Blackstone's Roller Coaster Year & What Aspirants Must Know

This news will be very interesting to students who are keen on graduate jobs related to asset management and private equity.

Stephen Schwarzman, the CEO of Blackstone, earned over US$1.27 billion in salary and dividends last year (approximately 800 million yuan), which was certainly cause for much discussion. Even though Wall Street is well known for its high salaries, US$1.27 billion is unheard of.

However, not all of that $1.27 billion was just salary. $253.1 million was total compensation (inclusive of nearly $190.5 million in carryover interest + incentive fees) and the rest was from company dividends. Schwarzman, the company’s largest shareholder (with 19% of shares), received dividends totalling $941.6 million, and compensation worth $160.3 million, which was made up of profits linked to investment performance plus a $350,000 base salary 🤯🤯.  

Criticism ensued, especially from the media, who noted he had made significant profits for himself rather than for investors.

2022 was not the best year for the alternative asset management company.  Investors were left upset when they learned Blackstone’s revenue and stock price plummeted last year. Their operating income fell 74.78% to US$3.461 billion. Net profit decreased by 75.85% to US$2.988 billion, whilst shareholder distributable income sank 70.16% to US$1.748 billion. Its stock price fell drastically from $128.53 to $91 in 2022, a massive drop of 26%!

The start of 2023 hasn’t exactly been amazing either. They angered investors further who tried to cash out investments amidst worries related to the commercial real estate market, by restricting BREIT withdrawals.

Earlier in March, they announced they would default on a $563 million bond supported by offices and stores owned by Sponda Oy, especially as interest rates affected the value of property in Europe. Their default is one of many from big-name companies who have also defaulted, such as Brookfield and Columbia Property Trust.

However, despite 2022 not being great for private equity, Blackstone still fared the best out of the big players by managing 60 deals that were valued at $118.1 billion, which featured the largest deal being $45 billion.

What does all this mean for Blackstone?

✅ Blackstone has the ability to weather challenging financial turbulence, as it did last year and during the financial crisis, so it won’t be crumbling any time soon.

✅ The long-term outlook for private equity looks to be sound, however, firms will have to find new ways to create value. For Blackstone, it may mean following up on its plan to focus more on its private credit business.

Blackstone may be experiencing a challenge now but it will survive and potentially thrive thanks to its plan to capitalize on new investment opportunities within 2023.

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