Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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The following discussion and analysis should be read in conjunction with The Blackstone Group Inc.’s consolidated financial statements and the related notes included within this Annual Report on Form

10-K.

This section of this Form

10-K

generally discusses 2019 and 2018 items and year to year comparisons between 2019 and 2018. For the discussion of 2018 compared to 2017 see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Blackstone’s Annual Report on Form

10-K

for the year ended December 31, 2018, which specific discussion is incorporated herein by reference.

Effective July 1, 2019, The Blackstone Group L.P. (the “Partnership”) converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. (the “Conversion”). This report includes the results for the Partnership prior to the Conversion and The Blackstone Group Inc. following the Conversion. In this report, references to “Blackstone,” the “Company,” “we,” “us” or “our” refer to (a) The Blackstone Group Inc. and its consolidated subsidiaries following the Conversion and (b) the Partnership and its consolidated subsidiaries prior to the Conversion. All references to shares or per share amounts prior to the Conversion refer to units or per unit amounts. Unless otherwise noted, all references to shares or per share amounts following the Conversion refer to shares or per share amounts of Class A common stock. All references to dividends prior to the Conversion refer to distributions. See “— Organizational Structure.”

Our Business

Blackstone is one of the world’s leading investment firms. Our business is organized into four segments:

•Real Estate. Our real estate business is a global leader in real estate investing. Our real estate segment operates as one globally integrated business, with investments in North America, Europe, Asia and Latin America. Our real estate investment teams seek to utilize our global expertise and presence to generate attractive risk-adjusted returns for our investors and to make a positive impact on the communities in which we invest.

Our Blackstone Real Estate Partners (“BREP”) funds are geographically diversified and target a broad range of “opportunistic” real estate and real estate-related investments. The BREP funds include global funds as well as funds focused specifically on Europe or Asia investments. BREP seeks to invest thematically in high-quality assets, focusing where we see outsized growth potential driven by global economic and demographic trends. BREP has made significant investments in logistics, rental housing, office hospitality and retail properties around the world, as well as a variety of real estate operating companies.

Our Blackstone Real Estate Debt Strategies (“BREDS”) vehicles primarily target real estate-related debt investment opportunities. BREDS’ scale and investment mandates enable it to provide a variety of lending and investment options including mezzanine loans, senior loans and liquid securities. The BREDS platform includes a number of high-yield real estate debt funds, liquid real estate debt funds and BXMT, a NYSE-listed real estate investment trust (“REIT”).

Our core+ real estate business includes Blackstone Property Partners (“BPP”) and a

non-exchange

traded REIT (“BREIT”). BPP has assembled a global portfolio of high-quality investments across North America, Europe and Asia, which target substantially stabilized assets in prime markets with a focus on industrial, multifamily, office and retail assets. BREIT invests primarily in stabilized income-oriented commercial real estate in the U.S. and to a lesser extent in real estate-related securities.

•Private Equity. Our Private Equity segment includes our corporate private equity business, which consists of (a) our flagship private equity funds (Blackstone Capital Partners (“BCP”) funds), (b) our sector-focused private equity funds, including our energy-focused funds (Blackstone Energy Partners (“BEP”) funds) and (c) our Asia-focused fund (Blackstone Capital Partners Asia (“BCP Asia”) fund). In addition, our Private Equity segment includes (a) our core private equity fund, Blackstone Core Equity Partners (“BCEP”),
(b) our opportunistic investment platform that invests globally across asset classes, industries and geographies, Blackstone Tactical Opportunities (“Tactical Opportunities”), (c) our secondary fund of funds business, Strategic Partners Fund Solutions (“Strategic Partners”), (d) our infrastructure-focused funds, Blackstone Infrastructure Partners (“BIP”), (e) our life sciences private investment platform, Blackstone Life Sciences (“BXLS”), (f) a multi-asset investment program for eligible high net worth investors offering exposure to certain of Blackstone’s key illiquid investment strategies through a single commitment, Blackstone Total Alternatives Solution (“BTAS”) and (g) our capital markets services business, Blackstone Capital Markets (“BXCM”).

We are a world leader in private equity investing. Our corporate private equity business, established in 1987, pursues transactions across industries in both established and growth-oriented businesses across the globe. It strives to create value by investing in great businesses where our capital, strategic insight, global relationships and operational support can drive transformation. Our core private equity fund targets control-oriented investments in high-quality companies with durable businesses and seeks to offer a lower level of risk and a longer hold period than traditional private equity.

Tactical Opportunities invests globally across asset classes, industries and geographies, seeking to identify and execute on attractive, differentiated investment opportunities, leveraging the intellectual capital across our various businesses while continuously optimizing its approach in the face of ever-changing market conditions. Strategic Partners is a total fund solutions provider that acquires interests in high-quality private funds from original holders seeking liquidity, makes primary investments and

co-investments

with financial sponsors and provides investment advisory services to clients investing in primary and secondary investments in private funds and

co-investments.

BIP focuses on investments across all infrastructure sectors, including energy, water and waste and communications. BXLS is our private investment platform with capabilities to invest across the life cycle of companies and products within the life sciences sector.

•Hedge Fund Solutions. The principal component of our Hedge Fund Solutions segment is Blackstone Alternative Asset Management (“BAAM”). BAAM is the world’s largest discretionary allocator to hedge funds, managing a broad range of commingled and customized fund solutions since its inception in 1990. The Hedge Fund Solutions segment also includes investment platforms that seed new hedge fund businesses, purchase minority interests in more established general partners and management companies of funds, invest in special situation opportunities, create alternative solutions in the form of daily liquidity products and invest directly.
•Credit. The principal component of our Credit segment is GSO Capital Partners (“GSO”). GSO is one of the largest credit-oriented managers in the world and is the largest manager of collateralized loan obligations (“CLOs”) globally. The investment portfolios of the funds GSO manages or sub-advises predominantly consist of loans and securities of non-investment grade companies spread across the capital structure including senior debt, subordinated debt, preferred stock and common equity.

GSO is organized into three overarching strategies: performing credit, distressed and long only. GSO’s performing credit strategies include mezzanine lending funds, middle market direct lending funds, including our business development company (“BDC”) and other performing credit strategy funds. GSO’s distressed strategies include credit alpha strategies, stressed/distressed funds and energy strategies. GSO’s long only strategies consist of CLOs, closed-ended funds, open-ended funds and separately managed accounts.

In addition, our Credit segment includes our publicly traded master limited partnership (“MLP”) investment platform, which is managed by Harvest. Harvest primarily invests capital raised from institutional investors in separately managed accounts and pooled vehicles, investing in publicly traded MLPs holding primarily midstream energy assets in the U.S.

Our insurer-focused platform, BIS, also a part of our Credit segment, partners with insurers to deliver customized and diversified portfolios of Blackstone products across asset classes, including the option for full management of insurance companies’ investment portfolios.

We generate revenue from fees earned pursuant to contractual arrangements with funds, fund investors and fund portfolio companies (including management, transaction and monitoring fees), and from capital markets services. We also invest in the funds we manage and we are entitled to a

pro-rata

share of the results of the fund (a

“pro-rata

allocation”). In addition to a

pro-rata

allocation, and assuming certain investment returns are achieved, we are entitled to a disproportionate allocation of the income otherwise allocable to the limited partners, commonly referred to as carried interest (“Performance Allocations”). In certain structures, we receive a contractual incentive fee from an investment fund in the event that specified cumulative investment returns are achieved (an “Incentive Fee”, and together with Performance Allocations, “Performance Revenues”). The composition of our revenues will vary based on market conditions and the cyclicality of the different businesses in which we operate. Net investment gains and investment income generated by the Blackstone Funds are driven by value created by our operating and strategic initiatives as well as overall market conditions. Fair values are affected by changes in the fundamentals of our portfolio company and other investments, the industries in which they operate, the overall economy and other market conditions.

Business Environment

Blackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the U.S., Europe, Asia and, to a lesser extent, elsewhere in the world.

2019 was characterized by rising global markets and continued economic expansion, despite uncertainty related to trade disputes, geopolitical risks, and yield curve inversions in the U.S. and around the world.

In the U.S., the S&P 500 increased 29% in 2019. Global and regional equity indices also appreciated in 2019, with the MSCI World Index rising 25% and the MSCI Europe Index up 22%. The MSCI Asia and Emerging Markets Indices trailed slightly, but still finished the year up 16% and 15%, respectively.

All of the major U.S. equity market sectors posted positive returns in 2019, with particular strength in technology stocks, which were up 48% for 2019. Energy stocks lagged the overall market, ending the year up only 8%. The price of West Texas Intermediate crude oil increased 34% in 2019 to $61 per barrel, but declined to $51 in early 2020, while the Henry Hub Natural Gas spot price declined 36% in 2019 to $2.09, and declined further to $1.94 in early 2020. Spot prices for other commodities were mixed, and the Bloomberg Commodity Index increased 5% in 2019.

In fixed income, dovish U.S. monetary policy drove government bond yields lower as the U.S. Federal Reserve lowered the federal funds target range in three rate cuts to

1.5%-1.75%,

noting that the current level would likely be held steady for the foreseeable future given an outlook for moderate economic growth, a strong labor market and low inflation.

Ten-year

U.S. Treasury yields declined 77 basis points to 1.92% in 2019, and declined another 55 basis points to 1.37% in early 2020. The Bloomberg Barclays U.S. Aggregate Index rose 9% and the Credit Suisse U.S. High-Yield Index advanced 14% in 2019. High-yield spreads contracted 161 basis points in 2019, while issuance increased 62% year-over-year.

Volatility moderated slightly in 2019, with the VIX index averaging 15.4, down 5% from the 2018 average, and ending the year at 13.8. Global equity issuance was fairly steady, down 1% in 2019. Merger and acquisition (M&A) activity was also fairly steady, with global announced M&A volumes down 1% in 2019.

The industrial sector remains soft, as industrial production declined 0.9% in the fourth quarter from the

year-ago

period. The Institute for Supply Management Manufacturing Purchasing Managers’ Index also declined in the fourth quarter to the lowest level since June 2009, signaling ongoing contraction in the U.S. manufacturing sector.

The U.S. continues to experience low unemployment, with a jobless rate of 3.5% — the lowest level since December 1969. Wage growth continued in the fourth quarter, with average hourly earnings increasing 3.3% year-over-year, based on the three-month average for production and nonsupervisory employees. Although the growth rate moderated from the third quarter of 2019, it remains elevated.

The global growth cycle is in a mature phase and signs of slowdown are evident in certain regions around the world, although most economists continue to expect moderate economic growth in the near term, with limited signals of an imminent recession in the U.S. as consumer and government spending remain healthy. Although the broader outlook remains constructive and progress was made on trade, including a phase one deal with China and the United States-Mexico-Canada Agreement, geopolitical instability continues to pose risk. In particular, the recent outbreak of the novel coronavirus in many countries, which is a rapidly evolving situation, has disrupted global travel and supply chains, and has adversely impacted global commercial activity and a number of industries, such as transportation, hospitality and entertainment. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novel coronavirus, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.

Notable Transactions

On April 10, 2019, Blackstone issued

€

600 million aggregate principal amount of 1.500% Senior Notes maturing on April 10, 2029.

Effective July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. See “— Organizational Structure.”

On October 10, 2019, Blackstone completed the retirement of its 5.875% Senior Notes maturing on March 15, 2021 (the “2021 Notes”). On September 3, 2019, Blackstone commenced a cash tender offer (the “Tender Offer”) on the notes and subsequently redeemed the

non-tendered

notes.

On September 10, 2019, Blackstone issued $500 million aggregate principal amount of 2.500% Senior Notes maturing on January 10, 2030 and $400 million aggregate principal amount of 3.500% Senior Notes maturing on September 10, 2049.

Organizational Structure

Effective July 1, 2019, The Blackstone Group L.P. converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc.

The simplified diagram below depicts our current organizational structure. The diagram does not depict all of our subsidiaries, including intermediate holding companies through which certain of the subsidiaries depicted are held.

Key Financial Measures and Indicators

We manage our business using certain financial measures and key operating metrics since we believe these metrics measure the productivity of our investment activities. We prepare our Consolidated Financial Statements in accordance with GAAP. See “— Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 2. Summary of Significant Accounting Policies” and “— Critical Accounting Policies.” Our key

non-GAAP

financial measures and operating indicators and metrics are discussed below.

Distributable Earnings

Distributable Earnings is derived from Blackstone’s segment reported results. Distributable Earnings is used to assess performance and amounts available for dividends to Blackstone shareholders, including Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships. Distributable Earnings is the sum of Segment Distributable Earnings plus Net Interest Income (Loss) less Taxes and Related Payables. Distributable Earnings excludes unrealized activity and is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision (Benefit) for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Distributable Earnings.

Net Interest Income (Loss) is presented on a segment basis and is equal to Interest and Dividend Revenue less Interest Expense, adjusted for the impact of consolidation of Blackstone Funds, and interest expense associated with the Tax Receivable Agreement.

Taxes and Related Payables represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision (Benefit) for Taxes excluding the tax impact of any divestitures and including the Payable under the Tax Receivable Agreement.

Segment Distributable Earnings

Segment Distributable Earnings is Blackstone’s segment profitability measure used to make operating decisions and assess performance across Blackstone’s four segments. Segment Distributable Earnings represents the net realized earnings of Blackstone’s segments and is the sum of Fee Related Earnings and Net Realizations for each segment. Blackstone’s segments are presented on a basis that deconsolidates Blackstone Funds, eliminates

non-controlling

ownership interests in Blackstone’s consolidated operating partnerships, removes the amortization of intangible assets and removes Transaction-Related Charges. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions. Segment Distributable Earnings excludes unrealized activity and is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision (Benefit) for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Segment Distributable Earnings.

Net Realizations is presented on a segment basis and is the sum of Realized Principal Investment Income and Realized Performance Revenues (which refers to Realized Performance Revenues excluding Fee Related Performance Revenues), less Realized Performance Compensation (which refers to Realized Performance Compensation excluding Fee Related Performance Compensation and Equity-Based Performance Compensation).

Fee Related Earnings

Fee Related Earnings is a performance measure used to assess Blackstone’s ability to generate profits from revenues that are measured and received on a recurring basis and not subject to future realization events. Fee Related Earnings equals management and advisory fees (net of management fee reductions and offsets) plus Fee Related Performance Revenues, less (a) Fee Related Compensation on a segment basis, and (b) Other Operating Expenses. Fee Related Earnings is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision (Benefit) for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Fee Related Earnings.

Fee Related Compensation is presented on a segment basis and refers to the compensation expense, excluding Equity-Based Compensation, directly related to (a) Management and Advisory Fees, Net and (b) Fee Related Performance Revenues, referred to as Fee Related Performance Compensation.

Fee Related Performance Revenues refers to the realized portion of Performance Revenues from Perpetual Capital that are (a) measured and received on a recurring basis, and (b) not dependent on realization events from the underlying investments.

Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization

Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization (“Adjusted EBITDA”), is a supplemental measure used to assess performance derived from Blackstone’s segment results and may be used to assess its ability to service its borrowings. Adjusted EBITDA represents Distributable Earnings plus the addition of (a) Interest Expense on a segment basis, (b) Taxes and Related Payables, and (c) Depreciation and Amortization. Adjusted EBITDA is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Income (Loss) Before Provision (Benefit) for Taxes. See “—

Non-GAAP

Financial Measures” for our reconciliation of Adjusted EBITDA.

Operating Metrics

The alternative asset management business is primarily based on managing third party capital and does not require substantial capital investment to support rapid growth. Since our inception, we have developed and used various key operating metrics to assess and monitor the operating performance of our various alternative asset management businesses in order to monitor the effectiveness of our value creating strategies.

Assets Under Management.

Assets Under Management refers to the assets we manage. Our Assets Under Management equals the sum of:

(a)the fair value of the investments held by our carry funds and our side-by-side and co-investment entities managed by us, plus (1) the capital that we are entitled to call from investors in those funds and entities pursuant to the terms of their respective capital commitments, including capital commitments to funds that have yet to commence their investment periods, or (2) for certain credit-focused funds the amounts available to be borrowed under asset based credit facilities,
(b)the net asset value of (1) our hedge funds and real estate debt carry funds, BPP, certain co-investments managed by us, certain credit-focused funds, and our Hedge Fund Solutions drawdown funds (plus, in each case, the capital that we are entitled to call from investors in those funds, including commitments yet to commence their investment periods), and (2) our funds of hedge funds, our Hedge Fund Solutions registered investment companies, and BREIT,
(c)the invested capital, fair value or net asset value of assets we manage pursuant to separately managed accounts,
(d)the amount of debt and equity outstanding for our CLOs during the reinvestment period,
(e)the aggregate par amount of collateral assets, including principal cash, for our CLOs after the reinvestment period,
(f)the gross or net amount of assets (including leverage where applicable) for our credit-focused registered investment companies, and
(g)the fair value of common stock, preferred stock, convertible debt, or similar instruments issued by BXMT.

Our carry funds are commitment-based drawdown structured funds that do not permit investors to redeem their interests at their election. Our funds of hedge funds, hedge funds, funds structured like hedge funds and other open-ended funds in our Hedge Fund Solutions, Credit and Real Estate segments generally have structures that afford an investor the right to withdraw or redeem their interests on a periodic basis (for example, annually or quarterly), typically with 30 to 95 days’ notice, depending on the fund and the liquidity profile of the underlying assets. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit segments, excluding our BIS separately managed accounts, may generally be terminated by an investor on 30 to 90 days’ notice.

Fee-Earning Assets Under Management

.

Fee-Earning

Assets Under Management refers to the assets we manage on which we derive management fees and/or performance revenues. Our

Fee-Earning

Assets Under Management equals the sum of:

(a)for our Private Equity segment funds and Real Estate segment carry funds, including certain BREDS and Hedge Fund Solutions funds, the amount of capital commitments, remaining invested capital, fair value, net asset value or par value of assets held, depending on the fee terms of the fund,
(b)for our credit-focused carry funds, the amount of remaining invested capital (which may include leverage) or net asset value, depending on the fee terms of the fund,
(c)the remaining invested capital or fair value of assets held in co-investment vehicles managed by us on which we receive fees,
(d)the net asset value of our funds of hedge funds, hedge funds, BPP, certain co-investments managed by us, certain registered investment companies, BREIT, and certain of our Hedge Fund Solutions drawdown funds,
(e)the invested capital, fair value of assets or the net asset value we manage pursuant to separately managed accounts,
(f)the net proceeds received from equity offerings and accumulated core earnings of BXMT, subject to certain adjustments,
(g)the aggregate par amount of collateral assets, including principal cash, of our CLOs, and
(h)the gross amount of assets (including leverage) or the net assets (plus leverage where applicable) for certain of our credit-focused registered investment companies.

Each of our segments may include certain

Fee-Earning

Assets Under Management on which we earn performance revenues but not management fees.

Our calculations of assets under management and

fee-earning

assets under management may differ from the calculations of other asset managers, and as a result this measure may not be comparable to similar measures presented by other asset managers. In addition, our calculation of assets under management includes commitments to, and the fair value of, invested capital in our funds from Blackstone and our personnel, regardless of whether such commitments or invested capital are subject to fees. Our definitions of assets under management and

fee-earning

assets under management are not based on any definition of assets under management and

fee-earning

assets under management that is set forth in the agreements governing the investment funds that we manage.

For our carry funds, total assets under management includes the fair value of the investments held and uncalled capital commitments, whereas

fee-earning

assets under management includes the total amount of capital commitments or the remaining amount of invested capital at cost depending on whether the investment period has expired or as specified by the fee terms of the fund. As such,

fee-earning

assets under management may be greater than total assets under management when the aggregate fair value of the remaining investments is less than the cost of those investments.

Perpetual Capital

. Perpetual Capital refers to the component of assets under management with an indefinite term, that is not in liquidation, and for which there is no requirement to return capital to investors through redemption requests in the ordinary course of business, except where funded by new capital inflows. Perpetual Capital includes

co-investment

capital with an investor right to convert into Perpetual Capital.

Dry Powder

. Dry Powder represents the amount of capital available for investment or reinvestment, including general partner and employee capital, and is an indicator of the capital we have available for future investments.

Performance Revenue Eligible Assets Under Management

. Performance Revenue Eligible Assets Under Management represents invested and to be invested capital at fair value, including capital closed for funds whose investment period has not yet commenced, on which performance revenues could be earned if certain hurdles are met.

Income Tax Current Developments

Prior to the Conversion, certain of our share of investment income and carried interest was not subject to U.S. corporate income taxes. Subsequent to the Conversion, all income earned by us is subject to U.S. corporate income taxes, which we believe will result in an overall higher income tax expense (or benefit) over time when compared to periods prior to the Conversion.

Congress, the Organization for Economic

Co-operation

and Development (“OECD”) and other government agencies in jurisdictions in which we and our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD, which represents a coalition of member countries, is contemplating changes to numerous long-standing tax principles through its base erosion and profit shifting (“BEPS”) project, which is focused on a number of issues, including the shifting of profits between affiliated entities in different tax jurisdictions, interest deductibility and eligibility for the benefits of double tax treaties. Several of

the proposed measures are potentially relevant to some of our structures and could have an adverse tax impact on our funds, investors and/or our portfolio companies. Some member countries have been moving forward on the BEPS agenda but, because timing of implementation and the specific measures adopted will vary among participating states, significant uncertainty remains regarding the impact of BEPS proposals. If implemented, these proposals could result in a loss of tax treaty benefits and increased taxes on income from our investments.

A number of European jurisdictions have enacted taxes on financial transactions, and the European Commission has proposed legislation to harmonize these taxes under the

so-called

“enhanced cooperation procedure,” which provides for adoption of

EU-level

legislation applicable to some but not all EU Member States. These contemplated changes, if adopted by individual countries, could increase tax uncertainty and/or costs faced by us, our funds’ portfolio companies and our investors, change our business model and cause other adverse consequences. The timing or impact of these proposals is unclear at this point. In addition, tax laws, regulations and interpretations are subject to continual changes, which could adversely affect our structures or returns to our investors. For instance, various countries have adopted or proposed tax legislation that may adversely affect portfolio companies and investment structures in countries in which our funds have invested and may limit the benefits of additional investments in those countries.

Consolidated Results of Operations

Following is a discussion of our consolidated results of operations for each of the years in the three-year period ended December 31, 2019. For a more detailed discussion of the factors that affected the results of our four business segments (which are presented on a basis that deconsolidates the investment funds we manage) in these periods, see “— Segment Analysis” below.

The following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the years ended December 31, 2019, 2018 and 2017:

Year Ended December 31,2019 vs. 20182018 vs. 2017
201920182017$%$%
(Dollars in Thousands)
Revenues
Management and Advisory Fees, Net$3,472,155$3,027,796$2,751,322$444,35915%$276,47410%
Incentive Fees129,91157,540242,51472,371126%(184,974)-76%
Investment Income (Loss)
Performance Allocations
Realized1,739,0001,876,5073,571,811(137,507)-7%(1,695,304)-47%
Unrealized1,126,332561,373(105,473)564,959101%666,846N/M
Principal Investments
Realized393,478415,862635,769(22,384)-5%(219,907)-35%
Unrealized215,00349,91742,605165,086331%7,31217%
Total Investment Income3,473,8132,903,6594,144,712570,15420%(1,241,053)-30%
Interest and Dividend Revenue182,398171,947139,69610,4516%32,25123%
Other79,993672,317(133,229)(592,324)-88%805,546N/M
Total Revenues7,338,2706,833,2597,145,015505,0117%(311,756)-4%
Expenses
Compensation and Benefits
Compensation1,820,3301,609,9571,442,485210,37313%167,47212%
Incentive Fee Compensation44,30033,916105,27910,38431%(71,363)-68%
Performance Allocations Compensation
Realized662,942711,0761,281,965(48,134)-7%(570,889)-45%
Unrealized540,285319,742103,794220,54369%215,948208%
Total Compensation and Benefits3,067,8572,674,6912,933,523393,16615%(258,832)-9%
General, Administrative and Other679,408594,873488,58284,53514%106,29122%
Interest Expense199,648163,990197,48635,65822%(33,496)-17%
Fund Expenses17,73878,486132,787(60,748)-77%(54,301)-41%
Total Expenses3,964,6513,512,0403,752,378452,61113%(240,338)-6%
Other Income
Change in Tax Receivable Agreement Liability161,567—403,855161,567N/M(403,855)-100%
Net Gains from Fund Investment Activities282,829191,722321,59791,10748%(129,875)-40%
Total Other Income444,396191,722725,452252,674132%(533,730)-74%
Income Before Provision (Benefit) for Taxes3,818,0153,512,9414,118,089305,0749%(605,148)-15%
Provision (Benefit) for Taxes(47,952)249,390743,147(297,342)N/M(493,757)-66%
Net Income3,865,9673,263,5513,374,942602,41618%(111,391)-3%
Net Income (Loss) Attributable to Redeemable Non-Controlling Interests in Consolidated Entities(121)(2,104)13,8061,983-94%(15,910)N/M
Net Income Attributable to Non- Controlling Interests in Consolidated Entities476,779358,878497,439117,90133%(138,561)-28%
Net Income Attributable to Non- Controlling Interests in Blackstone Holdings1,339,6271,364,9891,392,323(25,362)-2%(27,334)-2%
Net Income Attributable to The Blackstone Group Inc.$2,049,682$1,541,788$1,471,374$507,89433%$70,4145%
N/MNot meaningful.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenues

Revenues were $7.3 billion for the year ended December 31, 2019, an increase of $505.0 million compared to $6.8 billion for the year ended December 31, 2018. The increase in Revenues was primarily attributable to increases of $570.2 million in Investment Income, $444.4 million in Management and Advisory Fees, Net and $72.4 million in Incentive Fees, partially offset by a decrease of $592.3 million in Other Revenue.

The increase in Investment Income was primarily attributable to increases in our Real Estate, Credit and Hedge Fund Solutions segments of $1.0 billion, $173.4 million and $53.7 million, respectively, partially offset by a decrease in our Private Equity segment of $632.8 million. The increase in our Real Estate segment was primarily attributable to higher net appreciation of investment holdings in our BREP opportunistic funds. The carrying value of investments for our BREP opportunistic funds increased 17.6% for the year ended December 31, 2019 compared to 9.8% for the year ended December 31, 2018. The increase in our Credit segment was primarily attributable to higher returns in 2019 than in 2018 due to the negative impact of decreases in certain public positions and the volatility in the energy and credit markets in 2018. The increase in our Hedge Fund Solutions segment was primarily driven by higher net appreciation of investments of which Blackstone owns a share. The decrease in our Private Equity segment was primarily due to lower appreciation in corporate private equity. Corporate private equity carrying value increased 9.3% for the year ended December 31, 2019 compared to 19.1% for the year ended December 31, 2018.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Private Equity, Real Estate, Credit and Hedge Fund Solutions segments of $234.4 million, $138.7 million, $37.4 million and $37.3 million, respectively. The increase in our Private Equity segment was primarily due to increases in

Fee-Earning

Assets Under Management in Strategic Partners, BIP and Tactical Opportunities. The increase in our Real Estate segment was primarily due to

Fee-Earning

Asset Under Management growth in our core+ real estate funds and BREDS insurance separately managed accounts, as well as higher management and transaction fees in BXMT. The increase in our Credit segment was primarily due to the launch of several GSO and BIS funds subsequent to the year ended December 31, 2018, including successor flagship funds and multiple long only funds, as well as a full year of management fees on our BDC, partially offset by the receipt of a fixed payment in the first quarter of 2018 in connection with the conclusion of our

sub-advisory

relationship with FS Investments. The increase in our Hedge Fund Solutions segment was primarily due to

Fee-Earning

Asset Under Management growth in our individual investor and specialized solutions funds and a reduction of placement fees, which offset Base Management Fees.

The increase in Incentive Fees was primarily due to increases in our Hedge Fund Solutions and Credit segments of $52.8 million and $12.8 million, respectively. The increase in our Hedge Fund Solutions segment was primarily due to higher returns across a number of strategies, including customized solutions, commingled products and individual investor solutions and specialized solutions, compared to the year ended December 31, 2018. The increase in our Credit segment was primarily due to the contribution of a full year of fees from our BDC in 2019.

The decrease in Other Revenue was primarily due to proceeds received during the year ended December 31, 2018 from the conclusion of our

sub-advisory

relationship with FS Investments, partially offset by a foreign exchange gain on our euro denominated bonds.

Expenses

Expenses were $4.0 billion for the year ended December 31, 2019, an increase of $452.6 million, compared to $3.5 billion for the year ended December 31, 2018. The increase was primarily attributable to increases in Compensation, Performance Allocations Compensation and General, Administrative and Other Expenses, partially offset by a decrease of $60.7 million in Fund Expenses. The increase of $210.4 million in Compensation was due to the increase in Management and Advisory Fees, Net, on which a portion of compensation is based. The increase of $172.4 million in Performance Allocations Compensation was primarily due to the increase in Investment Income. The increase of $84.5 million in General, Administrative and Other Expenses was primarily due to new business growth, legal and advisory fees associated with the Conversion as well as consulting fees. The decrease of $60.7 million in Fund Expenses was due to a decrease of $61.3 million in our Credit segment primarily from the deconsolidation of certain CLO and other vehicles in 2018.

Other Income

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Other Income was $444.4 million for the year ended December 31, 2019, an increase of $252.7 million, compared to $191.7 million for the year ended December 31, 2018. The increase in Other Income was due to increases of $161.6 million in Change in Tax Receivable Agreement Liability and $91.1 million in Net Gains from Fund Investment Activities.

The increase in Other Income — Change in Tax Receivable Agreement Liability was primarily attributable to the Conversion.

The increase in Other Income — Net Gain from Fund Investment Activities was principally driven by increases of $58.7 million and $52.2 million in our Real Estate and Credit segments, respectively, partially offset by a decrease of $20.9 million in our Private Equity segment. The increase in our Real Estate segment was primarily due to a year-over-year net increase in the appreciation of investments in our BREP opportunistic funds. The increase in our Credit segment was primarily driven by a year-over-year net increase in appreciation of CLOs and other vehicles, partially offset by the deconsolidation of certain CLO and other vehicles during the twelve months ended December 31, 2018. The decrease in our Private Equity segment was primarily due to lower appreciation of investments across the private equity funds.

Provision (Benefit) for Taxes

The following table summarizes Blackstone’s tax position:

Year Ended December 31,
201920182017
(Dollars in Thousands)
Income Before Provision (Benefit) for Taxes$3,818,015$3,512,941$4,118,089
Provision (Benefit) for Taxes$(47,952)$249,390$743,147
Effective Income Tax Rate-1.3%7.1%18.0%

The following table reconciles the effective income tax rate to the U.S. federal statutory tax rate:

Year Ended December 31,2019 vs. 20182018 vs. 2017
201920182017
Statutory U.S. Federal Income Tax Rate21.0%21.0%35.0%—-14.0%
Income Passed Through to Common Shareholders and Non-Controlling Interest Holders (a)-13.5%-15.5%-25.9%2.0%10.4%
State and Local Income Taxes1.6%1.8%1.5%-0.2%0.3%
Equity-Based Compensation——-0.1%—0.1%
Change to a Taxable Corporation-10.3%——-10.3%—
Impact of the Tax Reform Bill——8.3%—-8.3%
Change in Valuation Allowance (b)-0.8%——-0.8%—
Other0.7%-0.2%-0.8%0.9%0.6%
Effective Income Tax Rate-1.3%7.1%18.0%-8.4%-10.9%
(a)Includes income that was not taxable to Blackstone and its subsidiaries. Such income was directly taxable to shareholders of Blackstone’s Class A common stock for the period prior to the Conversion and remains taxable to Blackstone’s non-controlling interest holders.
(b)The Change in Valuation Allowance for the year ended December 31, 2019 represents the change from July 1, 2019 to December 31, 2019, following the change to a taxable corporation.

Blackstone’s Provision (Benefit) for Taxes for the years ended December 31, 2019, 2018 and 2017 was $(48.0) million, $249.4 million and $743.1 million, respectively. This resulted in an effective tax rate of

-1.3%,

7.1% and 18.0%, respectively, based on our Income Before Provision (Benefit) for Taxes of $3.8 billion, $3.5 billion and $4.1 billion, respectively.

The decrease in Blackstone’s effective tax rate for the year ended December 31, 2019, compared with the year ended December 31, 2018 resulted primarily from the tax benefit recorded on the date of the Conversion, which was partially offset by a higher level of income being subject to U.S. federal (and state and local) corporate income taxes following the Conversion.

Additional information regarding our income taxes can be found in “— Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 15. Income Taxes” of this filing.

Non-Controlling

Interests in Consolidated Entities

The Net Income Attributable to Redeemable

Non-Controlling

Interests in Consolidated Entities and Net Income Attributable to

Non-Controlling

Interests in Consolidated Entities is attributable to the consolidated Blackstone Funds. The amounts of these items vary directly with the performance of the consolidated Blackstone Funds and largely eliminate the amount of Other Income — Net Gains from Fund Investment Activities from the Net Income (Loss) Attributable to The Blackstone Group Inc.

Net Income Attributable to

Non-Controlling

Interests in Blackstone Holdings is derived from the Income Before Provision (Benefit) for Taxes, excluding the Net Gains from Fund Investment Activities and the percentage allocation of the income between Blackstone personnel and others who are limited partners of Blackstone Holdings and Blackstone after considering any contractual arrangements that govern the allocation of income such as fees allocable to Blackstone.

For the years ended December 31, 2019, 2018 and 2017, the Net Income Before Taxes allocated to Blackstone personnel and others who are limited partners of Blackstone Holdings was 43.9%, 44.0% and 44.9%, respectively. The decrease of 0.1% was primarily due to conversions of Blackstone Holdings Partnership Units to shares of Class A common stock and the vesting of shares of Class A common stock.

The Other Income — Reduction of Tax Receivable Agreement Liability was entirely allocated to The Blackstone Group Inc.

Operating Metrics

The following graphs and tables summarize the

Fee-Earning

Assets Under Management by Segment and Total Assets Under Management by Segment, followed by a rollforward of activity for the years ended December 31, 2019, 2018 and 2017. For a description of how Assets Under Management and

Fee-Earning

Assets Under Management are determined, please see “— Key Financial Measures and Indicators — Operating Metrics — Assets Under Management and

Fee-Earning

Assets Under Management.”

Note: Totals may not add due to rounding.

Year Ended December 31,
20192018
Real EstatePrivate EquityHedge Fund SolutionsCreditTotalReal EstatePrivate EquityHedge Fund SolutionsCreditTotal
(Dollars in Thousands)
Fee-Earning Assets Under Management
Balance, Beginning of Period$93,252,724$80,008,166$72,280,606$96,986,011$342,527,507$83,984,824$70,140,883$69,914,061$111,304,230$335,343,998
Inflows, including Commitments (a)52,424,66227,260,48011,488,23421,069,189112,242,56517,961,22316,096,54312,354,41024,587,95771,000,133
Outflows, including Distributions (b)(9,690,143)(2,352,716)(11,928,940)(9,067,554)(33,039,353)(2,000,367)(1,888,223)(10,278,403)(27,640,908)(41,807,901)
Net Inflows (Outflows)42,734,51924,907,764(440,706)12,001,63579,203,21215,960,85614,208,3202,076,007(3,052,951)29,192,232
Realizations (c)(11,353,675)(7,212,993)(1,153,785)(5,629,089)(25,349,542)(8,781,140)(4,729,843)(429,912)(6,672,539)(20,613,434)
Market Activity (d)(g)3,580,56971,0274,949,8893,092,19011,693,6752,088,184388,806720,450(4,592,729)(1,395,289)
Balance, End of Period (e)$128,214,137$97,773,964$75,636,004$106,450,747$408,074,852$93,252,724$80,008,166$72,280,606$96,986,011$342,527,507
Increase (Decrease)$34,961,413$17,765,798$3,355,398$9,464,736$65,547,345$9,267,900$9,867,283$2,366,545$(14,318,219)$7,183,509
Increase (Decrease)37%22%5%10%19%11%14%3%-13%2%
Annualized Base Management Fee Rate (f)1.04%1.02%0.75%0.56%0.86%1.09%1.00%0.73%0.56%0.84%
Year Ended December 31,
2017
Real EstatePrivate EquityHedge Fund SolutionsCreditTotal
(Dollars in Thousands)
Fee-Earning Assets Under Management
Balance, Beginning of Period$72,030,054$69,110,457$66,987,553$68,964,608$277,092,672
Inflows, including Commitments (a)23,555,8668,257,43010,302,44455,099,84597,215,585
Outflows, including Distributions (b)(2,773,181)(1,196,502)(9,777,064)(4,364,916)(18,111,663)
Net Inflows20,782,6857,060,928525,38050,734,92979,103,922
Realizations (c)(11,851,866)(6,558,390)(2,182,220)(10,396,313)(30,988,789)
Market Activity (d)(g)3,023,951527,8884,583,3482,001,00610,136,193
Balance, End of Period (e)$83,984,824$70,140,883$69,914,061$111,304,230$335,343,998
Increase$11,954,770$1,030,426$2,926,508$42,339,622$58,251,326
Increase17%1%4%61%21%
Annualized Base Management Fee Rate (f)1.06%1.07%0.74%0.56%0.83%
Year Ended December 31,
20192018
Real EstatePrivate EquityHedge Fund SolutionsCreditTotalReal EstatePrivate EquityHedge Fund SolutionsCreditTotal
(Dollars in Thousands)
Total Assets Under Management
Balance, Beginning of Period$136,247,229$130,665,286$77,814,516$127,515,286$472,242,317$115,340,363$105,560,576$75,090,834$138,136,470$434,128,243
Inflows, including Commitments (a)34,190,56656,836,57012,242,85531,107,288134,377,27931,478,43126,639,96313,278,32729,578,890100,975,611
Outflows, including Distributions (b)(2,664,717)(1,065,445)(13,433,702)(11,629,269)(28,793,133)(2,162,958)(1,617,585)(10,780,055)(28,057,658)(42,618,256)
Net Inflows (Outflows)31,525,84955,771,125(1,190,847)19,478,019105,584,14629,315,47325,022,3782,498,2721,521,23258,357,355
Realizations (c)(18,097,899)(13,540,914)(1,271,968)(7,291,045)(40,201,826)(14,675,095)(10,396,611)(471,931)(8,516,996)(34,060,633)
Market Activity (d)(h)13,480,8859,990,6125,386,4114,639,91833,497,8266,266,48810,478,943697,341(3,625,420)13,817,352
Balance, End of Period (e)$163,156,064$182,886,109$80,738,112$144,342,178$571,122,463$136,247,229$130,665,286$77,814,516$127,515,286$472,242,317
Increase (Decrease)$26,908,835$52,220,823$2,923,596$16,826,892$98,880,146$20,906,866$25,104,710$2,723,682$(10,621,184)$38,114,074
Increase (Decrease)20%40%4%13%21%18%24%4%-8%9%
Year Ended December 31,
2017
Real EstatePrivate EquityHedge Fund SolutionsCreditTotal
(Dollars in Thousands)
Total Assets Under Management
Balance, Beginning of Period$101,963,652$100,189,994$71,119,718$93,280,101$366,553,465
Inflows, including Commitments (a)23,844,27012,631,10612,106,47159,373,876107,955,723
Outflows, including Distributions (b)(1,399,741)(1,230,409)(10,661,542)(6,165,216)(19,456,908)
Net Inflows22,444,52911,400,6971,444,92953,208,66088,498,815
Realizations (c)(24,527,951)(15,760,727)(2,409,985)(12,487,834)(55,186,497)
Market Activity (d)(h)15,460,1339,730,6124,936,1724,135,54334,262,460
Balance, End of Period (e)$115,340,363$105,560,576$75,090,834$138,136,470$434,128,243
Increase$13,376,711$5,370,582$3,971,116$44,856,369$67,574,778
Increase13%5%6%48%18%
(a)Inflows represent contributions, capital raised, other increases in available capital (recallable capital, increased side-by-side commitments), purchases, inter-segment allocations and acquisitions.
(b)Outflows represent redemptions, client withdrawals and decreases in available capital (expired capital, expense drawdowns and decreased side-by-side commitments).
(c)Realizations represent realizations from the disposition of assets or capital returned to investors from CLOs.
(d)Market activity includes realized and unrealized gains (losses) on portfolio investments and the impact of foreign exchange rate fluctuations.
(e)Assets Under Management are reported in the segment where the assets are managed.
(f)Represents the annualized current quarter’s Base Management Fee divided by period end Fee-Earning Assets Under Management.
(g)For the year ended December 31, 2019, the impact to Fee-Earning Assets Under Management due to foreign exchange rate fluctuations was $(94.9) million, $(280.6) million and $(375.5) million for the Real Estate, Credit and Total segments, respectively. For the year ended December 31, 2018, the impact to Fee-Earning Assets Under Management due to foreign exchange rate fluctuations was $(904.2) million, $(626.6) million and $(1.5) billion for the Real Estate, Credit and Total segments, respectively. For the year ended December 31, 2017, such impact was $1.4 billion, $1.3 million, $1.4 billion and $2.8 billion for the Real Estate, Private Equity, Credit and Total segments, respectively.
(h)For the year ended December 31, 2019, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $(908.4) million, $238.8 million, $(233.0) million and $(902.6) million for the Real Estate, Private Equity, Credit and Total segments, respectively. For the year ended December 31, 2018, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $(2.1) billion, $(354.1) million, $(821.9) million and $(3.3) billion for the Real Estate, Private Equity, Credit and Total segments, respectively. For the year ended December 31, 2017, such impact was $3.1 billion, $1.1 billion, $1.8 billion and $5.9 billion for the Real Estate, Private Equity, Credit and Total segments, respectively.

Fee-Earning

Assets Under Management

Fee-Earning

Assets Under Management were $408.1 billion at December 31, 2019, an increase of $65.5 billion, or 19%, compared to $342.5 billion at December 31, 2018. The net increase was due to:

•Inflows of $112.2 billion related to:
¡$52.4 billion in our Real Estate segment primarily driven by $20.1 billion from BREP IX, which started its investment period on June 3, 2019 (this amount was reflected in Total Assets Under Management at each capital closing of the fund), $9.8 billion from BREP Europe VI, which started its investment period on October 9, 2019 (this amount was reflected in Total Assets Under Management at each capital closing of the fund), $8.2 billion from BREIT, $5.3 billion from BREDS, $3.1 billion from BPP U.S. and co-investment, $1.3 billion from BPP Europe and co-investment and $970.6 million from BPP Asia,
¡$27.3 billion in our Private Equity segment driven by $11.7 billion from Strategic Partners, $8.1 billion from BIP, $4.0 billion from Tactical Opportunities, $2.5 billion from core private equity, $492.5 million from corporate private equity and $429.9 million from multi-asset products,
¡$21.1 billion in our Credit segment driven by $19.0 billion from certain long only and MLP strategies, $5.2 billion from direct lending, $4.8 billion from BIS, $3.7 billion from new CLOs, $2.8 billion from our distressed strategies and $993.8 million from mezzanine funds, partially offset by $16.0 billion of allocations to various strategies, and
¡$11.5 billion in our Hedge Fund Solutions segment driven by $7.0 billion from individual investor and specialized solutions, $2.8 billion from customized solutions and $1.7 billion from commingled products.
•Market activity of $11.7 billion due to:
¡$4.9 billion of market activity in our Hedge Fund Solutions segment driven by returns from BAAM’s Principal Solutions Composite of 8.2% gross (7.3% net),
¡$3.6 billion of market activity in our Real Estate segment driven by $3.1 billion of appreciation from our core+ real estate funds ($3.0 billion from market appreciation and $50.8 million from foreign exchange appreciation) and $710.1 million of market appreciation from BREDS, partially offset by $145.8 million of foreign exchange depreciation from BREP opportunistic funds, and
¡$3.1 billion of market activity in our Credit segment driven by $3.4 billion of market appreciation (primarily in certain long only and MLP strategies and BIS), partially offset by $280.6 million of foreign exchange depreciation.

Offsetting these increases were:

•Outflows of $33.0 billion primarily attributable to:
¡$11.9 billion in our Hedge Fund Solutions segment driven by $6.3 billion from customized solutions, $3.4 billion from individual investor and specialized solutions and $2.2 billion from commingled products,
¡$9.7 billion in our Real Estate segment driven by $5.4 billion of uninvested reserves at the end of BREP VIII’s investment period and $2.9 billion of uninvested reserves at the end of BREP Europe V’s investment period (these amounts are still classified as available capital and included in Total Assets Under Management), $693.7 million of redemptions from core+ real estate funds and $583.9 million of redemptions from BREDS liquids funds,
¡$9.1 billion in our Credit segment driven by $6.6 billion from certain long only and MLP strategies, $1.3 billion from BIS and $493.8 million from our distressed strategies, and
¡$2.4 billion in our Private Equity segment driven by $978.1 million from core private equity, $440.2 million from multi-asset products, $369.2 million from corporate private equity, $286.4 million from Tactical Opportunities and $194.1 million from BXLS.
•Realizations of $25.3 billion primarily driven by:
¡$11.4 billion in our Real Estate segment driven by $5.8 billion from BREP opportunistic funds and co-investment, $3.1 billion from BREDS and $2.5 billion from core+ real estate funds,
¡$7.2 billion in our Private Equity segment driven by $3.5 billion from corporate private equity, $2.0 billion from Tactical Opportunities and $1.4 billion from Strategic Partners and $260.0 million from core private equity,
¡$5.6 billion in our Credit segment driven by $1.9 billion from our distressed strategies, $1.4 billion from our mezzanine funds, $904.9 million from capital returned to investors from CLOs that are post their reinvestment periods, $762.9 million from certain long only and MLP strategies and $610.4 million from direct lending, and
¡$1.2 billion in our Hedge Fund Solutions segment drive by $1.1 billion from individual investor and specialized solutions.

Hedge Fund Solutions had net inflows of $903.7 million from January 1 through February 1, 2020.

Total Assets Under Management

Total Assets Under Management were $571.1 billion at December 31, 2019, an increase of $98.9 billion, or 21%, compared to $472.2 billion at December 31, 2018. The net increase was due to:

•Inflows of $134.4 billion related to:
¡$56.8 billion in our Private Equity segment driven by $27.7 billion from corporate private equity primarily due to the initial close for the eighth flagship private equity fund in the first quarter of 2019 (this amount will be reflected in Fee-Earning Assets Under Management when the investment period commences), $11.2 billion from Strategic Partners, $8.3 billion from BIP, $5.4 billion from Tactical Opportunities, $3.0 billion from BXLS, $608.3 million from core private equity and $606.9 million from multi-asset products,
¡$34.2 billion in our Real Estate segment driven by $10.0 billion capital raised from BREP Europe VI, $8.2 billion capital raised from BREIT, $5.2 billion capital raised from BREP IX, $6.0 billion total inflows from BREDS and $3.8 billion from BPP funds,
¡$31.1 billion in our Credit segment driven by $19.9 billion from certain long only and MLP strategies, $10.3 billion from direct lending, $8.1 billion from BIS, $4.0 billion from our distressed strategies, $3.7 billion from new CLOs and $587.3 million from mezzanine funds, partially offset by $16.0 billion of allocations to various strategies, and
¡$12.2 billion in our Hedge Fund Solutions segment driven by $6.5 billion from individual investor and specialized solutions, $4.1 billion from customized solutions, and $1.6 billion from commingled products.
•Market activity of $33.5 billion due to:
¡$13.5 billion of market activity in our Real Estate segment driven by carrying value increases in our opportunistic and BPP funds of 17.6% and 9.2% for the year, respectively, which includes $908.4 million of foreign exchange depreciation across the segment,
¡$10.0 billion of market activity in our Private Equity segment driven by carrying value increase in Strategic Partners, Tactical Opportunities and corporate private equity of 17.0%, 13.1% and 9.3%, respectively, which included $238.8 million of foreign exchange appreciation across the segment,
¡$5.4 billion of market activity in our Hedge Fund Solutions segment driven by reasons noted above in Fee-Earning Assets Under Management, and
¡$4.6 billion of market activity in our Credit segment driven by $4.9 billion of market appreciation (primarily in certain long only and MLP strategies, BIS, and mezzanine funds), partially offset by $233.0 million of foreign exchange depreciation.

Total Assets Under Management market activity in our Real Estate and Private Equity segments generally represents the change in fair value of the investments held and typically exceeds the

Fee-Earning

Assets Under Management market activity.

Offsetting these increases were:

•Realizations of $40.2 billion primarily driven by:
¡$18.1 billion in our Real Estate segment driven by $13.1 billion from BREP opportunistic and co-investment, $2.7 billion from core+ real estate funds and $2.3 billion from BREDS,
¡$13.5 billion in our Private Equity segment driven by disposition activity across the segment, mainly related to $6.9 billion from corporate private equity, $3.2 billion from Tactical Opportunities, $2.7 billion from Strategic Partners, $418.1 million from core private equity, and $353.9 million from BXLS,
¡$7.3 billion in our Credit segment driven by $2.8 billion from our distressed strategies, $1.6 billion from our mezzanine funds, $1.1 billion from direct lending, $904.9 million from capital returned to investors from CLOs that are post their reinvestment periods and $788.2 million from certain long only and MLP strategies, and
¡$1.3 billion in our Hedge Fund Solutions segment driven by $1.2 billion from individual investor and specialized solutions.

Total Assets Under Management realizations in our Real Estate and Private Equity segments generally represent the total proceeds and typically exceed the

Fee-Earning

Assets Under Management realizations which generally represent only the invested capital.

•Outflows of $28.8 billion primarily attributable to:
¡$13.4 billion in our Hedge Fund Solutions segment driven by $7.5 billion from customized solutions, $3.4 billion from individual investor and specialized solutions and $2.5 billion from commingled products,
¡$11.6 billion in our Credit segment driven by $6.9 billion from certain long only and MLP strategies, $1.4 billion from direct lending, $1.3 billion from BIS and $1.2 billion from our distressed strategies,
¡$2.7 billion in our Real Estate segment driven by the release of uninvested capital in BPP and BREDS, and redemptions from BREDS liquid funds, BPP U.S. and BREIT, and
¡$1.1 billion in our Private Equity segment driven by $447.1 million from Strategic Partners, $365.2 million from Tactical Opportunities, $268.3 million from corporate private equity and $111.0 million from multi-asset products, partially offset by $145.6 million from BXLS.

Dry Powder

The following presents our Dry Powder as of December 31 of each year:

Note: Totals may not add due to rounding.

(a)Represents illiquid drawdown funds, a component of Perpetual Capital and fee-paying co-investments; includes fee-paying third party capital as well as general partner and employee capital that does not earn fees. Amounts are reduced by outstanding capital commitments, for which capital has not yet been invested.
December 31,
201720182019
(Dollars in Thousands)
Dry Powder Available for Investment
Real Estate$32,251,005$40,627,676$45,698,155
Private Equity36,302,49744,431,88174,013,156
Hedge Fund Solutions3,943,3583,275,7682,677,748
Credit22,285,14924,542,24328,716,911
$94,782,009$112,877,568$151,105,970

Net Accrued Performance Revenues

The following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as of December 31, 2019 and 2018. Net Accrued Performance Revenues presented do not include clawback amounts, if any, which are disclosed in Note 19. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing. The Net Accrued Performance Revenues as of each reporting date were principally unrealized; if realized, such amount would be a component of Distributable Earnings.

December 31,
20192018
(Dollars in Millions)
Real Estate
BREP IV$11$3
BREP V1955
BREP VI8189
BREP VII447484
BREP VIII674429
BREP IX6—
BREP International II——
BREP Europe IV167200
BREP Europe V193110
BREP Asia I152114
BREP Asia II22—
BPP282215
BREIT7923
BREDS4717
BTAS4236
Total Real Estate (a)2,2201,775
Private Equity
BCP IV2372
BCP VI705746
BCP VII471225
BCP Asia17—
BEP I102103
BEP II—73
Tactical Opportunities160155
Strategic Partners14494
BCEP4619
Clarus7—
BTAS6141
Other—1
Total Private Equity (a)1,7371,529
Hedge Fund Solutions10524
Credit252195
Total Blackstone Net Accrued Performance Revenues$4,314$3,523

Note: Totals may not add due to rounding.

(a)Real Estate and Private Equity include Co-Investments, as applicable.

For the year ended December 31, 2019 Net Accrued Performance Revenues receivable was increased by Net Accrued Performance Revenues of $1.9 billion and decreased by net realized distributions of $1.1 billion.

Performance Revenue Eligible Assets Under Management

The following presents our Invested Performance Revenue Eligible Assets Under Management as of December 31 of each year:

Note: Totals may not add due to rounding.

Perpetual Capital

The following presents our Perpetual Capital as of December 31 of each year:

Note: Totals may not add due to rounding.

Investment Record

Fund returns information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents the investment record of our significant drawdown funds from inception through December 31, 2019:

Fund (Investment Period Beginning Date / Ending Date) (a)Committed CapitalAvailable Capital (b)Unrealized InvestmentsRealized InvestmentsTotal InvestmentsNet IRRs (d)
ValueMOIC (c)% PublicValueMOIC (c)ValueMOIC (c)RealizedTotal
(Dollars in Thousands, Except Where Noted)
Real Estate
Pre-BREP$140,714$—$—N/A—$345,1902.5x$345,1902.5x33%33%
BREP I (Sep 1994 / Oct 1996)380,708——N/A—1,327,7082.8x1,327,7082.8x40%40%
BREP II (Oct 1996 / Mar 1999)1,198,339——N/A—2,531,6142.1x2,531,6142.1x19%19%
BREP III (Apr 1999 / Apr 2003)1,522,708——N/A—3,330,4062.4x3,330,4062.4x21%21%
BREP IV (Apr 2003 / Dec 2005)2,198,694—74,8550.1x50%4,521,1642.2x4,596,0191.7x28%12%
BREP V (Dec 2005 / Feb 2007)5,539,418—272,7651.0x54%13,030,7192.4x13,303,4842.3x12%11%
BREP VI (Feb 2007 / Aug 2011)11,060,444—917,0092.8x72%26,936,7282.5x27,853,7372.5x13%13%
BREP VII (Aug 2011 / Apr 2015)13,496,5641,906,6997,262,9241.6x8%22,551,6042.1x29,814,5282.0x22%16%
BREP VIII (Apr 2015 / Jun 2019)16,629,9143,254,16318,095,9031.4x—6,838,5701.7x24,934,4731.5x26%16%
*BREP IX (Jun 2019 / Dec 2024)20,634,39816,859,2733,907,6081.0x—87,590N/M3,995,1981.0xN/MN/M
Total Global BREP$72,801,901$22,020,135$30,531,0641.4x5%$81,501,2932.2x$112,032,3571.9x18%16%
BREP Int’l (Jan 2001 / Sep 2005)€824,172€—€—N/A—€1,373,1702.1x€1,373,1702.1x23%23%
BREP Int’l II (Sep 2005 / Jun 2008) (e)1,629,748—3,566N/A—2,572,3641.8x2,575,9301.8x8%8%
BREP Europe III (Jun 2008 / Sep 2013)3,205,167467,438581,5280.8x—5,579,3252.5x6,160,8532.1x21%14%
BREP Europe IV (Sep 2013 / Dec 2016)6,709,1451,339,2583,091,2811.6x—8,910,4802.0x12,001,7611.9x23%17%
BREP Europe V (Dec 2016 / Oct 2019)7,935,1401,780,7677,935,1181.3x—667,0502.6x8,602,1681.4x51%16%
*BREP Europe VI (Oct 2019 / Apr 2025)8,880,4978,371,719507,4761.0x——N/A507,4761.0xN/AN/M
Total BREP Europe€29,183,869€11,959,182€12,118,9691.3x—€19,102,3892.1x€31,221,3581.7x16%14%
BREP Asia I (Jun 2013 / Dec 2017)$5,096,361$1,728,289$3,774,2571.6x15%$4,049,8381.9x$7,824,0951.7x21%15%
*BREP Asia II (Dec 2017 / Jun 2023)7,208,0704,785,4712,787,1201.2x—62,0501.6x2,849,1701.2xN/M10%
BREP Co-Investment (f)7,055,974170,1351,587,6922.1x—13,263,0502.1x14,850,7422.1x15%16%
Total BREP$127,001,719$42,113,862$52,689,5351.4x4%$122,989,0212.2x$175,678,5561.9x17%15%
*Core+ BPP (Various) (g)29,378,175689,94732,420,228N/A—5,877,291N/A38,297,519N/AN/M10%
*Core+ BREIT (Various) (h)12,532,379N/M13,104,041N/A—258,935N/A13,362,976N/AN/M10%
*BREDS High-Yield (Various) (i)13,856,1874,489,2133,310,2771.1x—11,889,0181.3x15,199,2951.3x11%11%

continued...

Fund (Investment Period Beginning Date / Ending Date) (a)Committed CapitalAvailable Capital (b)Unrealized InvestmentsRealized InvestmentsTotal InvestmentsNet IRRs (d)
ValueMOIC (c)% PublicValueMOIC (c)ValueMOIC (c)RealizedTotal
(Dollars in Thousands, Except Where Noted)
Corporate Private Equity
BCP I (Oct 1987 / Oct 1993)$859,081$—$—N/A—$1,741,7382.6x$1,741,7382.6x19%19%
BCP II (Oct 1993 / Aug 1997)1,361,100——N/A—3,256,8192.5x3,256,8192.5x32%32%
BCP III (Aug 1997 / Nov 2002)3,967,422——N/A—9,184,6882.3x9,184,6882.3x14%14%
BCOM (Jun 2000 / Jun 2006)2,137,33024,57513,493N/A—2,953,6491.4x2,967,1421.4x6%6%
BCP IV (Nov 2002 / Dec 2005)6,773,182198,964178,3782.5x—21,417,8212.9x21,596,1992.9x36%36%
BCP V (Dec 2005 / Jan 2011)21,013,6581,039,805736,9180.7x45%37,166,6221.9x37,903,5401.9x9%8%
BCP VI (Jan 2011 / May 2016)15,192,4471,652,51412,566,4841.7x38%14,834,5832.1x27,401,0671.9x18%12%
*BCP VII (May 2016 / May 2022)18,819,8535,048,79217,566,4251.4x1%1,663,6481.7x19,230,0731.4x45%19%
BCP VIII (TBD)24,500,00024,500,000—N/A——N/A—N/AN/AN/A
Energy I (Aug 2011 / Feb 2015)2,435,285224,7841,611,1011.6x61%2,699,5242.0x4,310,6251.8x18%12%
*Energy II (Feb 2015 / Feb 2021)4,913,607749,7174,347,0431.3x—278,1921.8x4,625,2351.3x43%7%
Energy III (TBD)4,193,0154,193,015—N/A——N/A—N/AN/AN/A
*BCP Asia (Dec 2017 / Dec 2023)2,397,7441,310,3661,028,2711.3x6%54,3081.7x1,082,5791.3xN/M25%
Total Corporate Private Equity$108,563,724$38,942,532$38,048,1131.5x17%$95,251,5922.1x$133,299,7051.9x16%15%
*Core Private Equity (Jan 2017 / Jan 2021) (j)4,755,0771,385,3544,325,9801.3x—418,0531.6x4,744,0331.3x37%15%
Tactical Opportunities
*Tactical Opportunities (Various)23,654,24210,157,25210,351,9851.2x11%8,955,1791.7x19,307,1641.4x19%10%
*Tactical Opportunities Co-Investment and Other (Various)6,885,2592,352,4645,409,6821.3x4%1,894,7921.6x7,304,4741.4x23%14%
Total Tactical Opportunities$30,539,501$12,509,716$15,761,6671.3x9%$10,849,9711.7x$26,611,6381.4x20%11%
Strategic Partners (Secondaries)
Strategic Partners I-V (Various) (k)11,862,6231,732,0941,092,247N/M—16,645,510N/M17,737,7571.5xN/A13%
Strategic Partners VI (Apr 2014 / Apr 2016) (k)4,362,7501,140,9351,488,888N/M—3,111,382N/M4,600,2701.5xN/A16%
Strategic Partners VII (May 2016 / Mar 2019) (k)7,489,9702,506,6245,556,596N/M—1,546,950N/M7,103,5461.5xN/A23%
*Strategic Partners Real Assets II (May 2017 / Mar 2022) (k)1,749,807516,372817,832N/M—271,186N/M1,089,0181.2xN/A17%
*Strategic Partners VIII (Mar 2019 / Jul 2023) (k)10,763,6005,421,2243,166,592N/M—53,818N/M3,220,4101.3xN/AN/M
*Strategic Partners Real Estate, SMA and Other (Various) (k)6,606,9782,096,6022,498,143N/M—1,189,081N/M3,687,2241.3xN/A18%
Total Strategic Partners (Secondaries)$42,835,728$13,413,851$14,620,298N/M—$22,817,927N/M$37,438,2251.5xN/A14%
*Infrastructure (Various)13,659,16311,309,1492,407,6431.0x53%—N/A2,407,6431.0xN/AN/M
Life Sciences
*Clarus IV (Jan 2018 / Jan 2020)910,000547,667467,4711.5x4%3,323N/M470,7941.5xN/M29%
BXLS V (Jan 2020 / Jan 2025)3,194,6303,194,630—N/A——N/A—N/AN/AN/A

continued...

Fund (Investment Period Beginning Date / Ending Date) (a)Committed CapitalAvailable Capital (b)Unrealized InvestmentsRealized InvestmentsTotal InvestmentsNet IRRs (d)
ValueMOIC (c)% PublicValueMOIC (c)ValueMOIC (c)RealizedTotal
(Dollars in Thousands, Except Where Noted)
Credit (l)
Mezzanine I (Jul 2007 / Oct 2011)$2,000,000$97,114$23,0531.2x—$4,772,3161.6x$4,795,3691.6xN/A17%
Mezzanine II (Nov 2011 / Nov 2016)4,120,0001,033,2551,371,2380.9x—5,273,4601.6x6,644,6981.3xN/A11%
*Mezzanine III (Sep 2016 / Sep 2021)6,639,1332,845,1764,324,2591.1x1%1,678,7391.6x6,002,9981.2xN/A12%
Distressed I (Sep 2009 / May 2013)3,253,14385,000121,4580.2x—5,772,9641.6x5,894,4221.4xN/A10%
Distressed II (Jun 2013 / Jun 2018)5,125,000573,3151,160,8200.6x9%4,300,2321.3x5,461,0521.1xN/A2%
*Distressed III (Dec 2017 / Dec 2022)7,356,3804,962,3771,772,3341.0x1%866,5281.4x2,638,8621.1xN/A11%
Energy I (Nov 2015 / Nov 2018)2,856,8671,078,0491,834,2811.1x—1,013,4661.7x2,847,7471.3xN/A10%
*Energy II (Feb 2019 / Feb 2024)3,616,0812,973,803671,5121.0x—30,0672.3x701,5791.1xN/AN/M
Euro
European Senior Debt (Feb 2015 / Feb 2019)€1,964,689€381,768€2,028,5391.1x2%€1,159,5831.5x€3,188,1221.2xN/A9%
*European Senior Debt II (Jun 2019 / Jun 2024)€3,403,585€3,117,425€292,4681.0x—€—N/A€292,4681.0xN/AN/M
Total Credit$41,095,232$17,575,933$13,884,2861.0x2%$25,026,9931.5x$38,911,2791.3xN/A11%

The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.

N/MNot meaningful generally due to the limited time since initial investment.
N/ANot applicable.
*Represents funds that are currently in their investment period and open-ended funds.
(a)Excludes investment vehicles where Blackstone does not earn fees.
(b)Available Capital represents total investable capital commitments, including side-by-side, adjusted for certain expenses and expired or recallable capital and may include leverage, less invested capital. This amount is not reduced by outstanding commitments to investments.
(c)Multiple of Invested Capital (“MOIC”) represents carrying value, before management fees, expenses and Performance Revenues, divided by invested capital.
(d)Net Internal Rate of Return (“IRR”) represents the annualized inception to December 31, 2019 IRR on total invested capital based on realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues. IRRs are calculated using actual timing of limited partner cash flows. Initial inception date cash flow may differ from the Investment Period Beginning Date.
(e)The 8% Realized Net IRR and 8% Total Net IRR exclude investors that opted out of the Hilton investment opportunity. Overall BREP International II performance reflects a 7% Realized Net IRR and a 7% Total Net IRR.
(f)BREP Co-Investment represents co-investment capital raised for various BREP investments. The Net IRR reflected is calculated by aggregating each co-investment’s realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues.
(g)BPP represents the core+ real estate funds which invest with a more modest risk profile and lower leverage.
(h)Unrealized Investment Value reflects BREIT’s net asset value as of December 31, 2019. Realized Investment Value represents BREIT’s cash distributions, net of servicing fees. BREIT net return reflects a per share blended return, assuming BREIT had a single share class, reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BREIT. These returns are not representative of the returns experienced by any particular investor or share class. Inception to date net returns are presented on an annualized basis and are from January 1, 2017.
(i)BREDS High-Yield represents the flagship real estate debt drawdown funds only and excludes BREDS High-Grade.
(j)BCEP, or Blackstone Core Equity Partners, is a core private equity fund which invests with a more modest risk profile and longer hold period.
(k)Realizations are treated as return of capital until fully recovered and therefore unrealized and realized MOICs are not meaningful. If information is not available on a timely basis, returns are calculated from results that are reported on a three month lag.
(l)Funds presented represent the flagship credit drawdown funds only. The Total Credit Net IRR is the combined IRR of the credit drawdown funds presented.

Segment Analysis

Discussed below is our Segment Distributable Earnings for each of our segments. This information is reflected in the manner utilized by our senior management to make operating decisions, assess performance and allocate resources. References to “our” sectors or investments may also refer to portfolio companies and investments of the underlying funds that we manage.

Real Estate

The following table presents the results of operations for our Real Estate segment:

Year Ended December 31,2019 vs. 20182018 vs. 2017
201920182017$%$%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$1,116,183$985,399$872,191$130,78413%$113,20813%
Transaction and Other Fees, Net175,831152,51382,78123,31815%69,73284%
Management Fee Offsets(26,836)(11,442)(15,934)(15,394)135%4,492-28%
Total Management Fees, Net1,265,1781,126,470939,038138,70812%187,43220%
Fee Related Performance Revenues198,237124,50279,50073,73559%45,00257%
Fee Related Compensation(531,259)(459,430)(437,311)(71,829)16%(22,119)5%
Other Operating Expenses(168,332)(146,260)(136,042)(22,072)15%(10,218)8%
Fee Related Earnings763,824645,282445,185118,54218%200,09745%
Realized Performance Revenues1,032,337914,9842,141,374117,35313%(1,226,390)-57%
Realized Performance Compensation(374,096)(284,319)(751,526)(89,777)32%467,207-62%
Realized Principal Investment Income79,73392,525255,903(12,792)-14%(163,378)-64%
Net Realizations737,974723,1901,645,75114,7842%(922,561)-56%
Segment Distributable Earnings$1,501,798$1,368,472$2,090,936$133,32610%$(722,464)-35%
N/MNot meaningful.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Segment Distributable Earnings were $1.5 billion for the year ended December 31, 2019, an increase of $133.3 million, or 10%, compared to $1.4 billion for the year ended December 31, 2018. The increase in Segment Distributable Earnings was primarily attributable to increases of $118.5 million in Fee Related Earnings and $14.8 million in Net Realizations.

Segment Distributable Earnings in our Real Estate segment in 2019 were higher compared to 2018. This was primarily driven by growth in

Fee-Earning

Assets Under Management in our core+ real estate funds, an increase in management fees from our BREDS liquids funds, and higher Realized Performance Revenues in BREP and BREIT in 2019 compared to 2018. The market environment continues to be characterized by volatility and macroeconomic and geopolitical concerns, such as uncertainty regarding the next stage of trade negotiations between the U.S. and China and concerns regarding the rate of global growth and the impact of the recent and rapidly evolving outbreak of the novel coronavirus in many countries. We have also seen an increasing focus in certain markets in the U.S. and Europe toward rent regulation as a means to address residential affordability caused by undersupply of housing. Such conditions (which may be across industries, sectors or geographies) may contribute to adverse operating performance, including by moderating rent growth in certain markets in our residential portfolio. Such conditions may also limit attractive realization opportunities for our Real Estate segment. Overall, operating trends in our Real Estate portfolio remain stable and supply-demand fundamentals remain positive in most markets, although decelerating growth in certain sectors, including retail, may contribute to a more challenging operating environment. Factors such as increasing wages and a tight labor market create profit margin pressure in certain sectors in the U.S., including hospitality. Capital deployment in opportunistic investments in the U.S. continues to be challenging, as distress levels are low and asset values are relatively high. Nonetheless, we deployed a record $22.5 billion of capital in our Real Estate segment in 2019, primarily in North America. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition” and “— A period of economic slowdown, which may be across one or more industries, sectors or geographies, could contribute to adverse operating performance for certain of our funds’ investments, which would adversely affect our operating results and cash flows.”

Fee Related Earnings

Fee Related Earnings were $763.8 million for the year ended December 31, 2019, an increase of $118.5 million, or 18%, compared to $645.3 million for the year ended December 31, 2018. The increase in Fee Related Earnings was primarily attributable to increases of $138.7 million in Management Fees, Net and $73.7 million in Fee Related Performance Revenues, partially offset by increases of $71.8 million in Fee Related Compensation and $22.1 million in Other Operating Expenses.

Management Fees, Net were $1.3 billion for the year ended December 31, 2019, an increase of $138.7 million compared to $1.1 billion for the year ended December 31, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $1.1 billion for the year ended December 31, 2019, an increase of $130.8 million compared to $985.4 million for the year ended December 31, 2018, primarily due to

Fee-Earning

Assets Under Management growth in our core+ real estate funds and BREDS insurance separately managed accounts, as well as higher management and transaction fees in BXMT.

Fee Related Performance Revenues were $198.2 million for the year ended December 31, 2019, an increase of $73.7 million, compared to $124.5 million for the year ended December 31, 2018. The increase was primarily due to timing of crystallizations in BPP U.S. and an increase in BREIT net asset value.

Fee Related Compensation was $531.3 million for the year ended December 31, 2019, an increase of $71.8 million, compared to $459.4 million for the year ended December 31, 2018. The increase was primarily due to increases in Management and Advisory Fees, Net and Fee Related Performance Fee Revenues on which a portion of Fee Related Compensation is based.

Other Operating Expenses were $168.3 million for the year ended December 31, 2019, an increase of $22.1 million, compared to $146.3 million for the year ended December 31, 2018. The increase was primarily due to consulting fees and other business development costs.

Net Realizations

Net Realizations were $738.0 million for the year ended December 31, 2019, an increase of $14.8 million, compared to $723.2 million for the year ended December 31, 2018. The increase in Net Realizations was primarily attributable to an increase of $117.4 million in Realized Performance Revenues, partially offset by an increase of $89.8 million in Realized Performance Compensation and a decrease of $12.8 million in Realized Principal Investment Income.

Realized Performance Revenues were $1.0 billion for the year ended December 31, 2019, an increase of $117.4 million, compared to $915.0 million for the year ended December 31, 2018. The increase was due to higher Realized Performance Revenues in BREP and BREDS.

Realized Performance Compensation was $374.1 million for the year ended December 31, 2019, an increase of $89.8 million, compared to $284.3 million for the year ended December 31, 2018. The increase was due to the increase in Realized Performance Revenues.

Realized Principal Investment Income was $79.7 million for the year ended December 31, 2019, a decrease of $12.8 million, compared to $92.5 million for the year ended December 31, 2018. The decrease was primarily due to lower Realized Principal Investment Income for BREP VI.

Fund Returns

Fund return information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents the internal rates of return, except where noted, of our significant real estate funds:

Year Ended December 31,December 31, 2019 Inception to Date
201920182017RealizedTotal
Fund (a)GrossNetGrossNetGrossNetGrossNetGrossNet
BREP IV90%66%-14%-12%3%3%48%28%22%12%
BREP V16%13%-6%-5%11%10%15%12%14%11%
BREP VI34%28%7%5%28%23%18%13%17%13%
BREP VII15%12%3%2%22%17%31%22%23%16%
BREP VIII20%15%20%14%24%16%36%26%23%16%
BREP International II (b)(c)(d)N/AN/A34%29%23%21%10%8%10%8%
BREP Europe III (b)1%-1%-18%-15%25%20%30%21%23%14%
BREP Europe IV (b)13%10%20%14%33%26%32%23%23%17%
BREP Europe V (b)20%14%25%17%N/MN/M68%51%24%16%
BREP Asia I19%14%10%7%27%19%29%21%22%15%
BREP Asia II27%16%N/MN/MN/AN/AN/MN/M25%10%
BREP Co-Investment (e)20%13%-1%—24%22%17%15%18%16%
BPP (f)10%8%11%10%13%10%N/MN/M12%10%
BREDS High-Yield (g)17%13%9%4%15%11%15%11%15%11%
BREDS High-Grade (g)8%7%7%5%N/MN/M8%7%8%6%
BREDS Liquid (h)13%10%6%4%11%8%N/AN/A11%8%
BXMT (i)N/A25%N/A7%N/A16%N/AN/AN/A14%
BREIT (j)N/A12%N/A8%N/A10%N/AN/AN/A10%

The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.

N/MNot meaningful generally due to the limited time since initial investment.
N/ANot applicable.
(a)Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Revenues.
(b)Euro-based internal rates of return.
(c)The 8% Realized Net IRR and 8% Total Net IRR exclude investors that opted out of the Hilton investment opportunity. Overall BREP International II Performance reflects a 7% Realized Net IRR and a 7% Total Net IRR.
(d)For the year ended December 31, 2019, the appreciation of our remaining assets has resulted in the fund exceeding the preferred return.
(e)BREP Co-Investment represents co-investment capital raised for various BREP investments. The Net IRR reflected is calculated by aggregating each co-investment’s realized proceeds and unrealized value, as applicable, after management fees, expenses and Performance Revenues.
(f)BPP represents the core+ real estate funds which invest with a more modest risk profile and lower leverage.
(g)Effective March 31, 2019, the former BREDS Drawdown composite is presented by its components, BREDS High-Yield and BREDS High-Grade. BREDS High-Yield represents the flagship real estate debt drawdown funds and excludes the BREDS High-Grade drawdown fund, which has a different risk-return profile. Inception to date returns are from July 1, 2009 and July 1, 2017 for BREDS High-Yield and BREDS High-Grade, respectively. Prior periods have been updated to reflect this presentation.
(h)BREDS Liquid represents BREDS funds that invest in liquid real estate debt securities, except funds in liquidation and insurance mandates with specific investment objectives. Effective June 30, 2018, the returns presented represent summarized asset-weighted gross and net rates of return. Inception to Date returns are presented on an annualized basis. Prior periods have been updated to reflect such rates of return.
(i)Reflects annualized return of a shareholder invested in BXMT as of the beginning of each period presented, assuming reinvestment of all dividends received during the period, and net of all fees and expenses incurred by BXMT. Return incorporates the closing NYSE stock price as of each period end. Inception to date returns are from May 22, 2013.
(j)Effective September 30, 2019, the BREIT return reflects a per share blended return for each respective period, assuming BREIT had a single share class, reinvestment of all dividends received during the period, and no upfront selling commission, net of all fees and expenses incurred by BREIT. These returns are not representative of the returns experienced by any particular investor or share class. Inception to date returns are presented on an annualized basis and are from January 1, 2017. Prior periods have been updated to reflect BREIT’s per share blended return. The BREIT returns presented in filings prior to September 30, 2019 were for BREIT’s Class S investors.

As of December 31, 2019, BREP IX was not above its carried interest threshold at the fund level. However, certain BREP IX investors have a reduced management fee due to completing their capital commitment process as of the initial closing date, thereby resulting in higher net gains and have exceeded the carried interest threshold this quarter.

The Real Estate segment has two funds in their investment period, which were above their respective carried interest thresholds as of December 31, 2019: BREP Asia II and BREDS III.

Private Equity

The following table presents the results of operations for our Private Equity segment:

Year Ended December 31,2019 vs. 20182018 vs. 2017
201920182017$%$%
(Dollars in Thousands)
Management and Advisory Fees, Net
Base Management Fees$986,482$785,223$724,818$201,25926%$60,4058%
Transaction, Advisory and Other Fees, Net115,17458,16557,62457,00998%5411%
Management Fee Offsets(37,327)(13,504)(18,007)(23,823)176%4,503-25%
Total Management and Advisory Fees, Net1,064,329829,884764,435234,44528%65,4499%
Fee Related Compensation(423,752)(375,446)(347,562)(48,306)13%(27,884)8%
Other Operating Expenses(160,010)(133,096)(120,997)(26,914)20%(12,099)10%
Fee Related Earnings480,567321,342295,876159,22550%25,4669%
Realized Performance Revenues468,992757,4061,157,188(288,414)-38%(399,782)-35%
Realized Performance Compensation(192,566)(318,167)(404,544)125,601-39%86,377-21%
Realized Principal Investment Income90,249109,731154,837(19,482)-18%(45,106)-29%
Net Realizations366,675548,970907,481(182,295)-33%(358,511)-40%
Segment Distributable Earnings$847,242$870,312$1,203,357$(23,070)-3%$(333,045)-28%
N/MNot meaningful.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Segment Distributable Earnings were $847.2 million for the year ended December 31, 2019, a decrease of $23.1 million, compared to $870.3 million for the year ended December 31, 2018. The decrease in Segment Distributable Earnings was primarily attributable to a decrease of $182.3 million in Net Realizations, partially offset by an increase of $159.2 million in Fee Related Earnings.

Segment Distributable Earnings in our Private Equity segment in 2019 were lower compared to 2018, primarily driven by a decrease in Realized Performance Revenue in corporate private equity and Strategic Partners, partially offset by an increase in Fee Related Earnings from growth in

Fee-Earning

Assets Under Management in Strategic Partners, BIP and Tactical Opportunities. Stable underlying performance private investment in the corporate private equity portfolio was partially offset by declines in two public holdings. An increased focus on energy sustainability, including potential alternatives to fossil fuels, has exacerbated the impact of weakened market fundamentals in certain energy subsectors, particularly upstream. The persistence of these weakened market fundamentals would negatively impact the performance of certain investments in our energy and corporate private equity funds. The market environment has continued to be characterized by volatility and macroeconomic and geopolitical concerns, such as uncertainty regarding the next stage of trade negotiations between the U.S. and China and concerns regarding the rate of global growth and the impact of the recent and rapidly evolving outbreak of the novel coronavirus in many countries. Such conditions (which may be across industries, sectors or geographies) may contribute to adverse operating performance at our portfolio companies and limit attractive realization opportunities for our Private Equity segment. Factors such as increasing wages, a tight labor market, the imposition of tariffs and overall uncertainty regarding trade policy, create challenges to increasing or maintaining profit margins for U.S. companies, particularly in the industrials and retail sectors. In that connection, adverse wage and trade developments put pressure on our ability to increase profit margins at our U.S. portfolio companies through operational initiatives. The market environment continues to be generally characterized by high prices, and this can make deployment of capital more difficult. Nonetheless, we deployed $26.6 billion of capital across the segment in 2019. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition” and “— A period of economic slowdown, which may be across one or more industries, sectors or geographies, could contribute to adverse operating performance for certain of our funds’ investments, which would adversely affect our operating results and cash flows.”

Fee Related Earnings

Fee Related Earnings were $480.6 million for the year ended December 31, 2019, an increase of $159.2 million, or 50%, compared to $321.3 million for the year ended December 31, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $234.4 million in Management and Advisory Fees, Net, partially offset by increases of $48.3 million in Fee Related Compensation and $26.9 million in Other Operating Expenses.

Management and Advisory Fees, Net were $1.1 billion for the year ended December 31, 2019, an increase of $234.4 million compared to $829.9 million for the year ended December 31, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $986.5 million for the year ended December 31, 2019, an increase of $201.3 million compared to $785.2 million for the year ended December 31, 2018, primarily due to increases in

Fee-Earning

Assets Under Management in Strategic Partners, BIP and Tactical Opportunities.

Fee Related Compensation was $423.8 million for the year ended December 31, 2019, an increase of $48.3 million, compared to $375.4 million for the year ended December 31, 2018. The increase was primarily due to the increase in Management and Advisory Fees, Net, on which a portion of Fee Related Compensation is based.

Other Operating Expenses were $160.0 million for the year ended December 31, 2019, an increase of $26.9 million, compared to $133.1 million for the year ended December 31, 2018. The increase was primarily due to consulting fees and growth in our new business initiatives, including BXLS.

Net Realizations

Net Realizations were $366.7 million for the year ended December 31, 2019, a decrease of $182.3 million, compared to $549.0 million for the year ended December 31, 2018. The decrease in Net Realizations was primarily attributable to decreases of $288.4 million in Realized Performance Revenues and $19.5 million in Realized Principal Investment Income, partially offset by a decrease of $125.6 million in Realized Performance Compensation.

Realized Performance Revenues were $469.0 million for the year ended December 31, 2019, a decrease of $288.4 million, compared to $757.4 million for the year ended December 31, 2018. The decrease was primarily due to lower Realized Performance Revenues in corporate private equity and Strategic Partners.

Realized Principal Investment Income was $90.2 million for the year ended December 31, 2019, a decrease of $19.5 million, compared to $109.7 million for the year ended December 31, 2018. The decrease was primarily due to a decrease of Realized Principal Investment Income in corporate private equity.

Realized Performance Compensation was $192.6 million for the year ended December 31, 2019, a decrease of $125.6 million, compared to $318.2 million for the year ended December 31, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Fund Returns

Fund returns information for our significant funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future performance of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents the internal rates of return of our significant private equity funds:

Year Ended December 31,December 31, 2019 Inception to Date
201920182017RealizedTotal
Fund (a)GrossNetGrossNetGrossNetGrossNetGrossNet
BCP IV68%51%6%5%1%1%50%36%50%36%
BCP V-14%-4%-6%-5%12%9%11%9%10%8%
BCP VI4%3%17%14%27%22%24%18%17%12%
BCP VII24%18%43%28%29%12%64%45%31%19%
BEP I——18%15%16%13%22%18%15%12%
BEP II-5%-3%32%20%15%6%59%43%13%7%
BCOM-22%-23%3%2%-3%-4%13%6%13%6%
BCEP24%20%N/MN/MN/MN/M41%37%18%15%
Tactical Opportunities10%6%13%9%16%13%23%19%14%10%
Tactical Opportunities Co-Investment and Other15%14%13%11%28%21%26%23%16%14%
Strategic Partners I-V (b)—-1%9%6%12%11%N/AN/A16%13%
Strategic Partners VI (b)-4%-5%18%15%15%12%N/AN/A21%16%
Strategic Partners VII (b)12%10%32%26%103%82%N/AN/A30%23%
Strategic Partners Real Assets II (b)21%17%33%22%N/MN/MN/AN/A23%17%
Strategic Partners Real Estate, SMA and Other (b)19%18%15%13%22%17%N/AN/A21%18%

The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.

N/MNot meaningful generally due to the limited time since initial investment.
N/ANot applicable.
(a)Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Revenues.
(b)Realizations are treated as return of capital until fully recovered and therefore inception to date realized returns are not applicable. Returns are calculated from results that are reported on a three month lag.

The corporate private equity funds within the Private Equity segment have five funds with closed investment periods: BCP IV, BCP V, BCP VI, BCOM and BEP I. As of December 31, 2019, BCP IV was above its carried interest threshold (i.e., the preferred return payable to its limited partners before the general partner is eligible to receive carried interest) and would still be above its carried interest threshold even if all remaining investments were valued at zero. BCP V is comprised of two fund classes based on the timings of fund closings, the BCP V “main fund” and BCP

V-AC

fund. Within these fund classes, the general partner is subject to equalization such that (a) the general partner accrues carried interest when the respective carried interest for either fund class is positive and (b) the general partner realizes carried interest so long as clawback obligations, if any, for either of the respective fund classes are fully satisfied. During the quarter, BCP V is currently below its carried interest threshold, while BCP

V-AC

is above its carried interest threshold. BCP VI is currently above its carried interest threshold. BCOM is currently above its carried interest threshold. We are entitled to retain previously realized carried interest up to 20% of BCOM’s net gains. As a result, Performance Revenues are recognized from BCOM on current period gains and losses. BEP I is currently above its carried interest threshold.

Hedge Fund Solutions

The following table presents the results of operations for our Hedge Fund Solutions segment:

Year Ended December 31,2019 vs. 20182018 vs. 2017
201920182017$%$%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$556,730$519,782$516,048$36,9487%$3,7341%
Transaction and Other Fees, Net3,5333,1802,98035311%2007%
Management Fee Offsets(138)(93)(93)(45)48%——
Total Management Fees, Net560,125522,869518,93537,2567%3,9341%
Fee Related Compensation(151,960)(162,172)(146,924)10,212-6%(15,248)10%
Other Operating Expenses(81,999)(77,772)(68,265)(4,227)5%(9,507)14%
Fee Related Earnings326,166282,925303,74643,24115%(20,821)-7%
Realized Performance Revenues126,57642,419154,34384,157198%(111,924)-73%
Realized Performance Compensation(24,301)(21,792)(40,707)(2,509)12%18,915-46%
Realized Principal Investment Income21,70717,0399,0744,66827%7,96588%
Net Realizations123,98237,666122,71086,316229%(85,044)-69%
Segment Distributable Earnings$450,148$320,591$426,456$129,55740%$(105,865)-25%
N/MNot meaningful.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Segment Distributable Earnings were $450.1 million for the year ended December 31, 2019, an increase of $129.6 million, or 40%, compared to $320.6 million for the year ended December 31, 2018. The increase in Segment Distributable Earnings was primarily attributable to increases of $86.3 million in Net Realizations and $43.2 million in Fee Related Earnings.

Segment Distributable Earnings in our Hedge Fund Solutions segment in 2019 were higher compared to 2018. This increase was primarily driven by an increase in Realized Performance Revenues due to higher returns across a number of strategies in 2019 compared to 2018, and growth in

Fee-Earning

Assets Under Management in

individual investor and specialized solutions and a reduction in placement fees, which offset Base Management Fees. Segment Distributable Earnings in the Hedge Fund Solutions segment would likely be negatively impacted in the event of a significant or sustained decline in global, regional or sector asset prices, or a prolonged weak equity market environment, which may be caused by concerns over macroeconomic and geopolitical factors such as uncertainty regarding the next stage of trade negotiations between the U.S. and China and concerns regarding the rate of global growth and the impact of the recent and rapidly evolving outbreak of the novel coronavirus in many countries. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition,” “— A period of economic slowdown, which may be across one or more industries, sectors or geographies, could contribute to adverse operating performance for certain of our funds’ investments, which would adversely affect our operating results and cash flows” and “— Hedge fund investments are subject to numerous additional risks.” In an equity market environment that has in recent years been characterized by relatively low volatility, investors may choose to reallocate capital away from traditional hedge fund strategies. Our Hedge Fund Solutions segment operates multiple business lines, manages strategies that are both long and short asset classes and generates a majority of its revenue through management fees. In that regard, the segment’s revenues will depend in part on our ability to successfully grow such existing diverse business lines and strategies, and identify new ones to meet evolving investor appetites. Over time we anticipate an increasing change in the mix of our product offerings to products whose performance-based fees represent a more significant proportion of the fees than has historically been the case for such products.

Fee Related Earnings

Fee Related Earnings were $326.2 million for the year ended December 31, 2019, an increase of $43.2 million, or 15%, compared to $282.9 million for the year ended December 31, 2018. The increase in Fee Related Earnings was primarily attributable to an increase of $37.3 million in Management Fees, Net and a decrease of $10.2 million in Fee Related Compensation.

Management Fees, Net were $560.1 million for the year ended December 31, 2019, an increase of $37.3 million, compared to $522.9 million for the year ended December 31, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $556.7 million for the year ended December 31, 2019, an increase of $36.9 million, compared to $519.8 million for the year ended December 31, 2018, primarily due to

Fee-Earning

Asset Under Management growth in our individual investor and specialized solutions and a reduction in placement fees, which offset Base Management Fees.

Fee Related Compensation was $152.0 million for the year ended December 31, 2019, a decrease of $10.2 million, compared to $162.2 million for the year ended December 31, 2018. The decrease was primarily due to changes in compensation accruals.

Net Realizations

Net Realizations were $124.0 million for the year ended December 31, 2019, an increase of $86.3 million, or 229%, compared to $37.7 million for the year ended December 31, 2018. The increase in Net Realizations was primarily attributable to an increase of $84.2 million in Realized Performance Revenues.

Realized Performance Revenues were $126.6 million for the year ended December 31, 2019, an increase of $84.2 million, compared to $42.4 million for the year ended December 31, 2018. The increase was primarily driven by higher returns across a number of strategies, including customized solutions, commingled products and individual investor and specialized solutions, compared to the year ended December 31, 2018.

Operating Metrics

The following table presents information regarding our Invested Performance Revenue Eligible Assets Under Management:

Invested Performance Revenue Eligible Assets Under ManagementEstimated % Above High Water Mark/Benchmark (a)
December 31,December 31,
201920182017201920182017
(Dollars in Thousands)
Hedge Fund Solutions Managed Funds (b)$43,789,081$42,393,275$41,238,33091%46%91%
(a)Estimated % Above High Water Mark/Benchmark represents the percentage of Invested Performance Revenue Eligible Assets Under Management that as of the dates presented would earn performance fees when the applicable Hedge Fund Solutions managed fund has positive investment performance relative to a benchmark, where applicable. Incremental positive performance in the applicable Blackstone Funds may cause additional assets to reach their respective High Water Mark or clear a benchmark return, thereby resulting in an increase in Estimated % Above High Water Mark/Benchmark.
(b)For the Hedge Fund Solutions managed funds, at December 31, 2019, the incremental appreciation needed for the 9% of Invested Performance Revenue Eligible Assets Under Management below their respective High Water Marks/Benchmarks to reach their respective High Water Marks/Benchmarks was $504.3 million, a decrease of $352.4 million, compared to $856.7 million at December 31, 2018. Of the Invested Performance Revenue Eligible Assets Under Management below their respective High Water Marks/Benchmarks as of December 31, 2019, 33% were within 5% of reaching their respective High Water Mark.

Composite Returns

Composite returns information is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The composite returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future results of any particular fund. An investment in Blackstone is not an investment in any of our funds or composites. There can be no assurance that any of our funds or composites or our other existing and future funds or composites will achieve similar returns.

The following table presents the return information of the BAAM Principal Solutions Composite:

Average Annual Returns (a)
Periods Ended December 31, 2019
One YearThree YearFive YearHistorical
CompositeGrossNetGrossNetGrossNetGrossNet
BAAM Principal Solutions Composite (b)8%7%6%5%5%4%7%6%

The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.

(a)Composite returns present a summarized asset-weighted return measure to evaluate the overall performance of the applicable class of Blackstone Funds.
(b)BAAM’s Principal Solutions (“BPS”) Composite covers the period from January 2000 to present, although BAAM’s inception date is September 1990. The BPS Composite includes only BAAM-managed commingled and customized multi-manager funds and accounts. None of the other platforms/strategies managed through the Blackstone Hedge Fund Solutions Group are included in the composite (except for investments by BPS funds/accounts directly into those platforms/strategies). BAAM-managed funds in liquidation and non-fee-paying assets (in the case of net returns) are excluded from the composite. The historical return is from January 1, 2000.

Credit

The following table presents the results of operations for our Credit segment:

Year Ended December 31,2019 vs. 20182018 vs. 2017
201920182017$%$%
(Dollars in Thousands)
Management Fees, Net
Base Management Fees$586,535$553,921$567,334$32,6146%$(13,413)-2%
Transaction and Other Fees, Net19,88215,64013,4314,24227%2,20916%
Management Fee Offsets(11,813)(12,332)(32,382)519-4%20,050-62%
Total Management Fees, Net594,604557,229548,38337,3757%8,8462%
Fee Related Performance Revenues13,764(666)89,94514,430N/M(90,611)N/M
Fee Related Compensation(229,607)(219,098)(253,842)(10,509)5%34,744-14%
Other Operating Expenses(160,801)(131,200)(99,562)(29,601)23%(31,638)32%
Fee Related Earnings217,960206,265284,92411,6956%(78,659)-28%
Realized Performance Revenues32,73796,962194,902(64,225)-66%(97,940)-50%
Realized Performance Compensation(12,972)(53,863)(100,834)40,891-76%46,971-47%
Realized Principal Investment Income32,46616,76316,38015,70394%3832%
Net Realizations52,23159,862110,448(7,631)-13%(50,586)-46%
Segment Distributable Earnings$270,191$266,127$395,372$4,0642%$(129,245)-33%
N/MNot meaningful.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Segment Distributable Earnings were $270.2 million for the year ended December 31, 2019, an increase of $4.1 million, compared to $266.1 million for the year ended December 31, 2018. The increase in Segment Distributable Earnings was primarily attributable to an increase of $11.7 million in Fee Related Earnings, partially offset by a decrease of $7.6 million in Net Realizations.

Segment Distributable Earnings in our Credit segment in 2019 were higher compared to 2018, driven in part by higher Fee Related Earnings as a result of the launch of several GSO and BIS funds in 2019, as well as a full year of management fees from the BDC. This was partially offset by lower Realized Performance Revenue due to a mezzanine fund crossing its carry threshold at the end of 2017, which resulted in higher Realized Performance in 2018 compared to 2019. In a distressed market that continues to be challenged, our performing credit strategies delivered a 13% gross return in 2019 and our distressed strategies declined 4.0%, largely driven by decreases in certain upstream energy positions. An increased focus on energy sustainability, including potential alternatives to fossil fuels, has exacerbated the impact of weakened market fundamentals in certain energy subsectors, particularly upstream. The persistence of weakened market fundamentals in the energy sector or in the credit markets more broadly, including as a result of concerns regarding the impact of the recent and rapidly evolving outbreak of the novel coronavirus in many countries, would negatively impact the performance of certain Credit segment investments. Our Credit segment deployed $10.2 billion of capital in 2019. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Difficult market and geopolitical conditions can adversely affect our business in many ways, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition” and “— A period of economic slowdown, which may be across one or more industries, sectors or geographies, could contribute to adverse operating performance for certain of our funds’ investments, which would adversely affect our operating results and cash flows.”

Fee Related Earnings

Fee Related Earnings were $218.0 million for the year ended December 31, 2019, an increase of $11.7 million, compared to $206.3 million for the year ended December 31, 2018. The increase in Fee Related Earnings was primarily attributable to increases of $37.4 million in Management Fees, Net and $14.4 million in Fee Related Performance Revenues, partially offset increases of $29.6 million in Other Operating Expenses and $10.5 million in Fee Related Compensation.

Management Fees, Net were $594.6 million for the year ended December 31, 2019, an increase of $37.4 million, compared to $557.2 million for the year ended December 31, 2018, primarily driven by an increase in Base Management Fees. Base Management Fees were $586.5 million for the year ended December 31, 2019, an increase of $32.6 million, compared to $553.9 million for the year ended December 31, 2018. The increase was primarily due to the launch of several GSO and BIS funds subsequent to the year ended December 31, 2018, including successor flagship funds and multiple long only funds, as well as a full year of management fees on our BDC, partially offset by the receipt of a fixed payment in the first quarter of 2018 in connection with the conclusion of our

sub-advisory

relationship with FS Investments.

Fee Related Performance Revenues were $13.8 million for the year ended December 31, 2019, an increase of $14.4 million, compared to $(0.7) million for the year ended December 31, 2018. The increase was due to the ramp up of our BDC.

Other Operating Expenses were $160.8 million for the year ended December 31, 2019, an increase of $29.6 million, compared to $131.2 million for the year ended December 31, 2018. The increase was primarily due to the growth in our new business initiatives, including BIS and the direct lending platform.

Fee Related Compensation was $229.6 million for the year ended December 31, 2019, an increase of $10.5 million, compared to $219.1 million for the year ended December 31, 2018. The increase was primarily due to the increase in Management Fees, Net, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $52.2 million for the year ended December 31, 2019, a decrease of $7.6 million, compared to $59.9 million for the year ended December 31, 2018. The decrease in Net Realizations was primarily attributable to a decrease of $64.2 million in Realized Performance Revenues, partially offset by a decrease of $40.9 million in Realized Performance Compensation and an increase of $15.7 million in Realized Principal Investment Income.

Realized Performance Revenues were $32.7 million for the year ended December 31, 2019, a decrease of $64.2 million, compared to $97.0 million for the year ended December 31, 2018. The decrease was primarily attributable to a mezzanine fund crossing its carry threshold during the fourth quarter of 2017, resulting in higher Realized Performance Revenues in the year ended December 31, 2018 compared to the year ended December 31, 2019.

Realized Performance Compensation was $13.0 million for the year ended December 31, 2019, a decrease of $40.9 million, compared to $53.9 million for the year ended December 31, 2018. The decrease was due to the decrease in Realized Performance Revenues.

Realized Principal Investment Income was $32.5 million for the year ended December 31, 2019, an increase of $15.7 million, compared to $16.8 million for the year ended December 31, 2018. The increase was driven by the realized gain on our Corporate Treasury Investments.

Fund Returns

Fund return information for our significant businesses is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund returns information reflected in this discussion and analysis is not indicative of the financial performance of Blackstone and is also not necessarily indicative of the future results of any particular fund. An investment in Blackstone is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns.

The following table presents combined internal rates of return of the segment’s performing credit and distressed strategies funds:

Year Ended December 31,Inception to December 31, 2019
201920182017Total
Composite (a)GrossNetGrossNetGrossNetGrossNet
Performing Credit Strategies (b)13%10%9%6%11%6%14%9%
Distressed Strategies (c)-4%-6%-2%-2%9%6%10%6%

The returns presented herein represent those of the applicable Blackstone Funds and not those of Blackstone.

(a)Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Allocations, net of tax advances.
(b)Performing Credit Strategies include mezzanine lending funds, middle market direct lending funds, including our BDC, and other performing credit strategy funds. Performing Credit Strategies’ returns represent the IRR of the combined cash flows of the fee-earning funds exceeding $100 million of fair value at each respective quarter end as well as the Blackstone Funds that were contributed to GSO as part of Blackstone’s acquisition of GSO in March 2008. Effective December 31, 2019 Performing Credit Strategies’ returns exclude funds in liquidation. The inception to date returns are from July 16, 2007. Prior periods have been updated to reflect this presentation.
(c)Distressed Strategies include stressed/distressed funds, credit alpha strategies and energy strategies. Distressed Strategies’ returns represent the IRR of the combined cash flows of the fee-earning funds exceeding $100 million of fair value at each respective quarter end. Effective December 31, 2019 Distressed Strategies’ returns exclude funds in liquidation. The inception to date returns are from August 1, 2005. Prior periods have been updated to reflect this presentation.

As of December 31, 2019, there was $18.7 billion of Performance Revenue Eligible Assets Under Management invested in Credit strategies that were above the hurdle necessary to generate Incentive Fees or Performance Allocations. This represented 38% of the total Performance Revenue Eligible Assets Under Management across all Credit strategies.

Non-GAAP

Financial Measures

These

non-GAAP

financial measures are presented without the consolidation of any Blackstone Funds that are consolidated into the Consolidated Financial Statements. Consequently, all

non-GAAP

financial measures exclude the assets, liabilities and operating results related to the Blackstone Funds. See “— Key Financial Measures and Indicators” for our definitions of Distributable Earnings, Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA.

The following table is a reconciliation of Net Income Attributable to The Blackstone Group Inc. to Distributable Earnings, Total Segment Distributable Earnings, Fee Related Earnings and Adjusted EBITDA:

(a)This adjustment removes Transaction-Related Charges, which are excluded from Blackstone’s segment presentation. Transaction-Related Charges arise from corporate actions including acquisitions, divestitures, and Blackstone’s initial public offering. They consist primarily of equity-based compensation charges, gains and losses on contingent consideration arrangements, changes in the balance of the Tax Receivable Agreement resulting from a change in tax law or similar event, transaction costs and any gains or losses associated with these corporate actions.
(b)This adjustment removes the amortization of transaction-related intangibles, which are excluded from Blackstone’s segment presentation. This amount includes amortization of intangibles associated with Blackstone’s investment in Pátria, which is accounted for under the equity method.
(c)This adjustment reverses the effect of consolidating Blackstone Funds, which are excluded from Blackstone’s segment presentation. This adjustment includes the elimination of Blackstone’s interest in these funds and the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.
(d)This adjustment removes Unrealized Performance Revenues on a segment basis. The Segment Adjustment represents the add back of performance revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation.
Year Ended December 31,
201920182017
(Dollars in Thousands)
GAAP Unrealized Performance Allocations$1,126,332$561,373$(105,473)
Segment Adjustment336(210)41
Unrealized Performance Revenues$1,126,668$561,163$(105,432)
(e)This adjustment removes Unrealized Performance Allocations Compensation.
(f)This adjustment removes Unrealized Principal Investment Income (Loss) on a segment basis. The Segment Adjustment represents (1) the add back of Principal Investment Income, including general partner income, earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of amounts associated with the ownership of Blackstone consolidated operating partnerships held by non-controlling interests.
Year Ended December 31,
201920182017
(Dollars in Thousands)
GAAP Unrealized Principal Investment Income$215,003$49,917$42,605
Segment Adjustment(101,676)(115,768)(173,811)
Unrealized Principal Investment Income (Loss)$113,327$(65,851)$(131,206)
(g)This adjustment removes Other Revenues on a segment basis. The Segment Adjustment represents (1) the add back of Other Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of certain Transaction-Related Charges. For the year ended December 31, 2018, Transaction-Related Charges included $580.9 million of Other Revenues received upon the conclusion of Blackstone’s investment sub-advisory relationship with FS Investments’ funds.
Year Ended December 31,
201920182017
(Dollars in Thousands)
GAAP Other Revenue$79,993$672,317$(133,229)
Segment Adjustment(546)(582,849)(6,822)
Other Revenues$79,447$89,468$(140,051)
(h)This adjustment removes Equity-Based Compensation on a segment basis.
(i)Taxes represent the total GAAP tax provision adjusted to include only the current tax provision (benefit) calculated on Income (Loss) Before Provision (Benefit) for Taxes and adjusted to exclude the tax impact of any divestitures. Related Payables represent tax-related payables including the amount payable under the Tax Receivable Agreement.
Year Ended December 31,
201920182017
(Dollars in Thousands)
Taxes$140,416$90,022$101,531
Related Payables55,74363,84388,457
Taxes and Related Payables$196,159$153,865$189,988
(j)This adjustment removes Interest and Dividend Revenue less Interest Expense on a segment basis. The Segment Adjustment represents (1) the add back of Other Revenues earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of interest expense associated with the Tax Receivable Agreement.
Year Ended December 31,
201920182017
(Dollars in Thousands)
GAAP Interest and Dividend Revenue$182,398$171,947$139,696
Segment Adjustment10,1959,8163,224
Interest and Dividend Revenue192,593181,763142,920
GAAP Interest Expense199,648163,990197,486
Segment Adjustment(4,614)(4,152)(4,648)
Interest Expense195,034159,838192,838
Net Interest Income (Loss)$(2,441)$21,925$(49,918)
(k)This adjustment removes the total segment amounts of Realized Performance Revenues.
(l)This adjustment removes the total segment amounts of Realized Performance Compensation.
(m)This adjustment removes the total segment amount of Realized Principal Investment Income.
(n)This adjustment adds back Interest Expense on a segment basis.

The following tables are a reconciliation of Total GAAP Investments to Net Accrued Performance Revenues. Total GAAP Investments and Net Accrued Performance Revenues consist of the following:

December 31,
20192018
(Dollars in Thousands)
Investments of Consolidated Blackstone Funds$8,380,698$8,376,338
Equity Method Investments
Partnership Investments4,035,6753,649,423
Accrued Performance Allocations7,180,4495,883,924
Corporate Treasury Investments2,419,5872,206,493
Other Investments265,273260,853
Total GAAP Investments$22,281,682$20,377,031
Accrued Performance Allocations - GAAP$7,180,449$5,883,924
Impact of Consolidation (a)384—
Due From Affiliates - GAAP (b)154,98033,419
Less: Accrued Performance Compensation - GAAP (c)(3,021,899)(2,394,747)
Net Accrued Performance Revenues$4,313,914$3,522,596
(a)This adjustment adds back investments in consolidated Blackstone Funds which have been eliminated in consolidation.
(b)Represents GAAP accrued performance revenue recorded within Due from Affiliates.
(c)Represents GAAP accrued performance compensation associated with Accrued Performance Allocations and is recorded within Accrued Compensation and Benefits and Due to Affiliates.

Liquidity and Capital Resources

General

Blackstone’s business model derives revenue primarily from third party assets under management. Blackstone is not a capital or balance sheet intensive business and targets operating expense levels such that total management and advisory fees exceed total operating expenses each period. As a result, we require limited capital resources to support the working capital or operating needs of our businesses. We draw primarily on the long-term committed capital of our limited partner investors to fund the investment requirements of the Blackstone Funds and use our own realizations and cash flows to invest in growth initiatives, make commitments to our own funds, where our minimum general partner commitments are generally less than 5% of the limited partner commitments of a fund, and pay dividends to shareholders.

Fluctuations in our statement of financial condition result primarily from activities of the Blackstone Funds that are consolidated as well as business transactions, such as the issuance of senior notes described below. The majority economic ownership interests of the Blackstone Funds are reflected as Redeemable

Non-Controlling

Interests in Consolidated Entities, and

Non-Controlling

Interests in Consolidated Entities in the Consolidated Financial Statements. The consolidation of these Blackstone Funds has no net effect on Blackstone’s Net Income or Partners’ Capital. Additionally, fluctuations in our statement of financial condition also include appreciation or depreciation in Blackstone investments in the Blackstone Funds, additional investments and redemptions of such interests in the Blackstone Funds and the collection of receivables related to management and advisory fees.

Total assets were $32.6 billion as of December 31, 2019, an increase of $3.7 billion, or 13%, from December 31, 2018. The increase in total assets was principally due to an increase of $3.6 billion in total assets attributable to the consolidated operating partnerships. The increase in total assets attributable to the consolidated operating partnerships was primarily due to increases of $1.9 billion in Investments, $595.2 million in Due from Affiliates and $471.1 million in

Right-of-Use

Assets. The increase in Investments was primarily due to appreciation in the value of Blackstone’s interests in its real estate and private equity investments. The increase in Due from Affiliates was primarily due to management fees, performance revenues and reimbursable expenses from

non-consolidated

entities and portfolio companies. Effective January 1, 2019, Blackstone adopted new GAAP guidance on the accounting for leases on a modified retrospective basis. See Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing. The adoption resulted in the recognition of

Right-of-Use

Assets of $471.1 million as of December 31, 2019. The other net variances of the assets attributable to the consolidated operating partnerships were relatively unchanged.

Total liabilities were $17.5 billion as of December 31, 2019, an increase of $2.3 billion, or 15%, from December 31, 2018. The increase in total liabilities was principally due to an increase of $2.4 billion in total liabilities attributable to the consolidated operating partnerships. The increase in total liabilities attributable to the consolidated operating partnerships was primarily due to increases of $1.1 billion in Loans Payable, $853.9 million in Accrued Compensation and Benefits and $543.0 million in Operating Lease Liability. The increase in Loans Payable was due to the issuance of

€

600 million of notes on April 10, 2019 and $500 million and $400 million of notes on September 10, 2019. The increase in Accrued Compensation and Benefits was primarily due to an increase in performance compensation. Effective January 1, 2019, Blackstone adopted new GAAP guidance on the accounting for leases on a modified retrospective basis. The adoption resulted in the recognition of Operating Lease Liabilities of $543.0 million as of December 31, 2019. The other net variances of the liabilities attributable to the consolidated operating partnerships were relatively unchanged.

Sources and Uses of Liquidity

We have multiple sources of liquidity to meet our capital needs, including annual cash flows, accumulated earnings in our businesses, the proceeds from our issuances of senior notes, liquid investments we hold on our balance sheet and access to our $1.6 billion committed revolving credit facility. As of December 31, 2019, Blackstone had $2.2 billion in cash and cash equivalents, $2.4 billion invested in corporate treasury investments, against $4.7 billion in borrowings from our bond issuances, and no borrowings outstanding under our revolving credit facility.

On April 10, 2019, Blackstone issued

€

600 million aggregate principal amount of 1.500% Senior Notes maturing on April 10, 2029.

On September 3, 2019, Blackstone commenced the Tender Offer for any and all of its 2021 Notes. On September 9, 2019, the Tender Offer expired and $175.0 million aggregate principal amount of the 2021 Notes were validly tendered for payment. Payment for the tendered notes was made on September 10, 2019. On October 10, 2019, in accordance with the optional redemption provision under the indenture governing the 2021 Notes, Blackstone redeemed the 2021 Notes that were not previously tendered in the Tender Offer.

On September 10, 2019, Blackstone issued $500 million aggregate principal amount of 2.500% Senior Notes maturing on January 10, 2030 and $400 million aggregate principal amount of 3.500% Senior Notes maturing on September 10, 2049. Blackstone used the proceeds from the notes offering, together with cash on hand or available liquidity, to effectuate the Tender Offer and subsequent redemption of the 2021 Notes and to pay related fees and expenses. Remaining proceeds will be used for general corporate purposes.

In addition to the cash we received from our notes offerings and availability under our revolving credit facility, we expect to receive (a) cash generated from operating activities, (b) Performance Allocations and Incentive Fee realizations, and (c) realizations on the fund investments that we make. The amounts received from these three sources in particular may vary substantially from year to year and quarter to quarter depending on the frequency and size of realization events or net returns experienced by our investment funds. Our available capital could be adversely affected if there are prolonged periods of few substantial realizations from our investment funds accompanied by substantial capital calls for new investments from those investment funds. Therefore, Blackstone’s commitments to our funds are taken into consideration when managing our overall liquidity and cash position.

We expect that our primary liquidity needs will be cash to (a) provide capital to facilitate the growth of our existing businesses, which principally includes funding our general partner and

co-investment

commitments to our funds, (b) provide capital to facilitate our expansion into new businesses, (c) pay operating expenses, including cash compensation to our employees, and other obligations as they arise, (d) fund modest capital expenditures, (e) repay borrowings and related interest costs, (f) pay income taxes, (g) repurchase share of our common stock and Blackstone Holdings Partnership Units pursuant to our repurchase program and (h) pay dividends to our shareholders and distributions to the holders of Blackstone Holdings Partnership Units.

Our own capital commitments to our funds, the funds we invest in and our investment strategies as of December 31, 2019 consisted of the following:

Blackstone and General PartnerSenior Managing Directors and Certain Other Professionals (a)
FundOriginal CommitmentRemaining CommitmentOriginal CommitmentRemaining Commitment
(Dollars in Thousands)
Real Estate
BREP VII$300,000$41,987$100,000$13,996
BREP VIII300,00056,952100,00018,984
BREP IX300,000246,615100,00082,205
BREP Europe III100,00013,23135,0004,410
BREP Europe IV130,00023,54043,3337,847
BREP Europe V150,00034,99543,33310,110
BREP Europe VI130,000122,76843,33340,923
BREP Asia I50,00014,80616,6674,935
BREP Asia II70,70747,26723,56915,756
BREDS II50,0006,22716,6672,076
BREDS III50,00021,54516,6677,182
BREDS IV50,00050,000——
BPP75,9945,327——
Other (b)9,7523,054——
Private Equity
BCP V629,35630,642——
BCP VI719,71891,540250,00031,797
BCP VII500,000164,618225,00074,078
BCP VIII500,000500,000225,000225,000
BEP I50,0004,728——
BEP II80,00021,81326,6677,271
BEP III80,00080,00026,66726,667
BCEP120,00035,17918,9925,568
BCP Asia40,00026,67513,3338,892
Tactical Opportunities408,657208,225136,21969,408
Strategic Partners737,539463,09290,62752,595
BIP168,632139,709——
BXLS10,5006,780——
Other (b)265,97434,676——
Hedge Fund Solutions
Strategic Alliance50,0002,033——
Strategic Alliance II50,0001,482——
Strategic Alliance III22,00011,880——
Strategic Holdings LP154,61083,379——
Strategic Holdings II LP50,00050,000——
Other (b)3,2391,667——

continued...

Blackstone and General PartnerSenior Managing Directors and Certain Other Professionals (a)
FundOriginal CommitmentRemaining CommitmentOriginal CommitmentRemaining Commitment
(Dollars in Thousands)
Credit
Capital Opportunities Fund II LP$120,000$30,218$110,101$27,726
Capital Opportunities Fund III LP130,78368,90530,68816,569
GSO European Senior Debt Fund LP63,00016,54756,99214,969
GSO European Senior Debt Fund II LP77,18269,77326,98925,657
GSO Capital Solutions50,0005,00827,6662,771
GSO Capital Solutions II125,00051,695119,95949,610
GSO Capital Solutions III151,000123,65631,39526,923
GSO Energy Select Opportunities Fund80,00041,24774,74138,535
GSO Energy Select Opportunities Fund II150,000139,91725,22223,523
GSO Credit Alpha Fund LP52,1027,46550,3947,221
GSO Credit Alpha Fund II LP25,50015,7015,9073,626
Blackstone / GSO Secured Lending Fund64,50031,650——
Other (b)164,37849,88321,5153,913
Other
Treasury (c)748,854512,352——
$8,408,977$3,810,449$2,132,643$950,743
(a)For some of the general partner commitments shown in the table above we require our senior managing directors and certain other professionals to fund a portion of the commitment even though the ultimate obligation to fund the aggregate commitment is ours pursuant to the governing agreements of the respective funds. The amounts of the aggregate applicable general partner original and remaining commitment are shown in the table above. In addition, certain senior managing directors and other professionals may be required to fund a de minimis amount of the commitment in certain carry funds. We expect our commitments to be drawn down over time and to be funded by available cash and cash generated from operations and realizations. Taking into account prevailing market conditions and both the liquidity and cash or liquid investment balances, we believe that the sources of liquidity described above will be more than sufficient to fund our working capital requirements.
(b)Represents capital commitments to a number of other funds in each respective segment.
(c)Represents loan origination commitments, which are typically funded within 60-90 days of making a commitment, and capital market commitments.

As of December 31, 2019, Blackstone Holdings Finance Co. L.L.C. (the “Issuer”), an indirect subsidiary of Blackstone, had issued and outstanding the following senior notes (collectively the “Notes”):

Senior Notes (a)Aggregate Principal Amount (Dollars/Euros in Thousands)
4.750%, Due 2/15/2023$400,000
2.000%, Due 5/19/2025€300,000
1.000%, Due 10/5/2026€600,000
3.150%, Due 10/2/2027$300,000
1.500%, Due 4/10/2029€600,000
2.500%, Due 1/10/2030$500,000
6.250%, Due 8/15/2042$250,000
5.000%, Due 6/15/2044$500,000
4.450%, Due 7/15/2045$350,000
4.000%, Due 10/2/2047$300,000
3.500%, Due 9/10/2049$400,000
(a)The Notes are unsecured and unsubordinated obligations of the Issuer and are fully and unconditionally guaranteed, jointly and severally, by The Blackstone Group Inc. and each of the Blackstone Holdings Partnerships. The Notes contain customary covenants and financial restrictions that, among other things, limit the Issuer and the guarantors’ ability, subject to certain exceptions, to incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The Notes also contain customary events of default. All or a portion of the Notes may be redeemed at our option, in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the Notes. If a change of control repurchase event occurs, the Notes are subject to repurchase at the repurchase price as set forth in the Notes.

Blackstone, through its indirect subsidiary Blackstone Holdings Finance Co. L.L.C., has a $1.6 billion unsecured revolving credit facility (the “Credit Facility”) with Citibank, N.A., as administrative agent with a maturity date of September 21, 2023. Borrowings may also be made in U.K. sterling, euros, Swiss francs, Japanese yen or Canadian dollars, in each case subject to certain

sub-limits.

The Credit Facility contains customary representations, covenants and events of default. Financial covenants consist of a maximum net leverage ratio and a requirement to keep a minimum amount of

fee-earning

assets under management, each tested quarterly.

On July 16, 2019, our board of directors authorized the repurchase of up to $1.0 billion of Class A common stock and Blackstone Holdings Partnership Units. Under the repurchase program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual number repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.

During the year ended December 31, 2019, we repurchased 12.8 million shares of Class A common stock as part of the repurchase program at a total cost of $561.9 million. As of December 31, 2019, the amount remaining available for repurchases under the program was $781.2 million.

Dividends

Our intention is to pay to holders of Class A common stock a quarterly dividend representing approximately 85% of The Blackstone Group Inc.’s share of Distributable Earnings, subject to adjustment by amounts determined by our board of directors to be necessary or appropriate to provide for the conduct of our business, to make

appropriate investments in our business and funds, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future cash requirements such as

tax-related

payments, clawback obligations and dividends to shareholders for any ensuing quarter. The dividend amount could also be adjusted upward in any one quarter.

For Blackstone’s definition of Distributable Earnings, see “— Key Financial Measures and Indicators”.

All of the foregoing is subject to the qualification that the declaration and payment of any dividends are at the sole discretion of our board of directors, and our board of directors may change our dividend policy at any time, including, without limitation, to reduce such quarterly dividends or even to eliminate such dividends entirely.

Because the publicly traded entity and/or its wholly owned subsidiaries must pay taxes and make payments under the tax receivable agreements, the amounts ultimately paid as dividends by The Blackstone Group Inc. to common shareholders in respect of each fiscal year are generally expected to be less, on a per share or per unit basis, than the amounts distributed by the Blackstone Holdings Partnerships to the Blackstone personnel and others who are limited partners of the Blackstone Holdings Partnerships in respect of their Blackstone Holdings Partnership Units. Following the Conversion, we expect to pay more corporate income taxes than we would have as a limited partnership, which will increase this difference in the dividend and/or distribution amounts on a per share or per unit basis.

Dividends are treated as qualified dividends to the extent of Blackstone’s current and accumulated earnings and profits, with any excess dividends treated as a return of capital to the extent of the shareholder’s basis.

The following graph shows fiscal quarterly and annual per common shareholder dividends for 2017, 2018 and 2019. Dividends are declared and paid in the quarter subsequent to the quarter in which they are earned.

With respect to fiscal year 2019, we paid to shareholders of our Class A common stock a dividend of $0.37, $0.48, $0.49 and $0.61 per share in respect of the first, second, third and fourth quarters, respectively, aggregating $1.95 per share. With respect to fiscal years 2018 and 2017, we paid to shareholders of our Class A common stock an aggregate dividend of $2.15 per share and $2.70 per share, respectively. The dividend for each of the second, third and fourth quarter of 2018 was $0.58, $0.64 and $0.58, respectively, and in each case included a $0.10 per share dividend from a portion of the

after-tax

proceeds received in connection with the conclusion of Blackstone’s

sub-advisory

relationship with FS Investments.

Leverage

We may under certain circumstances use leverage opportunistically and over time to create the most efficient capital structure for Blackstone and our shareholders. In addition to the borrowings from our notes issuances and our revolving credit facility, we may use reverse repurchase agreements, repurchase agreements and securities sold, not yet purchased. All of these positions are held in a separately managed portfolio. Reverse repurchase agreements are entered into primarily to take advantage of opportunistic yields otherwise absent in the overnight markets and also to use the collateral received to cover securities sold, not yet purchased. Repurchase agreements are entered into primarily to opportunistically yield higher spreads on purchased securities. The balances held in these financial instruments fluctuate based on Blackstone’s liquidity needs, market conditions and investment risk profiles.

Generally the funds in our Private Equity segment, our opportunistic real estate funds, funds of hedge funds and certain credit-focused funds have not utilized substantial leverage at the fund level other than for (a) short-term borrowings between the date of an investment and the receipt of capital from the investing fund’s investors, and (b) long-term borrowings for certain investments in aggregate amounts which are generally 1% to 25% of the capital commitments of the respective fund. Our carry funds make direct or indirect investments in companies that utilize leverage in their capital structure. The degree of leverage employed varies among portfolio companies.

Certain of our Real Estate debt hedge funds, Hedge Fund Solutions funds and credit-focused funds use leverage in order to obtain additional market exposure, enhance returns on invested capital and/or to bridge short-term cash needs. The forms of leverage primarily employed by these funds include purchasing securities on margin, utilizing collateralized financing and using derivative instruments.

The following table presents information regarding these financial instruments in our Consolidated Statements of Financial Condition:

Repurchase AgreementsSecurities Sold, Not Yet Purchased
(Dollars in Millions)
Balance, December 31, 2019$154.1$75.5
Balance, December 31, 2018$222.2$142.6
Year Ended December 31, 2019
Average Daily Balance$191.4$112.8
Maximum Daily Balance$224.6$142.9

Critical Accounting Policies

We prepare our Consolidated Financial Statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective. Actual results may be affected negatively based on changing circumstances. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates and/or judgments. For a description of our accounting policies, see Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

Principles of Consolidation

For a description of our accounting policy on consolidation, see Note 2. “Summary of Significant Accounting Policies — Consolidation” and Note 9. “Variable Interest Entities” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” for detailed information on Blackstone’s involvement with VIEs. The following discussion is intended to provide supplemental information about how the application of consolidation principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.

The determination that Blackstone holds a controlling financial interest in a Blackstone Fund or investment vehicle significantly changes the presentation of our consolidated financial statements. In our Consolidated Statements of Financial Position included in this filing, we present 100% of the assets and liabilities of consolidated VIEs along with a

non-controlling

interest which represents the portion of the consolidated vehicle’s interests held by third parties. However, assets of our consolidated VIEs can only be used to settle obligations of the consolidated VIE and are not available for general use by Blackstone. Further, the liabilities of our consolidated VIEs do not have recourse to the general credit of Blackstone. In the Consolidated Statements of Operations, we eliminate any management fees, Incentive Fees, or Performance Allocations received or accrued from consolidated VIEs as they are considered intercompany transactions. We recognize 100% of the consolidated VIE’s investment income (loss) and allocate the portion of that income (loss) attributable to third party ownership to

non-controlling

interests in arriving at Net Income Attributable to The Blackstone Group Inc.

The assessment of whether we consolidate a Blackstone Fund or investment vehicle we manage requires the application of significant judgment. These judgments are applied both at the time we become involved with the VIE and on an ongoing basis and include, but are not limited to:

•Determining whether our management fees, Incentive Fees or Performance Allocations represent variable interests — We make judgments as to whether the fees we earn are commensurate with the level of effort required for those fees and at market rates. In making this judgment, we consider, among other things, the extent of third party investment in the entity and the terms of any other interests we hold in the VIE.
•Determining whether kick-out rights are substantive — We make judgments as to whether the third party investors in a partnership entity have the ability to remove the general partner, the investment manager or its equivalent, or to dissolve (liquidate) the partnership entity, through a simple majority vote. This includes an evaluation of whether barriers to exercise these rights exist.
•Concluding whether Blackstone has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE — As there is no explicit threshold in GAAP to define “potentially significant,” management must apply judgment and evaluate both quantitative and qualitative factors to conclude whether this threshold is met.

Revenue Recognition

For a description of our accounting policy on revenue recognition, see Note 2. “Summary of Significant Accounting Policies — Revenue Recognition” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.” For additional description of the nature of our revenue arrangements, including how management fees, Incentive Fees, and Performance Allocations are generated, please refer to “Part I. Item 1. Business — Fee Structure/Incentive Arrangements.” The following discussion is intended to provide supplemental information about how the application of revenue recognition principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.

Management and Advisory Fees, Net

— Blackstone earns base management fees from the investors in each of its managed funds and investment vehicles, at a fixed percentage of a calculation base which is typically assets under management, net asset value, total assets, committed capital or invested capital. The range of management fee rates and the calculation base from which they are earned, generally, are as follows:

On private equity, real estate, and certain of our hedge fund solutions and credit-focused funds:

•0.25% to 1.75% of committed capital or invested capital during the investment period,
•0.25% to 1.50% of invested capital, committed capital and investment fair value subsequent to the investment period for private equity and real estate funds, and
•0.75% to 1.50% of invested capital or net asset value subsequent to the investment period for certain of our hedge fund solutions and credit-focused funds.

On real estate, credit and

MLP-focused

funds structured like hedge funds:

•0.30% to 1.50% of net asset value.

On credit and

MLP-focused

separately managed accounts:

•0.25% to 1.50% of net asset value or total assets.

On real estate separately managed accounts:

•0.50% to 2.00% of invested capital, net operating income or net asset value.

On funds of hedge funds, certain hedge funds and separately managed accounts invested in hedge funds:

•0.25% to 1.50% of net asset value.

On CLO vehicles:

•0.40% to 0.65% of the aggregate par amount of collateral assets, including principal cash.

On credit-focused registered and

non-registered

investment companies:

•0.35% to 1.50% of total assets or net asset value.

The investment adviser of BXMT receives annual management fees based on 1.50% of BXMT’s net proceeds received from equity offerings and accumulated “core earnings” (which is generally equal to its GAAP net income excluding certain

non-cash

and other items), subject to certain adjustments. The investment adviser of BREIT receives a management fee of 1.25% per annum of net asset value, payable monthly.

Management fee calculations based on committed capital or invested capital are mechanical in nature and therefore do not require the use of significant estimates or judgments. Management fee calculations based on net asset value, total assets, or investment fair value depend on the fair value of the underlying investments within the funds. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds and could vary depending on the valuation methodology that is used as well as economic conditions. See “— Fair Value” below for further discussion of the judgment required for determining the fair value of the underlying investments.

Investment Income (Loss)

— Performance Allocations are made to the general partner based on cumulative fund performance to date, subject to a preferred return to limited partners. Blackstone has concluded that investments made alongside its limited partners in a partnership which entitle Blackstone to a Performance Allocation represent equity method investments that are not in the scope of the GAAP guidance on accounting for revenues from contracts with customers. Blackstone accounts for these arrangements under the equity method of accounting. Under the equity method Blackstone’s share of earnings (losses) from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, at the end of each reporting period Blackstone calculates the accrued Performance Allocations that would be due to Blackstone for each fund pursuant to the fund agreements as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. Performance Allocations are subject to clawback to the extent that the Performance Allocation received to date exceeds the amount due to Blackstone based on cumulative results.

The change in the fair value of the investments held by certain Blackstone Funds is a significant input into the accrued Performance Allocation calculation and accrual for potential repayment of previously received Performance Allocations. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds. See “— Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments.

Fair Value

Blackstone uses fair value throughout the reporting process. For a description of our accounting policies related to valuation, see Note 2. “Summary of Significant Accounting Policies — Fair Value of Financial Instruments” and “Summary of Significant Accounting Policies — Investments at Fair Value” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing. The following discussion is intended to provide supplemental information about how the application of fair value principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.

The fair value of the investments held by Blackstone Funds is the primary input to the calculation of certain of our management fees, Incentive Fees, Performance Allocations and the related Compensation we recognize. The Blackstone Funds are accounted for as investment companies under the American Institute of Certified Public Accountants Accounting and Auditing Guide,

Investment Companies

, and in accordance with the GAAP guidance on investment companies and reflect their investments, including majority-owned and controlled investments (the “Portfolio Companies”), at fair value. In the absence of observable market prices, we utilize valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For investments where little market activity exists management’s determination of fair value is based on the best information available in the circumstances, which may incorporate management’s own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors, including the appropriate risk adjustments for

non-performance

and liquidity risks.

Blackstone has also elected the fair value option for certain instruments it owns directly, including loans and receivables and investments in private debt securities, the assets of consolidated CLO vehicles and other proprietary investments. Blackstone is required to measure certain financial instruments at fair value, including debt instruments, equity securities and freestanding derivatives.

Fair Value of Investments or Instruments that are Publicly Traded

Securities that are publicly traded and for which a quoted market exists will be valued at the closing price of such securities in the principal market in which the security trades, or in the absence of a principal market, in the most advantageous market on the valuation date. When a quoted price in an active market exists, no block discounts or control premiums are permitted regardless of the size of the public security held. In some cases, securities will include legal and contractual restrictions limiting their purchase and sale for a period of time, such as may be required under SEC Rule 144 or by underwriters in certain transactions. A discount to publicly traded price may be appropriate in those cases; the amount of the discount shall be determined based on the time period that must pass before the restricted security becomes unrestricted or otherwise available for sale.

Fair Value of Investments or Instruments that are not Publicly Traded

Investments for which market prices are not observable include private investments in the equity or debt of operating companies or real estate properties. Our primary methodology for determining the fair values of such investments is the income approach which provides an indication of fair value based on the present value of cash flows that a business, security, or property is expected to generate in the future. The most widely used methodology under the income approach is the discounted cash flow method which includes significant

assumptions about the underlying investment’s projected net earnings or cash flows, discount rate, capitalization rate and exit multiple. Our secondary methodology, generally used to corroborate the results of the income approach, is the market approach. The most widely used methodology under the market approach relies upon valuations for comparable public companies, transactions, or assets, and includes making judgments about which companies, transactions, or assets are comparable.

In certain cases debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices and market transactions in comparable investments and various relationships between investments.

Management Process on Fair Value

Due to the importance of fair value throughout the consolidated financial statements and the significant judgment required to be applied in arriving at those fair values, we have developed a process around valuation that incorporates several levels of approval and review from both internal and external sources. Blackstone Fund investments are valued on a quarterly basis by our internal valuation teams, which are independent from our investment teams.

For investments valued utilizing the income method and where Blackstone has information rights, we generally have a direct line of communication with each of the Portfolio Company finance teams and collect financial data used to support projections used in a discounted cash flow analysis. The respective businesses’ valuation team then analyzes the data received and updates the valuation models reflecting any changes in the underlying cash flow projections, weighted-average cost of capital, exit multiple, and any other valuation input relevant economic conditions.

The results of all valuations of investments held by Blackstone Fund and investment vehicles are reviewed and approved by the relevant business unit’s valuation

sub-committee,

which is comprised of key personnel from the business unit, typically the chief investment officer, chief operating officer, chief financial officer, chief compliance officer (or their respective equivalents where applicable) and other senior managing directors in the business. To further corroborate our results, we also generally obtain either a positive assurance opinion or a range of value by an independent valuation party, at least annually for all investments and quarterly for certain investments. Our firmwide valuation committee, chaired by our Chief Financial Officer and comprised of senior heads of our businesses and representatives from legal and finance, reviews the valuation process for investments held by us and our investment vehicles, including the application of appropriate valuation standards on a consistent basis. Each quarter, the valuations of the investment portfolios of Blackstone Funds are presented to the audit committee of our board of directors, which is comprised of our

non-employee

directors.

Income Tax

For a description of our accounting policy on taxes and additional information on taxes see Note 2. “Summary of Significant Accounting Policies” and Note 15. “Income Taxes”, respectively, in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

Our provision for income taxes is composed of current and deferred taxes. Current income taxes approximate taxes to be paid or refunded for the current period. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the applicable enacted tax rates and laws that will be in effect when such differences are expected to reverse. During the current year, the Conversion resulted in a

step-up

in the tax basis of certain assets that will be recovered as those assets are sold or the basis is amortized. The final amount of the

step-up

in tax basis may differ as the basis information becomes available and is finalized.

Additionally, significant judgment is required in estimating the provision for (benefit from) income taxes, current and deferred tax balances (including valuation allowance), accrued interest or penalties and uncertain tax positions. In evaluating these judgments, we consider, among other items, projections of taxable income (including the character of such income), beginning with historic results and incorporating assumptions of the amount of future pretax operating income. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates that Blackstone uses to manage its business. A portion of the deferred tax assets are not considered to be more likely than not to be realized due to the character of income necessary for recovery. For that portion of the deferred tax assets, a valuation allowance has been recorded.

Revisions in estimates and/or actual costs of a tax assessment may ultimately be materially different from the recorded accruals and unrecognized tax benefits, if any.

Off-Balance

Sheet Arrangements

In the normal course of business, we engage in

off-balance

sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications and potential contingent repayment obligations. We do not have any

off-balance

sheet arrangements that would require us to fund losses or guarantee target returns to investors in our funds.

Further disclosure on our

off-balance

sheet arrangements is presented in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing as follows:

•Note 9. “Variable Interest Entities”, and
•Note 19. “Commitments and Contingencies — Commitments — Investment Commitments” and “— Contingencies — Guarantees”.

Recent Accounting Developments

Information regarding recent accounting developments and their impact on Blackstone can be found in Note 2. “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

Interbank Offered Rates Transition

Certain jurisdictions are currently reforming or phasing out their Interbank Offered Rates (“IBORs”), including, without limitation, the London Interbank Offered Rates, Euro Interbank Offered Rate, Tokyo Interbank Offered Rate, Hong Kong Interbank Offered Rate and Singapore Interbank Offered Rate. The timing of the anticipated reforms or phase-outs vary by jurisdiction, with most of the reforms or phase-outs currently scheduled to take effect at the end of calendar year 2021. We are actively evaluating operational and other impacts of such changes and managing transition efforts accordingly. See “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Interest rates on our and our portfolio companies’ outstanding financial instruments might be subject to change based on regulatory developments, which could adversely affect our revenue, expenses and the value of those financial instruments.”

Contractual Obligations, Commitments and Contingencies

The following table sets forth information relating to our contractual obligations as of December 31, 2019 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:

Contractual Obligations20202021-20222023-2024ThereafterTotal
(Dollars in Thousands)
Operating Lease Obligations (a)$90,569$208,113$182,780$259,311$740,773
Purchase Obligations39,95824,38824—64,370
Blackstone Issued Notes and Revolving Credit Facility (b)——400,0004,281,9504,681,950
Interest on Blackstone Issued Notes and Revolving Credit Facility (c)146,697293,395264,8951,889,5672,594,554
Blackstone Funds and CLO Vehicles Debt Obligations Payable (d)113——6,859,5356,859,648
Interest on Blackstone Funds and CLO Vehicles Debt Obligations Payable (e)231,786463,571463,5711,237,5182,396,446
Blackstone Funds Capital Commitments to Investee Funds (f)79,950———79,950
Due to Certain Non-Controlling Interest Holders in Connection with Tax Receivable Agreements (g)70,98778,32364,233467,967681,510
Unrecognized Tax Benefits, Including Interest and Penalties (h)912———912
Blackstone Operating Entities Capital Commitments to Blackstone Funds and Other (i)3,810,449———3,810,449
Consolidated Contractual Obligations4,471,4211,067,7901,375,50314,995,84821,910,562
Blackstone Funds and CLO Vehicles Debt Obligations Payable (d)(113)——(6,859,535)(6,859,648)
Interest on Blackstone Funds and CLO Vehicles Debt Obligations Payable (e)(231,786)(463,571)(463,571)(1,237,518)(2,396,446)
Blackstone Funds Capital Commitments to Investee Funds (f)(79,950)———(79,950)
Blackstone Operating Entities Contractual Obligations$4,159,572$604,219$911,932$6,898,795$12,574,518
(a)We lease our primary office space and certain office equipment under agreements that expire through 2030. Occupancy lease agreements, in addition to contractual rent payments, generally include additional payments for certain costs incurred by the landlord, such as building expenses and utilities. To the extent these are fixed or determinable they are included in the table above. The table above includes operating leases that are recognized as Operating Lease Liabilities, short-term leases that are not recorded as Operating Lease Liabilities and leases that have been signed but not yet commenced which are not recorded as Operating Lease Liabilities. The amounts in this table are presented net of contractual sublease commitments.
(b)Represents the principal amount due on the senior notes we issued. As of December 31, 2019, we had no outstanding borrowings under our revolver.
(c)Represents interest to be paid over the maturity of our senior notes and borrowings under our revolving credit facility which has been calculated assuming no pre-payments are made and debt is held until its final maturity date. These amounts exclude commitment fees for unutilized borrowings under our revolver.
(d)These obligations are those of the Blackstone Funds including the consolidated CLO vehicles.
(e)Represents interest to be paid over the maturity of the related consolidated Blackstone Funds’ and CLO vehicles’ debt obligations which has been calculated assuming no pre-payments will be made and debt will be held until its final maturity date. The future interest payments are calculated using variable rates in effect as of December 31, 2019, at spreads to market rates pursuant to the financing agreements, and range from 2.6% to 8.4%. The majority of the borrowings are due on demand and for purposes of this schedule are assumed to mature within one year. Interest on the majority of these borrowings rolls over into the principal balance at each reset date.
(f)These obligations represent commitments of the consolidated Blackstone Funds to make capital contributions to investee funds and portfolio companies. These amounts are generally due on demand and are therefore presented in the less than one year category.
(g)Represents obligations by Blackstone’s corporate subsidiary to make payments under the Tax Receivable Agreements to certain non-controlling interest holders for the tax savings realized from the taxable purchases of their interests in connection with the reorganization at the time of Blackstone’s IPO in 2007 and subsequent purchases. The obligation represents the amount of the payments currently expected to be made, which are dependent on the tax savings actually realized as determined annually without discounting for the timing of the payments. As required by GAAP, the amount of the obligation included in the Consolidated Financial Statements and shown in Note 18. “Related Party Transactions” (see “— Item 8. Financial Statements and Supplementary Data”) differs to reflect the net present value of the payments due to certain non-controlling interest holders.
(h)The total represents gross unrecognized tax benefits of $0.5 million and interest and penalties of $0.5 million. In addition, Blackstone is not able to make a reasonably reliable estimate of the timing of payments in individual years in connection with gross unrecognized benefits of $24.5 million and interest of $2.2 million; therefore, such amounts are not included in the above contractual obligations table.
(i)These obligations represent commitments by us to provide general partner capital funding to the Blackstone Funds, limited partner capital funding to other funds and Blackstone principal investment commitments. These amounts are generally due on demand and are therefore presented in the less than one year category; however, a substantial amount of the capital commitments are expected to be called over the next three years. We expect to continue to make these general partner capital commitments as we raise additional amounts for our investment funds over time.

Guarantees

Blackstone and certain of its consolidated funds provide financial guarantees. The amounts and nature of these guarantees are described in Note 19. “Commitments and Contingencies — Contingencies — Guarantees” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

Indemnifications

In many of its service contracts, Blackstone agrees to indemnify the third party service provider under certain circumstances. The terms of the indemnities vary from contract to contract and the amount of indemnification liability, if any, cannot be determined and has not been included in the table above or recorded in our Consolidated Financial Statements as of December 31, 2019.

Clawback Obligations

Performance Allocations are subject to clawback to the extent that the Performance Allocations received to date with respect to a fund exceeds the amount due to Blackstone based on cumulative results of that fund. The actual clawback liability, however, generally does not become realized until the end of a fund’s life except for certain Blackstone real estate funds, multi-asset class investment funds and credit-focused funds, which may have an interim clawback liability. The lives of the carry funds, including available contemplated extensions, for which a liability for potential clawback obligations has been recorded for financial reporting purposes, are currently anticipated to expire at various points through 2028. Further extensions of such terms may be implemented under given circumstances.

For financial reporting purposes, when applicable, the general partners record a liability for potential clawback obligations to the limited partners of some of the carry funds due to changes in the unrealized value of a fund’s remaining investments and where the fund’s general partner has previously received Performance Allocation distributions with respect to such fund’s realized investments.

As of December 31, 2019, the total clawback obligations were $126.9 million, of which $105.3 million was related to Blackstone Holdings and $21.6 million was related to current and former Blackstone personnel. The split of clawback between Blackstone Holdings and current and former personnel is based on the performance of individual investments held by a fund rather than on a fund by fund basis. If, at December 31, 2019, all of the investments held by our carry funds were deemed worthless, a possibility that management views as remote, the amount of Performance Allocations subject to potential clawback would be $7.2 billion, on an

after-tax

basis where applicable, of which Blackstone Holdings is potentially liable for $6.6 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote. See Note 18. “Related Party Transactions” and Note 19. “Commitments and Contingencies” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

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