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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