Blackstone Inc. (BX) FY 2021 MD&A

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

The following discussion and analysis should be read in conjunction with Blackstone 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 2021 and 2020 items and year to year comparisons between 2021 and 2020. For the discussion of 2020 compared to 2019 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, 2020, which specific discussion is incorporated herein by reference.

Effective August 6, 2021, The Blackstone Group Inc. changed its name to Blackstone Inc. Blackstone Inc. was initially formed as The Blackstone Group L.P. (the “Partnership”) and converted from a Delaware limited partnership to a Delaware corporation, The Blackstone Group Inc. (the “Conversion”), effective July 1, 2019. This report includes the results for the Partnership prior to the Conversion and Blackstone Inc. following the Conversion. In this report, references to “Blackstone,” the “Company,” “we,” “us” or “our” refer to (a) Blackstone 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 common stock. All references to dividends prior to the Conversion refer to distributions. See “— Organizational Structure.”

Effective February 26, 2021, Blackstone effectuated changes to rename its Class A common stock as “common stock,” and to reclassify its Class B and Class C common stock into a new “Series I preferred stock” and “Series II preferred stock,” respectively. Each new stock has the same rights and powers of its predecessor. See “— Organizational Structure.”

Our Business

Blackstone is one of the world’s leading investment firms. Our business is organized into four segments: Real Estate, Private Equity, Hedge Fund Solutions and Credit & Insurance. For more information about our business segments, see “Part I. Item 1. Business — Business Segments.”

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.

88

Table of Contents

Our Response to
COVID-19

Our primary focus during the
COVID-19
pandemic has been the safety and wellbeing of our employees and their families, as well as the seamless functioning of the firm in serving our investors who have entrusted us with their capital, and our shareholders. Where remote work has been appropriate or recommended under local government guidelines, our technology infrastructure has proven to be robust and capable of supporting a remote work model and we have implemented rigorous protocols for remote work across the firm, including increased cadence of group calls and updates, and frequent communication across leadership and working levels. We have also leveraged technology to ensure our teams stay connected and productive, and that our culture remains strong. To the extent we have not been meeting with our clients in person, we have continued to actively communicate with them through videoconference, teleconference and email. Our investment committees have also continued to convene as needed, and the firm has continued to operate across investment, asset management and corporate support functions. Our return to office protocols have been developed and implemented consistent with local government guidelines, with testing, contact-tracing and social distancing and other safety protocols in place, and we continue to closely monitor applicable public health and government guidance and the proliferation of variants.

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.

In 2021, economic conditions strongly rebounded from the prior year, particularly in the U.S., which was significantly affected by the
COVID-19
pandemic in 2020. The Bureau of Economic Analysis’ advance estimate of U.S. real GDP growth indicated growth of 5.7% in 2021, after a 3.4% decline in GDP in 2020. This estimate for 2021 would equate to the fastest rate of economic growth in nearly 40 years. At the same time, in December 2021, annual U.S. inflation reached a
39-year
high of 7.0%, leading the U.S. Federal Reserve to indicate a plan to begin to increase interest rates in the near term. Despite strong equity market returns overall for 2021, concerns over inflation, higher interest rates and the impact of COVID variants on economic growth led to heightened equity market volatility exiting the year, and such volatility continued into early 2022. Global supply chains have also continued to be disrupted, particularly given China’s recurrent COVID restrictions. Such disruption has contributed to growing inflationary pressure and may further contribute to slower real GDP growth globally.

The S&P 500 Total Return Index increased 11% in the fourth quarter of 2021 and 29% in 2021, with strong appreciation across sectors, led by energy and real estate. The Bloomberg Commodity Index fell by
-1.6%
in the fourth quarter but rose more than 27% for the year. The price of West Texas Intermediate crude oil increased 55% to $75 per barrel for the year.

Credit markets also appreciated in 2021, as U.S. leveraged loans and high yield bonds returned 5.2% and 5.4%, respectively. High yield spreads tightened a total of 76 basis points in the year, while issuance increased 15%. Merger and acquisition activity accelerated, with global announced deal value increasing 63% in 2021 compared to 2020.

Throughout 2021, the U.S. Federal Reserve maintained the federal funds target range at
0.0%-0.25%,
the range set in March 2020 in response to the onset of
COVID-19.
The yield on the
ten-year
Treasury remained relatively flat in the fourth quarter, ending the year at 1.51%, but has risen sharply so far in 2022, to 1.96% as of February 17, 2022. Three-month LIBOR increased eight basis points in the fourth quarter to 0.21%, and further to 0.49% as of February 16, 2022. Subsequent to the end of 2021, the U.S. Federal Reserve indicated that it foresees up to three quarter-percentage-point interest rate increases in 2022, beginning as early as March 2022, with continued increases expected in 2023 and 2024.

The U.S. unemployment rate decreased to a post-pandemic low of 3.9% as of December 2021 from 6.7% in December 2020. Average hourly earnings in December increased 4.7% year-over-year based on the three-month average for production and nonsupervisory employees. U.S. retail sales increased 18% year-over-year in 2021 on a seasonally adjusted basis. Since 2019, personal savings in 2021 increased 88% and disposable personal income increased 14%. The Institute for Supply Management Purchasing Managers’ Index decreased in 2021 to 58.7, compared to 60.7 at the end of 2020, signaling moderate expansion in the U.S. manufacturing sector.

89

Table of Contents

Countries around the world continue to recover from the economic impacts of the
COVID-19
pandemic. While economic activity remains robust, global supply chain disruptions, labor shortages and rising commodity prices continue to have a negative impact across sectors and regions, and concerns regarding inflation and increasing interest rates are deepening.

Notable Transactions

On August 5, 2021, Blackstone issued $650 million aggregate principal amount of 1.625% senior notes due August 5, 2028 (the “2028 Notes”), $800 million aggregate principal amount of 2.000% senior notes due January 30, 2032 (the “August 2032 Notes”) and $550 million aggregate principal amount of 2.850% senior notes due August 5, 2051 (the “2051 Notes”). For additional information see Note 13. “Borrowings” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.”

On November 2, 2021, Blackstone (a) closed the acquisition of a 9.9% equity stake in SAFG Retirement Services, Inc., which is expected to be the parent of American International Group, Inc.’s Life and Retirement (“AIG L&R”) business at the time of the anticipated IPO of AIG L&R and (b) entered into a long-term strategic asset management partnership to serve as the exclusive external investment manager of AIG L&R with respect to certain asset classes. For additional information see Note 4. “Investments — Other Investments” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.”

On January 10, 2022, Blackstone issued $500 million aggregate principal amount of 2.550% senior notes due March 30, 2032 (the “January 2032 Notes”) and $1.0 billion aggregate principal amount of 3.200% senior notes due January 30, 2052 (the “2052 Notes”). For additional information see Note 13. “Borrowings” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.”

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.

Effective February 26, 2021, Blackstone effectuated changes to rename its Class A common stock as “common stock,” and to reclassify its Class B and Class C common stock into a new “Series I preferred stock” and “Series II preferred stock,” respectively. Each new stock has the same rights and powers of its predecessor. For additional information, see Note 1. “Organization” and Note 16. “Earnings Per Share and Stockholders’ Equity — Stockholders’ Equity” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

Effective August 6, 2021, The Blackstone Group Inc. changed its name to Blackstone Inc. For additional information, see Note 1. “Organization” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.”

90

Table of Contents

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 accounting principles generally accepted in the United States of America (“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 and Dividend 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 and Dividend 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.

91

Table of Contents

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 and including the Payable under the Tax Receivable Agreement. Further, the current tax provision utilized when calculating Taxes and Related Payables and Distributable Earnings reflects the benefit of deductions available to the company on certain expense items that are excluded from the underlying calculation of Segment Distributable Earnings and Total Segment Distributable Earnings, such as equity-based compensation charges and certain Transaction-Related Charges where there is a current tax provision or benefit. The economic assumptions and methodologies that impact the implied income tax provision are the same as those methodologies and assumptions used in calculating the current income tax provision for Blackstone’s Consolidated Statements of Operations under GAAP, excluding the impact of divestitures and accrued tax contingencies and refunds which are reflected when paid or received. Management believes that including the amount payable under the tax receivable agreement and utilizing the current income tax provision adjusted as described above when calculating Distributable Earnings is meaningful as it increases comparability between periods and more accurately reflects earnings that are available for distribution to shareholders.

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).

Realized Performance Compensation reflects an increase in the aggregate Realized Performance Compensation paid to certain of our professionals above the amounts allocable to them based upon the percentage participation in the relevant performance plans previously awarded to them as a result of a new compensation program that commenced during the year ended December 31, 2021. As a result, in the year ended December 31, 2021, Realized Performance Compensation paid to our professionals was increased by an aggregate of $19.7 million and Fee Related Compensation was decreased by a corresponding amount. These changes to Realized Performance Compensation and Fee Related Compensation reduced Net Realizations, increased Fee Related Earnings, and were neutral to Income (Loss) Before Provision (Benefit) for Taxes and had no impact to Distributable Earnings in the year ended December 31, 2021.

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

92

Table of Contents

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.

Other Operating Expenses is presented on a segment basis and is equal to General, Administrative and Other Expenses, adjusted to (a) remove the amortization of transaction-related intangibles, (b) remove certain expenses reimbursed by the Blackstone Funds which are netted against Management and Advisory Fees, Net in Blackstone’s segment presentation, and (c) give effect to an administrative fee collected on a quarterly basis from certain holders of Blackstone Holdings Partnership Units. The administrative fee is accounted for as a capital contribution under GAAP, but is reflected as a reduction of Other Operating Expenses in Blackstone’s segment presentation.

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.

Net Accrued Performance Revenues

Net Accrued Performance Revenues is a financial measure used as an indicator of potential future realized performance revenues based on the current investment portfolio of the funds and vehicles we manage. Net Accrued Performance Revenues represents the accrued performance revenues receivable by Blackstone, net of the related accrued performance compensation payable by Blackstone, excluding Performance Revenues that have been realized but not yet distributed as of the reporting date and clawback amounts, if any. Net Accrued Performance Revenues is derived from and reconciled to, but not equivalent to, its most directly comparable GAAP measure of Investments. See
“— Non-GAAP
Financial Measures” for our reconciliation of Net Accrued Performance Revenues and Note 2 “Summary of Significant Accounting Policies — Equity Method Investments” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.” for additional information on the calculation of Investments — Accrued Performance Allocations.

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.

93

Table of Contents

Total and
Fee-Earning
Assets Under Management

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

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 Real Estate, Hedge Fund Solutions and Credit & Insurance 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. In our Perpetual Capital vehicles where redemption rights exist, Blackstone has the ability to fulfill redemption requests only (a) in Blackstone’s or the vehicles’ board’s discretion, as applicable, or (b) to the extent there is sufficient new capital. Investment advisory agreements related to certain separately managed accounts in our Hedge Fund Solutions and Credit & Insurance segments, excluding our BIS separately managed accounts, may generally be terminated by an investor on 30 to 90 days’ notice. Our BIS separately managed accounts can generally only be terminated for long-term underperformance, cause and certain other limited circumstances, in each case subject to Blackstone’s right to cure.

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:

94

Table of Contents

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 Total 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 Total 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 Total Assets Under Management and
Fee-Earning
Assets Under Management are not based on any definition of total 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 may include 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, in certain carry funds
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 Eligible Assets Under Management

Performance 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.

95

Table of Contents

Consolidated Results of Operations

Following is a discussion of our consolidated results of operations. 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, eliminates
non-controlling
ownership interests in Blackstone’s consolidated operating partnerships and removes the amortization of intangibles assets and Transaction-Related Charges) in these periods, see “— Segment Analysis” below.

96

Table of Contents

The following table sets forth information regarding our consolidated results of operations and certain key operating metrics for the years ended December 31, 2021, 2020 and 2019:

n/m Not meaningful.

97

Table of Contents

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Revenues

Revenues were $22.6 billion for the year ended December 31, 2021, an increase of $16.5 billion, or 270%, compared to $6.1 billion for the year ended December 31, 2020. The increase in Revenues was primarily attributable to an increase of $14.8 billion in Investment Income (Loss), which is composed of increases of $10.6 billion and $4.2 billion in Unrealized and Realized Investment Income (Loss), respectively.

The $10.6 billion increase in Unrealized Investment Income (Loss) was primarily attributable to net unrealized appreciation of investment holdings in the year ended December 31, 2021 compared to net unrealized depreciation of investment holdings in the year ended December 31, 2020 in each of our segments. Principal drivers of these increases were:

Effective September 30, 2021, Strategic Partners’ fund financial reporting process was updated. As a result, the increase in Strategic Partners’ carrying value for the year ended December 31, 2021 includes the economic and market activity of five quarters. If the updated Strategic Partners’ fund financial reporting process had been in place in prior periods, Strategic Partners’ carrying value would have increased 49.8% for the year ended December 31, 2021. See Note 2. “Summary of Significant Accounting Policies — Equity Method Investments” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” for additional information.

The $4.2 billion increase in Realized Investment Income (Loss) was primarily attributable to higher realized gains in our Private Equity and Real Estate segments and the gain recognized in connection with the Pátria sale transactions in the first and third quarter of 2021. For additional information, see Note 4. “Investments — Equity Method Investments” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data.”

98

Table of Contents

Expenses

Expenses were $9.5 billion for the year ended December 31, 2021, an increase of $6.0 billion, compared to $3.5 billion for the year ended December 31, 2020. The increase was primarily attributable to an increase of $5.8 billion in Total Compensation and Benefits, of which $5.4 billion was Performance Allocations Compensation. The increase in Performance Allocations Compensation was primarily due to the increase in Investment Income (Loss) – Performance Allocations, on which a portion of this compensation is based.

Other Income (Loss)

Other Income (Loss) was $458.9 million for the year ended December 31, 2021, an increase of $463.7 million, compared to $(4.8) million for the year ended December 31, 2020. The increase in Other Income (Loss) was due to increases of $431.1 million in Net Gains (Losses) from Fund Investment Activities and $32.6 million in Change in Tax Receivable Agreement Liability.

The increase in Net Gains (Losses) from Fund Investment Activities was principally driven by increases of $206.0 million, $205.6 million and $31.2 million in our Real Estate, Private Equity and Credit & Insurance segments, respectively. The increase in our Real Estate and Private Equity segments was primarily due to unrealized appreciation and realized net gains of investments in our consolidated real estate and private equity funds, as applicable. The increase in our Credit & Insurance segment was primarily driven by the deconsolidation of nine CLO vehicles during the year ended December 31, 2020, as well as realized net gains of investments, partially offset by unrealized depreciation of investments, in our consolidated credit funds. See Note 9. “Variable Interest Entities” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” for additional information on the deconsolidated CLO vehicles.

The increase in Change in Tax Receivable Agreement Liability was due to changes in estimated tax basis recovery.

Provision (Benefit) for Taxes

The following table summarizes Blackstone’s tax position:

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

99

Table of Contents

Blackstone’s Provision (Benefit) for Taxes for the years ended December 31, 2021 and 2020 was $1.2 billion and $356.0 million, respectively. This resulted in an effective tax rate of 8.7% and 13.6%, respectively, based on our Income Before Provision (Benefit) for Taxes of $13.6 billion and $2.6 billion, respectively.

The decrease in Blackstone’s effective tax rate for the year ended December 31, 2021, compared to the year ended December 31, 2020, resulted primarily from the Conversion, state taxes and valuation allowance releases related to the
step-up
in the tax basis of investment assets.

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 (Loss) — Net Gains (Losses) from Fund Investment Activities from the Net Income (Loss) Attributable to Blackstone Inc.

Net Income Attributable to
Non-Controlling
Interests in Blackstone Holdings is derived from the Income Before Provision (Benefit) for Taxes at the Blackstone Holdings level, excluding the Net Gains (Losses) 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, 2021 and 2020, the Net Income Before Taxes allocated to Blackstone personnel and others who are limited partners of Blackstone Holdings was 41.3% and 42.7%, respectively. The decrease of 1.4% was primarily due to the conversion of Blackstone Holdings Partnership Units to shares of common stock and the vesting of shares of common stock.

The Other Income (Loss) — Change in Tax Receivable Agreement Liability was entirely allocated to Blackstone Inc.

Operating Metrics

Total and
Fee-Earning
Assets Under Management

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, 2021, 2020 and 2019. 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 — Total and
Fee-Earning
Assets Under Management.”

100

Table of Contents

Note: Totals may not add due to rounding.

101

Table of Contents

102

Table of Contents

103

Table of Contents

Fee-Earning
Assets Under Management

Fee-Earning
Assets Under Management were $650.0 billion at December 31, 2021, an increase of $180.5 billion, or 38%, compared to $469.4 billion at December 31, 2020. The net increase was due to:

104

Table of Contents

Inflows for BIS exclude inflows related to Everlake and AIG L&R that were allocated to strategies across various segments.
Fee-Earning
Assets Under Management inflows in BREDS funds exceed the Total Assets Under Management inflows due to the inflows being reflected in prior periods at the time of each capital closing of the fund for Total Assets Under Management.

For additional information regarding the update to Strategic Partners’ fund financial reporting process, see Note 2. “Summary of Significant Accounting Policies — Equity Method Investments” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing.

Offsetting these increases were:

105

Table of Contents

Fee-Earning
Assets Under Management realizations in our BREDS funds exceed the Total Assets Under Management realizations due to reductions in BREDS IV’s fee basis as a result of third party financing during the period.

Total Assets Under Management

Total Assets Under Management were $880.9 billion at December 31, 2021, an increase of $262.3 billion, or 42%, compared to $618.6 billion at December 31, 2020. The net increase was due to:

Inflows for BIS exclude inflows related to Everlake and AIG L&R that were allocated to strategies across various segments. Total Assets Under Management inflows may exceed
Fee-Earning
Assets Under Management inflows due to the following reasons:

106

Table of Contents

Effective September 30, 2021, Strategic Partners’ fund financial reporting process was updated. As a result, the increase in Strategic Partners’ carrying value for the year ended December 31, 2021 includes the economic and market activity of five quarters. If the updated Strategic Partners’ fund financial reporting process had been in place in prior periods, Strategic Partners’ carrying value would have increased 49.8% for the year ended December 31, 2021. See Note 2. “Summary of Significant Accounting Policies — Equity Method Investments” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” for additional information.

Total Assets Under Management market activity in our BREP and
co-investment
funds and our Private Equity segment 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:

Total Assets Under Management realizations in our BREP and
co-investment
funds and our Private Equity segment generally represents the total proceeds and typically exceeds the
Fee-Earning
Assets Under Management realizations which generally represents only the invested capital.

107

Table of Contents

Dry Powder

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

Note:     Totals may not add due to rounding.

Net Accrued Performance Revenues

The following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as of December 31, 2021 and 2020. 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. See
“— Non-GAAP
Financial Measures” for our reconciliation of Net Accrued Performance Revenues.

108

Table of Contents

Note:     Totals may not add due to rounding.

For the year ended December 31, 2021 Net Accrued Performance Revenues receivable increased due to Net Performance Revenues of $8.4 billion offset by net realized distributions of $3.5 billion.

109

Table of Contents

Invested Performance Eligible Assets Under Management

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

Note:     Totals may not add due to rounding.

110

Table of Contents

Perpetual Capital

The following presents our Perpetual Capital Total Assets Under Management as of December 31 of each year:

Note:     Totals may not add due to rounding.

Perpetual Capital Total Assets Under Management were $313.4 billion as of December 31, 2021, an increase of $178.5 billion, or 132%, compared to $134.9 billion as of December 31, 2020. Perpetual Capital Total Assets Under Management in our Credit & Insurance, Real Estate and Private Equity segments increased $90.3 billion, $75.1 billion and $9.9 billion, respectively. Principal drivers of these increases were:

111

Table of Contents

Perpetual Capital Total Assets Under Management were $134.9 billion as of December 31, 2020, an increase of $31.2 billion, or 30%, compared to $103.7 billion as of December 31, 2019. Perpetual Capital Total Assets Under Management in our Real Estate and Credit & Insurance segments increased $24.0 billion and $4.5 billion, respectively. Principal drivers of these increases were:

Investment Records

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.

112

Table of Contents

The following table presents the investment record of our significant funds from inception through December 31, 2021:

continued ...

113

Table of Contents

continued ...

114

Table of Contents