Why did Blackstone's full-year distributable earnings decline so sharply in 2023?

Full-year DE fell 24% to $5.1 billion because realized performance revenues dropped 54% to $2.1 billion from $4.5 billion in 2022. 2022 benefited from large realizations in Real Estate, which generated $3.0 billion in net realizations that year versus $1.3 billion in 2023. Fee-related earnings, which are more recurring, were nearly flat, so the decline was concentrated in performance-related income.

Is the quarterly dividend safe given the lower full-year earnings?

The declared $0.94 quarterly dividend is about 85% of Blackstone's stated policy target of DE attributable to common shareholders, and it is up from $0.91 a year earlier. Investors should note that the dividend is set at the board's discretion and the policy allows adjustments for taxes, clawbacks and reinvestment needs. Full-year 2023 dividends totaled $3.35 per share, reflecting the lower earnings base.

What drove the strong fundraising in the fourth quarter?

Q4 inflows of $52.7 billion were led by Credit & Insurance ($23.2 billion, including $7.6 billion into the global direct lending strategy and $14.3 billion from insurance partnerships), Real Estate ($19.9 billion, including $10.5 billion from the Signature Bank loan portfolio joint venture), and Private Equity ($7.2 billion). Management described a meaningful acceleration in fundraising and investment activity relative to earlier in the year.

How did investment performance compare across Blackstone's strategies?

Performance was uneven. Corporate Private Equity (12.1%), Infrastructure (12.1%), Private Credit (16.4% gross, 12.1% net) and Liquid Credit (13.0% gross) posted strong full-year gains. Real Estate was weaker, with Opportunistic funds down 6.3% and Core+ down 4.3% for the year. Q4 Real Estate results were negative, with Opportunistic down 3.8% and Core+ down 4.6%, which pressured accrued performance revenues in that segment.

What is the outlook implied by the company's liquidity and capital position?

Blackstone reported $8.4 billion of total cash and investments, $16.9 billion of cash and net investments, and $197.3 billion of total dry powder available for investment. Outstanding debt at par was $10.7 billion with an undrawn $4.3 billion credit revolver maturing in December 2028. Management highlighted the dry powder as positioning the firm to deploy capital, though the filing does not provide explicit forward guidance and the forward-looking statements caution that actual results may differ materially.

BX 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Blackstone (BX) reported fourth quarter and full year 2023 results on January 25, 2024, with a mixed picture: a sharp drop in GAAP and distributable earnings for the full year, offset by a strong quarter-over-quarter rebound in fundraising and deployment.

GAAP Net Income was $2.4 billion^a for FY'23 (versus $3.0 billion in FY'22), and Net Income Attributable to Blackstone Inc. fell to $1.4 billion from $1.7 billion. Fee-related earnings were resilient at $4.3 billion ($3.58/share), down only 1% year-over-year, supported by a 6% increase in management and advisory fees. Distributable Earnings fell 24% to $5.1 billion ($3.95/share) for the year, driven primarily by lower realized performance revenues, which dropped 54% to $2.1 billion from $4.5 billion in FY'22.

The quarter itself showed clear momentum. Inflows were $52.7 billion^b in 4Q'23 and $148.5 billion for the full year, total AUM rose 7% to $1.04 trillion, and fee-earning AUM grew 6% to $762.6 billion. Capital deployment reached $31.1 billion in the quarter and $73.8 billion for the year.

Investment performance was mixed: Corporate Private Equity returned 12.1% for the year, Private Credit 16.4% gross, and Infrastructure 12.1%, while Opportunistic Real Estate declined 6.3% and Core+ declined 4.3% for the year. Net Accrued Performance Revenues declined 15% year-over-year to $5.8 billion^c ($4.80/share), reflecting realized distributions that outpaced new performance revenue. For shareholders, the declared quarterly dividend is $0.94 per share, payable February 12, 2024 to holders of record on February 5, 2024.

Full-year dividends totaled $3.35^d per share, down from $4.40 in 2022, as the dividend tracks DE. Blackstone ended the year with $8.4 billion in total cash and investments, $16.9 billion in cash and net investments ($13.93 per share), a $4.3 billion undrawn revolver, and A+/A+ ratings.

Total dry powder was $197.3 billion. All figures are preliminary and unaudited, and the presentation is furnished rather than filed under Item 2.02.

02—Key points

Key Highlights

Q4'23 Distributable Earnings rose 4% year-over-year to $1.4 billion ($1.11/share), while full-year DE fell 24% to $5.1 billion ($3.95/share) on lower realized performance revenues.
Fee Related Earnings were $1.0 billion in Q4 and $4.3 billion for FY'23 ($3.58/share), down 1% year-over-year, supported by 6% growth in management and advisory fees to $6.7 billion.
Record-level capital raising: inflows of $52.7 billion in Q4 and $148.5 billion for FY'23, with Real Estate contributing $10.5 billion from the Signature Bank loan portfolio joint venture with the FDIC.
Total AUM reached $1,040.2 billion (up 7% year-over-year) and Perpetual Capital AUM reached $396.3 billion (up 7%), enhancing earnings durability.
Net Accrued Performance Revenues fell 15% year-over-year to $5.8 billion ($4.80/share), reflecting realizations across strategies, which is a key watch item for future performance revenue.
Full-year dividends of $3.35 per share declined from $4.40 in 2022, though the declared $0.94 quarterly dividend rose 3% from the prior-year quarter's $0.91.
Strong balance sheet with $16.9 billion in cash and net investments ($13.93/share), $4.3 billion undrawn revolver, A+/A+ ratings, and approximately $197.3 billion in total dry powder.

03—Questions

Frequently Asked Questions

Why did Blackstone's full-year distributable earnings decline so sharply in 2023?
Full-year DE fell 24% to $5.1 billion because realized performance revenues dropped 54% to $2.1 billion from $4.5 billion in 2022. 2022 benefited from large realizations in Real Estate, which generated $3.0 billion in net realizations that year versus $1.3 billion in 2023. Fee-related earnings, which are more recurring, were nearly flat, so the decline was concentrated in performance-related income.
Is the quarterly dividend safe given the lower full-year earnings?
The declared $0.94 quarterly dividend is about 85% of Blackstone's stated policy target of DE attributable to common shareholders, and it is up from $0.91 a year earlier. Investors should note that the dividend is set at the board's discretion and the policy allows adjustments for taxes, clawbacks and reinvestment needs. Full-year 2023 dividends totaled $3.35 per share, reflecting the lower earnings base.
What drove the strong fundraising in the fourth quarter?
Q4 inflows of $52.7 billion were led by Credit & Insurance ($23.2 billion, including $7.6 billion into the global direct lending strategy and $14.3 billion from insurance partnerships), Real Estate ($19.9 billion, including $10.5 billion from the Signature Bank loan portfolio joint venture), and Private Equity ($7.2 billion). Management described a meaningful acceleration in fundraising and investment activity relative to earlier in the year.
How did investment performance compare across Blackstone's strategies?
Performance was uneven. Corporate Private Equity (12.1%), Infrastructure (12.1%), Private Credit (16.4% gross, 12.1% net) and Liquid Credit (13.0% gross) posted strong full-year gains. Real Estate was weaker, with Opportunistic funds down 6.3% and Core+ down 4.3% for the year. Q4 Real Estate results were negative, with Opportunistic down 3.8% and Core+ down 4.6%, which pressured accrued performance revenues in that segment.
What is the outlook implied by the company's liquidity and capital position?
Blackstone reported $8.4 billion of total cash and investments, $16.9 billion of cash and net investments, and $197.3 billion of total dry powder available for investment. Outstanding debt at par was $10.7 billion with an undrawn $4.3 billion credit revolver maturing in December 2028. Management highlighted the dry powder as positioning the firm to deploy capital, though the filing does not provide explicit forward guidance and the forward-looking statements caution that actual results may differ materially.

04—Continue

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