Blackstone’s first-quarter profit fell as rising interest rates roiled markets and trading at the world’s largest alternative asset manager slowed during turbulent times.
Distributable earnings fell 36 percent from a year earlier to $1.25 billion (1.14 billion euros), or 97 cents a share, New York-based Blackstone said in a statement. That beat the 94-cent average estimate of 16 analysts surveyed by Bloomberg. Assets under management approached the $1 trillion mark, rising 8 percent to $991.3 billion.
Blackstone has grown to become a dominant force in finance beyond stocks and bonds. It is a giant in privatizations, takeovers and real estate transactions. Now it must grapple with how the Fed’s rate hikes could dampen deals and end a period of rapid growth.
“The slowdown in the trading environment is not shocking,” President Jon Gray said in an interview. “Things are moving slowly because of the uncertainty.”
The company’s shares closed at $92.55 in New York on Wednesday. It’s up 25% this year, easily beating rivals KKR and Apollo Global Management.
Blackstone dealmakers held back on cashing out investments compared with a year ago, resulting in a 22% drop in sales proceeds. They also slowed the pace of new bets by more than half.
Economic uncertainty is testing investors’ appetite for strategies that are harder to trade and value than stocks and bonds. Blackstone’s net inflows for the quarter were $29.5 billion, down from $39.9 billion a year earlier.
Its real estate unit was the biggest source of net inflows in the quarter, boosted by the closure of institutional mega funds. That partially offset some of the pain from the $70 billion Blackstone Real Estate Income Trust’s redemption backlog. Real estate funds targeting the wealthy have seen limited redemptions in recent months after more clients tried to exit.
Blackstone, the world’s largest owner of commercial real estate, wrote down the valuation of some U.S. offices in the quarter as many employees continued to be reluctant to return to the workplace in the wake of the pandemic. The firm has been paring back its exposure to these properties, and U.S. office buildings now make up less than 2% of its real estate portfolio, down from 61% in 2007.
An investment in Corebridge Financial weighed on profits. Blackstone took a minority stake in the insurer in 2021 in exchange for locking in a deal to manage its growing portfolio of assets over time. Shares of Corebridge are down 15% this year.
