Blackstone Inc.

Good day, everyone, and welcome to the Blackstone fourth quarter and year end 2021 investor call hosted by Weston Tucker, head of shareholder relations. My name is Leslie and I'm the event manager. During the presentation, your lines will remain on listen only. And if you require assistance at any time, please press star zero on your telephone and a coordinator will be happy to assist you. There will be a Q&A session at the end of the presentation. And if you could limit your questions to one, And then if you wish to ask further questions, please rejoin the queue. I'd like to advise all parties that the conference is being recorded for replay purposes. And now I'd like to hand you over to your host for today, Weston. Please go ahead.

Terrific. Thanks, Leslie. And good morning and welcome to Blackstone's fourth quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO, John Gray, President and Chief Operating Officer, and Michael Che, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation which are available on our website. We expect to file our 10-K report later next month. I'd like to remind you that today's call may include forward-looking statements which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements. For discussion of some of the risks that could affect results, please see the risk factor section of our 10-K. We'll also refer to non-GAAP measures on this call, and you'll find reconciliations in the press release on the shareholders page of our website. Also, please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of $2.9 billion. Distributable earnings were $2.3 billion, or $1.71 for common share, and we declared a dividend of $1.45 to be paid to holders of record as of February 7th. With that, I'll now turn the call over to Steve.

Thank you, Weston. Good morning, and thank you for joining our call. Today, Blackstone reported the most remarkable results in our history on virtually every metric. Distributable earnings rose 55% to $2.3 billion in the fourth quarter. and increased 85% to $6.2 billion for the year. Investment performance was exceptional, including over 40% appreciation in our opportunistic real estate and corporate private equity funds for 2021. And we raised $270 billion of inflows, over a quarter of a trillion dollars in one year. lifting assets under management by 42% to $881 billion. No other alternative firm in the world has approached this level of absolute growth in a single year. We told you in the second quarter that it was the most consequential in our history. That assertion was not based on short-term results. was reflective of the sea change underway in asset management and our positioning within it, which is now playing out even more powerfully than we had previously anticipated. Capital flows continue to shift towards two ends of a barbell. On one side, to low-cost passive funds. On the other side, flows are accelerating towards alternatives. A trend benefit numerous firms in our industry but none more profoundly than Blackstone. In the world of alternatives, Blackstone is a clear choice for global limited partners looking to invest in the asset class, whether it's a retail distributor or an institutional investor that needs to deploy billions of dollars across the capital structure. Today, we offer nearly 60 investment strategies, up from 35 five years ago. We have the deepest menu of available products with compelling performance across our platform and the largest flow of investment activity in the world. The result is a powerful network effect. Our customers are constantly in our store and our shelves are full. which results in Blackstone gaining a huge percentage of repeat business and a high likelihood they will choose our new products as well. This network effect extends to new platforms that we launch. Our LPs know that when we launch a new product, it is with the intention of building the highest quality business and that our scale and reach can have an extraordinarily positive effect for them. For example, the clean energy transition has been a major investment theme across the firm for several years, and we are already one of the largest providers of private credit in this area. Last week, we launched a sustainable resources platform to pull together the full breadth of the firm's resources. We see an opportunity to invest $100 billion in support of energy transition and climate change solutions over the next decade. Blackstone intends to be a global leader in investing and a force for good in this critically important area. Across the firm, we are exceptionally well positioned to continue growing in a way that is unprecedented in the alternatives asset class. And I couldn't be more confident in our momentum, despite the significant correction underway in the global markets. The average stock in the S&P has declined 17% from its recent peak, while the average NASDAQ stock is down 44%. The alternative managers' stocks have not been immune to these pressures. And we've noted investor concerns around the impact of inflation, the prospect of rising interest rates, and the ability to continue raising capital. I believe the tremendous balance of our firm and the careful design of our portfolio will once again allow us to not only navigate this environment, but to thrive in it as we have for 36 years. In our $280 billion real estate business, which generated nearly half of our earnings last year, over 70% of the equity portfolio is in the best areas, logistics, rental housing, and life sciences office. Leases in this portfolio are shorter duration with the ability to reprice as we move through the inflationary period. Importantly, in the United States, we're now seeing rents in these sectors grow at two to three times the rate of inflation. And as the cost of new construction rises with inflation, it greatly benefits the value of our existing holdings. In corporate private equity, our portfolio is also well positioned for inflation. Our holdings are concentrated in areas with strong secular growth that are more resilient to rising input costs. Our operating companies reported 23% year-over-year growth in revenues in the fourth quarter.