Redefining the ‘Core’ Portfolio

By Joan Solotar April 28, 2022

We would like to take this opportunity to wish you and your loved ones well as we enter the middle months of 2022. The prospect of inflation, rising interest rates and volatile public markets has created a challenging environment for many investors, as most major market indexes posted 1Q losses. Fixed-income investors experienced the worst start to a year since 1980.¹ Amid these challenges, Blackstone stayed the course in its time-tested, thematic approach to investing.

Until relatively recently, private real estate, private credit, and private equity were inaccessible to most individuals. Blackstone is committed to providing individual investors with institutional quality solutions across the broad spectrum of private investments, all matched with excellent service. The firm’s strategies focus on income potential, capital appreciation, diversification of risk, and more recently, inflation protection. Today, Blackstone manages $222 billion on behalf of individuals around the world with a growing team of more than 225 people dedicated to serving our clients.

Public equities and fixed income have long figured prominently in most definitions of ‘core’ portfolios. Low but rising interest rates, inflation, and greater availability of investment products across private markets are catalysts for many investors and their advisors reconsidering what a ‘core’ portfolio should be. Individual investors, in our view, need exposure to alternatives now more than ever. We are beginning to see evidence of this shift in allocations – and we expect more recognition that alternatives such as private real estate, private credit, and private equity are core holdings.

Blackstone ended the quarter with a total of $915 billion assets under management. Retail assets represented $222 billion of the total. President and COO Jon Gray highlighted Blackstone’s achievement for the quarter in his recent interview on CNBC.

Blackstone continues to find what we believe are attractive opportunities in the “good neighborhoods” that we have identified. Below are three illustrative examples from recent months.

Consumer: Blackstone Growth (BXG) made a majority investment in Supergoop!, a leading protective skincare brand that puts daily skin protection at the forefront. Founded by Holly Thaggard in 2007, Supergoop! develops highly innovative dermatologist-approved, clean ingredient SPF products. Today, with nearly 50 formulas, the company’s products are sold globally. Supergoop! is the latest example of Blackstone’s commitment to innovative female-founded companies.

Online Education: Blackstone Credit served as lead lender and signed a $1 billion financing commitment for Clearlake’s acquisition of Discovery Education from Francisco Partners. Discovery Education is a digital core and supplementary K-12 science curriculum provider with products in approximately 40% of U.S. K-12 schools. Blackstone Credit was brought into the deal as a staple financing provider due to BXC’s considerable experience in education technology, namely its investments in Cambium and Dreambox in 2021.

Affordable Housing Portfolio: Blackstone Real Estate Income Trust (BREIT) acquired American International Group, Inc.’s interests in a US affordable housing portfolio for a $5.1 billion equity purchase price plus the assumption of debt. The portfolio consists of approximately 650 affordable housing communities, consisting of primarily suburban, garden-style properties concentrated in growth markets in California, Colorado, Texas, and Virginia.

Staying Connected with Blackstone

As you position your business for the future, we are here to partner with you, to find the solutions that fit best with your needs. And as ever, we remain grateful for your trust.

We wish you and your family health and well-being, and continued good fortune in 2022.

Joan Solotar

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

1. Source: Morningstar as of March 31, 2022. Past performance is not necessarily indicative of future results, and there can be no assurance that any Blackstone fund or investment will achieve its objectives or avoid substantial losses. Based on Q1 performance of the S&P 500 (-4.6%), Bloomberg U.S. Aggregate Bond Index (-5.9%), Bloomberg U.S. Corporate High Yield Index (-4.8%), MSCI U.S. REIT Index (-4.1%), and Bloomberg Municipal Bond Index (-6.2%). See the Index Definitions at the end of this presentation. There can be no assurances that any of the trends described throughout this presentation will continue or will not reverse.

Index Definitions

Bloomberg Municipal Bond Index: The Bloomberg Municipal Bond Index covers the U.S. dollar-denominated, long-term tax-exempt bond market with for main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds.

Bloomberg U.S. Aggregate Bond Index: The Bloomberg Aggregate Bond Index is an index of U.S. dollar-denominated, investment-grade U.S. corporate, government, and mortgage-backed securities.

Bloomberg U.S. Corporate High Yield Bond Index: The Bloomberg U.S. Corporate High Yield Bond Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market.

MSCI U.S. REIT Index: The MSCI U.S. REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs. The index is based on MSCI USA Investable Market Index (IMI) its parent index which captures large, mid and small caps securities. It represents about 99% of the U.S. REIT universe. The index is calculated with dividends reinvested on a daily basis.

S&P 500 Index: The S&P 500 index is a free-float weighted/capitalization-weighted index of U.S. large-cap equities.

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All information is as of March 31, 2021 (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.

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Case Studies. The selected investment examples, case studies and/or transaction summaries presented or referred to herein may not be representative of all transactions of a given type or of investments generally and are intended to be illustrative of the types of investments that have been made or may be made by a Fund in employing such Fund’s investment strategies. It should not be assumed that a Fund will make equally successful or comparable investments in the future. Moreover, the actual investments to be made by a Fund or any other future fund will be made under different market conditions from those investments presented or referenced in the Materials and may differ substantially from the investments presented herein as a result of various factors. Prospective investors should also note that the selected investment examples, case studies and/or transaction summaries presented or referred to herein have involved Blackstone professionals who will be involved with the management and operations of a Fund as well as other Blackstone personnel who will not be involved in the management and operations of such Fund. Certain investment examples described herein may be owned by investment vehicles managed by Blackstone and by certain other third-party equity partners, and in connection therewith Blackstone may own less than a majority of the equity securities of such investment. Further investment details are available upon request.

Epidemics/Pandemics. Certain countries have been susceptible to epidemics which may be designated as pandemics by world health authorities, most recently COVID-19. The outbreak of such epidemics, together with any resulting restrictions on travel or quarantines imposed, has had and will continue to have a negative impact on the economy and business activity globally (including in the countries in which the Funds invest), and thereby is expected to adversely affect the performance of the Funds’ Investments. Furthermore, the rapid development of epidemics could preclude prediction as to their ultimate adverse impact on economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Funds and the performance of their Investments.

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 its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of each of Blackstone and BREIT, and any such updated factors included in its 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. 
 
No Assurance of Investment Return. Prospective investors should be aware that an investment in a Fund is speculative and involves a high degree of risk. There can be no assurance that a Fund will achieve comparable results, implement its investment strategy, achieve its objectives or avoid substantial losses or that any expected returns will be met. A Fund’s performance may be volatile. An investment should only be considered by sophisticated investors who can afford to lose all or a substantial amount of their investment. A Fund’s fees and expenses may offset or exceed its profits.

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. 

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. 

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.