Where and How You Invest Matters
As with meteorological phenomena, certain financial storms can be anticipated. Others seem to spring out of thin air and dissipate just as suddenly. The gear you rely on and the preparations you make often dictate the outcomes. Investing is no different.
Resilience and steadiness are key. Blackstone has weathered myriad storms throughout its nearly 40 years of investing and managing client assets, and the firm is navigating this latest dislocation in similar fashion. Blackstone has distinguished itself as a long-term investor in a short-term world. The firm currently possesses nearly $194 billion1 of ready-to-invest capital, or “dry powder,” a record amount, to deploy when market uncertainty gives rise to opportunity. This dry powder, combined with rigorous underwriting, the ability to leverage proprietary data to identify attractive assets, and transact on the firm’s own schedule, positions Blackstone enviably for this environment.
The firm’s scale provides distinct advantages. As the largest owner of commercial real estate globally,2 with one of the broadest private equity platforms and one of the largest alternative credit managers, Blackstone’s dashboard of proprietary data and ability to translate it into unique insights helps the firm spot trends early. These tools and skills are how Blackstone anticipated inflation early on, and why the firm then secured longer-term financing at lower interest rates, and largely avoided investments that resembled long duration fixed-income bonds.
Today, investors around the world can earn yields of 4% to 5% just by holding cash or cash-like instruments, levels not seen in many years.3 Our conversations with financial advisors suggest that a portion of that cash will likely get redeployed to other asset classes, including private investments, as investors seek higher returns for their overall portfolios.
Blackstone’s investment returns are a direct outcome of how the firm deploys capital—and a primary reason it has continued to attract investor capital.
Blackstone’s investment returns are a direct outcome of how the firm deploys capital—and a primary reason it has continued to attract investor capital. In the first quarter of this year, Blackstone’s funds helped to protected investor capital against a volatile market backdrop. Looking over the past 12 months, nearly all its flagship strategies meaningfully outperformed the relevant public indices.4
A Discerning Approach to Investing
As the saying goes, “Don’t throw the baby out with the bathwater.” Widely reported challenges in the office and retail sectors have fueled investors’ negative sentiment toward real estate. However, Blackstone focuses on sectors including rental housing, logistics, data centers and life science offices which are currently benefitting from favorable tailwinds. Robust demand trends and supply constraints exacerbated by limited financing availability have led to strong cash flow dynamics in these sectors. The public markets have noted these sector distinctions, with shares in Vornado Realty Trust (VNO), a benchmark commercial office company, down 66% compared with their pre-COVID level, while shares in Prologis Inc. (PLD), an industrial logistics-centric company, have gained 60% over the same period, a staggering 126-percentage-point difference.5
Strong sector selection, rigorous analysis to build conviction, exercising discipline on pricing and timing, and deploying a full box of tools to improve assets and companies—that’s how we believe Blackstone’s businesses have continued to generate performance for investors over decades. The care that Blackstone puts into asset selection, credit selection and managing those assets is highly differentiated.
Understanding Private Markets
With higher interest rates and wider spreads, we also see significant opportunities in private credit, which has provided strong returns over an extended period of time, while also protecting against the downside,6 through careful underwriting and being senior secured, with floating rates that can adjust to changing market rates. Private credit outperformed major fixed income assets like leveraged loans and high-yield and investment-grade bonds in 2022.7 Blackstone is one of the largest alternative credit managers in the world,8 one where growing capital constraints likely will prove favorable for deployment.
Private investing opportunities can offer a significantly broader scope than publicly traded securities. Consider, for example, private equity as companies that simply do not trade publicly. These firms represent 92% of all companies with $100 million or more in revenues.9 Likewise real estate that is not publicly traded represents more than 90% of all U.S. commercial real estate.10
Over time, these private investments have been less volatile than public stocks and bonds because they generally are not subject to the whims and shifting sentiments of short-term investing flows. In exchange for higher returns and reduced volatility, investors understand that these funds will be less liquid, giving rise to the concept of the illiquidity premium. Investing in these longer-hold funds is about building value over time and the benefits of compounding, rather than the very difficult task of timing the markets.
Today, eligible individual investors can reap the benefits of private market investments, which traditionally have been the domain of institutional investors. This conclusion is supported by the most recent SHOOK Research Advisor Trends in Private Markets 2023 survey.11 This survey, conducted in partnership with Blackstone, illustrates that many financial advisors maintain their conviction in private market investments as a way to offer their clients greater diversification12 and lower volatility during challenging times.
You will hear the phrases “Build with Blackstone” and “Build Wealth with Blackstone”13 from us more often, since at the firm’s core, it is what Blackstone does—building on behalf of its investors, its portfolio companies, and communities at large.
Partnering with advisors and investors is at the heart of our mission, especially during turbulent times.
Partnering with advisors and investors is at the heart of our mission, especially during turbulent times. Education remains paramount. As part of our efforts to foster a better understanding of private investments, Blackstone recently launched its “Essentials of Private Markets” series. This educational initiative features Blackstone specialists covering the basics of these unique markets for advisors and investors seeking a more comprehensive foundation. We invite you to check it out, and to contact your Blackstone representative for more information.
Accessing Private Markets with Blackstone
Thank you for your partnership. We are grateful to our clients for entrusting us with their wealth and remain committed to providing institutional-quality investment solutions, education and continued collaboration.
Global Head of Private Wealth Solutions
Past performance is not indicative of future results. There can be no assurance that any Blackstone fund or investment will achieve its objectives or avoid substantial losses.
- Represents undrawn capital (“total dry powder”) available for investment of $193.9 billion as of March 31, 2023.
- Source: Real Capital Analytics, 12/31/22.
- Source: Morningstar, reflecting Bloomberg 1-3 Month U.S. Treasury Bill Index annualized yield as of March 31, 2023.
- Based on comparison of most recently published performance of Blackstone strategies to the following public indices: S&P 500 Index, MSCI World Index, Bloomberg US Aggregate Bond Index, Bloomberg US Corporate High Yield Bond Index, MSCI US REIT Index.
- Source Morningstar, measuring Vornado Realty Trust and Prologis Inc. returns from Feb. 28, 2020-March 31, 2023.
- Investing is subject to the risk of capital loss and investors may not get back the amount originally invested.
- Source: Morningstar, as of 12/31/2022. Private credit is represented by the Cliffwater Direct Lending Index. Leveraged loans is represented by the Morningstar LSTA US Leveraged Loan Index. High yield is represented by the Bloomberg US Corporate High Yield Index. Investment-grade bonds are represented by the Bloomberg US Aggregate Bond Index.
- Based on Blackstone Credit analysis of company earnings presentations and calls, as of June 30, 2022 or latest publicly available data.
- Source: Capital IQ, based on data available in Capital IQ’s database, April 2022.
- Source: NAREIT, June 30, 2021. “Estimating the Size of the Commercial Real Estate Market.”
- This survey was prepared by SHOOK Research and commissioned by Blackstone Inc. (“Blackstone”). Survey results presented throughout these materials reflect data from a survey that Blackstone commissioned of 200+ SHOOK-ranked advisors. Additionally, Blackstone participated in the review and preparation of this survey. Any views or opinions expressed in the survey reflect solely the views of the advisors who were surveyed in connection with this survey and, in certain cases, SHOOK Research and/or Blackstone, and such views or opinions are subject to change without notice and may differ from opinions expressed by others. Neither SHOOK Research nor Blackstone has independently verified the information received from the advisors surveyed and no representation is made as to the accuracy of such information. Any estimates, expectations or other forward-looking statements set forth herein are based on assumptions that are believed by SHOOK Research and Blackstone to be reasonable as of the date hereof. Neither SHOOK Research nor Blackstone has any obligation to update any such statements. Actual results are inherently uncertain and are subject to many factors, changing market conditions and general economic conditions, and may vary materially from the themes set forth herein. Nothing herein constitutes investment advice or recommendations, and this survey should not be relied upon as a basis for making an investment decision.
- Diversification does not ensure a profit or protect against losses.
- Investing involves risks, including loss of capital.
Important Disclosure Information
All information is as of March 31, 2023 (the “Reporting Date”), unless otherwise indicated and may change materially in the future. Capitalized terms used herein but not otherwise defined have the meanings set forth in the Offering Documents. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon the merits of the investments described herein and any representation to the contrary is an offense.
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Blackstone Proprietary Data. Certain information and data provided herein is based on Blackstone proprietary knowledge and data. Portfolio companies may provide proprietary market data to Blackstone, including about local market supply and demand conditions, current market rents and operating expenses, capital expenditures, and valuations for multiple assets. Such proprietary market data is used by Blackstone to evaluate market trends as well as to underwrite potential and existing investments. While Blackstone currently believes that such information is reliable for purposes used herein, it is subject to change, and reflects Blackstone’s opinion as to whether the amount, nature and quality of the data is sufficient for the applicable conclusion, and no representations are made as to the accuracy or completeness thereof.
Forward-Looking Statements. Certain information contained in the Materials constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology or the negatives thereof. These may include financial estimates and their underlying assumptions, statements about plans, objectives and expectations with respect to future operations, and statements regarding future performance. Such forward-looking statements are inherently uncertain and there are or may be important factors that could cause actual outcomes or results to differ materially from those indicated in such statements. Blackstone believes these factors include but are not limited to those described under the section entitled “Risk Factors” in the Annual Report on Form 10-K for the most recent fiscal year ended December 31, of that year, and any such updated factors included in their respective periodic filings with the Securities and Exchange Commission, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in the materials and in the filings. Blackstone undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
Highly Competitive Market for Investment Opportunities. The activity of identifying, completing and realizing attractive investments is highly competitive, and involves a high degree of uncertainty. There can be no assurance that a Fund will be able to locate, consummate and exit investments that satisfy its objectives or realize upon their values or that a Fund will be able to fully invest its committed capital. There is no guarantee that investment opportunities will be allocated to a Fund and/or that the activities of Blackstone’s other funds will not adversely affect the interests of such Fund.
Index Definitions. The volatility and risk profile of the indices presented is likely to be materially different from that of BREIT and BCRED including those related to fees and expenses, liquidity, safety, and tax features. In addition, the indices employ different investment guidelines and criteria than BREIT and BCRED and do not employ leverage; as a result, the holdings in BREIT or BCRED and the liquidity of such holdings, as applicable, may differ significantly from the holdings of the securities that comprise the indices. The performance of the indices has not been selected to represent an appropriate benchmark to compare to the performance of BREIT or BCRED, but rather is disclosed to allow for comparison of the performance of BREIT or BCRED, as applicable, to that of well-known and widely recognized indices. The indices are not subject to fees or expenses and it may not be possible to invest in the indices. A summary of the investment guidelines for the indices presented is available upon request.
Opinions. Opinions expressed reflect the current opinions of Blackstone as of the date appearing in the Materials only and are based on Blackstone’s opinions of the current market environment, which is subject to change. Certain information contained in the Materials discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Recent Market Events Risk. Local, regional, or global events such as war (e.g., Russia/Ukraine), acts of terrorism, public health issues like pandemics or epidemics (e.g., COVID-19), recessions, or other economic, political and global macro factors and events could lead to a substantial economic downturn or recession in the U.S. and global economies and have a significant impact on a fund and its investments. The recovery from such downturns is uncertain and may last for an extended period of time or result in significant volatility, and many of the risks discussed herein associated with an investment in a fund may be increased.
Reliance on Key Management Personnel. The success of a Fund will depend, in large part, upon the skill and expertise of certain Blackstone professionals. In the event of the death, disability or departure of any key Blackstone professionals, the business and the performance of a Fund may be adversely affected. Some Blackstone professionals may have other responsibilities, including senior management responsibilities, throughout Blackstone and, therefore, conflicts are expected to arise in the allocation of such personnel’s time (including as a result of such personnel deriving financial benefit from these other activities, including fees and performance-based compensation.
Third-Party Information. Certain information contained in the Materials has been obtained from sources outside Blackstone, which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for purposes used herein, no representations are made as to the accuracy or completeness thereof and none of Blackstone, its funds, nor any of their affiliates takes any responsibility for, and has not independently verified, any such information.
Trends. There can be no assurances that any of the trends described herein will continue or will not reverse. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of, future events or results.