- Blackstone’s net realizations, the proceeds from selling assets, fell 34% from a year earlier in the third quarter, led by a 49% drop in private equity and a 21% decline in real estate. Rising rates make it harder for buyers and sellers to agree on prices and raise the cost of financing deals.
- Distributable earnings came to $1.7 billion, or $1.32 a share, beating expectations but down from $1.52 a share a year earlier. Fee-related earnings rose 6% to $1.57 billion, just shy of analyst expectations.
- The firm marked down its property funds for institutional investors by 3.2% in the quarter, while its perpetual core funds were marked up 1.6% and flagship retail fund Breit has returned 7% net this year. President Jon Gray told the FT the adjustment reflects higher cap rates and higher interest rates.
- Fundraising stayed strong, with more than $63 billion of new money lifting the past 12 months to a near-record $272 billion. Realizations in credit and insurance rose 43%, and massive AI-related borrowing has benefited Blackstone and other private credit providers.
What Happened?
Blackstone reported third-quarter results on Thursday showing a sharp slowdown in asset sales, which The Wall Street Journal and the Financial Times tied to higher interest rates. Sales and IPOs of private companies slowed after the Federal Reserve approved a rate increase in mid-September, following a strong start to the quarter that included the IPO of Jersey Mike’s. Gray said Blackstone has taken five companies public this year but has had to delay a few, and Blackstone-backed data center operators AirTrunk and Firmus pushed back or pulled listings this month. CEO Stephen Schwarzman cited a higher cost of capital, geopolitical turbulence and uncertainty over the midterm elections as headwinds.
Why It Matters?
Realizations drive the performance profits Blackstone earns from asset sales, so a 34% drop shows how directly rates hit the alternative asset model. The split in property marks is notable, with institutional funds cut 3.2% while retail-focused core funds rose 1.6%, a gap investors are likely to scrutinize. The firm’s momentum is shifting toward credit and infrastructure, where AI-related borrowing is fueling both deals and fundraising. Shares of Blackstone and its rivals have fallen around 30% this year as analysts cut estimates for a tougher investing climate.
What’s Next?
Gray expects realizations to normalize and said “the sun will come back out,” while Schwarzman expects an “outstanding” 2027. The IPO window is the key variable, since Blackstone needs calmer markets to sell down its large investments through public offerings. Watch the next round of property marks for signs that rate-driven markdowns are spreading beyond slower-growing assets such as European portfolios and US multifamily homes. Gray also said fears of a broad-based apocalypse in private credit have not materialized, a view that will be tested if rates stay high.
Affected Tickers and Coins: BX, APO, KKR
Source: The Wall Street Journal, Financial Times
