the results of the income approach, is typically the market approach. The most widely used methodology under the market approach relies upon valuations for comparable public companies, transactions, or assets, and includes making judgments about which companies, transactions, or assets are comparable. Depending on the facts and circumstances associated with the investment, different primary and secondary methodologies may be used including option value, contingent claims or scenario analysis, yield analysis, projected cash flow through maturity or expiration, discount to sale, probability weighted methods or recent round of financing.147
Table of ContentsIn certain cases debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments.
Management Process on Fair ValueDue to the importance of fair value throughout the consolidated financial statements and the significant judgment required to be applied in arriving at those fair values, we have developed a process around valuation that incorporates several levels of approval and review from both internal and external sources. Investments held by Blackstone Funds and investment vehicles are valued on at least a quarterly basis by our internal valuation or asset management teams, which are independent from our investment teams. For investments held by vehicles managed by more than one business unit, Blackstone has developed a process designed to facilitate coordination and alignment, as appropriate, of the fair value of in-scope investments across business units.
For investments valued utilizing the income method and where Blackstone has information rights, we generally have a direct line of communication with each of the Portfolio Companies’ and underlying assets’ finance teams and collect financial data used to support projections used in a discounted cash flow analysis. The valuation team then analyzes the data received and updates the valuation models reflecting any changes in the underlying cash flow projections, weighted-average cost of capital, exit multiple or capitalization rate, and any other valuation input relevant to economic conditions.
The results of all valuations of investments held by Blackstone Funds and investment vehicles are reviewed by the relevant business unit’s valuation sub-committee, which is comprised of key personnel from the business unit, typically the chief investment officer, chief operating officer, chief financial officer, chief compliance officer (or their respective equivalents where applicable) and other senior managing directors in the business. To further corroborate results, each business unit also generally obtains either a positive assurance opinion or a range of value from an independent valuation party, at least annually for internally prepared valuations for investments that have been held by Blackstone Funds and investment vehicles for greater than a year and quarterly for certain investments. Our firmwide valuation committee, chaired by our Chief Financial Officer and comprised of senior members of our businesses and representatives from corporate functions, including legal and finance, reviews the valuation process for investments held by us and our investment vehicles, including the application of appropriate valuation standards on a consistent basis. Each quarter, the valuation process is also reviewed by the audit committee of our board of directors, which is comprised of our non-employee directors.
Income Tax
For a description of our accounting policy on taxes and additional information on taxes see Note 2. “Summary of Significant Accounting Policies” and Note 15. “Income Taxes,” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.
Our provision for income taxes is composed of current and deferred taxes. Current income taxes approximate taxes to be paid or refunded for the current period. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse.
Additionally, significant judgment is required in estimating the provision for (benefit from) income taxes, current and deferred tax balances (including valuation allowance), accrued interest or penalties and uncertain tax positions. In evaluating these judgments, we consider, among other items, projections of taxable income (including the character of such income), beginning with historic results and incorporating assumptions of the amount of future pretax operating income. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that Blackstone uses to manage its business. To the extent any portion of the deferred tax assets are not considered to be more likely than not to be realized, a valuation allowance is recorded.
148Table of ContentsRevisions in estimates and/or actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any.Recent Accounting DevelopmentsInformation regarding recent accounting developments and their impact on Blackstone, if any, can be found in Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.
Interbank Offered Rates Transition
Certain jurisdictions are currently reforming or phasing out their benchmark interest rates, most notably LIBOR across multiple currencies. Most such reforms and phase outs, including all tenors of U.S. dollar LIBOR, became effective on or prior to June 30, 2023, though some rates may persist on a synthetic basis through September 2024. Blackstone has taken steps to prepare for and mitigate the impact of changing base rates and continues to manage transition efforts and evaluate the impact of prospective changes on existing transactions and contractual arrangements. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Interest rates on our and our funds’ portfolio companies’ outstanding financial instruments have been and might in the future be subject to change based on regulatory developments, which could adversely affect our investment returns and our and our portfolio companies’ borrowing costs.”
FY 2025-12-31 (later)
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with Blackstone Inc.’s consolidated financial statements and the related notes included within this Annual Report on Form 10-K.This section of this Form 10-K
generally discusses 2025 and 2024 items and year to year comparisons between 2025 and 2024. For the discussion of 2024 compared to 2023 , see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Blackstone’s Annual Report on Form 10-K
for the year ended December 31, 2024, which specific discussion is incorporated herein by reference.Our BusinessBlackstone is the world’s largest alternative asset manager. Our business is organized into four segments: Real Estate, Private Equity, Credit & Insurance and Multi-Asset Investing. For more information about our business segments, see “Part I. Item 1. Business — Business Segments.”
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 investment fund structures, we receive a contractual incentive fee from the 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 business units we operate. Net investment gains and investment income generated by Blackstone Funds are driven by the performance of underlying investments in such funds as well as overall market conditions. Fair values are affected by changes in the fundamentals of our funds’ portfolio companies and other investments, the industries in which they operate, the overall economy and other market conditions.Business EnvironmentBlackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S., Europe, Asia and, to a lesser extent, elsewhere in the world.
Most major equity markets appreciated in the fourth quarter of 2025, driven by positive economic data and accommodative central bank actions. The total return of the S&P 500 Index was 2.7% in the fourth quarter, led by the healthcare and telecommunications sectors, which gained 11.7% and 7.3%, respectively. The real estate and utilities sectors underperformed, declining 2.9% and 1.4%, respectively. Equity market volatility decreased, with the CBOE Volatility Index (VIX) declining 8.2% at the end of the fourth quarter compared to the third quarter. In credit markets, the S&P Leveraged Loan Index generated a total return of 1.2% and the ICE Bank of America High Yield Bond Index returned 1.3%. At the beginning of 2026, however, concerns regarding impact of artificial intelligence-driven disruption weighed on equity capital markets. By mid-February 2026,
the Dow Jones and S&P 500 Index had experienced declines for four out of five weeks, while the Nasdaq recorded its fifth straight negative week.
Capital markets activity levels in the U.S. expanded considerably in 2025, with U.S. initial public offering volumes and announced merger and acquisition volumes up approximately 73% and 60%, respectively, compared to 2024. In particular, the fourth quarter saw a two-and-a-half
year-over-year increase in merger and acquisition and initial public offerings activity. High-yield spreads tightened by 21 basis points in 2025, while issuance increased 16.8% year-over-year.
80Table of ContentsWhile the U.S. economy exhibited steady growth through most of 2025, the Bureau of Economic Analysis’ advance estimate of U.S. real GDP annualized growth was 1.4% in the fourth quarter. This was well below estimates, and the Bureau estimated, among other factors, that the U.S. government shutdown subtracted about 1.0% from such expected GDP growth. The labor market remained largely in balance, with an unemployment rate of 4.4% at year end, up moderately from 4.1% at year-end 2024. Inflation decreased over the course of 2025, with headline CPI of 2.7% in December 2025 compared to 3.0% in January 2025. The Federal Reserve decreased the federal funds target range three times in 2025 to 3.50-3.75%
by year end and held rates steady in January 2026, based on its view that inflation has remained above the target rate of 2%.
Outside of the U.S., most major central banks reduced interest rates in 2025 as inflation around the world continued to show signs of moderation. Inflation in the U.K. increased slightly to 3.4% in December 2025 compared to 3.0% in January 2025, but remained well below prior year peaks, and The Bank of England lowered its rate by 100 points over four reductions in 2025, ending the year at 3.75%. The European Central Bank lowered its deposit facility by 100 basis points during the year, with inflation in the Eurozone falling to 1.9% in December 2025 compared to 2.5% in January 2025. In China, the People’s Bank also lowered the required reserve ratio by 50 basis points in 2025 to 9%, continuing a rate-cutting cycle that began in 2021. By contrast, the Bank of Japan further increased its policy rate twice in 2025 to 0.75% by year end, the highest level since 1995.
An overall resilient economic backdrop, alongside moderating interest rates in several major economies, supported a gradual improvement in capital markets and transaction activity in the latter part of 2025. Uncertainty regarding the trajectory of inflation and interest rates in the U.S., continued geopolitical turbulence and concerns regarding the potential impact of artificial intelligence-related disruptions across a number of industries, however, have more recently adversely impacted investor sentiment and the market environment.
For additional information on the potential impact on each of our business segments of the conditions described above see “—Segment Analysis.”Notable TransactionsOn October 16, 2025, Blackstone entered into an amended and restated $4.325 billion revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility amends and restates Blackstone’s existing revolving credit facility to, among other things, extend the maturity date from December 15, 2028 to October 16, 2030 and increase the aggregate required minimum amount of fee generating assets under management. For additional information see Note 12. “Borrowings” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data.”
On November 3, 2025, Blackstone, through its subsidiary Blackstone Reg Finance Co. L.L.C., issued $600 million aggregate principal amount of 4.300% senior notes due November 3, 2030 (the “Registered 2030 Notes”), and $600 million aggregate principal amount of 4.950% senior notes due February 15, 2036 (the “Registered 2036 Notes”) and, together with the Registered 2030 Notes, (the “Registered Notes”), pursuant to a Registration Statement on Form S-3.
Blackstone intends to use the net proceeds from the sale of the Registered Notes for general corporate purposes. For additional information, see Note 12. “Borrowings” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” and “—Liquidity and Capital Resources — Sources and Uses of Liquidity.”
81Table of Contents
Organizational Structure
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.
Key Financial Measures and IndicatorsWe 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 consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See “—Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 2. Summary of Significant Accounting Policies” and “—Critical Accounting Policies.” Our key non-GAAP
financial measures and operating indicators and metrics are discussed below.Distributable EarningsDistributable Earnings is derived from Blackstone’s segment reported results. Distributable Earnings is used to assess performance and amounts available for dividends to Blackstone stockholders, 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 (Loss) Before Provision (Benefit) for Taxes. See “—Non-GAAP
Financial Measures” for our reconciliation of Distributable Earnings.
82Table of Contents
Net Interest and Dividend Income (Loss) is presented on a segment basis and is equal to Interest and Dividend Revenue less Interest Expense, adjusted for the impact of consolidation of Blackstone Funds, and interest expense associated with the Tax Receivable Agreement.Taxes and Related Payables represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) 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 and Non-Recurring
Items 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 Consolidated Statements of Operations under GAAP, excluding the impact of divestitures and accrued tax contingency-related liabilities or refunds which are reflected when paid or received. The Payable under the Tax Receivable Agreement reflects the expected amount of tax savings generated in the period that parties to the Tax Receivable Agreement are entitled to receive in future periods. 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 stockholders.Segment Distributable EarningsSegment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. Blackstone believes it is useful to stockholders to review the measure that management uses in assessing segment performance. 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 and Non-Recurring
Items. Transaction-Related and Non-Recurring
Items arise from corporate actions including acquisitions, divestitures, Blackstone’s initial public offering and non-recurring
gains, losses, or other charges, if any. 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, gains or losses associated with these corporate actions and non-recurring
gains, losses or other charges that affect period-to-period
comparability and are not reflective of Blackstone’s operational performance. 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 (Loss) 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, pursuant to an ongoing compensation program, 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. For the year ended December 31, 2025, Realized Performance Compensation increased by an aggregate of $76.6 million and Fee Related Compensation decreased by a corresponding amount. For the year ended December 31, 2024, Realized Performance Compensation increased by an aggregate of $83.1 million and Fee
83Table of ContentsRelated Compensation decreased by a corresponding amount. These changes to Realized Performance Compensation and Fee Related Compensation reduced Net Realizations, increased Fee Related Earnings and had a neutral impact to Income Before Provision (Benefit) for Taxes and Distributable Earnings for the years ended December 31, 2025 and 2024.Fee Related EarningsFee 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. Blackstone believes Fee Related Earnings is useful to stockholders as it provides insight into the profitability of the portion of Blackstone’s business that is not dependent on realization activity. 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 (Loss) 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 from Perpetual 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 transaction-related and non-recurring
items that arise from corporate actions including acquisitions, divestitures, Blackstone’s initial public offering and non-recurring
gains, losses or other charges, if any, (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 AmortizationAdjusted 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 (Loss) Before Provision (Benefit) for Taxes. See “—Non-GAAP
Financial Measures” for our reconciliation of Adjusted EBITDA.Net Accrued Performance RevenuesNet Accrued Performance Revenues is a non-GAAP
financial measure Blackstone believes is useful to stockholders 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
84
Table of Contents
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 Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” for additional information on the calculation of Investments — Accrued Performance Allocations.Operating MetricsThe 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 invested and available capital in Blackstone-managed or advised vehicles (including, without limitation, investment funds and SMAs). The Total Assets Under Management attributable to an individual vehicle is dependent on the structure and investment strategy of such vehicle and accordingly, will vary from vehicle to vehicle. Total Assets Under Management generally equals the sum of the following across Blackstone-managed or advised vehicles, as applicable:
(a) a vehicle’s invested capital at fair value which, as applicable, is measured as (1) total investments measured at fair value, or gross asset values, each of which may include the fair value of investments purchased with leverage under certain credit facilities, (2) net asset value, or (3) amount of debt and equity outstanding or aggregate par amount of assets, including principal cash for CLOs, and
(b) a vehicle’s available capital, if any, which represents (1) uncalled commitments made by investors and (2) available borrowing capacity under certain credit facilities.
Uncalled commitments represent the capital we are entitled to call from investors pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods. Drawdown funds, perpetual capital vehicles, co-investment
vehicles, and SMAs can each be structured with a commitment from an investor that is called over time as opposed to fully funded upon subscription.
Assets may be raised in one vehicle or business unit and subsequently invested in or managed or advised by another vehicle or business unit. Total Assets Under Management are reported in the segment where the assets are managed.
Our measurement of Total Assets Under Management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel. Our calculation of Total 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. Our definition of Total Assets Under Management differs from the manner in which affiliated investment advisors report regulatory assets under management and may differ from the definition set forth in the agreements governing the vehicles we manage or advise.
“Fee-Earning
Assets Under Management” refers to the portion of Total Assets Under Management on which we are entitled to earn management fees and/or performance revenues. The Fee-Earning
Assets Under Management attributable to an individual vehicle is driven by the basis on which fees are earned and accordingly, will vary from vehicle to vehicle. Fee-Earning
Assets Under Management generally equals the sum of the following across Blackstone-managed or advised vehicles, as applicable: (a) net asset value, (b) committed capital and remaining invested capital during the investment period and post-investment period, respectively, (c) invested capital (including leverage to the extent management fee-eligible),
(d) gross asset value, (e) fair value of investments, or (f) the aggregate par amount of collateral assets, including principal cash, of CLOs.
85Table of ContentsAssets may be raised in one vehicle or business unit and subsequently invested in or managed or advised by another vehicle or business unit. Fee-Earning
Assets Under Management are reported in the segment where the Total Assets Under Management are reported to the extent fee-paying
to Blackstone.
While Fee-Earning
Assets Under Management generally reflects Total Assets Under Management on which we are entitled to earn management fees, Fee-Earning
Assets Under Management may also include Total Assets Under Management on which we are entitled to earn only performance revenues. Our calculation of 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. Our definition of Fee-Earning
Assets Under Management may differ from the definition set forth in the agreements governing the vehicles that we manage or advise.
Commitment-based drawdown structured funds generally do not permit investors to redeem their interests at their election. Certain of our open-ended vehicles generally afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually, quarterly or monthly), typically with 2 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. In our perpetual capital vehicles where redemption rights exist, redemption requests are required to be fulfilled only (a) in Blackstone’s or the vehicles’ board’s discretion, as applicable, (b) to the extent there is sufficient new capital, or (c) where such required redemptions are limited in quantum, such as interval funds or in certain insurance-dedicated vehicles. Investment advisory agreements related to certain SMAs in our Credit & Insurance and Multi-Asset Investing segments, excluding SMAs in our insurance platform, may generally be terminated by an investor on 15 to 95 days’ notice. SMAs in our insurance platform 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.Perpetual Capital“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 or where required redemptions are limited in quantum. Perpetual Capital includes co-investment
capital with an investor right to convert into Perpetual Capital.
In our Perpetual Capital vehicles where redemption rights exist, redemption requests are required to be fulfilled only (a) in Blackstone’s or the vehicles’ board’s discretion, as applicable, (b) to the extent there is sufficient new capital, or (c) where such required redemptions are limited in quantum, such as interval funds or in certain insurance-dedicated vehicles. Perpetual Capital includes co-investment
capital with an investor right to convert into Perpetual Capital. We believe this measure is useful to stockholders as it represents capital we manage that has a longer duration and the ability to generate recurring revenues in a different manner than traditional fund structures.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. We believe this measure is useful to stockholders as it provides insight into the extent to which capital is available for Blackstone to deploy capital into investment opportunities as they arise.86
Table of ContentsInvested Performance Eligible Assets Under ManagementInvested Performance Eligible Assets Under Management represents invested capital at fair value on which performance revenues could be earned if certain hurdles are met. We believe Invested Performance Eligible Assets Under Management is useful to stockholders as it provides insight into the capital deployed that has the potential to generate performance revenues.Recent Tax DevelopmentsOn July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA provides for significant U.S. tax law changes including making permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. Prior to the enactment of the OBBBA, these provisions were set to sunset on December 31, 2025. Blackstone does not believe the extension of these provisions, or other provisions contained in the OBBBA, will materially impact its financial statements. 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 in U.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.”
On July 29, 2025, the U.S. Internal Revenue Service (“IRS”) issued guidance which provides for a simplified approach to the calculation of the corporate alternative minimum tax (“CAMT”). Based on the available guidance, Blackstone does not believe CAMT will materially impact its Provision for Taxes.Consolidated Results of OperationsFollowing 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 intangible assets and Transaction-Related and Non-Recurring
Items) in these periods, see “—Segment Analysis” below.
87Table of ContentsThe following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the years ended December 31, 2025, 2024 and 2023:Year Ended December 31,2025 vs. 2024
2024 vs. 2023
2025
20242023$
%
$
%
(Dollars in Thousands)
Revenues
Management and Advisory Fees, Net$ 8,075,601 $ 7,188,936 $ 6,671,260 $ 886,665 12% $ 517,676 8%Incentive Fees978,202 964,178 695,171 14,024 1% 269,007 39%Investment Income (Loss)
Performance Allocations
Realized3,662,243 3,457,746 2,223,841 204,497 6% 1,233,905 55%Unrealized643,063 371,407 (1,691,668 ) 271,656 73% 2,063,075 n/mPrincipal Investments
Realized697,632 332,258 303,823 365,374 110% 28,435 9%Unrealized248,304 380,591 (603,154 ) (132,287 ) -35% 983,745 n/mTotal Investment Income5,251,242 4,542,002 232,842 709,240 16% 4,309,160 n/mInterest and Dividend Revenue416,093 411,159 516,497 4,934 1% (105,338 ) -20%Other(270,873 ) 123,693 (92,929 ) (394,566 ) n/m 216,622 n/mTotal Revenues14,450,265 13,229,968 8,022,841 1,220,297 9% 5,207,127 65%Expenses
Compensation and Benefits
Compensation3,671,193 3,048,229 2,785,447 622,964 20% 262,782 9%Incentive Fee Compensation274,902 373,586 281,067 (98,684 ) -26% 92,519 33%Performance Allocations Compensation
Realized1,297,472 1,432,217 900,859 (134,745 ) -9% 531,358 59%Unrealized376,962 140,021 (654,403 ) 236,941 169% 794,424 n/mTotal Compensation and Benefits5,620,529 4,994,053 3,312,970 626,476 13% 1,681,083 51%General, Administrative and Other1,524,548 1,361,909 1,117,305 162,639 12% 244,604 22%Interest Expense508,314 443,688 431,868 64,626 15% 11,820 3%Fund Expenses49,216 19,676 118,987 29,540 150% (99,311 ) -83%Total Expenses7,702,607 6,819,326 4,981,130 883,281 13% 1,838,196 37%Other Income (Loss)
Change in Tax Receivable Agreement Liability6,591 (41,246 ) (27,196 ) 47,837 n/m (14,050 ) 52%Net Gains (Losses) from Fund Investment Activities417,397 90,084 (56,801 ) 327,313 363% 146,885 n/mTotal Other Income (Loss)423,988 48,838 (83,997 ) 375,150 768% 132,835 n/mIncome Before Provision for Taxes7,171,646 6,459,480 2,957,714 712,166 11% 3,501,766 118%Provision for Taxes1,125,023 1,021,671 513,461 103,352 10% 508,210 99%Net Income6,046,623 5,437,809 2,444,253 608,814 11% 2,993,556 122%
Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities
45,500 (61,289 ) (245,518 ) 106,789 n/m 184,229 -75%Net Income Attributable to Non-Controlling Interests in Consolidated Entities660,568 473,826 224,155 186,742 39% 249,671 111%Net Income Attributable to Non-Controlling Interests in Blackstone Holdings2,321,341 2,248,764 1,074,736 72,577 3% 1,174,028 109%Net Income Attributable to Blackstone Inc.$ 3,019,214 $ 2,776,508 $ 1,390,880 $ 242,706 9% $ 1,385,628 100%n/m Not meaningful.88Table of ContentsYear Ended December 31, 2025 Compared to Year Ended December 31, 2024RevenuesRevenues were $14.5 billion for the year ended December 31, 2025, an increase of $1.2 billion, compared to $13.2 billion for the year ended December 31, 2024. The increase in Revenues was primarily attributable to increases of $886.7 million in Management and Advisory Fees, Net and $709.2 million in Investment Income (Loss).
Management and Advisory Fees, Net were $8.1 billion for the year ended December 31, 2025, an increase of $886.7 million, compared to $7.2 billion for the year ended December 31, 2024. The increase in Management and Advisory Fees, Net was primarily attributable to increases in our Private Equity and Credit & Insurance segments of $573.3 million and $347.8 million, respectively. The increase in our Private Equity segment was primarily attributable to an increase in Base Management Fees due to fee holiday expirations of BCP IX and BETP IV, an increase in Fee-Earning
Assets Under Management in BXPE and BIP, and increased deal activity in BXCM. The increase in our Credit & Insurance segment was primarily attributable to an increase in Base Management Fees due to increased Fee-Earning
Assets Under Management in private credit strategies.
Investment Income (Loss) was $5.3 billion for the year ended December 31, 2025, an increase of $709.2 million, compared to $4.5 billion for the year ended December 31, 2024. The increase in Investment Income (Loss) was primarily attributable to an increase of $569.9 million in Realized Investment Income. The increase in Realized Investment Income was primarily attributable to higher realized gains during the year ended December 31, 2025 compared to the year ended December 31, 2024. The principal driver of this increase was an increase of $406.7 million in our Credit & Insurance segment which was primarily attributable to the sale of Bistro, a portfolio visualization software platform developed by Blackstone, and the monetization of Blackstone’s stake in Resolution Life.ExpensesExpenses were $7.7 billion for the year ended December 31, 2025, an increase of $883.3 million, compared to $6.8 billion for the year ended December 31, 2024. The increase was primarily attributable to an increase of $626.5 million in Total Compensation and Benefits, of which $623.0 million was an increase in Compensation. The increase in Compensation was primarily attributable to the increase in Management and Advisory Fees, Net, on which a portion of Compensation is based.Other Income (Loss)Other Income was $424.0 million for the year ended December 31, 2025, an increase of $375.2 million, compared to $48.8 million for the year ended December 31, 2024. The increase in Other Income was primarily attributable to an increase of $327.3 million in Net Gains from Fund Investment Activities.
The increase in Net Gains from Fund Investment Activities was primarily attributable to increases of $172.8 million in our Real Estate segment and $123.9 million in our Private Equity segment. The increase in our Real Estate segment was primarily attributable to net unrealized appreciation of investments in our consolidated funds in the year ended December 31, 2025 compared to net unrealized depreciation of investments in the year ended December 31, 2024. The increase in our Private Equity segment was primarily attributable to higher net unrealized appreciation of investments in our consolidated funds in the year ended December 31, 2025 compared to the year ended December 31, 2024.
Provision for Taxes
Blackstone’s Provision for Taxes for the year ended December 31, 2025 was $1.1 billion, an increase of $103.4 million, compared to $1.0 billion for the year ended December 31, 2024. This resulted in an effective tax rate of 15.7% and 15.8%, based on our Income Before Provision for Taxes of $7.2 billion and $6.5 billion for the years ended December 31, 2025 and 2024, respectively.
89Table of ContentsThe decrease in Blackstone’s effective tax rate for the year ended December 31, 2025 compared to the year ended December 31, 2024 relates primarily to the impact of Non-Controlling
Interests in Consolidated Entities and the deferred tax impact of Blackstone’s investment in its operating partnerships.
Additional information regarding our income taxes can be found in “—Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 14. Income Taxes” of this filing.
Non-Controlling
Interests in Consolidated Entities
The Net Income Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities and Net Income Attributable to Non-Controlling
Interests in Consolidated Entities is attributable to the consolidated Blackstone Funds. The amounts of these items vary directly with the performance of the consolidated Blackstone funds and largely eliminate the amount of Other Income (Loss) — Net Gains (Losses) from Fund Investment Activities from the Net Income Attributable to Blackstone Inc.
Net Income Attributable to Non-Controlling
Interests in Blackstone Holdings is derived from the Income Before Provision for Taxes at the Blackstone 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 of Blackstone Holdings and Blackstone after considering any contractual arrangements that govern the allocation of income such as fees allocable to Blackstone.
For the years ended December 31, 2025 and 2024, the Net Income Before Taxes allocated to Blackstone personnel and other limited partners of Blackstone Holdings was 37.6% and 38.5%, respectively. The decrease of 0.9% was primarily attributable 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 Blackstone Inc.
Operating MetricsTotal and Fee-Earning
Assets Under Management
The following graphs and tables summarize the Total Assets Under Management by Segment and Fee-Earning
Assets Under Management by Segment, followed by a rollforward of activity for the years ended December 31, 2025, 2024 and 2023. For a description of how Total 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.”
90Table of Contents
Note: Totals may not add due to rounding.91Table of Contents
Year Ended December 31,2025
2024Real Estate
Private
EquityCredit & Insurance
Multi-Asset InvestingTotal
Real Estate
Private
Equity
Credit & InsuranceMulti-Asset InvestingTotal
(Dollars in Thousands)Total Assets Under ManagementBalance, Beginning of Period$ 315,353,132 $ 352,168,635 $ 375,507,818 $ 84,150,411 $ 1,127,179,996 $ 336,940,096 $ 314,391,397 $ 312,674,037 $ 76,186,917 $ 1,040,192,447Inflows (a)25,526,691 68,140,673 132,134,874 13,582,909 239,385,147 27,941,070 41,285,126 91,200,162 11,032,279 171,458,637Outflows (b)(8,543,827 ) (10,881,149 ) (20,385,059 ) (7,316,009 ) (47,126,044 ) (24,543,453 ) (7,225,733 ) (6,347,592 ) (9,687,779 ) (47,804,557 )
Net Inflows
16,982,864 57,259,524 111,749,815 6,266,900 192,259,103 3,397,617 34,059,393 84,852,570 1,344,500 123,654,080Realizations (c)(25,550,971 ) (33,878,269 ) (62,408,320 ) (3,713,189 ) (125,550,749 ) (22,164,223 ) (28,930,508 ) (33,319,081 ) (2,728,668 ) (87,142,480 )Market Activity (d)(g)12,557,850 40,873,266 18,102,293 9,509,475 81,042,884 (2,820,358 ) 32,648,353 11,300,292 9,347,662 50,475,949Balance, End of Period (e)$ 319,342,875 $ 416,423,156 $ 442,951,606 $ 96,213,597 $ 1,274,931,234 $ 315,353,132 $ 352,168,635 $ 375,507,818 $ 84,150,411 $ 1,127,179,996Increase (Decrease)$ 3,989,743 $ 64,254,521 $ 67,443,788 $ 12,063,186 $ 147,751,238 $ (21,586,964 ) $ 37,777,238 $ 62,833,781 $ 7,963,494 $ 86,987,549Increase (Decrease)1% 18% 18% 14% 13% -6% 12% 20% 10% 8%Year Ended December 31,2023Real EstatePrivate Equity
Credit & Insurance
Multi-Asset InvestingTotal
(Dollars in Thousands)Total Assets Under ManagementBalance, Beginning of Period$ 326,146,904 $ 299,850,659 $ 273,746,559 $ 74,928,955 $ 974,673,077Inflows (a)53,922,506 23,986,567 62,132,619 8,476,721 148,518,413Outflows (b)(15,642,086 ) (3,085,261 ) (16,132,113 ) (10,858,518 ) (45,717,978 )Net Inflows (Outflows)38,280,420 20,901,306 46,000,506 (2,381,797 ) 102,800,435Realizations (c)(18,744,078 ) (24,426,644 ) (20,080,725 ) (2,439,392 ) (65,690,839 )Market Activity (d)(g)(8,743,150 ) 18,066,076 13,007,697 6,079,151 28,409,774Balance, End of Period (e)$ 336,940,096 $ 314,391,397 $ 312,674,037 $ 76,186,917 $ 1,040,192,447Increase$ 10,793,192 $ 14,540,738 $ 38,927,478 $ 1,257,962 $ 65,519,370
Increase
3% 5% 14% 2% 7%
92Table of Contents
Year Ended December 31,2025
2024Real Estate
Private
EquityCredit & Insurance
Multi-Asset InvestingTotal
Real Estate
Private
EquityCredit & Insurance
Multi-Asset InvestingTotal
(Dollars in Thousands)Fee-Earning
Assets Under ManagementBalance, Beginning of Period$ 278,914,938 $ 212,182,896 $ 264,617,560 $ 74,993,209 $ 830,708,603 $ 298,889,475 $ 176,997,265 $ 218,188,936 $ 68,532,226 $ 762,607,902Inflows (a)23,254,718 40,165,992 91,520,537 12,050,975 166,992,222 28,674,456 46,270,186 71,529,783 8,957,656 155,432,081Outflows (b)(7,538,536 ) (8,600,986 ) (16,998,063 ) (6,734,396 ) (39,871,981 ) (23,207,214 ) (7,997,715 ) (6,391,518 ) (8,768,766 ) (46,365,213 )
Net Inflows
15,716,182 31,565,006 74,522,474 5,316,579 127,120,241 5,467,242 38,272,471 65,138,265 188,890 109,066,868Realizations (c)(23,513,152 ) (15,938,130 ) (33,745,202 ) (3,363,748 ) (76,560,232 ) (23,409,231 ) (9,408,638 ) (23,840,463 ) (2,505,119 ) (59,163,451 )Market Activity (d)(h)8,309,180 13,149,286 10,245,751 8,701,625 40,405,842 (2,032,548 ) 6,321,798 5,130,822 8,777,212 18,197,284Balance, End of Period (e)$ 279,427,148 $ 240,959,058 $ 315,640,583 $ 85,647,665 $ 921,674,454 $ 278,914,938 $ 212,182,896 $ 264,617,560 $ 74,993,209 $ 830,708,603Increase (Decrease)$ 512,210 $ 28,776,162 $ 51,023,023 $ 10,654,456 $ 90,965,851 $ (19,974,537 ) $ 35,185,631 $ 46,428,624 $ 6,460,983 $ 68,100,701Increase (Decrease)— 14% 19% 14% 11% -7% 20% 21% 9% 9%
Annualized Base Management Fee Rate (f)
0.94% 1.07% 0.66% 0.66% 0.86% 0.93% 1.04% 0.65% 0.66% 0.85%Year Ended December 31,2023Real Estate
Private
Equity
Credit & InsuranceMulti-Asset InvestingTotal
(Dollars in Thousands)Fee-Earning
Assets Under ManagementBalance, Beginning of Period$ 281,967,153 $ 175,990,967 $ 192,535,693 $ 67,893,075 $ 718,386,888Inflows (a)60,404,380 8,501,835 42,750,955 7,694,930 119,352,100Outflows (b)(18,176,929 ) (737,831 ) (12,485,948 ) (10,461,779 ) (41,862,487 )Net Inflows (Outflows)42,227,451 7,764,004 30,265,007 (2,766,849 ) 77,489,613Realizations (c)(20,266,342 ) (9,767,895 ) (13,242,327 ) (2,324,408 ) (45,600,972 )Market Activity (d)(h)(5,038,787 ) 3,010,189 8,630,563 5,730,408 12,332,373Balance, End of Period (e)$ 298,889,475 $ 176,997,265 $ 218,188,936 $ 68,532,226 $ 762,607,902Increase$ 16,922,322 $ 1,006,298 $ 25,653,243 $ 639,151 $ 44,221,014Increase6% 1% 13% 1% 6%
Annualized Base Management Fee Rate (f)
0.97% 1.09% 0.64% 0.69% 0.88%
93Table of Contents(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 Fee Rate represents annualized year to date Base 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 year ended December 31, 2025, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $7.8 billion, $3.2 billion, $2.9 billion, $182.6 million, and $14.1 billion for the Real Estate, Private Equity, Credit & Insurance, Multi-Asset Investing and Total segments, respectively. For the year ended December 31, 2024, the impact was $(4.7) billion, $(1.3) billion, $(1.2) billion, $(652.0) million, and $(7.8) billion for the Real Estate, Private Equity, Credit & Insurance, Multi-Asset Investing and Total segments, respectively. For the year ended December 31, 2023, the impact was $2.2 billion, $1.1 billion, $1.1 billion, $232.1 million and $4.6 billion for the Real Estate, Private Equity, Credit & Insurance and Total segments, respectively.
(h) For the year ended December 31, 2025, the impact to Fee-Earning
Assets Under Management due to foreign exchange rate fluctuations was $6.1 billion, $586.9 million, $2.9 billion, $178.3 million, and $9.7 billion for the Real Estate, Private Equity, Credit & Insurance, Multi-Asset Investing and Total segments, respectively. For the year ended December 31, 2024, the impact was $(3.0) billion, $(278.0) million, $(1.1) billion, $(651.2) million, and $(5.1) billion for the Real Estate, Private Equity, Credit & Insurance, Multi-Asset Investing and Total segments, respectively. For the year ended December 31, 2023, the impact was $1.6 billion, $110.2 million, $1.0 billion, $223.5 million and $3.0 billion for the Real Estate, Private Equity, Credit & Insurance, Multi-Asset Investing and Total segments, respectively.
Total Assets Under Management and Fee-Earning
Assets Under Management may have differences in the measurement and timing of certain activities that affect each of inflows, outflows, realizations and market activity. These differences include, but are not limited to:
• For commitment-based drawdown funds, Total Assets Under Management inflows are generally reported at each fund closing whereas Fee-Earning
Assets Under Management inflows are generally reported when a fund’s investment period commences. Fund closings and the investment period commencement generally occur in different periods and as such, Fee-Earning
Assets Under Management inflows in such funds may exceed Total Assets Under Management inflows in the period when the investment period commences. This is most prevalent in our Real Estate and Private Equity segments.
• For commitment-based drawdown funds, Total Assets Under Management realizations generally represents the total proceeds whereas Fee-Earning
Assets Under Management generally represents only the invested capital. As such, Total Assets Under Management realizations typically exceeds Fee-Earning
Assets Under Management realizations. This is most prevalent in our Real Estate and Private Equity segments.
• For commitment-based drawdown funds, Total Assets Under Management is reported based on invested capital at fair value and available capital whereas Fee-Earning
Assets Under Management is reported based on committed or remaining invested capital. As such, Total Assets Under Management market activity generally exceeds Fee-Earning
Assets Under Management market activity. This is most prevalent in our Real Estate and Private Equity segments.
94Table of Contents• For certain credit funds, Total Assets Under Management are based on gross asset value while Fee-Earning
Assets Under Management are based on net asset value. As such, Total Assets Under Management inflows, outflows, realizations and market activity for the period generally exceed the Fee-Earning
Assets Under Management inflows, outflows, realizations and market activity for the period.Total Assets Under ManagementTotal Assets Under Management were $1,274.9 billion at December 31, 2025, an increase of $147.8 billion compared to $1,127.2 billion at December 31, 2024. The net increase was due to:
• In our Real Estate segment, an increase of $4.0 billion from $315.4 billion at December 31, 2024 to $319.3 billion at December 31, 2025. The net increase was due to inflows of $25.5 billion and market appreciation of $12.6 billion, offset by realizations of $25.6 billion and outflows of $8.5 billion.
o Inflows were driven by $9.2 billion from BREDS, $7.2 billion from BREIT, $3.6 billion from BPP and co-investment
and $2.8 billion from BREP.
o Market appreciation was driven by appreciation of $4.3 billion from BREDS (which reflected $179.2 million of foreign exchange appreciation), $4.0 billion from BREIT (which reflected $270.6 million of foreign exchange appreciation) and $3.1 billion from BREP (which reflected $3.6 billion of foreign exchange appreciation).
o Realizations were driven by $10.5 billion from BREDS, $7.3 billion from BREP and $4.7 billion from BREIT.
o Outflows were driven by $6.2 billion from BREIT.
• In our Private Equity segment, an increase of $64.3 billion from $352.2 billion at December 31, 2024 to $416.4 billion at December 31, 2025. The net increase was due to inflows of $68.1 billion and market appreciation of $40.9 billion, offset by realizations of $33.9 billion and outflows of $10.9 billion.
o Inflows were driven by $19.6 billion from Secondaries, $18.6 billion from Corporate Private Equity, $13.3 billion from Infrastructure and $8.2 billion from BXPE.
o Market appreciation was driven by appreciation of $15.8 billion from Corporate Private Equity (which reflected $1.7 billion of foreign exchange appreciation), $12.1 billion from Infrastructure (which reflected $1.0 billion of foreign exchange appreciation) and $6.9 billion from Secondaries (which reflected $52.0 million of foreign exchange depreciation).
o Realizations were driven by $13.8 billion from Corporate Private Equity, $9.9 billion from Secondaries and $5.3 billion from Tactical Opportunities.
o Outflows were driven by $4.5 billion from Secondaries, $2.6 billion from Corporate Private Equity and $1.1 billion from Infrastructure.
• In our Credit & Insurance segment, an increase of $67.4 billion from $375.5 billion at December 31, 2024 to $443.0 billion at December 31, 2025. The net increase was due to inflows of $132.1 billion and market appreciation of $18.1 billion, offset by realizations of $62.4 billion and outflows of $20.4 billion.
o Inflows were driven by $62.1 billion from private corporate credit, $36.0 billion from infrastructure and asset based credit and $22.4 billion from liquid corporate credit.
o Market appreciation was driven by appreciation of $7.4 billion from private corporate credit (which reflected $979.3 million of foreign exchange appreciation), $4.2 billion from liquid corporate credit (which reflected $2.0 billion of foreign exchange appreciation) and $3.6 billion from infrastructure and asset based credit (which reflected $13.5 million of foreign exchange appreciation).
95Table of Contentso Realizations were driven by $29.2 billion from private corporate credit, $14.7 billion from infrastructure and asset based credit and $11.5 billion from our insurance platform.
o Outflows were driven by $10.0 billion from private corporate credit and $9.9 billion from liquid corporate credit.
• In our Multi-Asset Investing segment, an increase of $12.1 billion from $84.2 billion at December 31, 2024 to $96.2 billion at December 31, 2025. The net increase was due to inflows of $13.6 billion and market appreciation of $9.5 billion, offset by outflows of $7.3 billion and realizations of $3.7 billion.
o Inflows were driven by $8.9 billion from Absolute Return, $2.1 billion from Multi-Strategy and $1.9 billion from Total Portfolio Management.
o Market appreciation was driven by $6.5 billion from Absolute Return (which reflected $267.0 million of foreign exchange appreciation).
o Outflows were driven by $6.0 billion from Absolute Return.
o Realizations were driven by $1.6 billion from Multi-Strategy and $1.2 billion from Absolute Return.
Fee-Earning
Assets Under Management
Fee-Earning
Assets Under Management were $921.7 billion at December 31, 2025, an increase of $91.0 billion compared to $830.7 billion at December 31, 2024. The net increase was due to:
• In our Real Estate segment, an increase of $512.2 million from $278.9 billion at December 31, 2024 to $279.4 billion at December 31, 2025. The net increase was due to inflows of $23.3 billion and market appreciation of $8.3 billion, offset by realizations of $23.5 billion and outflows of $7.5 billion.
o Inflows were driven by $8.1 billion from BREDS, $7.2 billion from BREIT, $2.7 billion from BPP and co-investment
and $2.5 billion from BREP.
o Market appreciation was driven by appreciation of $4.0 billion from BREIT (which reflected $270.6 million of foreign exchange appreciation), $2.0 billion from BREP (which reflected $2.0 billion of foreign exchange appreciation) and $1.1 billion from BREDS (which reflected $136.9 million of foreign exchange appreciation).
o Realizations were driven by $12.1 billion from BREDS, $4.7 billion from BREIT, $3.8 billion from BREP and $2.5 billion from BPP and co-investment.
o Outflows were driven by $6.2 billion from BREIT.
• In our Private Equity segment, an increase of $28.8 billion from $212.2 billion at December 31, 2024 to $241.0 billion at December 31, 2025. The net increase was due to inflows of $40.2 billion and market appreciation of $13.1 billion, offset by realizations of $15.9 billion and outflows of $8.6 billion.
o Inflows were driven by $10.6 billion from Infrastructure, $8.0 billion from BXPE, $7.1 billion from Corporate Private Equity, $5.2 billion from BXLS, $4.2 billion from BXG and $3.4 billion from Secondaries.
o Market appreciation was driven by appreciation of $9.5 billion from Infrastructure (which reflected $586.4 million of foreign exchange appreciation), $2.4 billion from BXPE and $1.2 billion from Secondaries.
o Realizations were driven by $6.3 billion from Corporate Private Equity, $4.2 billion from Secondaries, $2.4 billion from Tactical Opportunities and $1.8 billion from Infrastructure.
o Outflows were driven by $3.0 billion from Secondaries, $1.6 billion from BXLS and $1.5 billion from Tactical Opportunities.
96Table of Contents• In our Credit & Insurance segment, an increase of $51.0 billion from $264.6 billion at December 31, 2024 to $315.6 billion at December 31, 2025. The net increase was due to inflows of $91.5 billion and market appreciation of $10.2 billion, offset by realizations of $33.7 billion and outflows of $17.0 billion.
o Inflows were driven by $31.6 billion from private corporate credit, $24.6 billion from infrastructure and asset based credit and $23.8 billion from liquid corporate credit.
o Market appreciation was driven by appreciation of $5.0 billion from private corporate credit (which reflected $950.0 million of foreign exchange appreciation), $3.8 billion from liquid corporate credit (which reflected $1.9 billion of foreign exchange appreciation) and $1.2 billion from infrastructure and asset based credit (which reflected $35.5 million of foreign exchange appreciation).
o Realizations were driven by $13.6 billion from infrastructure and asset based credit, $12.9 billion from private corporate credit and $7.0 billion from liquid corporate credit.
o Outflows were driven by $9.3 billion from liquid corporate credit and $7.9 billion from private corporate credit.
• In our Multi-Asset Investing segment, an increase of $10.7 billion from $75.0 billion at December 31, 2024 to $85.6 billion at December 31, 2025. The net increase was due to inflows of $12.1 billion and market appreciation of $8.7 billion, offset by outflows of $6.7 billion and realizations of $3.4 billion.
o Inflows were driven by $8.1 billion from Absolute Return, $2.3 billion from Multi-Strategy and $1.0 billion from Total Portfolio Management.
o Market appreciation was driven by $6.1 billion from Absolute Return (which reflected $267.0 million of foreign exchange appreciation).
o Outflows were driven by $5.7 billion from Absolute Return.
o Realizations were driven by $1.6 billion from Multi-Strategy and $1.1 billion from Absolute Return.
97
Table of ContentsDry Powder
The following presents our Dry Powder as of December 31 of each year:
Note: Totals may not add due to rounding.(a) Represents illiquid drawdown funds, a component of Perpetual Capital and fee-paying
co-investments;
includes fee-paying
third-party capital as well as general partner and employee capital that does not earn fees. Amounts are reduced by outstanding capital commitments, for which capital has not yet been invested.Net Accrued Performance RevenuesThe following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as of December 31, 2025 and 2024. Net Accrued Performance Revenues presented do not include clawback amounts, if any, which are disclosed in Note 18. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing. See “—Non-GAAP
Financial Measures” for our reconciliation of Net Accrued Performance Revenues.
98Table of Contents
December 31,2025
2024(Dollars in Millions)
Real EstateBREP Global
$ 530 $ 892
BREP Europe
44 126
BREP Asia
94 98BPP75 42BREDS32 27Total Real Estate (a)775 1,186Private EquityBCP Global
2,044 1,733
BCP Asia
289 334
Energy/Energy Transition
646 568
Core Private Equity
287 247Tactical Opportunities225 201
Secondaries
1,141 1,072
Infrastructure
554 84
Life Sciences
216 197
BTAS/BXPE
246 229Total Private Equity (a)5,648 4,665Credit & Insurance286 401
Multi-Asset Investing
33 30Total Blackstone Net Accrued Performance Revenues$ 6,743 $ 6,281Note: Totals may not add due to rounding.(a) Real Estate and Private Equity include co-investments,
as applicable.
For the year ended December 31, 2025, Net Accrued Performance Revenues receivable increased due to Net Performance Revenues of $3.6 billion, partially offset by net realized distributions of $3.1 billion.
99Table of Contents
Invested Performance Eligible Assets Under Management
The following presents our Invested Performance Eligible Assets Under Management as of December 31 of each year:
Note: Totals may not add due to rounding.100Table of Contents
Perpetual Capital
The following presents our Perpetual Capital Total Assets Under Management as of December 31 of each year:
Note: Totals may not add due to rounding.(a) Perpetual Capital Total Assets Under Management for the Multi-Asset Investing segment was zero for the year ended December 31, 2023, $247.1 million for the year ended December 31, 2024, and $582.2 million for the year ended December 31, 2025.
Perpetual Capital Total Assets Under Management were $523.6 billion as of December 31, 2025, an increase of $78.8 billion, compared to $444.8 billion as of December 31, 2024. Perpetual Capital Total Assets Under Management in our Credit & Insurance and Private Equity segments increased by $43.7 billion and $29.4 billion, respectively. Principal drivers of the increases were:
• In our Credit & Insurance segment, growth in insurance capital managed in the segment and BCRED resulted in increases of $21.7 billion and $13.3 billion, respectively.
• In our Private Equity segment, growth in Infrastructure and BXPE resulted in increases of $21.8 billion and $12.7 billion, respectively.
101Table of Contents
Investment RecordsFund returns information is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.
The following tables present the investment record of our significant and formerly significant carry/drawdown funds and select perpetual capital strategies from inception through December 31, 2025:
102Table of Contents
Carry/Drawdown Funds
Fund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
Net IRRs (d)
Beginning Date / Ending Date) (a)
Capital
Capital (b)
Value
MOIC (c)
% Public
Value
MOIC (c)
Value
MOIC (c)
Realized
Total
(Dollars/Euros in Thousands, Except Where Noted)
Real Estate
Pre-BREP$ 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 — — n/a — 4,684,608 1.7x 4,684,608 1.7x 12 % 12 %BREP V (Dec 2005 / Feb 2007)5,539,418 — 2,331 n/a — 13,468,476 2.3x 13,470,807 2.3x 11 % 11 %BREP VI (Feb 2007 / Aug 2011)11,060,122 — 1,747 n/a — 27,764,962 2.5x 27,766,709 2.5x 13 % 13 %BREP VII (Aug 2011 / Apr 2015)13,506,816 896,934 1,324,159 0.5x — 29,057,157 2.2x 30,381,316 1.9x 17 % 14 %BREP VIII (Apr 2015 / Jun 2019)16,644,918 1,311,808 9,393,336 1.2x 4 % 23,891,973 2.3x 33,285,309 1.8x 23 % 11 %BREP IX (Jun 2019 / Aug 2022)21,365,328 3,013,563 18,574,894 1.1x 1 % 11,579,516 2.0x 30,154,410 1.4x 35 % 6 %*BREP X (Aug 2022 / Feb 2028)30,667,106 18,386,583 15,584,353 1.3x 1 % 1,810,148 1.4x 17,394,501 1.3x 13 % 10 %Total Global BREP$ 104,224,871 $ 23,608,888 $ 44,880,820 1.1x 2 % $ 119,791,758 2.2x $ 164,672,578 1.8x 17 % 14 %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)3,205,420 385,712 8,469 0.1x — 5,980,277 2.1x 5,988,746 2.0x 14 % 13 %BREP Europe IV (Sep 2013 / Dec 2016)6,676,604 1,045,677 812,529 0.7x — 10,336,480 1.9x 11,149,009 1.7x 16 % 11 %BREP Europe V (Dec 2016 / Oct 2019)7,997,175 763,392 3,942,707 0.7x — 6,762,819 3.8x 10,705,526 1.5x 41 % 5 %BREP Europe VI (Oct 2019 / Sep 2023)9,940,863 2,765,196 6,697,970 1.0x 5 % 3,970,669 2.4x 10,668,639 1.3x 62 % 4 %*BREP Europe VII (Sep 2023 / Mar 2029)9,783,505 6,226,849 4,048,162 1.2x — 54,974 1.1x 4,103,136 1.2x n/ m 13 %Total BREP Europe
€40,057,487 €
11,186,826 €
15,509,837 0.9x 2 % €
31,061,421 2.2x €
46,571,258 1.5x 16 % 9 %continued...103Table of ContentsCarry/Drawdown Funds continuedFund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
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)$ 4,262,075 $ 899,226 $ 1,333,832 1.7x 53 % $ 7,636,566 2.0x $ 8,970,398 1.9x 15% 12%BREP Asia II (Dec 2017 / Mar 2022)7,359,503 1,208,240 5,663,414 1.2x 26 % 3,040,279 1.6x 8,703,693 1.3x 12% 4%*BREP Asia III (Mar 2022 / Sep 2027)8,227,683 4,424,359 4,506,438 1.2x 3 % 161,351 1.7x 4,667,789 1.2x 41% 4%Total BREP Asia19,849,261 6,531,825 11,503,684 1.3x 20 % 10,838,196 1.8x 22,341,880 1.5x 15% 8%
BREP Co-Investment
(f)
7,789,658 143,551 1,097,386 1.4x — 15,314,021 2.2x 16,411,407 2.1x 16% 16%Total BREP$ 178,548,617 $ 43,424,309 $ 74,923,772 1.1x 5 % $ 183,872,026 2.2x $ 258,795,798 1.7x 16% 13%*BREDS High-Yield (Various) (g)$ 27,606,102 $ 9,596,082 $ 4,313,482 1.1x — $ 24,866,679 1.3x $ 29,180,161 1.3x 11% 9%Private Equity
Corporate Private Equity
BCP I (Oct 1987 / Oct 1993)$ 859,081 $ — $ — n/a — $ 1,741,738 2.6x $ 1,741,738 2.6x 19% 19%BCP II (Oct 1993 / Aug 1997)1,361,100 — — n/a — 3,268,627 2.5x 3,268,627 2.5x 32% 32%BCP III (Aug 1997 / Nov 2002)3,967,422 — — n/a — 9,228,707 2.3x 9,228,707 2.3x 14% 14%BCOM (Jun 2000 / Jun 2006)2,137,330 — — n/a — 2,995,106 1.4x 2,995,106 1.4x 6% 6%BCP IV (Nov 2002 / Dec 2005)6,773,182 — — n/a — 21,720,334 2.9x 21,720,334 2.9x 36% 36%BCP V (Dec 2005 / Jan 2011)21,009,112 982,018 — n/a — 38,870,191 1.9x 38,870,191 1.9x 8% 8%BCP VI (Jan 2011 / May 2016)15,195,162 1,340,945 3,008,679 3.1x 23 % 30,023,272 2.2x 33,031,951 2.2x 13% 12%BCP VII (May 2016 / Feb 2020)18,878,473 1,314,707 15,920,703 1.6x 24 % 22,962,054 2.6x 38,882,757 2.1x 23% 12%
BCP VIII (Feb 2020 / Apr 2024)
25,891,216 5,827,331 29,175,489 1.5x 24 % 6,978,010 2.2x 36,153,499 1.6x 27% 11%
*BCP IX (Apr 2024 / Apr 2030)
21,679,699 20,438,631 2,495,883 2.7x — — n/a 2,495,883 2.7x n/a n/mEnergy I (Aug 2011 / Feb 2015)2,441,558 177,091 373,586 2.1x 100 % 4,473,204 2.0x 4,846,790 2.0x 13% 12%Energy II (Feb 2015 / Feb 2020)4,928,860 781,327 3,220,608 1.9x 68 % 5,376,212 1.8x 8,596,820 1.8x 9% 8%
Energy III (Feb 2020 / Jun 2024)
4,393,256 1,804,027 5,491,714 2.2x 22 % 3,606,324 2.6x 9,098,038 2.4x 34% 27%
*Energy Transition IV (Jun 2024 / Jun 2030)
5,835,515 3,115,433 4,435,071 1.6x — 2,519 n/a 4,437,590 1.6x n/a n/mBCP Asia I (Dec 2017 / Sep 2021)2,437,080 417,510 2,310,979 2.0x 60 % 2,958,668 3.0x 5,269,647 2.4x 42% 21%*BCP Asia II (Sep 2021 / Sep 2027)6,793,697 3,820,598 5,299,447 1.9x 15 % 961,374 3.6x 6,260,821 2.0x 116% 30%
BCP Asia III (TBD)
10,283,637 10,283,637 — n/a — — n/a — n/a n/a n/aCore Private Equity I (Jan 2017 / Mar 2021) (h)4,760,130 1,189,022 6,857,365 2.1x — 4,163,377 3.6x 11,020,742 2.5x 32% 15%*Core Private Equity II (Mar 2021 / Mar 2026) (h)8,231,063 5,197,659 5,634,160 1.6x — 751,706 n/a 6,385,866 1.8x n/a 16%Total Corporate Private Equity$ 167,856,573 $ 56,689,936 $ 84,223,684 1.7x 21 % $ 160,081,423 2.3x $ 244,305,107 2.0x 16% 15%continued...104Table of ContentsCarry/Drawdown Funds continuedFund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
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)$ 33,171,632 $ 14,054,016 $ 13,677,512 1.2x 3 % $ 29,518,254 1.8x $ 43,195,766 1.6x 15% 10%
*Tactical Opportunities Co-Investment
and Other (Various)
10,719,217 1,225,389 6,260,728 1.3x 2 % 11,586,128 1.8x 17,846,856 1.6x 18% 16%Total Tactical Opportunities$ 43,890,849 $ 15,279,405 $ 19,938,240 1.3x 3 % $ 41,104,382 1.8x $ 61,042,622 1.6x 16% 11%GrowthBXG I (Jul 2020 / Feb 2025)
$ 4,963,268 $ 333,002 $ 4,779,253 1.1x 1 % $ 655,662 2.4x $ 5,434,915 1.2x n/m 1%
*BXG II (Feb 2025 / Feb 2030)
4,589,980 4,589,980 96,903 n/m — 7,369 n/m 104,272 n/m n/m n/mTotal Growth$ 9,553,248 $ 4,922,982 $ 4,876,156 1.1x 1 % $ 663,031 2.4x $ 5,539,187 1.2x n/m 1%Strategic Partners (Secondaries)Strategic Partners I-V
(Various) (i)
$ 11,035,527 $ 9,572 $ 2,154 n/a — $ 16,796,758 n/a $ 16,798,912 1.7x n/a 13%Strategic Partners VI (Apr 2014 / Apr 2016) (i)4,362,772 384,275 495,135 n/a — 4,593,629 n/a 5,088,764 1.7x n/a 13%Strategic Partners VII (May 2016 / Mar 2019) (i)7,489,970 1,613,449 2,550,415 n/a — 8,313,341 n/a 10,863,756 1.9x n/a 15%Strategic Partners Real Assets II (May 2017 / Jun 2020) (i)1,749,807 522,909 1,396,595 n/a — 1,287,984 n/a 2,684,579 1.9x n/a 15%Strategic Partners VIII (Mar 2019 / Oct 2021) (i)10,763,600 3,459,321 7,260,437 n/a — 8,078,676 n/a 15,339,113 1.8x n/a 19%*Strategic Partners Real Estate, SMA and Other (Various) (i)7,055,591 1,199,023 2,575,807 n/a — 2,797,785 n/a 5,373,592 1.4x n/a 10%
Strategic Partners Infrastructure III (Jun 2020 / Jun 2024) (i)
3,250,100 770,107 2,688,722 n/a — 677,888 n/a 3,366,610 1.6x n/a 17%*Strategic Partners IX (Oct 2021 / Jan 2027) (i)19,692,625 1,854,423 16,644,858 n/a — 1,307,669 n/a 17,952,527 1.5x n/a 19%*Strategic Partners GP Solutions (Jun 2021 / Dec 2026) (i)2,095,211 485,189 1,204,116 n/a — 27,124 n/a 1,231,240 1.1x n/a —
*Strategic Partners Infrastructure IV (Jul 2024 / Sep 2029) (i)
4,837,949 3,959,714 114,527 n/a — — n/a 114,527 n/m n/a n/mTotal Strategic Partners (Secondaries)$ 72,333,152 $ 14,257,982 $ 34,932,766 n/a — $ 43,880,854 n/a $ 78,813,620 1.6x n/a 14%Life Sciences
Clarus IV (Jan 2018 / Jan 2020)$ 910,000 $ 45,070 $ 620,911 2.1x — $ 691,143 1.5x $ 1,312,054 1.7x 8% 9%
BXLS V (Jan 2020 / Mar 2025)
5,035,495 2,415,358 4,872,632 1.9x 1 % 1,624,693 2.0x 6,497,325 1.9x 16% 18%continued...105Table of ContentsCarry/Drawdown Funds continuedFund (Investment Period
Committed
Available
Unrealized Investments
Realized Investments
Total Investments
Net IRRs (d)
Beginning Date / Ending Date) (a)
Capital
Capital (b)
Value
MOIC (c)
% Public
Value
MOIC (c)
Value
MOIC (c)
Realized
Total
(Dollars/Euros in Thousands, Except Where Noted)
Credit
Mezzanine / Opportunistic I (Jul 2007 / Oct 2011)$ 2,000,000 $ — $ — n/a — $ 4,809,113 1.6x $ 4,809,113 1.6x n/a 17%Mezzanine / Opportunistic II (Nov 2011 / Nov 2016)4,120,000 993,260 65,047 0.6x — 6,686,891 1.4x 6,751,938 1.4x n/a 9%Mezzanine / Opportunistic III (Sep 2016 / Jan 2021)6,639,133 1,079,116 1,014,069 0.7x 21 % 9,703,429 1.7x 10,717,498 1.5x n/a 11%
Mezzanine / Opportunistic IV (Jan 2021 / Aug 2025)
5,016,771 1,268,274 3,494,143 1.2x — 3,594,812 1.5x 7,088,955 1.3x n/a 13%
*Mezzanine / Opportunistic V (Aug 2025 / Aug 2029)
5,930,213 5,361,992 574,609 1.0x — 12,870 1.1x 587,479 1.0x n/a n/m
Total Mezzanine / Opportunistic
23,706,117 8,702,642 5,147,868 1.0x 4 % 24,807,115 1.6x 29,954,983 1.4x n/a 13%Stressed / Distressed I (Sep 2009 / May 2013)3,253,143 — — 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 15,431 — — 5,554,145 1.2x 5,569,576 1.1x n/a 1%Stressed / Distressed III (Dec 2017 / Dec 2022)7,356,380 1,071,090 1,231,450 0.7x — 5,750,768 1.6x 6,982,218 1.3x n/a 10%
Total Stressed / Distressed
15,734,523 1,618,520 1,246,881 0.6x — 17,082,011 1.3x 18,328,892 1.2x n/a 7%European Senior Debt I (Feb 2015 / Feb 2019)
€1,964,689 €
65,688 €
151,535 0.3x — €
2,997,688 1.3x €
3,149,223 1.1x n/a 1%European Senior Debt II (Jun 2019 / Jun 2023) (j)4,088,344 861,645 2,389,870 0.9x — 4,594,698 1.7x 6,984,568 1.3x n/a 8%
Total European Senior Debt€6,053,033 €
927,333 €
2,541,405 0.8x — €
7,592,386 1.5x €
10,133,791 1.2x n/a 6%
Energy I (Nov 2015 / Nov 2018)
$ 2,856,867 $ 1,154,819 $ 177,527 0.9x — $ 3,436,589 1.6x $ 3,614,116 1.5x n/a 10%
Energy II (Feb 2019 / Jun 2023)
3,616,081 1,464,279 550,116 1.0x — 3,341,419 1.4x 3,891,535 1.3x n/a 15%
*Energy III (May 2023 / May 2028)
6,477,000 4,158,379 2,673,920 1.1x — 2,538,948 1.1x 5,212,868 1.1x n/a 14%
Total Energy
12,949,948 6,777,477 3,401,563 1.1x — 9,316,956 1.4x 12,718,519 1.3x n/a 12%
Senior Direct Lending I (Dec 2023 / Dec 2025) (k)
2,057,661 395,774 2,684,803 1.1x — 134,936 1.1x 2,819,739 1.1x n/a 10%
Total Credit Drawdown Funds (l)
$ 61,353,908 $ 18,583,518 $ 15,465,867 0.9x 1 % $ 60,399,072 1.5x $ 75,864,939 1.3x n/a 10%
106Table of ContentsSelect Perpetual Capital Strategies (m)Strategy (Inception Year) (a)
Investment Strategy
Total Assets Under ManagementTotal Net Return (n)(Dollars in Thousands, Except Where Noted)
Real EstateBPP—Blackstone Property Partners Platform (2013) (o)
Core+ Real Estate $ 62,170,019 3 %
BREIT—Blackstone Real Estate Income Trust (2017) (p)
Core+ Real Estate 54,287,711 9 %
BREIT—Class I (q)Core+ Real Estate9%BXMT—Blackstone Mortgage Trust (2013) (r)
Real Estate Debt 6,147,847 7 %Private EquityBXGP—Blackstone GP Stakes (2014) (s)
Minority GP Interests 10,309,849 13 %
BIP—Blackstone Infrastructure Partners (2019) (t)
Infrastructure 62,494,036 18 %
BXPE—Blackstone Private Equity Strategies Fund Program (2024) (u)
Private Equity 18,022,298 17 %
BXPE—Class I (v)
Private Equity
17%
CreditBXSL—Blackstone Secured Lending Fund (2018) (w)
U.S. Direct Lending 16,591,137 11 %
BCRED—Blackstone Private Credit Fund (2021) (x)
U.S. Direct Lending 89,600,114 10 %
BCRED—Class I (y)U.S. Direct Lending10
%ECRED—Blackstone European Credit Fund (2022) (z)
European Direct Lending €
4,213,467 9 %
ECRED—Class I (aa)
European Direct Lending10
%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.
* For the carry/drawdown funds only, represents funds that are in their investment period as of December 31, 2025.
(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 Invested Capital (“MOIC”) represents carrying value, before 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 December 31, 2025 IRR on total invested 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’s
realized 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) Blackstone Core Equity Partners is a core private equity strategy which invests with a more modest risk profile and longer hold period than traditional private equity.
107Table of Contents(i) Strategic Partners’ Unrealized Investment Value, Realized Investment Value, Total Investment Value, Total MOIC and Total Net IRRs are reported on a three-month lag and therefore do not include the impact of economic and market activities in the current quarter. Realizations are treated as returns of capital until fully recovered and therefore Unrealized and Realized MOICs and Realized Net IRRs are not applicable. Committed Capital and Available Capital are presented as of the current quarter.
(j) European Senior Debt II IRR represents the blended return across the commingled levered and unlevered funds within the strategy. Total net returns were 12% and 7%, respectively, for the levered and unlevered funds of the strategy.
(k) Senior Direct Lending I IRR represents the blended return across the commingled levered and unlevered funds within the strategy. Total net returns were 11% and 8%, respectively, for the levered and unlevered funds of the strategy.
(l) Funds presented represent the flagship credit drawdown funds only. The Total Credit Net IRR is the combined IRR of the credit drawdown funds presented.
(m) 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) perpetual capital assets managed for certain insurance clients, and (3) investment vehicles where Blackstone does not earn fees.
(n) Unless otherwise indicated, Total Net Return represents the annualized inception to December 31, 2025 IRR on total invested capital based on 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.
(o) BPP represents the aggregate Total Assets Under Management and Total Net Return of the BPP Platform, which comprises over 30 fund, co-investment
and separately managed account vehicles. It includes certain vehicles managed as part of the BPP Platform but not classified as Perpetual Capital. As of December 31, 2025, these vehicles represented $4.4 billion of Total Assets Under Management.
(p) 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. This return is not representative of the return experienced by any particular investor or share class. Total Net Return is presented on an annualized basis and is from January 1, 2017.
(q) Represents the Total Net Return for BREIT’s Class I shares, its largest share class. Performance varies by share class. Class I Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BREIT. Class I Total Net Return is presented on an annualized basis and is from January 1, 2017.
(r) The BXMT Total Net Return reflects annualized market return of a shareholder invested in BXMT since inception, May 22, 2013, assuming reinvestment of all dividends received during the period.
(s) Blackstone GP Stakes (“BXGP”) represents the aggregate Total Assets Under Management and Total Net Return of BSCH I and BSCH II funds that invest as part of the Secondaries—GP Stakes strategy, which targets minority investments in the general partners of private equity and other private-market alternative asset management firms globally. As of December 31, 2025, including vehicles that are not classified as Perpetual Capital and co-investment
vehicles that do not pay fees, BXGP Total Assets Under Management was $13.2 billion.
(t) BIP represents the aggregate Total Assets Under Management and Total Net Return of infrastructure-focused funds and co-investment
vehicles for institutional investors with a primary focus on the U.S. and Europe. As of December 31, 2025, including co-investment
vehicles that do not pay fees, BIP Total Assets Under Management was $74.5 billion.
(u) The BXPE Total Net Return reflects a per share blended return, assuming the BXPE fund program had a single vehicle and a single share class, reinvestment of any dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BXPE. This return is not representative of the return experienced by any particular vehicle, investor or share class. For purposes of calculating the blended return, U.S. dollar equivalent returns have been included for share classes that are
108Table of Contentsdenominated in a foreign currency. Total Net Return is from January 2, 2024 and any share class or vehicle that has an inception date of less than one year from such latest reporting date is excluded from the calculation. BXPE Total Assets Under Management reflects net asset value as of December 31, 2025. BXPE Total Assets Under Management, to the extent managed by a different business, is reported in such business for the purposes of segment Assets Under Management reporting.
(v) Represents the blended Total Net Return for the BXPE fund program’s Class I shares, its largest share class across vehicles. Performance varies by vehicle and share class. Class I Total Net Return assumes reinvestment of any dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by the Class I shares. For purposes of calculating the blended Class I return, U.S. dollar equivalent returns have been included for share classes that are denominated in a foreign currency. Class I Total Net Return is from January 2, 2024 and any share class or vehicle that has an inception date of less than one year from such latest reporting date is excluded from the calculation.
(w) The BXSL Total Assets Under Management and Total Net Return are presented as of September 30, 2025. Refer to BXSL public filings for current quarter results. BXSL Total Net Return reflects the change in Net Asset Value (“NAV”) per share, plus distributions per share (assuming dividends and distributions are reinvested in accordance with BXSL’s dividend reinvestment plan) divided by the beginning NAV per share. Total Net Returns are presented on an annualized basis and are from November 20, 2018.
(x) 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. This return is not representative of the return experienced by any particular investor or share class. Total Net Return is presented on an annualized basis and is from January 7, 2021. 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 December 31, 2025 was $47.6 billion.
(y) Represents the Total Net Return for BCRED’s Class I shares, its largest share class. Performance varies by share class. Class I Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BCRED. Class I Total Net Return is presented on an annualized basis and is from January 7, 2021.
(z) The ECRED Total Net Return reflects a per share blended return, assuming ECRED 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 ECRED. This return is not representative of the return experienced by any particular investor or share class. Total Net Return is presented on an annualized basis and is from October 3, 2022. Total Assets Under Management reflects gross asset value plus amounts borrowed or available to be borrowed under certain credit facilities as of December 31, 2025. ECRED net asset value as of December 31, 2025 was €
2.3 billion.
(aa) Represents the Total Net Return for ECRED’s Class I shares, its largest share class. Performance varies by share class. Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by ECRED. Class I Total Net Return is presented on an annualized basis and is from October 3, 2022.
109
Table of ContentsSegment 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.
Real Estate
The following table presents the results of operations for our Real Estate segment:
Year Ended December 31,2025 vs. 2024
2024 vs. 2023
2025
20242023$
%
$
%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$ 2,653,294 $ 2,716,983 $ 2,794,232 $ (63,689 ) -2 % $ (77,249 ) -3 %Transaction and Other Fees, Net141,696 175,010 78,483 (33,314 ) -19 % 96,527 123 %Management Fee Offsets(13,066 ) (16,716 ) (29,357 ) 3,650 -22 % 12,641 -43 %Total Management Fees, Net2,781,924 2,875,277 2,843,358 (93,353 ) -3 % 31,919 1 %Fee Related Performance Revenues489,648 203,425 294,240 286,223 141 % (90,815 ) -31 %Fee Related Compensation(690,292 ) (674,965 ) (675,880 ) (15,327 ) 2 % 915 —Other Operating Expenses(370,001 ) (380,321 ) (325,050 ) 10,320 -3 % (55,271 ) 17 %Fee Related Earnings2,211,279 2,023,416 2,136,668 187,863 9 % (113,252 ) -5 %Realized Performance Revenues268,773 200,974 244,358 67,799 34 % (43,384 ) -18 %Realized Performance Compensation(130,361 ) (101,011 ) (123,299 ) (29,350 ) 29 % 22,288 -18 %Realized Principal Investment Income10,689 14,522 7,628 (3,833 ) -26 % 6,894 90 %Net Realizations149,101 114,485 128,687 34,616 30 % (14,202 ) -11 %Segment Distributable Earnings$ 2,360,380 $ 2,137,901 $ 2,265,355 $ 222,479 10 % $ (127,454 ) -6 %
n/m Not meaningful.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Segment Distributable Earnings were $2.4 billion for the year ended December 31, 2025, an increase of $222.5 million, compared to $2.1 billion for the year ended December 31, 2024. The increase in Segment Distributable Earnings was attributable to an increase of $187.9 million in Fee Related Earnings and an increase of $34.6 million in Net Realizations.
Given the gradual pace of the real estate recovery over the course of 2025, the funds in our Real Estate segment saw limited appreciation in aggregate, notwithstanding strong performance in BREIT. Continued and significant strength in digital infrastructure investments supported performance in the year, which was partially offset by more challenging fundamentals in life sciences office, student housing and select logistics holdings. We believe there are a number of positive signs that should support values in our Real Estate portfolio, including favorable capital markets and declining new supply. Continued improvement in the cost and availability of debt also contributes to an environment that is more conducive to increased transaction volume.
110Table of ContentsFee Related EarningsFee Related Earnings were $2.2 billion for the year ended December 31, 2025, an increase of $187.9 million, compared to $2.0 billion for the year ended December 31, 2024. The increase in Fee Related Earnings was primarily attributable to an increase of $286.2 million in Fee Related Performance Revenues, partially offset by a decrease of $93.4 million in Management Fees, Net.
Fee Related Performance Revenues were $489.6 million for the year ended December 31, 2025, an increase of $286.2 million, compared to $203.4 million for the year ended December 31, 2024. The increase was primarily attributable to higher Fee Related Performance Revenues in BREIT.
Management Fees, Net were $2.8 billion for the year ended December 31, 2025, a decrease of $93.4 million, compared to $2.9 billion for the year ended December 31, 2024, primarily attributable to decreases in Base Management Fees and Transaction and Other Fees, Net. Base Management Fees decreased $63.7 million primarily attributable to a decrease in Fee-Earning
Assets Under Management in BREDS, which included the transfer of the residential debt business to our Credit & Insurance segment. Transaction and Other Fees, Net decreased $33.3 million primarily attributable to a decrease in acquisition advisory fees paid to the advisor of our BREP funds.Net RealizationsNet Realizations were $149.1 million for the year ended December 31, 2025, an increase of $34.6 million, compared to $114.5 million for the year ended December 31, 2024. The increase in Net Realizations was primarily attributable to an increase of $67.8 million in Realized Performance Revenues, partially offset by an increase of $29.4 million in Realized Performance Compensation.
Realized Performance Revenues were $268.8 million for the year ended December 31, 2025, an increase of $67.8 million, compared to $201.0 million for the year ended December 31, 2024. The increase was primarily attributable to higher Realized Performance Revenues in BREP.
Realized Performance Compensation was $130.4 million for the year ended December 31, 2025, an increase of $29.4 million, compared to $101.0 million for the year ended December 31, 2024. The increase was primarily attributable to the increase in Realized Performance Revenues.Fund ReturnsFund return information 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.
111
Table of ContentsThe following table presents the internal rates of return, except where noted, of our significant real estate funds:
Year Ended December 31,December 31, 2025Inception to Date2025
20242023Realized
Total
Fund (a)
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
NetBREP VIII-6% -6% -11% -11% -10% -9% 30% 23% 17% 11%BREP IX-8% -6% -8% -8% -6% -6% 53% 35% 10% 6%
BREP X
20% 11% 27% 15% n/m n/m 25% 13% 23% 10%BREP Europe V (b)-7% -7% -13% -12% -14% -13% 50% 41% 10% 5%BREP Europe VI (b)-18% -15% 3% 1% 10% 6% 87% 62% 10% 4%
BREP Europe VII (b)
18% 10% n/m n/m n/m n/m n/m n/m 31% 13%BREP Asia II4% 3% -2% -3% -2% -1% 19% 12% 7% 4%BREP Asia III28% 23% 6% -7% -4% -19% 83% 41% 14% 4%
BREP Co-Investment
(c)
— -1% -8% -10% 1% 1% 18% 16% 18% 16%BPP (d)-3% -4% -2% -3% -8% -8% n/a n/a 5% 3%BREIT (e)n/a 8% n/a 2% n/a -1% n/a n/a n/a 9%BREIT - Class I (f)n/a 8% n/a 2% n/a -1% n/a n/a n/a 9%BREDS High-Yield (g)15% 11% 17% 12% 12% 8% 14% 11% 14% 9%BXMT (h)n/a 21% n/a -8% n/a 13% 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. Excludes investment vehicles where Blackstone does not earn fees.
(b) Reflects an internal rate of return for euro-denominated investors in these funds.
(c) BREP Co-Investment
represents co-investment
capital raised for various BREP investments. The Net IRR reflected is calculated by aggregating each co-investment’s
realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues.
(d) The BPP platform, which comprises over 30 fund, co-investment
and separately managed account vehicles, represents the Core+ real estate funds that 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 the returns experienced by any particular investor or share class. Inception to date returns are presented on an annualized basis and are from January 1, 2017.
(f) Represents the Total Net Return for BREIT’s Class I shares, its largest share class. Performance varies by share class. Class I Total Net Return assumes reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BREIT. Inception to date return is from January 1, 2017.
(g) BREDS High-Yield represents the flagship real estate debt drawdown funds only. Inception to date returns are from July 1, 2009.
(h) Reflects the annualized return of a shareholder invested in BXMT as of the beginning 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 May 22, 2013.
112Table of ContentsFunds with Closed Investment Periods as of December 31, 2025
The Real Estate segment has thirteen funds with closed investment periods as of December 31, 2025: BREP IX, BREP VIII, BREP VII, BREP VI, BREP V, BREP Europe VI, BREP Europe V, BREP Europe IV, BREP Europe III, BREP Asia II, BREP Asia I, BREDS IV and BREDS III. As of December 31, 2025, BREP VII, BREP VI, BREP V, BREP Europe IV, BREP Europe III and BREP Asia I 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 VIII, BREDS IV and BREDS III were above their carried interest thresholds as of December 31, 2025, while BREP IX, BREP Asia II, BREP Europe VI, and BREP Europe V were below 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.
113Table of Contents
Private Equity
The following table presents the results of operations for our Private Equity segment:
Year Ended December 31,2025 vs. 2024
2024 vs. 2023
2025
20242023$
%
$
%
(Dollars in Thousands)
Management and Advisory Fees, Net
Base Management Fees$ 2,457,981 $ 2,027,855 $ 1,903,972 $ 430,126 21 % $ 123,883 7%Transaction, Advisory and Other Fees, Net362,531 176,469 108,848 186,062 105 % 67,621 62%Management Fee Offsets(48,903 ) (6,044 ) (5,228 ) (42,859 ) 709 % (816 ) 16%Total Management and Advisory Fees, Net2,771,609 2,198,280 2,007,592 573,329 26 % 190,688 9%Fee Related Performance Revenues547,985 1,185,428 — (637,443 ) -54 % 1,185,428 n/mFee Related Compensation(961,448 ) (1,164,237 ) (619,678 ) 202,789 -17 % (544,559 ) 88%Other Operating Expenses(482,312 ) (391,309 ) (329,221 ) (91,003 ) 23 % (62,088 ) 19%Fee Related Earnings1,875,834 1,828,162 1,058,693 47,672 3 % 769,469 73%Realized Performance Revenues1,670,108 1,392,447 1,343,865 277,661 20 % 48,582 4%Realized Performance Compensation(704,938 ) (633,491 ) (584,154 ) (71,447) 11 % (49,337 ) 8%Realized Principal Investment Income66,495 52,356 76,220 14,139 27 % (23,864 ) -31%Net Realizations1,031,665 811,312 835,931 220,353 27 % (24,619 ) -3%Segment Distributable Earnings$ 2,907,499 $ 2,639,474 $ 1,894,624 $ 268,025 10 % $ 744,850 39%
n/m Not meaningful.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Segment Distributable Earnings were $2.9 billion for the year ended December 31, 2025, an increase of $268.0 million, compared to $2.6 billion for the year ended December 31, 2024. The increase in Segment Distributable Earnings was attributable to an increase of $47.7 million in Fee Related Earnings, and an increase of $220.4 million in Net Realizations.
Our Private Equity segment generated strong performance across all strategies in 2025, with particular strength in Infrastructure. In Corporate Private Equity, our operating companies exhibited solid revenue growth and resilient margins. A more favorable capital markets environment supported an acceleration in transaction activity, particularly initial public offerings, in our Private Equity segment funds in the second half of 2025. A continuation of a favorable capital markets environment should contribute to a further increase in transaction activity, including realizations, in our Private Equity segment. Despite an overall strong capital markets environment, the potential for artificial intelligence-driven disruption has recently weighed on equity capital markets and equity values of companies in certain sectors, such as software. We believe the ultimate impact of such disruption will vary significantly across companies based on multiple factors, with a number of companies well-positioned to be protected or benefit from such disruption. We believe such factors, which include large company size, depth of resources and high customer switching costs, are generally evident across our portfolio.Fee Related EarningsFee Related Earnings were $1.9 billion for the year ended December 31, 2025, an increase of $47.7 million, compared to $1.8 billion for the year ended December 31, 2024. The increase in Fee Related Earnings was primarily attributable to an increase of $573.3 million in Management and Advisory Fees, Net and a decrease of $202.8 million in Fee Related Compensation, partially offset by a decrease of $637.4 million in Fee Related Performance Revenues.
114
Table of Contents
Management and Advisory Fees, Net were $2.8 billion for the year ended December 31, 2025, an increase of $573.3 million, compared to $2.2 billion for the year ended December 31, 2024, primarily attributable to increases in Base Management Fees and Transaction, Advisory and Other Fees, Net. Base Management Fees increased $430.1 million primarily attributable to fee holiday expirations in BCP IX and BETP IV, as well as increased Fee-Earning
Assets Under Management in BXPE and BIP. Transaction, Advisory and Other Fees, Net increased $186.1 million primarily attributable to increased volume of deal activity in BXCM.
Fee Related Performance Revenues were $548.0 million for the year ended December 31, 2025, a decrease of $637.4 million, compared to the year ended December 31, 2024. The decrease was primarily attributable to the crystallization of prior year performance revenues for BIP, partially offset by increased performance fee crystallizations for BXPE.
Fee Related Compensation was $961.4 million for the year ended December 31, 2025, a decrease of $202.8 million, compared to $1.2 billion for the year ended December 31, 2024. The decrease was primarily attributable to a decrease in Fee Related Performance Revenues, which impacts Fee Related Compensation.Net RealizationsNet Realizations were $1.0 billion for the year ended December 31, 2025, an increase of $220.4 million, compared to $811.3 million for the year ended December 31, 2024. The increase in Net Realizations was primarily attributable to an increase of $277.7 million in Realized Performance Revenues, partially offset by an increase of $71.4 million in Realized Performance Compensation.
Realized Performance Revenues were $1.7 billion for the year ended December 31, 2025, an increase of $277.7 million, compared to $1.4 billion for the year ended December 31, 2024. The increase was primarily attributable to increases in Realized Performance Revenues in Secondaries, related to the sale of an interest in the GP Stakes portfolio, BXLS and Tactical Opportunities, partially offset by decreases in Corporate Private Equity.
Realized Performance Compensation were $704.9 million for the year ended December 31, 2025, an increase of $71.4 million, compared to $633.5 million for the year ended December 31, 2024. The increase was primarily attributable to increases in Realized Performance Revenues.Fund ReturnsFund returns information 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.
115Table of Contents
The following table presents the internal rates of return of our significant private equity funds:
Year Ended December 31,December 31, 2025Inception to Date2025
20242023Realized
Total
Fund (a)
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Gross
Net
BCP VI-2% -3% 7% 6% 7% 6% 17% 13% 17% 12%BCP VII9% 7% 13% 10% 13% 10% 32% 23% 17% 12%BCP VIII17% 12% 14% 9% 12% 6% 38% 27% 18% 11%BCP Asia I-9% -9% 14% 12% 16% 13% 61% 42% 31% 21%BCP Asia II10% 4% 91% 76% 62% 23% 179% 116% 51% 30%
BEP II
-16% -14% 40% 23% 12% 8% 14% 9% 12% 8%
BEP III
29% 23% 20% 15% 28% 20% 47% 34% 39% 27%
BCEP I
6% 5% 10% 8% 2% 2% 36% 32% 18% 15%
BCEP II
28% 24% 14% 10% 31% 24% n/a n/a 21% 16%Tactical Opportunities10% 6% 13% 9% 9% 5% 18% 15% 15% 10%
Tactical Opportunities Co-Investment
and Other
15% 12% 13% 11% 7% 7% 20% 18% 18% 16%Clarus IV1% — 22% 17% -3% -4% 12% 8% 14% 9%BXLS V21% 16% 42% 31% 43% 27% 22% 16% 29% 18%
BXG I
13% 9% 2% -2% -2% -5% n/m n/m 5%
1%
BXPE (e)
n/a 18% n/a 13% n/a n/a n/a n/a 20% 17%
BXPE - Class I (f)
n/a 19% n/a 14% n/a n/a n/a n/a 20% 17%
BIP (d)
27% 22% 24% 20% 13% 10% n/a n/a 23% 18%
Strategic Partners VII (b)
6% 4% -1% -2% 1% — n/a n/a 20% 15%
Strategic Partners Real Assets II (b)
14% 12% 13% 11% 19% 16% n/a n/a 18% 15%
Strategic Partners VIII (b)
4% 2% 1% — -1% -3% n/a n/a 26% 19%
Strategic Partners Real Estate, SMA and Other (b)
3% 1% -1% -6% -6% -7% n/a n/a 12% 10%
Strategic Partners Infrastructure III (b)
12% 9% 13% 10% 15% 11% n/a n/a 23% 17%
Strategic Partners IX (b)
25% 20% 25% 19% 15% 7% n/a n/a 27% 19%
Strategic Partners GP Solutions (b)
7% 5% — -3% -16% -11% n/a n/a 3% —
BXGP (c)
15% 11% 35% 25% 8% 5% n/a n/a 20% 13%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. Excludes investment vehicles where Blackstone does not earn fees.
(b) Gross and net returns are reported on a three-month lag, reflect Strategic Partners’ fund financial performance as of the prior quarter and therefore do not include the impact of economic and market activities in the current quarter. Realizations are treated as returns of capital until fully recovered and therefore inception to date realized returns are not applicable.
(c) Blackstone GP Stakes (“BXGP”) gross and net returns represent BSCH I and II funds that invest as part of the Secondaries GP Stakes strategy. Returns include performance of investments in four public-market general partner stakes acquired in BSCH I, prior to a shift in BXGP’s strategy in 2017 to focus exclusively on private-markets general partners.
116Table of Contents(d) Gross and net returns reflect infrastructure-focused funds for institutional investors.
(e) Reflects a per share blended return for each respective period, assuming the BXPE had a single vehicle and a single share class, reinvestment of any dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BXPE. These returns are not representative of the returns experienced by any particular vehicle, investor or share class. For purposes of calculating the blended return, U.S. dollar equivalent returns have been included for share classes that are in a foreign currency. Inception to date returns are presented on an annualized basis and are from January 2, 2024 and any share class or vehicle that has an inception date of less than one year from such latest reporting date is excluded from the calculation.
(f) Represents the blended returns for BXPE’s Class I shares, its largest share class across vehicles. Performance varies by vehicle and share class. Class I Total Net Return assumes reinvestment of any dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by the Class I shares. For purposes of calculating the blended Class I return, U.S. dollar equivalent returns have been included for share classes that are denominated in a foreign currency. Class I Total Net Return is from January 2, 2024 and any share class or vehicle that has an inception date of less than one year from such latest reporting date is excluded from the calculation.
Funds With Closed Investment Periods as of December 31, 2025
Corporate Private Equity has nine funds with closed investment periods: BCP V, BCP VI, BCP VII, BCP VIII, BEP I, BEP II, BEP III, BCEP I and BCP Asia I. 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, BCP VIII, BEP I, BEP II, BEP III, 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.
Tactical Opportunities has various funds with closed investment periods, which are each above their carried interest thresholds based on aggregate fund position. Blackstone Growth has one fund with a closed investment period, BXG I, which is not above its carried interest threshold. Secondaries has various funds with closed investment periods, including but not limited to: Strategic Partners Infrastructure III, Strategic Partners VIII, Strategic Partners Real Estate VII and BSCH I which are above their respective carried interest thresholds based on aggregate fund position. Blackstone Life Sciences has funds with a closed investment period: Clarus IV, BXLS V and BXLS Yield, which are each above their carried interest thresholds.
117Table of Contents
Credit & Insurance
The following table presents the results of operations for our Credit & Insurance segment:
Year Ended December 31,2025 vs. 2024
2024 vs. 2023
2025
20242023$
%
$
%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$ 1,909,147 $ 1,561,649 $ 1,297,406 $ 347,498 22 % $ 264,243 20%Transaction and Other Fees, Net74,115 44,354 44,542 29,761 67 % (188 ) —Management Fee Offsets(53,670 ) (24,196 ) (3,907 ) (29,474 ) 122 % (20,289 ) 519%Total Management Fees, Net1,929,592 1,581,807 1,338,041 347,785 22 % 243,766 18%Fee Related Performance Revenues787,795 747,092 564,287 40,703 5 % 182,805 32%Fee Related Compensation(869,636 ) (755,620 ) (628,064 ) (114,016 ) 15 % (127,556 ) 20%Other Operating Expenses(450,401 ) (371,354 ) (323,773 ) (79,047 ) 21 % (47,581 ) 15%Fee Related Earnings1,397,350 1,201,925 950,491 195,425 16 % 251,434 26%Realized Performance Revenues386,729 313,092 317,620 73,637 24 % (4,528 ) -1%Realized Performance Compensation(161,493 ) (129,814 ) (140,210 ) (31,679 ) 24 % 10,396 -7%Realized Principal Investment Income335,870 39,855 21,752 296,015 743 % 18,103 83%Net Realizations561,106 223,133 199,162 337,973 151 % 23,971 12%Segment Distributable Earnings$ 1,958,456 $ 1,425,058 $ 1,149,653 $ 533,398 37 % $ 275,405 24%
n/m Not meaningful.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Segment Distributable Earnings were $2.0 billion for the year ended December 31, 2025, an increase of $533.4 million, compared to $1.4 billion for the year ended December 31, 2024. The increase in Segment Distributable Earnings was attributable to increases of $195.4 million in Fee Related Earnings and $338.0 million in Net Realizations.
Our Credit & Insurance segment demonstrated strong performance in 2025. While lower interest rates will likely reduce returns in our floating rate strategies, we believe we will continue to generate excess returns relative to liquid markets in our private credit strategies. We also continue to see long-term structural shifts toward private credit in the credit market. This has contributed to robust momentum in our non-investment
grade and investment grade private credit strategies. Opportunities for corporate and bank partnerships should also support momentum in investment grade private credit strategies. While we would expect defaults to rise from a historically low level as the credit cycle progresses, our Credit & Insurance segment funds’ holdings are predominantly in senior secured credit with significant equity subordination from institutional borrowers. We believe this should position our Credit & Insurance segment well. A favorable capital markets environment has supported, and should continue to support, overall transaction activity in our Credit & Insurance segment. Nevertheless, despite an overall strong capital markets environment, the potential for artificial intelligence-driven disruption has recently weighed on the equity capital markets and on equity values of companies in certain sectors, such as software. We believe the ultimate impact of such disruption will vary significantly across companies based on multiple factors, and that companies that are larger, have depth of resources and whose customers face high switching costs, are well-positioned to be protected or benefit from such disruption. Notwithstanding the potential for artificial-intelligence disruption, we believe our overall portfolio is relatively well-protected given the extent of our equity cushion and the prevalence of such factors at companies in our portfolio.
118Table of ContentsIn our perpetual capital strategies, BCRED maintained healthy demand with over $14 billion raised in 2025. While heightened market attention around private credit has and could continue to adversely affect net flows, we believe that strong investment performance should drive flows over the long-term.Fee Related EarningsFee Related Earnings were $1.4 billion for the year ended December 31, 2025, an increase of $195.4 million, compared to $1.2 billion for the year ended December 31, 2024. The increase in Fee Related Earnings was primarily attributable to increases of $347.8 million in Management Fees, Net and $40.7 million in Fee Related Performance Revenues, partially offset by increases of $114.0 million in Fee Related Compensation and of $79.0 million in Other Operating Expenses.
Management Fees, Net were $1.9 billion for the year ended December 31, 2025, an increase of $347.8 million, compared to $1.6 billion for the year ended December 31, 2024, primarily attributable to an increase in Base Management Fees. Base Management Fees increased $347.5 million primarily attributable to an increase in Fee-Earning
Assets Under Management in private credit strategies.
Fee Related Performance Revenues were $787.8 million for the year ended December 31, 2025, an increase of $40.7 million, compared to $747.1 million for the year ended December 31, 2024. The increase was primarily attributable to higher net investment income and Fee-Earning
Assets Under Management in BCRED.
Fee Related Compensation was $869.6 million for the year ended December 31, 2025, an increase of $114.0 million, compared to $755.6 million for the year ended December 31, 2024. The increase was primarily attributable to increases in Management Fees, Net and Fee Related Performance Revenues, both of which impact Fee Related Compensation.
Other Operating Expenses was $450.4 million for the year ended December 31, 2025, an increase of $79.0 million, compared to $371.4 million for the year ended December 31, 2024. The increase was primarily attributable to an increase in professional fees.Net RealizationsNet Realizations were $561.1 million for the year ended December 31, 2025, an increase of $338.0 million, compared to $223.1 million for the year ended December 31, 2024. The increase in Net Realizations was primarily attributable to an increase of $296.0 million in Realized Principal Investment Income.
Realized Principal Investment Income was $335.9 million for the year ended December 31, 2025, an increase of $296.0 million, compared to $39.9 million for the year ended December 31, 2024. The increase was primarily attributable to the sale of Bistro, a portfolio visualization software platform developed by Blackstone, and the monetization of Blackstone’s stake in Resolution Life.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.119
Table of ContentsThe following table presents the return information for the Private Credit and Liquid Credit composites:
Year Ended December 31,Inception to December 31, 2025
2025
20242023Total
Composite (a)
Gross
Net
Gross
Net
Gross
Net
Gross
Net
Private Credit (b)11 % 8 % 16 % 12 % 16 % 12 % 15 % 10 %Liquid Credit (b)6 % 5 % 10 % 9 % 13 % 12 % 5 % 5 %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 the Flagship commingled funds across the opportunistic lending, global middle market direct lending funds (including BXSL, BCRED, and ECRED strategies), stressed/distressed strategies, and non-investment
grade infrastructure and asset based credit. Separately managed accounts, funds with a limited number of limited partners that are not broadly marketed, inactive investment strategies, unlevered funds within a strategy that has designated levered and unlevered sleeves, and Multi-Asset Credit strategies are excluded. Liquid Credit returns include CLOs, closed-ended funds, open-ended funds and separately managed accounts. Only fee-earning
funds exceeding $100 million of fair value at the beginning of each respective quarter-end
are included. Funds in liquidation and funds investing primarily in investment grade corporate credit or asset based finance are excluded. Blackstone Funds that were contributed to BXCI as part of Blackstone’s acquisition of GSO in March 2008 and the pre-acquisition
date performance for funds and vehicles acquired by BXCI subsequent to March 2008, are also excluded.Operating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance
Eligible Assets Under
ManagementEstimated % Above High Water
Mark/Hurdle (a)December 31,
December 31,2025
202420232025
20242023(Dollars in Thousands)
Credit & Insurance (b)$ 125,846,018 $ 110,519,827 $ 89,500,575 99 % 99 % 97 %
(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 December 31, 2025, the incremental appreciation needed for the 1% of Invested Performance Eligible Assets Under Management below their respective High Water Marks/Hurdles to reach their respective High Water Marks/Hurdles was $2.5 billion, an increase of $347.8 million, compared to $2.2 billion at December 31, 2024. Of the Invested Performance Eligible Assets Under Management below their respective High Water Marks/Hurdles as of December 31, 2025, 27% were within 5% of reaching their respective High Water Mark.
120Table of ContentsMulti-Asset Investing
The following table presents the results of operations for our Multi-Asset Investing segment:Year Ended December 31,2025 vs. 2024
2024 vs. 2023
2025
20242023$
%
$
%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$ 528,435 $ 474,395 $ 470,237 $ 54,040 11% $ 4,158 1%Transaction and Other Fees, Net4,489 3,855 4,019 634 16% (164 ) -4%Management Fee Offsets— (80 ) (3 ) 80 -100% (77 ) n/mTotal Management Fees, Net532,924 478,170 474,253 54,754 11% 3,917 1%Fee Related Compensation(169,325 ) (144,500 ) (164,488 ) (24,825 ) 17% 19,988 -12%Other Operating Expenses(110,525 ) (105,108 ) (106,289 ) (5,417 ) 5% 1,181 -1%Fee Related Earnings253,074 228,562 203,476 24,512 11% 25,086 12%Realized Performance Revenues489,919 380,518 155,259 109,401 29% 225,259 145%Realized Performance Compensation(93,803 ) (86,930 ) (48,354 ) (6,873) 8% (38,576 ) 80%
Realized Principal Investment Income (Loss)
6,689 (14,207 ) 5,332 20,896 n/m (19,539 ) n/mNet Realizations402,805 279,381 112,237 123,424 44% 167,144 149%Segment Distributable Earnings$ 655,879 $ 507,943 $ 315,713 $ 147,936 29% $ 192,230 61%n/m Not meaningful.Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Segment Distributable Earnings were $655.9 million for the year ended December 31, 2025, an increase of $147.9 million, compared to $507.9 million for the year ended December 31, 2024. The increase in Segment Distributable Earnings was attributable to increases of $24.5 million in Fee Related Earnings and $123.4 million in Net Realizations.
All the strategies in our Multi-Asset Investing segment exhibited positive performance in 2025. In particular, the Absolute Return Composite had its twenty-third consecutive quarter of positive performance, including across our quantitative, equities, macro, and credit strategies. Continued strong performance in the segment contributed to favorable fundraising dynamics, with net inflows in the segment of over $6 billion for the year.Fee Related EarningsFee Related Earnings were $253.1 million for the year ended December 31, 2025, an increase of $24.5 million, compared to $228.6 million for the year ended December 31, 2024. The increase in Fee Related Earnings was primarily attributable to an increase of $54.8 million in Management Fees, Net, partially offset by an increase of $24.8 million in Fee Related Compensation.
Management Fees, Net were $532.9 million for the year ended December 31, 2025, an increase of $54.8 million, compared to $478.2 million for the year ended December 31, 2024, primarily attributable to an increase in Base Management Fees. Base Management Fees increased $54.0 million, primarily attributable to an increase in Fee-Earning
Assets Under Management in Absolute Return.
Fee Related Compensation was $169.3 million for the year ended December 31, 2025, an increase of $24.8 million, compared to $144.5 million for the year ended December 31, 2024, primarily attributable to an increase in Management Fees, Net, on which a portion of Fee Related Compensation is based.
121
Table of ContentsNet RealizationsNet Realizations were $402.8 million for the year ended December 31, 2025, an increase of $123.4 million, compared to $279.4 million for the year ended December 31, 2024. The increase in Net Realizations was primarily attributable to an increase of $109.4 million in Realized Performance Revenues.
Realized Performance Revenues were $489.9 million for the year ended December 31, 2025, an increase of $109.4 million, compared to $380.5 million for the year ended December 31, 2024. The increase was primarily attributable to Absolute Return, Total Portfolio Management and Multi-Strategy.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 Absolute Return Composite:Average Annual Returns (a)Periods Ended December 31, 2025One Year
Three Year
Five Year
Historical
Composite
Gross
Net
Gross
Net
Gross
Net
Gross
NetAbsolute Return Composite (b)
13 % 12 % 11 % 10 % 9 % 8 % 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) Absolute Return Composite covers the period from January 2000 to present, although BXMA’s inception date is September 1990. The Absolute Return Composite includes only BXMA-managed commingled and customized multi-manager funds and accounts and does not include BXMA’s liquid solutions, seeding, Multi-Strategy, Total Portfolio Management and Public Real Assets (non-discretionary)
platforms, except for investments by Absolute Return funds directly into those platforms. BXMA-managed funds in liquidation and, in the case of net returns, non-fee-paying
assets are also excluded. The funds/accounts that comprise the Absolute Return Composite are not managed within a single fund or account and are managed with different mandates. There is no guarantee that BXMA would have made the same mix of investments in a stand-alone fund/account. The Absolute Return Composite is not an investible product and, as such, the performance of the Absolute Return Composite does not represent the performance of an actual fund or account. The historical return is from January 1, 2000.
122
Table of ContentsOperating Metrics
The following table presents information regarding our Invested Performance Eligible Assets Under Management:
Invested Performance
Eligible Assets Under
ManagementEstimated % Above High Water Mark/Benchmark (a)December 31,
December 31,2025
202420232025
20242023(Dollars in Thousands)(Dollars in Thousands)
Multi-Asset Investing Managed Funds (b)
$ 54,530,128 $ 51,630,740 $ 45,631,127 99 % 98 % 95 %
(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 Multi-Asset Investing 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 their respective High Water Mark or clear a benchmark return, thereby resulting in an increase in Estimated % Above High Water Mark/Benchmark.
(b) For the Multi-Asset Investing managed funds, at December 31, 2025, the incremental appreciation needed for the 1% of Invested Performance Eligible Assets Under Management below their respective High Water Marks/Benchmarks to reach their respective High Water Marks/Benchmarks was $78.3 million, a decrease of $37.8 million, compared to $116.0 million at December 31, 2024. Of the Invested Performance Eligible Assets Under Management below their respective High Water Marks/Benchmarks as of December 31, 2025, 17% were within 5% of reaching their respective High Water Mark.
Non-GAAP
Financial Measures
These non-GAAP
financial measures are presented without the consolidation of any Blackstone Funds that are consolidated into the consolidated financial statements. Consequently, all non-GAAP
financial measures exclude the assets, liabilities and operating results related to the Blackstone Funds. See “— Key Financial Measures and Indicators” for our definitions of Distributable Earnings, Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA.
123Table of ContentsThe following table is a reconciliation of Net Income (Loss) Attributable to Blackstone Inc. to Distributable Earnings, Total Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA:Year Ended December 31,2025
20242023(Dollars in Thousands)
Net Income Attributable to Blackstone Inc.$ 3,019,214 $ 2,776,508 $ 1,390,880
Net Income Attributable to Non-Controlling
Interests in Blackstone Holdings
2,321,341 2,248,764 1,074,736
Net Income Attributable to Non-Controlling
Interests in Consolidated Entities
660,568 473,826 224,155
Net Income (Loss) Attributable to Redeemable Non-Controlling
Interests in Consolidated Entities
45,500 (61,289 ) (245,518 )Net Income6,046,623 5,437,809 2,444,253Provision for Taxes1,125,023 1,021,671 513,461Net Income Before Provision for Taxes7,171,646 6,459,480 2,957,714
Transaction-Related and Non-Recurring
Items (a)
12,971 56,372 25,981Amortization of Intangibles (b)29,326 29,332 33,457Impact of Consolidation (c)(706,068 ) (412,537 ) 21,363Unrealized Performance Revenues (d)(642,957 ) (371,407 ) 1,691,788Unrealized Performance Allocations Compensation (e)376,962 140,021 (654,403 )Unrealized Principal Investment (Income) Loss (f)(171,440 ) (271,868 ) 593,301Other Revenues (g)271,190 (123,166 ) 93,083Equity-Based Compensation (h)1,443,246 1,159,122 959,474Administrative Fee Adjustment (i)16,337 11,590 9,707Taxes and Related Payables (j)(690,349 ) (710,197 ) (670,510 )Distributable Earnings7,110,864 5,966,742 5,060,955Taxes and Related Payables (j)690,349 710,197 670,510Net Interest and Dividend (Income) Loss (k)81,001 33,437 (106,120 )Total Segment Distributable Earnings7,882,214 6,710,376 5,625,345Realized Performance Revenues (l)(2,815,529 ) (2,287,031 ) (2,061,102 )Realized Performance Compensation (m)1,090,595 951,246 896,017Realized Principal Investment Income (n)(419,743 ) (92,526 ) (110,932 )Fee Related Earnings$ 5,737,537 $ 5,282,065 $ 4,349,328Adjusted EBITDA Reconciliation
Distributable Earnings$ 7,110,864 $ 5,966,742 $ 5,060,955Interest Expense (o)497,095 444,417 429,521Taxes and Related Payables (j)690,349 710,197 670,510Depreciation and Amortization (p)98,985 98,756 94,124Adjusted EBITDA$ 8,397,293 $ 7,220,112 $ 6,255,110
(a) This adjustment removes Transaction-Related and Non-Recurring
Items, which are excluded from Blackstone’s segment presentation. Transaction-Related and Non-Recurring
Items arise from corporate actions including acquisitions, divestitures, Blackstone’s initial public offering and non-recurring
gains, losses, or other charges, if any. 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, gains or losses associated with these corporate actions and non-recurring gains, losses or other charges that affect period-to-period
comparability and are not reflective of Blackstone’s operational performance.
124Table of Contents(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 Revenues on a segment basis. The Segment Adjustment represents the add back of performance revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.Year Ended December 31,2025
20242023(Dollars in Thousands)
GAAP Unrealized Performance Allocations$ 643,063 $ 371,407 $ (1,691,668 )Segment Adjustment(106 ) — (120 )Unrealized Performance Revenues$ 642,957 $ 371,407 $ (1,691,788 )
(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.Year Ended December 31,2025
20242023(Dollars in Thousands)
GAAP Unrealized Principal Investment Income (Loss)$ 248,304 $ 380,591 $ (603,154 )Segment Adjustment(76,864 ) (108,723 ) 9,853Unrealized Principal Investment Income (Loss)$ 171,440 $ 271,868 $ (593,301 )
(g) This adjustment removes Other Revenues on a segment basis. The Segment Adjustment represents the removal of certain Transaction-Related and Non-Recurring
Items.Year Ended December 31,2025
20242023(Dollars in Thousands)
GAAP Other Revenue$ (270,873 ) $ 123,693 $ (92,929 )Segment Adjustment(317 ) (527 ) (154 )Other Revenues$ (271,190 ) $ 123,166 $ (93,083 )
(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 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.
125Table of Contents(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 for impacts of divestitures and tax contingencies. Related Payables represent tax-related
payables including the amount payable to the holders of the tax receivable agreements based on expected tax savings generated in the respective period. See “—Key Financial Measures and Indicators — Distributable Earnings” for the full definition of Taxes and Related Payables.Year Ended December 31,2025
20242023(Dollars in Thousands)
Taxes$ 575,650 $ 604,508 $ 580,925Related Payables114,699 105,689 89,585Taxes and Related Payables$ 690,349 $ 710,197 $ 670,510
(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.Year Ended December 31,2025
20242023(Dollars in Thousands)
GAAP Interest and Dividend Revenue$ 416,093 $ 411,159 $ 516,497Segment Adjustment1 (179 ) 19,144Interest and Dividend Revenue416,094 410,980 535,641GAAP Interest Expense508,314 443,688 431,868Segment Adjustment(11,219 ) 729 (2,347 )Interest Expense497,095 444,417 429,521Net Interest and Dividend Income (Loss)$ (81,001 ) $ (33,437 ) $ 106,120
(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.
126Table of Contents
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:
December 31,2025
2024(Dollars in Thousands)
Investments of Consolidated Blackstone Funds$ 5,180,879 $ 3,890,732Equity Method Investments
Partnership Investments6,546,190 6,546,728Accrued Performance Allocations12,980,356 12,397,366Corporate Treasury Investments359,657 1,147,328Other Investments7,145,029 5,818,412Total GAAP Investments$ 32,212,111 $ 29,800,566Accrued Performance Allocations - GAAP$ 12,980,356 $ 12,397,366Due from Affiliates - GAAP (a)577,467 489,086Less: Net Realized Performance Revenues (b)(1,081,738 ) (1,050,026 )Less: Accrued Performance Compensation - GAAP (c)(5,733,563 ) (5,555,870 )Net Accrued Performance Revenues$ 6,742,522 $ 6,280,556
(a) Represents GAAP accrued performance revenue recorded within Due from Affiliates.
(b) 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.
(c) 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
GeneralBlackstone’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 or invested capital of investors in our investment vehicles 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 stockholders and distributions to holders of Holdings Units.
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. The majority economic ownership interests of such consolidated Blackstone Funds are reflected as Redeemable Non-Controlling
Interests in Consolidated Entities, and Non-Controlling
Interests in Consolidated Entities in the 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 non-consolidated
Blackstone Funds, additional investments and redemptions of such interests in the non-consolidated
Blackstone Funds and the collection of receivables related to management and advisory fees.
Total Assets were $47.7 billion as of December 31, 2025, an increase of $4.2 billion from December 31, 2024. The increase in Total Assets was primarily attributable to increases of $2.8 billion in total assets attributable to consolidated operating partnerships and $1.6 billion in total assets attributable to consolidated Blackstone funds.
127Table of Contents• The increase in total assets attributable to consolidated operating partnerships was primarily attributable to increases of $1.3 billion in Investments, $659.1 million in Cash and Cash Equivalents and $618.2 million in Due from Affiliates.
o The increase in Investments was primarily attributable to appreciation in our Private Equity segment.
o The increase in Cash and Cash Equivalents was primarily attributable to the issuance of senior notes during the quarter ended December 31, 2025 and ongoing operating activities, partially offset by the paydown of senior notes that matured.
o The increase in Due from Affiliates was primarily attributable to an increase in management fees, performance revenues, reimbursable expenses and other receivables from non-consolidated
entities and portfolio companies.
• The increase in total assets attributable to consolidated Blackstone funds was primarily attributable to an increase of $1.3 billion in Investments.
o The increase in Investments was primarily attributable to purchases made by consolidated fund entities.
Total Liabilities were $25.8 billion as of December 31, 2025, an increase of $1.9 billion from December 31, 2024. The increase in Total Liabilities was primarily attributable to an increase of $1.9 billion in total liabilities attributable to consolidated operating partnerships.
• The increase in total liabilities attributable to consolidated operating partnerships was primarily attributable to an increase of $1.1 billion in Loans Payable.
o The increase in Loans Payable was primarily attributable to the issuance of senior notes during the quarter ended December 31, 2025, partially offset by the paydown of senior notes that matured.Sources and Uses of LiquidityWe 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 and other borrowings, liquid investments we hold on our Consolidated Statement of Financial Condition and access to our $4.325 billion committed revolving credit facility (the “Revolving Credit Facility”). As of December 31, 2025, Blackstone had $2.6 billion in Cash and Cash Equivalents, $359.7 million invested in Corporate Treasury Investments and $7.1 billion in Other Investments (which included $6.5 billion of liquid investments), against $12.4 billion in borrowings from our bond issuances. As of December 31, 2025, we had no borrowings outstanding under the Revolving Credit Facility. In February 2026, we drew $900.0 million under the Revolving Credit Facility.
On November 3, 2025, Blackstone, through its subsidiary Blackstone Reg Finance Co. L.L.C., issued $600 million aggregate principal amount of 4.300% senior notes due November 3, 2030 (the “Registered 2030 Notes”), and $600 million aggregate principal amount of 4.950% senior notes due February 15, 2036 (the “Registered 2036 Notes” and, together with the Registered 2030 Notes, the “Registered Notes”), pursuant to a Registration Statement on Form S-3.
Blackstone intends to use the net proceeds from the sale of the Registered Notes for general corporate purposes. For additional information see Note 12. “Borrowings” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing and “—Notable Transactions”.
128Table of ContentsIn addition to the cash we receive from our notes offerings and availability under the Revolving Credit Facility and other borrowings, we expect to receive (a) cash generated from operating activities, (b) Performance Revenue realizations, and (c) realizations on the fund investments that we make. The amounts and timing of cash received from sources in particular may vary substantially from year to year and quarter to quarter depending on the frequency and size of realization events, timing of settlement, the form in which we elect to receive payment (including in-kind)
and 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.
We expect that our primary liquidity needs will be cash to (a) provide capital to facilitate the growth of our existing businesses, which includes, without limitation, funding our general partner and co-investment
commitments to our funds and warehousing investments for our funds, (b) provide capital for business expansion, (c) pay operating expenses, including cash compensation to our employees, and other obligations as they arise, including servicing debts, (d) pay income taxes and (e) pay dividends to our stockholders, make distributions to the holders of Blackstone Holdings Partnership Units and make repurchases under our share repurchase program. For a tabular presentation of Blackstone’s contractual obligations and the expected timing of such see “—Contractual Obligations.”
129
Table of ContentsCapital CommitmentsOur own capital commitments to our funds, the funds we invest in and our investment strategies as of December 31, 2025 consisted of the following:Blackstone and
General Partner (a)Senior Managing Directors
and Certain Other
Professionals (b)Fund
Original Commitment
Remaining Commitment
Original Commitment
Remaining Commitment
(Dollars in Thousands)
Real Estate
BREP VII$ 300,000 $ 20,038 $ 100,000 $ 6,679BREP VIII300,000 24,552 100,000 8,184BREP IX300,000 41,946 100,000 13,982BREP X300,000 181,905 100,000 60,635BREP Europe III100,000 11,257 35,000 3,752BREP Europe IV130,000 19,034 43,333 6,345BREP Europe V150,000 15,959 43,333 4,610BREP Europe VI130,000 38,437 43,333 12,812BREP Europe VII130,000 81,735 43,333 27,245BREP Asia I50,392 10,342 16,797 3,447BREP Asia II70,707 11,872 23,569 3,957BREP Asia III81,078 42,974 27,026 14,325BREDS III50,000 11,358 16,667 3,786BREDS IV50,000 15,613 49,113 15,336BREDS V50,000 38,740 48,070 37,245BPP251,234 28,679 — —Other (c)53,677 31,568 — —Total Real Estate2,497,088 626,009 789,574 222,340Private Equity
BCP V629,356 29,573 — —BCP VI719,718 81,400 250,000 28,275BCP VII500,000 25,739 225,000 11,582BCP VIII500,000 97,349 225,000 43,807BCP IX500,000 475,308 225,000 213,889BEP I50,000 4,728 — —BEP II80,000 10,498 26,667 3,499BEP III80,000 32,539 26,667 10,846BETP IV80,000 40,839 26,667 13,613BCP Asia I40,000 5,869 13,333 1,956BCP Asia II100,000 57,360 33,333 19,120
BCP Asia III
195,673 195,673 65,224 65,224
continued...
130
Table of Contents
Blackstone and
General Partner (a)
Senior Managing Directors
and Certain Other
Professionals (b)
Fund
Original Commitment
Remaining Commitment
Original Commitment
Remaining Commitment
(Dollars in Thousands)
Private Equity (continued)
Core Private Equity I
$ 117,747 $ 27,016 $ 18,992 $ 4,358
Core Private Equity II
160,000 103,974 32,640 21,211Tactical Opportunities520,906 216,241 173,635 72,080
Strategic Partners (Secondaries)
1,566,751 643,574 1,225,756 527,706BIP551,277 142,112 — —
Life Sciences
225,570 149,811 37,353 20,507
Growth
165,094 95,104 54,697 31,683Other (c)90,209 21,119 — —Total Private Equity6,872,301 2,455,826 2,659,964 1,089,356Credit & Insurance
Mezzanine / Opportunistic II120,000 29,059 110,101 26,661Mezzanine / Opportunistic III130,783 33,723 98,118 25,300Mezzanine / Opportunistic IV122,000 51,059 116,171 48,619
Mezzanine / Opportunistic V
116,279 116,279 38,760 38,760
Stressed / Distressed II
125,000 51,612 119,878 49,497
Stressed / Distressed III
151,000 34,949 146,432 33,892European Senior Debt I63,000 2,873 56,882 2,594European Senior Debt II93,182 32,483 90,915 31,739European Senior Debt III23,870 12,345 19,807 10,243Energy I80,000 36,700 75,445 34,611Energy II150,000 102,832 149,036 102,171Energy III127,000 108,093 120,518 102,576
Energy SMAs
52,829 25,386 4,944 3,259Credit Alpha Fund52,102 19,752 50,670 19,209Credit Alpha Fund II25,500 12,550 24,385 12,001
Direct Lending SMAs
98,413 52,183 43,670 24,293
European Senior Direct Lending Fund
18,166 18,166 6,055 6,055
Blackstone Asset Based Finance Partners LP
38,268 38,268 12,756 12,756Other (c)62,225 31,059 1,726 740Total Credit & Insurance1,649,617 809,371 1,286,269 584,976continued...131Table of Contents
Blackstone and
General Partner (a)Senior Managing Directors
and Certain Other
Professionals (b)Fund
Original Commitment
Remaining Commitment
Original Commitment
Remaining Commitment
(Dollars in Thousands)Multi-Asset InvestingStrategic Alliance III22,000 24,263 — —Strategic Alliance IV15,000 9,802 — —Dislocation20,000 12,296 — —Other (c)5,947 2,221 — —
Total Multi-Asset Investing
62,947 48,582 — —Other
Treasury (d)2,991,878 2,541,659 — —
$ 14,073,831 $ 6,481,447 $ 4,735,807 $ 1,896,672
(a) 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. Additionally, 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. Remaining commitment may exceed original commitment due to recallable capital.
(b) Includes the full portion of our commitments (1) required to be funded by senior managing directors and certain other professionals and (2) that are elected by such individuals to be funded for the life of a fund, where such fund permits such election. Excludes amounts that are elected by such individuals to be funded on an annual basis and certain de minimis commitments funded by such individuals in certain carry funds.
(c) Represents capital commitments in each respective segment to a number of other funds.
(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”.132Table of Contents
BorrowingsAs of December 31, 2025, Blackstone Holdings Finance Co. L.L.C. and Blackstone Reg Finance Co. L.L.C. (each an “Issuer” and together the “Issuers”), both indirect subsidiaries of Blackstone, had issued and outstanding the following senior notes (collectively the “Notes”):Senior Notes (a)
Aggregate Principal Amount (Dollars/Euros in Thousands)1.000%, Due 10/5/2026
€
600,000
3.150%, Due 10/2/2027$ 300,0005.900%, Due 11/3/2027$ 600,0001.625%, Due 8/5/2028$ 650,0001.500%, Due 4/10/2029
€
600,000
2.500%, Due 1/10/2030$ 500,000
4.300%, Due 11/3/2030 (b)
$ 600,0001.600%, Due 3/30/2031$ 500,0002.000%, Due 1/30/2032$ 800,0002.550%, Due 3/30/2032$ 500,0006.200%, Due 4/22/2033$ 900,0003.500%, Due 6/1/2034
€
500,0005.000%, Due 12/6/2034 (b)
$ 750,000
4.950%, Due 2/15/2036 (b)
$ 600,0006.250%, Due 8/15/2042$ 250,0005.000%, Due 6/15/2044$ 500,0004.450%, Due 7/15/2045$ 350,0004.000%, Due 10/2/2047$ 300,0003.500%, Due 9/10/2049$ 400,0002.800%, Due 9/30/2050$ 400,0002.850%, Due 8/5/2051$ 550,0003.200%, Due 1/30/2052$ 1,000,000
$ 12,446,820
(a) The Notes are unsecured and unsubordinated obligations of the Issuers, as applicable, and are fully and unconditionally guaranteed, jointly and severally, by Blackstone Inc. and each of the Blackstone Holdings Partnerships (the “Guarantors”). The Notes contain customary covenants and financial restrictions that, among other things, limit the Issuers 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, in whole 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.
(b) The Registered 2030, 2034 and 2036 Notes’ Guarantors and Issuer, Blackstone Reg Finance Co. L.L.C. (collectively, the “Obligor Group”) do not have material assets, liabilities and results of operations, with the exception of certain amounts already disclosed in our consolidated financial statements (specifically, goodwill, the majority of our deferred tax assets, the Tax Receivable Agreement liability and the Registered 2030, 2034 and 2036 Notes). Therefore, we have excluded the summarized financial information for the Obligor Group due to management’s belief that such summarized financial information would be repetitive and would not provide material information to investors. For additional information see “— Notable Transactions” and Note 12. “Borrowings” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.
133Table of ContentsBlackstone, through Blackstone Holdings Finance Co. L.L.C., has a $4.325 billion unsecured Revolving Credit Facility with Citibank, N.A., as administrative agent with a maturity date of October 16, 2030. As of December 31, 2025, Blackstone had no borrowings outstanding under the Revolving Credit Facility. In February 2026, we drew $900.0 million under the Revolving Credit Facility. Borrowings may also be made in U.K. sterling, euros, Swiss francs, Japanese yen or Canadian dollars, in each case subject to certain sub-limits.
The Revolving Credit Facility contains customary representations, covenants and events of default. Financial covenants consist of a maximum net leverage ratio and a requirement to keep a minimum amount of fee-earning
assets under management, each tested quarterly.
For a tabular presentation of the payment timing of principal and interest due on Blackstone’s issued notes and the Revolving Credit Facility see “— Contractual Obligations”.Contractual ObligationsThe following table sets forth information relating to our contractual obligations as of December 31, 2025 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:Contractual Obligations20262027-20282029-2030Thereafter
Total
(Dollars in Thousands)
Operating Lease Obligations (a)$ 206,159 $ 392,982 $ 889,097 $ 1,700,232 $ 3,188,470Purchase Obligations133,562 134,066 9,355 — 276,983Blackstone Operating Borrowings (b)704,760 1,550,000 1,804,760 8,387,300 12,446,820Interest on Blackstone Operating Borrowings (c)498,610 951,443 868,639 3,228,187 5,546,879Borrowings of Consolidated Blackstone Funds— — 129,767 — 129,767Interest on Borrowings of Consolidated Blackstone Funds— 17,497 9,851 — 27,348Blackstone Funds Capital Commitments to Investee Funds (d)797,420 — — — 797,420
Due to Certain Non-Controlling
Interest Holders in Connection with Tax Receivable Agreements (e)
59,400 278,321 401,654 1,336,830 2,076,205Unrecognized Tax Benefits, Including Interest and Penalties (f)— — — — —Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (g)6,481,447 — — — 6,481,447Consolidated Contractual Obligations8,881,358 3,324,309 4,113,123 14,652,549 30,971,339Borrowings of Consolidated Blackstone Funds— — (129,767 ) — (129,767 )Interest on Borrowings of Consolidated Blackstone Funds— (17,497 ) (9,851 ) — (27,348 )Blackstone Funds Capital Commitments to Investee Funds (d)(797,420 ) — — — (797,420 )Blackstone Operating Entities Contractual Obligations$ 8,083,938 $ 3,306,812 $ 3,973,505 $ 14,652,549 $ 30,016,804
(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.
134Table of Contents(b) Represents the principal amounts due on our senior notes and secured borrowings. For our senior notes, we assume no pre-payments
and the borrowings are held until their final maturity. For our secured borrowings we project prepayments based on the performance of the underlying assets and principal may be paid down in full prior to their stated maturity. As of December 31, 2025, we had no borrowings outstanding under the Revolving Credit Facility. In February 2026, we drew $900.0 million under the Revolving Credit Facility.
(c) Represents interest to be paid over the maturity of our senior notes and secured borrowings. For our senior notes, we assume no pre-payments
and the borrowings are held until their final maturity. For our secured borrowings, we project pre-payments
based on the performance of the underlying assets with interest payments based on the estimated principal outstanding, inclusive of projected pre-payments.
These amounts include commitment fees for unutilized borrowings under the Revolving Credit Facility.
(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 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 expected to be realized as determined annually without discounting for the timing of the payments. As required by GAAP, the amount of the obligation included in the consolidated financial statements and shown in Note 17. “Related Party Transactions” (see “—Item 8. Financial Statements and Supplementary Data”) differs to reflect the net present value of the payments due to certain non-controlling
interest holders.
(f) 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 $320.4 million and interest of $121.1 million as of December 31, 2025; 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.GuaranteesBlackstone and certain of its consolidated funds provide financial guarantees. The amounts and nature of these guarantees are described in Note 18. “Commitments and Contingencies — Contingencies — Guarantees” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing.IndemnificationsIn 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 consolidated financial statements as of December 31, 2025.
135Table of ContentsClawback Obligations
Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceed 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 18. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing.Share Repurchase ProgramOn July 16, 2024, 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 of shares repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.
During the year ended December 31, 2025, Blackstone repurchased 0.8 million shares of common stock at a total cost of $122.6 million. As of December 31, 2025, the amount remaining available for repurchases under the program was $1.7 billion.DividendsOur intention is to pay to holders of common stock a quarterly dividend representing approximately 85% of Blackstone 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 stockholders 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 stockholders 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.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 stockholder’s basis.The following graph shows fiscal quarterly and annual per common stockholder dividends for 2025, 2024 and 2023. Dividends are declared and paid in the quarter subsequent to the quarter in which they are earned.
136Table of ContentsWith respect to fiscal year 2025, we paid to stockholders of our common stock a dividend of $0.93, $1.03, $1.29 and $1.49 per share in respect of the first, second, third and fourth quarters, respectively, aggregating to $4.74 per share of common stock. With respect to fiscal years 2024 and 2023, we paid stockholders of our common stock aggregate dividends of $3.95 per share and $3.35 per share, respectively.LeverageWe may, under certain circumstances, use leverage opportunistically and over time to create the most efficient capital structure for Blackstone and our stockholders. In addition to the borrowings from our notes issuances and our revolving credit facility, we may use asset based financing arrangements, including but not limited to margin loans, 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.
137Table of ContentsThe following table presents information regarding financial instruments which are included in Accounts Payable, Accrued Expenses and Other Liabilities in our Consolidated Statements of Financial Condition:Repurchase Agreements(Dollars in Millions)Balance, December 31, 2025
$ 289.2
Balance, December 31, 2024
$ 6.8
Year Ended December 31, 2025Average Daily Balance$ 141.2Maximum Daily Balance$ 388.8Critical Accounting PoliciesWe prepare our consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates and/or judgments. For a description of our accounting policies, see Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing.Principles of ConsolidationFor a description of our accounting policy on consolidation, see Note 2. “Summary of Significant Accounting Policies—Consolidation” and Note 8. “Variable Interest Entities” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” for detailed information on Blackstone’s involvement with VIEs. The following discussion is intended to provide supplemental information about how the application of consolidation principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.
The determination that Blackstone holds a controlling financial interest in a Blackstone Fund or investment vehicle significantly changes the presentation of our consolidated financial statements. In our Consolidated Statements of Financial Position included in this filing, we present 100% of the assets and liabilities of consolidated VIEs along with a non-controlling
interest which represents the portion of the consolidated vehicle’s interests held by third parties. However, assets of our consolidated VIEs can only be used to settle obligations of the consolidated VIE and are not available for general use by Blackstone. Further, the liabilities of our consolidated VIEs do not have recourse to the general credit of Blackstone. In the Consolidated Statements of Operations, we eliminate any management fees, Incentive Fees, or Performance Allocations received or accrued from consolidated VIEs as they are considered intercompany transactions. We recognize 100% of the consolidated VIE’s investment income (loss) and allocate the portion of that income (loss) attributable to third-party ownership to non-controlling
interests in arriving at Net Income Attributable to Blackstone Inc.The assessment of whether we consolidate a Blackstone Fund or investment vehicle we manage requires the application of significant judgment. These judgments are applied both at the time we become involved with the VIE and on an ongoing basis and include, but are not limited to:• Determining whether our management fees, Incentive Fees or Performance Allocations represent variable interests – We make judgments as to whether the fees we earn are commensurate with the level of effort required for those fees and at market rates. In making this judgment, we consider, among other things, the extent of third-party investment in the entity and the terms of any other interests we hold in the VIE.
138Table of Contents• Determining whether kick-out
rights are substantive – We make judgments as to whether the third-party investors in a partnership entity have the ability to remove the general partner, the investment manager or its equivalent, or to dissolve (liquidate) the partnership entity, through a simple majority vote. This includes an evaluation of whether barriers to exercise these rights exist.
• Concluding whether Blackstone has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE – As there is no explicit threshold in GAAP to define “potentially significant,” management must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.Revenue RecognitionFor a description of our accounting policy on revenue recognition, see Note 2. “Summary of Significant Accounting Policies—Revenue Recognition” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data.” For an additional description of the nature of our revenue arrangements, including how management fees, Incentive Fees, and Performance Allocations are generated, please refer to “Part I. Item 1. Business — Fee Structure/Incentive Arrangements.” The following discussion is intended to provide supplemental information about how the application of revenue recognition principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.Management and Advisory Fees, Net— Blackstone earns base management fees from its customers at a fixed percentage of a calculation base. The range of management fee rates and the calculation base from which they are earned, generally, are as follows:
For vehicles within the Real Estate segment:
• 0.35% to 1.50% of committed capital or invested capital during the investment period, invested capital subsequent to the investment period, or gross asset value for certain drawdown vehicles and co-investment
vehicles,
• 0.40% to 1.25% of net asset value for certain separately managed accounts, perpetual capital vehicles, drawdown vehicles, and co-investment
vehicles, and
• 1.50% of BXMT’s net proceeds received from equity offerings and accumulated “distributable earnings” (which is generally equal to its GAAP net income excluding certain non-cash
and other items), subject to certain adjustments.
For vehicles within the Private Equity segment:
• 0.50% to 1.75% of committed capital during the investment period or invested capital or gross investment value subsequent to the investment period for drawdown vehicles and certain co-investment
vehicles,
• 0.50% to 1.75% of invested capital for certain separately managed accounts and co-investment
vehicles, and
• 0.75% to 1.25% of net asset value for perpetual capital vehicles.
For vehicles within the Credit & Insurance segment:
• 0.20% to 1.25% of net asset value or fair value of investments for certain separately managed accounts and open-ended vehicles,
139Table of Contents• 0.35% to 1.25% of net asset value or gross asset value of our BDCs and certain registered investment companies,
• 0.30% to 0.50% of the aggregate par amount of collateral assets, including principal cash, for CLO vehicles, and
• 0.20% to 1.50% of invested capital for drawdown vehicles and certain separately managed accounts.
For vehicles within the Multi-Asset Investing segment:
• 0.20% to 1.50% of net asset value for all vehicles.
Management fee calculations based on committed capital or invested capital are mechanical in nature and therefore do not require the use of significant estimates or judgments. Management fee calculations based on net asset value, gross asset value, or investment fair value depend on the fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used as well as economic conditions. See “—Fair Value” below for further discussion of the judgment required for determining the fair value of the underlying investments.Investment Income (Loss)
— Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. Blackstone has concluded that investments made alongside its limited partners in a partnership which entitle Blackstone to a Performance Allocation represent equity method investments that are not in the scope of the GAAP guidance on accounting for revenues from contracts with customers. Blackstone accounts for these arrangements under the equity method of accounting. Under the equity method, Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period Blackstone calculates the accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results.The change in the fair value of the investments held by certain Blackstone Funds is a significant input into the accrued Performance Allocation calculation and accrual for potential repayment of previously received Performance Allocations. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds. See “—Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments.Fair ValueBlackstone uses fair value throughout the reporting process. For a description of our accounting policies related to valuation, see Note 2. “Summary of Significant Accounting Policies—Fair Value of Financial Instruments” and “Summary of Significant Accounting Policies—Investments, at Fair Value” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing. The following discussion is intended to provide supplemental information about how the application of fair value principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.
The fair value of the investments held by Blackstone Funds is the primary input to the calculation of certain of our management fees, Incentive Fees, Performance Allocations and the related Compensation we recognize. Generally, Blackstone Funds are accounted for in accordance with the GAAP guidance on investment companies, and under the American Institute of Certified Public Accountants Audit and Accounting Guide, Investment
140Table of ContentsCompanies
, and reflect their investments, including majority-owned and controlled investments, at fair value. In the absence of observable market prices, we utilize valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For investments where little market activity exists management’s determination of fair value is based on the best information available in the circumstances, which may incorporate management’s own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors, including the appropriate risk adjustments for non-performance
and liquidity risks.Blackstone has also elected the fair value option for certain instruments it owns directly, including loans and receivables, investments in private debt securities and other proprietary investments. Blackstone is required to measure certain financial instruments at fair value, including debt instruments, equity securities and freestanding derivatives.
Fair Value of Investments or Instruments that are Publicly TradedSecurities that are publicly traded and for which a quoted market exists will be valued at the closing price of such securities in the principal market in which the security trades, or in the absence of a principal market, in the most advantageous market on the valuation date. When a quoted price in an active market exists, no block discounts or control premiums are permitted regardless of the size of the public security held. In some cases, securities will include legal and contractual restrictions limiting their purchase and sale for a period of time. A discount to the publicly traded price may be appropriate in instances where a legal restriction is a characteristic of the security, such as may be required under SEC Rule 144. The amount of the discount, if taken, shall be determined based on the time period that must pass before the restricted security becomes unrestricted or otherwise available for sale.Fair Value of Investments or Instruments that are not Publicly Traded
Investments for which market prices are not observable include private investments in the equity or debt of operating companies or real estate properties. Our primary methodology for determining the fair values of such investments is generally the income approach which provides an indication of fair value based on the present value of cash flows that a business, security, or property is expected to generate in the future. The most widely used methodology under the income approach is the discounted cash flow method which includes significant assumptions about the underlying investment’s projected net earnings or cash flows, discount rate, capitalization rate and exit multiple. Our secondary methodology, generally used to corroborate the results of the income approach, is typically the market approach. The most widely used methodology under the market approach relies upon valuations for comparable public companies, transactions, or assets, and includes making judgments about which companies, transactions, or assets are comparable. Depending on the facts and circumstances associated with the investment, different primary and secondary methodologies may be used including option value, contingent claims or scenario analysis, yield analysis, projected cash flow through maturity or expiration, discount to sale, probability weighted methods or recent round of financing.In certain cases debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments.
Management Process on Fair ValueDue to the importance of fair value throughout the consolidated financial statements and the significant judgment required to be applied in arriving at those fair values, we have developed a process around valuation that incorporates several levels of approval and review from both internal and external sources. Investments held
141Table of Contentsby Blackstone Funds and investment vehicles are valued on at least a quarterly basis by our internal valuation or asset management teams, which are independent from our investment teams. For investments held by vehicles managed by more than one business unit, Blackstone has developed a process designed to facilitate coordination and alignment, as appropriate, of the fair value of in-scope
investments across business units.
For investments valued utilizing the income method and where Blackstone has information rights, we generally have a direct line of communication with each of the companies’ and underlying assets’ finance teams and collect financial data used to support projections used in a discounted cash flow analysis. The valuation team then analyzes the data received and updates the valuation models reflecting any changes in the underlying cash flow projections, weighted-average cost of capital, exit multiple or capitalization rate, and any other valuation input relevant to economic conditions.
The results of all valuations of investments held by Blackstone Funds and investment vehicles are reviewed by the relevant business unit’s valuation sub-committee,
which is comprised of key personnel from the business unit, typically the chief investment officer, chief operating officer, chief financial officer, head of finance, chief compliance officer (or their respective equivalents where applicable) and other senior managing directors in the business or support functions. To further corroborate results, each business unit also generally obtains either a positive assurance opinion or a range of value from an independent valuation party, at least annually for internally prepared valuations for investments that have been held by Blackstone Funds and investment vehicles for greater than a year and quarterly for certain investments. Our firmwide valuation committee, chaired by our Chief Financial Officer and comprised of senior members of our businesses and representatives from corporate functions, including legal and finance, reviews the valuation process for investments held by us and our investment vehicles, including the application of appropriate valuation standards on a consistent basis. Each quarter, the valuation process is also reviewed by the audit committee of our board of directors, which is comprised of our non-employee
directors.
Income Tax
For a description of our accounting policy on taxes and additional information on taxes see Note 2. “Summary of Significant Accounting Policies” and Note 14. “Income Taxes,” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing.
Our provision for income taxes is comprised of current and deferred taxes. Current income taxes approximate taxes to be paid or refunded for the current period. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse.
Additionally, significant judgment is required in estimating the provision for (benefit from) income taxes, current and deferred tax balances (including any valuation allowance), accrued interest or penalties and uncertain tax positions. In evaluating these judgments, we consider, among other items, projections of taxable income (including the character of such income), beginning with historic results and incorporating assumptions of the amount of future pretax operating income. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that Blackstone uses to manage its business. To the extent any portion of the deferred tax assets are not considered to be more likely than not to be realized, a valuation allowance is recorded.Revisions in estimates and/or actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any.142
Table of ContentsRecent Accounting DevelopmentsInformation regarding recent accounting developments and their impact on Blackstone, if any, can be found in Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “—Item 8. Financial Statements and Supplementary Data” of this filing.