Blackstone Inc. — FY 2022 Form 10-K
Reporting period: Year ended December 31, 2022; comparisons are primarily with FY 2021. This is an annual filing, not a standalone fourth-quarter report. Blackstone is a global alternative asset manager with four segments: Real Estate, Private Equity, Credit & Insurance, and Hedge Fund Solutions.
Business context and operating scale
- Total assets under management (AUM) were $974.7 billion at year-end, up 11% year over year; fee-earning AUM was $718.4 billion, up 11%.
- Perpetual capital AUM increased 18% to $371.1 billion. Real Estate represented $326.1 billion of AUM; Private Equity $288.9 billion; Credit & Insurance $279.9 billion; and Hedge Fund Solutions $79.7 billion.
- Blackstone said its business is affected by investment performance, fundraising, realizations, asset valuations and the market environment. Revenue includes recurring management fees as well as more volatile performance revenues and investment gains.
Key financial metrics
| Metric | FY 2022 | FY 2021 | Change / context |
|---|---|---|---|
| Total GAAP revenue | $8.52 billion | $22.58 billion | Down 62%, principally from lower unrealized investment gains and a shift to unrealized depreciation. |
| Management and advisory fees, net | $6.30 billion | $5.17 billion | Up 22%, supported chiefly by Real Estate and Credit & Insurance growth. |
| GAAP net income attributable to Blackstone Inc. | $1.75 billion | $5.86 billion | Down 70%; diluted EPS was $2.36 versus $8.13. |
| Distributable Earnings (non-GAAP) | $6.63 billion | $6.17 billion | Up 7%; excludes unrealized activity and is used by management to assess earnings available for distributions. |
| Fee Related Earnings (non-GAAP) | $4.41 billion | $4.05 billion | Up 9%, reflecting recurring fee-based profitability. |
| Total Segment Distributable Earnings (non-GAAP) | $7.46 billion | $6.96 billion | Up 7%. |
| Net cash provided by operating activities | $6.34 billion | $3.99 billion | Up year over year; cash flows can vary substantially with realizations and fund activity. |
| Cash and cash equivalents | $4.25 billion | $2.12 billion | At December 31, 2022; excludes cash held by consolidated funds. |
| Corporate senior-note borrowings | $11.04 billion principal | — | No borrowings under the $4.135 billion revolving facility at year-end. Consolidated loans payable were $12.35 billion, including $1.45 billion attributable to consolidated funds. |
Margins: The filing does not present a directly comparable GAAP operating margin as a headline measure. Blackstone reports non-GAAP segment profitability measures; these should not be treated as GAAP margins.
Dividends and repurchases: Dividends earned in respect of FY 2022 totaled $4.40 per common share. The stated policy targets approximately 85% of Blackstone Inc.’s share of Distributable Earnings, subject to board discretion and liquidity needs. Blackstone repurchased 3.9 million shares for $392 million during 2022; $1.1 billion remained authorized at year-end.
Changes versus prior year and management commentary
- The sharp decline in GAAP revenue and net income reflected investment marks: unrealized Performance Allocations changed from $8.68 billion of gains in 2021 to $3.44 billion of losses in 2022; unrealized principal investment income changed from $1.46 billion of gains to $1.56 billion of losses.
- Management and advisory fees grew as fee-earning AUM expanded, especially in Core+ real estate and credit, including BCRED. Realized performance and fund realization activity were mixed across segments.
- Segment Distributable Earnings rose in Real Estate to $4.31 billion (+34%) and Credit & Insurance to $1.01 billion (+86%). They declined in Private Equity to $1.74 billion (-31%) and Hedge Fund Solutions to $403 million (-40%), primarily reflecting lower net realizations and performance revenues.
- Management described 2022 as a highly challenging market year, with high inflation, sharp central-bank rate increases, market volatility and reduced transaction and capital-markets activity. The S&P 500 fell 18%; U.S. IPO volume fell 93% and announced M&A deal volume fell 43% versus 2021.
- Management stated it does not provide quarterly or annual operating-results guidance. It expects market volatility and economic uncertainty may continue to constrain realizations, deployment and fundraising in the near term, while expressing a positive long-term view of perpetual-capital strategies.
Outlook, risks, contingencies and unusual items
- Retail-fund liquidity: Increased BREIT repurchase requests led to proration beginning in November 2022, while inflows fell. BCRED also saw increased repurchase requests and lower inflows late in the year, with minimal net flows in Q4. Further weakness could pressure flows, fees and AUM.
- Market and portfolio risks: Higher rates and cost of capital may pressure real estate valuations, financing and exits; inflation and input costs may squeeze portfolio-company margins. Management highlighted exposure to traditional office and long-lease assets, and potential effects of recession, geopolitical events and China-related restrictions.
- Performance revenue and clawbacks: Performance revenues are realization- and valuation-dependent. The recorded clawback liability was $158.7 million at year-end; the filing also estimates a $6.0 billion after-tax potential clawback if all carry-fund investments were deemed worthless, a scenario management views as remote. $1.1 billion was held in segregated accounts for potential personnel clawbacks.
- Liquidity and obligations: Blackstone reported $5.0 billion of operating-entity capital commitments, generally callable on demand, and expected significant portions to be called over the following three years. Operating-entity contractual obligations totaled $24.66 billion, including notes, interest, leases, tax-receivable-agreement payments and commitments.
- Tax item: A 2022 out-of-period adjustment reduced tax provision and increased deferred tax assets by $158.2 million for the cumulative prior-year correction. The reported effective tax rate was 13.7%, versus 8.7% in 2021. The filing said the adjustment was not material to current or prior periods.
- UC Investments arrangement: A strategic venture entered in December 2022 provided for a $4.0 billion BREIT subscription on January 1, 2023. Blackstone pledged $1.0 billion of its BREIT holdings to support an 11.25% target annualized net return and recorded a $48.6 million liability at year-end.
- Legal and regulatory: Blackstone reported no pending legal proceeding expected to materially affect consolidated financial statements, while noting outcomes are inherently uncertain. The Kentucky Retirement Systems litigation remains ongoing; Blackstone says it is without merit. The SEC also requested information in October 2022 regarding retention of certain electronic business communications; Blackstone is cooperating.
- Audit and controls: Deloitte issued an unqualified opinion on the financial statements and internal control over financial reporting. The auditor identified valuation of underlying fund investments used to calculate Performance Allocations as a critical audit matter, reflecting significant judgment and unobservable inputs.
Most important facts for investors to verify
- Track BREIT and BCRED repurchase requests, proration, subscriptions and resulting fee-earning AUM.
- Assess whether unrealized marks, reported fund returns and private-asset valuations are ultimately supported by realizations; distinguish GAAP earnings from non-GAAP Distributable Earnings and Fee Related Earnings.
- Review segment-level fundraising, deployment, realizations and performance, particularly the weaker 2022 realization trends in Private Equity and Hedge Fund Solutions.
- Confirm corporate debt maturities, interest costs, available liquidity and the timing of capital commitments; distinguish Blackstone corporate obligations from fund-level debt.
- Monitor accrued performance revenues, clawback exposure, and the tax-receivable-agreement obligation and payments.
- Verify dividend amounts and future board decisions; the 85% Distributable Earnings policy is an intention, not a guaranteed payout.