Blackstone's Earnings Fall as Firm Misses Asset Target

Blackstone Inc. (BX) is a publicly traded company with a market capitalization of over $100 billion. It is one of the largest alternative asset managers in the world, with a focus on private equity, real estate, and credit investing.

Investing giant's net income falls during fourth quarter, missing $1 trillion target for assets under management in 2022. Fundraising weakens in some strategies aimed at individual investors.

The New York investment firm reported a net income of $557.9 million, or 75 cents a share, compared to a profit of $1.4 billion, or $1.92 a share, during the same period last year.

A drop in the value of Blackstone's real-estate investments contributed to the profit decline. The company's two main strategies saw valuations fall by 2% and 1.5% from the previous quarter.

Blackstone's assets under management rose to $974.7 billion in the third quarter of 2020, up from $950.9 billion in the second quarter and $880.9 billion in the third quarter of 2019. The firm raised $43.1 billion in the quarter and $226 billion for the full year. Although this represents significant growth, it is not enough to push Blackstone past its goal set in 2018 of reaching $1 trillion in assets by 2026. The firm had originally said it expected to reach this milestone in 2022, but it now appears that it will take longer to achieve this goal.

Blackstone Chief Executive Stephen Schwarzman said on a call with analysts Thursday that last year was the most challenging market environment since the global financial crisis.

Distributable earnings for the quarter were $1.3 billion, or $1.07 per share, compared to $2.3 billion, or $1.71 per share, in the same quarter last year. This decrease was due to fewer asset sales during the quarter.

This was higher than the 95 cents a share that analysts had estimated, according to FactSet. Blackstone's stock was up 3.69% to $92.15 in midday trading.

Breit, Blackstone's nontraded real-estate investment trust, has been a focus of the firm's shareholders of late. The vehicle posted a return of 8.4% in 2022, but experienced an uptick in requests from investors to sell shares in the fourth quarter. This caused Blackstone to limit redemptions and led to a big drop in its stock. The shares have since recovered that ground.

Breit and Blackstone's nontraded business-development company, Bcred, has been a big driver of asset and fee growth in recent quarters as the portfolios of institutions such as pension funds and sovereign-wealth funds become saturated with private assets.

On Jan. 3, Breit struck a deal with UC Investments, the entity that manages the endowment for the University of California system. Under the agreement, UC Investments said it would put $4 billion into Breit and hold the shares for six years. Blackstone is contributing $1 billion of its own Breit shares to the venture, effectively guaranteeing UC’s returns until its commitment is exhausted.

On Wednesday, UC Investments announced that it was committing an additional $500 million to Breit under the same terms.

"With over $14 billion in liquidity, we feel confident that we can meet investor requests and deploy capital as needed," said Blackstone President Jonathan Gray in an interview with The Wall Street Journal.

Blackstone reported that comparable cash flows were up 13% across Breit's portfolio in 2022. Mr. Gray said that the tone of Blackstone's conversations with financial advisers had improved in recent weeks.

On Thursday's analyst call, Mr. Gray said that rebuilding fundraising momentum for the vehicle will take time.

"I don't have a timeline for this, but I think the investment from Cal Regents was really important in terms of psychological confidence," he said.

The firm reported that the value of its corporate private-equity portfolio rose by 3.8% in the quarter. That figure is lower than the 7% gain seen in the S&P 500.

Blackstone's private-credit portfolio appreciated by 2.4% in the quarter as interest rates rose. Blackstone's hedge-fund investments climbed by 2.1%.

Earlier this month, Blackstone announced that it had completed the fundraising for its $25 billion secondaries fund. This type of fund invests in the interests of other private-equity funds from existing investors.

Perpetual-capital assets under management increased by 18% to $371 billion.

In October, Blackstone agreed to buy a majority stake in Emerson Electric Co.'s climate-technologies business for $14 billion.