Blackstone Inc.: Form 10-Q for the period ended Sep 30, 2020

The following discussion and analysis should be read in conjunction with The Blackstone Group Inc.’s condensed consolidated financial statements and the related notes included within this Quarterly Report on Form 10-Q.

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.”

Effective January 1, 2020, the Credit segment was renamed Credit & Insurance. There was no change to the composition of the segment or historical results.

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, office, rental housing, 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), (c) our Asia-focused fund (Blackstone Capital Partners Asia (“BCP Asia”) fund) and (d) our core private equity funds, Blackstone Core Equity Partners (“BCEP”). In addition, our Private Equity segment includes (a) our opportunistic investment platform that invests globally across asset classes, industries and geographies, Blackstone Tactical Opportunities (“Tactical Opportunities”), (b) our secondary fund of funds business, Strategic Partners Fund Solutions (“Strategic Partners”), (c) our infrastructure-focused funds, Blackstone Infrastructure Partners (“BIP”), (d) our life sciences private investment platform, Blackstone Life Sciences (“BXLS”), (e) our growth equity investment platform, Blackstone Growth (“BXG”), (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 funds target control-oriented investments in high quality companies with durable businesses and seek 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 investment across all infrastructure sectors, including energy, transportation, 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. BXG seeks to deliver attractive risk-adjusted returns by investing in dynamic, growth-stage businesses, with a focus on the consumer, enterprise solutions, financial services and healthcare sectors.

• 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 & Insurance. The principal component of our Credit & Insurance segment is GSO Capital Partners LP (“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. Performing credit strategies include mezzanine lending funds, middle market direct lending funds, including our business development company (“BDC”), Blackstone / GSO Secured Lending (“BGSL”), our structured products group and other performing credit strategy funds. Distressed strategies include credit alpha strategies, stressed/distressed funds and energy strategies. Long only strategies consist of CLOs, closed-ended funds, open-ended funds and separately managed accounts.

In addition, our Credit & Insurance 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 & Insurance 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.

Our Response to COVID-19

As the global response to novel coronavirus (“COVID-19”) continues to evolve, our primary focus has been the safety and wellbeing of our employees and their families, as well as the seamless functioning of the firm in serving our limited partner investors who have entrusted us with their capital, and our shareholders. In accordance with local government guidance and social distancing recommendations, the majority of our employees globally have been working remotely. Our technology infrastructure has proven to be robust and capable of supporting this model. 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 are leveraging technology to ensure our teams stay connected and productive, and that our culture remains strong even in these unusual circumstances. While we are generally not meeting with our clients in person, we continue to actively communicate with our clients through videoconference, teleconference and email. Investment committees continue to convene as needed, and the firm continues to operate across investment, asset management and corporate support functions.

As previously disclosed, in mid-July, our U.S. and European offices began a phased reopening, consistent with local government guidelines, on a voluntary basis with social distancing and other safety protocols in place. We continue to closely monitor applicable public health and government guidance.

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.

The third quarter of 2020 was characterized by continued recovery in global equity and credit markets as previously implemented fiscal and monetary stimulus continued to provide support to markets despite the ongoing economic impacts of the COVID-19 pandemic. Although the global economy has begun reopening, economic recovery is likely to continue to be gradual, uneven and characterized by meaningful dispersion across sectors and regions, with uncertainty regarding its ultimate length and trajectory.

All major U.S. equity market sectors except for energy posted positive returns in the third quarter. S&P 500 consumer discretionary stocks showed the strongest outperformance, ending the quarter up 15%, while the S&P 500 ended the quarter up 9%. S&P 500 energy stocks ended the quarter meaningfully lower, down 20% for the quarter and down 48% year-to-date. The price of West Texas Intermediate crude oil rose 2% in the third quarter to $40 per barrel, but was still down significantly from the 2019 year end price of $61. The Henry Hub Natural Gas spot price fell 0.6% in the third quarter to $1.63. Spot prices for other commodities increased and the Bloomberg Commodity Index rose 9% in the third quarter.

U.S. leveraged loan and high yield bond prices continued their recovery, increasing 4% and 5%, respectively, for the third quarter. High yield spreads compressed 117 basis points in the third quarter, while issuance increased 57% year-over-year. The Federal Reserve maintained the federal funds target range at 0.0%-0.25% due to the effects of the COVID-19 pandemic weighing on economic activity in the near term. In addition, the Federal Reserve has expanded its balance sheet since mid-March by nearly $3 trillion to support new credit and liquidity facilities and expects to maintain the current pace of purchasing of such instruments in the coming months. Three-month LIBOR declined 0.07% in the third quarter to 0.23%, remaining near historical lows.

Volatility decreased in the third quarter with the CBOE Volatility index declining 13% to 26.4. Global equity issuance declined 25% compared to the second quarter, but increased 55% relative to the third quarter of 2019. Merger and acquisition activity improved in the third quarter, with deal announcements up 49% compared to the second quarter and up 4% compared to the third quarter of 2019.

The industrial sector continued to show mixed signals, as industrial production declined 7.3% in the third quarter from the year-ago period. However, the Institute for Supply Management Purchasing Managers’ Index increased from last quarter, rising to 55.4 from 52.6 at the end of the second quarter, signaling moderate further expansion in the U.S. manufacturing sector.

The U.S. unemployment rate decreased meaningfully from 11.1% at the end of June, when it reached one of the highest levels since January 2013, to 7.9% at the end of September, but continues to be at historically elevated levels. Wages grew, with average hourly earnings increasing 4.7% year-over-year based on the three month average for production and nonsupervisory employees. In addition, U.S. retail sales in the third quarter reported a 3.6% increase year-over-year, and new orders for durable goods in September increased for the fifth consecutive month.

Countries around the globe continue to grapple with the economic impacts of the COVID-19 pandemic. Although economic recovery is partially underway, it continues to be gradual, uneven, and characterized by meaningful dispersion across sectors and regions, and could be hindered by persistent or resurgent infection rates. Commercial activity in a number of industries, including travel, hospitality, and in-person entertainment, remains challenged. The continued uncertainty regarding the length of economic recovery precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions.

Although the result of the recent Presidential election in the United States has not been finalized, a change in administration could lead to significant changes in the legal, regulatory and tax landscapes. The potential for governmental policy and regulatory reforms in a variety of areas as a result of such a change creates uncertainty for our business and investment strategies and may adversely affect the profitability of certain of our funds’ portfolio companies. For example, assuming Vice President Biden prevails in the election, his administration may pursue tax policies seeking to increase the corporate tax rate, limit further the deductibility of interest or subject carried interest to more onerous taxation. Especially if the U.S. Senate were no longer Republican controlled, this could materially increase the amount of taxes we, our portfolio companies, our investors or our employees and other key personnel would be required to pay. In that connection, if there were a Democratic sweep of the Executive and Legislative branches of government, this could materially increase the risk of legislative reforms that would adversely affect our business and the profitability of our funds’ portfolio companies.

Further, any reforms that may be undertaken as a result of a change in administration with respect to the regulation of asset management firms, or the U.S. financial services industry more generally, may affect the manner in which we conduct our business. A change in administration would likely result in leadership changes at a number of U.S. federal regulatory agencies with oversight over the U.S. financial services industry. This could pose uncertainty with respect to such agencies’ policy priorities and may lead to increased regulatory enforcement activity in the financial services industry. Leadership and policy changes could also affect various industries in which our portfolio companies operate, including healthcare, energy and consumer finance.

We believe the eventual conclusion of the U.S. Presidential and Congressional elections will increase the likelihood that the U.S. Congress will authorize additional fiscal stimulus to provide support to markets in response to the continued impacts of the COVID-19 pandemic. Moreover, certain governmental policy changes outlined by Vice President Biden during his campaign, including government investment in infrastructure, create potential opportunities for certain of our funds. However, the prospect of litigation with respect to the results of the Presidential election and substantial lack of clarity regarding the likelihood, timing and details of these and other changes could exacerbate existing risks relating to capital deployment, realization and fundraising activity. See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Notable Transactions

On September 29, 2020, Blackstone issued $500 million aggregate principal amount of 1.600% senior notes due March 30, 2031 (the “2031 Notes”) and $400 million aggregate principal amount of 2.800% senior notes due September 30, 2050 (the “2050 Notes”). For additional information see Note 12. “Borrowings” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements”.

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 Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Note 2. “Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” 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 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).

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.

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.

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, real estate debt carry funds, secondary funds of 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 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. 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.

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 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.

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.

Consolidated Results of Operations

Following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 2020 and 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 three and nine months ended September 30, 2020 and 2019:

(Dollars in Thousands)

N/M Not meaningful.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Revenues

Revenues were $3.0 billion for the three months ended September 30, 2020, an increase of $1.3 billion, compared to $1.7 billion for the three months ended September 30, 2019. The increase in Revenues was primarily attributable to increases of $1.4 billion in Investment Income (Loss) and $175.7 million in Management and Advisory Fees, Net, partially offset by a decrease of $285.4 million in Other Revenue.

The increase in Investment Income (Loss) was primarily attributable to increases in our Private Equity, Real Estate and Credit & Insurance segments of $792.9 million, $284.1 million and $172.6 million, respectively. The increase in our Private Equity segment was primarily attributable to higher net unrealized appreciation of investment holdings in corporate private equity and Tactical Opportunities in the current quarter relative to the prior quarter. Corporate private equity carrying value increased 12.2% in the three months ended September 30, 2020 compared to 2.7% in the three months ended September 30, 2019. Tactical Opportunities carrying value increased 10.7% in the three months ended September 30, 2020 compared to 1.0% in the three months ended September 30, 2019. The increase in our Real Estate segment was primarily attributable to higher unrealized appreciation of investment holdings in BREP opportunistic funds in the current quarter relative to the prior quarter. BREP opportunistic funds’ carrying value increased 6.4% in the three months ended September 30, 2020 compared to 3.8% in the three months ended September 30, 2019. The increase in our Credit & Insurance segment was primarily attributable to net unrealized appreciation of investments in our performing credit and distressed strategies in the three months ended September 30, 2020 compared to net unrealized depreciation in the three months ended September 30, 2019.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Private Equity and Real Estate segments of $92.9 million and $76.7 million, respectively. The increase in our Private Equity segment was primarily due to the end of BCP VIII, BEP III and BXLS V’s fee holidays during the three months ended September 30, 2020. The increase in our Real Estate segment was primarily due to the end of BREP IX’s fee holiday in 2019, the commencement of BREP Europe VI’s investment period in the fourth quarter of 2019 along with the end of its fee holiday in the first quarter of 2020 and Fee-Earning Assets Under Management growth in core+ real estate.

The decrease in Other Revenue was primarily due to foreign exchange losses on our euro denominated bonds and cross-currency swaps.

Expenses

Expenses were $1.3 billion for the three months ended September 30, 2020, an increase of $385.6 million, compared to $947.2 million for the three months ended September 30, 2019. The increase was primarily attributable to an increase of $401.2 million in Total Compensation and Benefits, which was primarily due to an increase of $401.1 million in Performance Allocations Compensation. The increase in Performance Allocations Compensation was primarily due to the increase in Investment Income (Loss) – Performance Allocations, on which the compensation is based.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Revenues

Revenues were $2.5 billion for the nine months ended September 30, 2020, a decrease of $2.8 billion, compared to $5.2 billion for the nine months ended September 30, 2019. The decrease in Revenues was primarily attributable to decreases of $3.0 billion in Investment Income (Loss) and $196.0 million in Other Revenue, partially offset by an increase of $430.2 million in Management and Advisory Fees, Net.

The decrease in Investment Income (Loss) was primarily net unrealized depreciation of investment holdings driven by the impacts of COVID-19. Investment Income (Loss) in our Real Estate, Private Equity and Credit & Insurance segments decreased $1.8 billion, $518.6 million and $390.5 million, respectively. The decrease in our Real Estate segment was primarily attributable to net unrealized depreciation of investment holdings in BREP opportunistic funds and lower realized gains in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. BREP opportunistic funds’ carrying value decreased 1.1% in the nine months ended September 30, 2020 compared to an increase of 12.9% in the nine months ended September 30, 2019. The decrease in our Private Equity segment was primarily attributable to lower net unrealized appreciation of investment holdings in corporate private equity and net unrealized depreciation of investment holdings in Strategic Partners. Corporate private equity carrying value increased 0.4% in the nine months ended September 30, 2020 compared to 8.5% in the nine months ended September 30, 2019. Strategic Partners carrying value decreased 8.0% in the nine months ended September 30, 2020, which reflects a reporting lag of its underlying funds, compared to an increase of 11.5% in the nine months ended September 30, 2019. The decrease in our Credit & Insurance segment was primarily attributable to net unrealized depreciation of investments in our performing credit and distressed strategies in the nine months ended September 30, 2020 compared to net unrealized appreciation in the nine months ended September 30, 2019.

The decrease in Other Revenue was primarily due to foreign exchange losses on our euro denominated bonds and cross-currency swaps.

The increase in Management and Advisory Fees, Net was primarily due to increases in our Real Estate and Private Equity segments of $313.3 million and $97.9 million, respectively. The increase in our Real Estate segment was primarily due to the end of BREP IX’s fee holiday in 2019, the commencement of BREP Europe VI’s investment period in the fourth quarter of 2019 along with the end of its fee holiday in the first quarter of 2020 and Fee-Earning Assets Under Management growth in core+ real estate. The increase in our Private Equity segment was primarily due to the end of BCP VIII, BEP III and BXLS V’s fee holiday during the three months ended September 30, 2020 and a full nine months of Base Management Fees from Strategic Partners VIII, partially offset by a decrease in Transaction, Advisory and Other Fees, Net in BIP and BXCM.

Expenses

Expenses were $1.9 billion for the nine months ended September 30, 2020, a decrease of $983.2 million, compared to $2.9 billion for the nine months ended September 30, 2019. The decrease was primarily attributable to a decrease of $968.3 million in Total Compensation and Benefits, which was primarily due to a decrease of $994.3 million in Performance Allocations Compensation. The decrease in Performance Allocations Compensation was primarily due to the decrease in Investment Income (Loss) – Performance Allocations, on which the compensation is based.

Other Income (Loss)

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Other Income (Loss) was $101.1 million for the three months ended September 30, 2020, a decrease of $122.0 million, compared to $223.1 million for the three months ended September 30, 2019. The decrease in Other Income (Loss) was due to a decrease of $182.3 million in Change in Tax Receivable Agreement Liability, partially offset by an increase of $60.3 million in Net Gains (Losses) from Fund Investment Activities.

The decrease in Change in Tax Receivable Agreement Liability was primarily due to the reduction of the estimated cash savings to be realized by Blackstone recorded in relation to the Conversion during the three months ended September 30, 2019.

The increase in Other Income (Loss) – Net Gain (Losses) from Fund Investment Activities was primarily due to increases of $41.1 million in our Private Equity segment and $21.2 million in our Real Estate segment. The increase in our Private Equity segment was primarily due to appreciation of investments in our consolidated Private Equity segment funds. The increase in our Real Estate segment was primarily driven by appreciation of investments in our consolidated Real Estate segment funds.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Other Income (Loss) was $(68.5) million for the nine months ended September 30, 2020, a decrease of $483.0 million, compared to $414.5 million for the nine months ended September 30, 2019. The decrease in Other Income (Loss) was due to decreases of $300.2 million in Net Gains (Losses) from Fund Investment Activities and $182.8 million in Change in Tax Receivable Agreement Liability.

The decrease in Other Income (Loss) – Net Gain (Losses) from Fund Investment Activities was primarily due to decreases of $187.6 million in our Credit & Insurance segment, $92.3 million in our Real Estate segment and $22.1 million in our Private Equity segment. The decrease in our Credit & Insurance segment was primarily driven by depreciation of consolidated CLOs and other vehicles during the first six months of 2020 and the deconsolidation of nine CLO vehicles during the three months ended September 30, 2020. See Note 9. “Variable Interest Entities” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing. The decrease in our Real Estate segment was primarily driven by depreciation of investments in our consolidated Real Estate segment funds. The decrease in our Private Equity segment was primarily due to depreciation of investments in our consolidated Private Equity segment funds.

The decrease in Change in Tax Receivable Agreement Liability was primarily due to the reduction of the estimated cash savings to be realized by Blackstone recorded in relation to the Conversion during the nine months ended September 30, 2019.

Provision (Benefit) for Taxes

The following table summarizes Blackstone’s tax position:

(Dollars in Thousands)

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

(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.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Blackstone’s Provision (Benefit) for Taxes for the three months ended September 30, 2020 and 2019 was $101.0 million and $(156.8) million, respectively. This resulted in an effective tax rate of 5.6% and -15.5%, respectively, based on our Income Before Provision (Benefit) for Taxes of $1.8 billion and $1.0 billion, respectively.

The increase in Blackstone’s effective tax rate for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, was primarily due to a tax benefit recorded on the date of the Conversion in the three months ended September 30, 2019 while an adjustment to the tax basis at the date of the Conversion resulted in a change to the step-up amounts resulting in an increase to the effective tax rate for the three months ended September 30, 2020.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Blackstone’s Provision (Benefit) for Taxes for the nine months ended September 30, 2020 and 2019 was $89.7 million and $(76.9) million, respectively. This resulted in an effective tax rate of 16.7% and -2.7%, respectively, based on our Income Before Provision (Benefit) for Taxes of $537.0 million and $2.8 billion, respectively.

The increase in Blackstone’s effective tax rate for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, resulted primarily from the Conversion. For the nine months ended September 30, 2020, Blackstone was a corporation subject to federal and state corporate income taxes while for the first six months of the nine months ended September 30, 2019, The Blackstone Group L.P. was a publicly traded partnership with income directly taxable to common unitholders. The tax benefit recorded on the date of the Conversion was reflected in the nine months ended September 30, 2019 while an adjustment to the tax basis at the date of the Conversion resulted in a change to the step-up amounts resulting in an increase to the effective tax rate for the period ended September 30, 2020. In addition, the decrease in the comparative effective tax rates attributable to the valuation allowance resulted from a greater utilization of tax benefit on asset dispositions in the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019.

Additional information regarding our income taxes can be found in Note 13. “Income Taxes” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” 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 The Blackstone Group 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 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 three months ended September 30, 2020 and 2019, the Net Income Before Taxes allocated to Blackstone Holdings was 42.5% and 43.9%, respectively. For the nine months ended September 30, 2020 and 2019, the Net Income Before Taxes allocated to Blackstone Holdings was 42.8% and 44.0%, respectively. The decrease of 1.4% 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 decrease of 1.2% 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 (Loss) — 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 and Total Assets Under Management by Segment, followed by a rollforward of activity for the three and nine months ended September 30, 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 — Assets Under Management and Fee-Earning Assets Under Management”:

Note: Totals may not add due to rounding.

(Dollars in Thousands)

(Dollars in Thousands)

82

(Dollars in Thousands)

(Dollars in Thousands)

83

(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) Effective January 1, 2020, Blackstone updated its calculation methodology as follows: annualized year to date Base Management Fee divided by the average of the beginning of year and each quarter end’s Fee-Earning Assets Under Management in the reporting period. Prior periods have been recast for this update.

(g) For the three months ended September 30, 2020, the impact to Fee-Earning Assets Under Management due to foreign exchange rate fluctuations was $1.2 billion, $932.6 million and $2.1 billion for the Real Estate, Credit & Insurance and Total segments, respectively. For the three months ended September 30, 2019, such impact was $(709.0) million, $(416.1) million and $(1.1) billion for the Real Estate, Credit & Insurance and Total segments, respectively.

(h) For the nine months ended September 30, 2020, the impact to Fee-Earning Assets Under Management due to foreign exchange rate fluctuations was $983.1 million, $918.3 million and $1.9 billion for the Real Estate, Credit & Insurance and Total segments, respectively. For the nine months ended September 30, 2019, such impact was $(791.1) million, $(688.1) million and $(1.5) billion for the Real Estate, Credit & Insurance and Total segments, respectively.

(i) For the three months ended September 30, 2020, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $2.1 billion, $432.8 million, $1.1 billion and $3.6 billion for the Real Estate, Private Equity, Credit & Insurance and Total segments, respectively. For the three months ended September 30, 2019, such impact was $(2.1) billion, $(411.8) million, $(434.2) million and $(2.9) billion for the Real Estate, Private Equity, Credit & Insurance and Total segments, respectively.

(j) For the nine months ended September 30, 2020, the impact to Total Assets Under Management due to foreign exchange rate fluctuations was $1.6 billion, $(131.8) million, $1.0 billion and $2.5 billion for the Real Estate, Private Equity, Credit & Insurance and Total segments, respectively. For the nine months ended September 30, 2019, such impact was $(2.4) billion, $(304.5) million, $(731.1) million and $(3.4) billion for the Real Estate, Private Equity, Credit & Insurance and Total segments, respectively.

Fee-Earning Assets Under Management

Fee-Earning Assets Under Management were $444.5 billion at September 30, 2020, an increase of $8.7 billion, compared to $435.8 billion at June 30, 2020. The net increase was due to:

• Inflows of $11.8 billion primarily attributable to:
• $4.4 billion in our Credit & Insurance segment driven by $1.5 billion from certain long only and MLP strategies, $1.1 billion of capital raised from CLOs, $1.1 billion from direct lending and $636.3 million from BIS,
• $3.5 billion in our Private Equity segment driven by $2.3 billion from BXG, $673.1 million from Tactical Opportunities and $539.9 million from Strategic Partners,
• $2.7 billion in our Real Estate segment driven by $1.3 billion from BREIT, $1.0 billion from BREDS and $388.6 million from BPP and co-investment, and
• $1.2 billion in our Hedge Fund Solutions segment driven by $1.0 billion from individual investor and specialized solutions.
• Market activity of $5.8 billion primarily attributable to:
• $3.0 billion of market appreciation in our Real Estate segment driven by $2.2 billion from core+ real estate (including $1.2 billion from foreign exchange appreciation), $513.2 million of foreign exchange appreciation from BREP opportunistic funds and co-investment and $268.8 million from BREDS,
• $2.1 billion of market appreciation in our Hedge Fund Solutions segment driven by returns from BAAM’s Principal Solutions Composite of 3.0% gross and 2.8% net,
• $1.8 billion of market appreciation in our Credit & Insurance segment driven by $617.1 million from CLOs, $588.6 million from certain long only and MLP strategies, $320.7 million from direct lending and $164.2 million from distressed strategies, which included $932.6 million of foreign exchange appreciation across the segment, and
• $1.1 billion of market depreciation in our Private Equity segment driven by Strategic Partners, which reflects a reporting lag of its underlying funds.

Offsetting these increases were:

• Outflows of $4.8 billion primarily attributable to:
• $2.2 billion in our Credit & Insurance segment driven by $1.1 billion from certain long only and MLP strategies and $995.9 million from direct lending, and
• $1.6 billion in our Hedge Fund Solutions segment driven by $898.5 million from individual investor and specialized solutions and $695.4 million from customized solutions.
• Realizations of $4.1 billion primarily attributable to:
• $1.6 billion in our Private Equity segment driven by $575.2 million from Tactical Opportunities, $542.9 million from Strategic Partners and $480.3 million from corporate private equity,
• $1.4 billion in our Real Estate segment driven by $685.0 million from BREDS, $506.8 million from core+ real estate and $242.9 million from BREP opportunistic and co-investment, and
• $868.1 million in our Credit & Insurance segment driven by $365.4 million from distressed strategies, $219.5 million from CLOs, $140.3 million from certain long only and MLP strategies and $116.1 million from direct lending.

Fee-Earning Assets Under Management were $444.5 billion at September 30, 2020, an increase of $36.4 billion, compared to $408.1 billion at December 31, 2019. The net increase was due to:

• Inflows of $78.1 billion primarily attributable to:
• $42.8 billion in our Private Equity segment driven by $28.5 billion from corporate private equity, primarily related to the commencement of BCP VIII and BEP III’s investment periods, $4.9 billion from BXLS, related to the commencement of BXLS V’s investment period, $4.5 billion from Strategic Partners, $2.3 billion from BXG, $1.9 billion from Tactical Opportunities and $721.8 million from multi-asset products,
• $15.7 billion in our Real Estate segment driven by $7.5 billion from BREIT, $4.0 billion from BREDS, $1.8 billion from BREP opportunistic funds and co-investment, $1.1 billion from BPP Asia and co-investment, $757.0 million from BPP U.S. and co-investment and $483.9 million from BPP Europe and co-investment,
• $12.6 billion in our Credit & Insurance segment driven by $4.2 billion from certain long only and MLP strategies, $3.3 billion of capital raised from CLOs, $3.3 billion from our structured products group, $3.1 billion from direct lending, $1.5 billion from BIS, $911.0 million from mezzanine funds and $894.6 million from distressed strategies, all partially offset by $5.2 billion of allocations to various strategies and other segments, and
• $7.1 billion in our Hedge Fund Solutions segment driven by $4.7 billion from individual investor and specialized solutions, $1.4 billion from customized solutions and $952.8 million from commingled products.

Offsetting these increases were:

• Outflows of $24.1 billion primarily attributable to:
• $8.8 billion in our Hedge Fund Solutions segment driven by $4.6 billion from individual investor and specialized solutions, $3.3 billion from customized solutions and $911.4 million from commingled products,
• $7.0 billion in our Credit & Insurance segment driven by $5.3 billion from certain long only and MLP strategies, $1.1 billion from direct lending and $284.7 million from distressed strategies,
• $5.9 billion in our Private Equity segment driven by $4.6 billion from corporate private equity primarily due to the end of BCP VII and BEP II’s investment periods, $707.0 million from Strategic Partners, $498.0 million from BXLS due to the end of Clarus IV’s investment period and $105.4 million from multi-asset products, and
• $2.3 billion in our Real Estate segment driven by $1.2 billion from BREIT, $690.7 million from BREDS, $256.0 million from BPP U.S. and co-investment and $145.5 million from BPP Europe.
• Realizations of $13.0 billion primarily attributable to:
• $5.1 billion in our Real Estate segment driven by $2.2 billion from BREDS, $2.2 billion from core+ real estate and $773.7 million from BREP opportunistic funds and co-investment,
• $3.6 billion in our Private Equity segment driven by $1.5 billion from Tactical Opportunities, $1.1 billion from Strategic Partners and $1.1 billion from corporate private equity, and
• $3.4 billion in our Credit & Insurance segment driven by $1.1 billion from distressed strategies, $714.0 million from CLOs, $597.4 million from mezzanine funds, $532.4 million from direct lending and $440.5 million from certain long only and MLP strategies.
• Market depreciation of $4.6 billion driven in large part by the market impacts of COVID-19 on the fair value components of Fee-Earning Assets Under Management unless otherwise stated:
• $3.4 billion of market depreciation in our Credit & Insurance segment driven by depreciation of $3.5 billion from certain long only and MLP strategies and $448.0 million from distressed strategies, partially offset by $568.6 million of market appreciation from CLOs, all of which included $918.3 million of foreign exchange appreciation across the segment,
• $1.4 billion of market depreciation in our Hedge Fund Solutions segment driven by returns from BAAM’s Principal Solutions Composite of -0.1% gross and -0.7% net,
• $1.3 billion of market depreciation in our Private Equity segment driven by Strategic Partners, which reflects a reporting lag of its underlying funds, and
• $1.4 billion of market appreciation in our Real Estate segment driven by $1.3 billion from core+ real estate (including $432.2 million from foreign exchange depreciation), $550.6 million from BREP opportunistic and co-investment and $384.4 million from BREDS.

Total Assets Under Management

Total Assets Under Management were $584.4 billion at September 30, 2020, an increase of $20.0 billion, compared to $564.3 billion at June 30, 2020. The net increase was due to:

• Market activity of $18.4 billion primarily attributable to:
• $6.7 billion of market appreciation in our Real Estate segment driven by carrying value increases in opportunistic and core+ real estate of 6.4% and 3.5%, respectively, which includes $2.1 billion of foreign exchange appreciation across the segment,
• $6.3 billion of market appreciation in our Private Equity segment driven by carrying value increases in corporate private equity and Tactical Opportunities of 12.2% and 10.7%, respectively, which included $432.8 million of foreign exchange appreciation across the segment,
• $3.1 billion of market appreciation in our Credit & Insurance segment driven by $686.1 million from direct lending, $678.9 million from certain long only and MLP strategies, $583.9 million from CLOs, $569.9 million from distressed strategies and $439.6 million from mezzanine funds, which included $1.1 billion of foreign exchange appreciation across the segment, and
• $2.3 billion of market appreciation in our Hedge Fund Solutions segment driven by reasons noted above in Fee-Earning Assets Under Management.

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.

• Inflows of $15.1 billion primarily attributable to:
• $5.6 billion in our Credit & Insurance segment driven by $1.7 billion from mezzanine funds, $1.6 billion from certain long only and MLP strategies, $1.1 billion of capital raised from CLOs, $636.3 million from BIS and $585.0 million from direct lending,
• $3.9 billion in our Private Equity segment driven by $2.5 billion from BXG, $290.4 million from corporate private equity, $263.1 million from Tactical Opportunities, $149.8 million from Strategic Partners and $139.6 million from multi-asset products,
• $3.9 billion in our Real Estate segment driven by $1.3 billion from BREDS, $1.3 billion from BREIT, $494.1 million from BPP Europe and co-investment, $320.6 million from BPP U.S. and co-investment, $259.0 million from BREP opportunistic funds and co-investment and $229.4 million from BPP Asia, and
• $1.7 billion in our Hedge Fund Solutions segment driven by $1.0 billion from individual investor and specialized solutions, $371.2 million from commingled products and $314.8 million from customized solutions.

Offsetting these increases were:

• Realizations of $7.9 billion primarily attributable to:
• $4.7 billion in our Private Equity segment driven by $3.2 billion from corporate private equity, $744.5 million from Tactical Opportunities and $696.2 million from Strategic Partners,
• $1.9 billion in our Real Estate segment driven by $758.3 million from BREDS, $578.8 million from BREP opportunistic and co-investment and $517.3 million from core+ real estate, and
• $1.2 billion in our Credit & Insurance segment driven by $483.9 million from distressed strategies, $280.0 million from direct lending, $219.5 million from CLOs and $156.3 million from certain long only and MLP strategies.

Total Assets Under Management realizations in our Real Estate and Private Equity segments generally represents the total proceeds and typically exceeds the Fee-Earning Assets Under Management realizations which generally represents only the invested capital.

• Outflows of $5.5 billion primarily attributable to:
• $1.7 billion in our Credit & Insurance segment driven by $1.1 billion from certain long only and MLP strategies and $356.6 million from direct lending,
• $1.7 billion in our Hedge Fund Solutions segment driven by $942.5 million from individual investor and specialized solutions and $710.4 million from customized solutions, and
• $1.7 billion in our Real Estate segment driven by redemptions from BREIT, BREDS liquid funds, BPP U.S. and BPP Europe.

Total Assets Under Management were $584.4 billion at September 30, 2020, an increase of $13.3 billion, compared to $571.1 billion at December 31, 2019. The net increase was due to:

• Inflows of $62.7 billion primarily attributable to:
• $21.4 billion in our Real Estate segment driven by $8.5 billion from BREDS, $7.5 billion from BREIT, $2.1 billion from BREP opportunistic funds and co-investment, $1.4 billion from BPP Asia and co-investment, $975.7 million from BPP U.S. and co-investment and $907.3 million from BPP Europe and co-investment,
• $18.0 billion in our Private Equity segment driven by $7.1 billion from corporate private equity, $4.0 billion from Strategic Partners, $2.5 billion from BXG, $2.0 billion from BXLS, $1.6 billion from Tactical Opportunities and $888.0 million from BIP,
• $15.0 billion in our Credit & Insurance segment driven by $6.6 billion from our structured products group, $4.9 billion from certain long only and MLP strategies, $3.4 billion from direct lending, $3.3 billion of capital raised from CLOs, $2.9 billion from mezzanine funds, $1.5 billion from BIS and $210.3 million from distressed strategies, all partially offset by $8.4 billion of allocations to various strategies and other segments, and
• $8.3 billion in our Hedge Fund Solutions segment driven by $5.0 billion from individual investor and specialized solutions, $2.1 billion from customized solutions and $1.2 billion from commingled products.

Offsetting these increases were:

• Realizations of $21.7 billion primarily attributable to:
• $9.7 billion in our Private Equity segment driven by $5.2 billion from corporate private equity, $2.3 billion from Tactical Opportunities, $1.8 billion from Strategic Partners and $437.2 million from BXLS,
• $6.6 billion in our Real Estate segment driven by $2.8 billion from BREP opportunistic and co-investment, $2.2 billion from core+ real estate and $1.6 billion from BREDS, and
• $4.5 billion in our Credit & Insurance segment driven by $1.2 billion from distressed strategies, $1.1 billion from mezzanine funds, $1.0 billion from direct lending, $714.0 million from CLOs and $490.6 million from certain long only and MLP strategies.
• Outflows of $20.8 billion primarily attributable to:
• $9.2 billion in our Hedge Fund Solutions segment driven by $4.7 billion from individual investor and specialized solutions, $3.4 billion from customized solutions and $1.1 billion from commingled products,
• $6.9 billion in our Credit & Insurance segment driven by $5.7 billion from certain long only and MLP strategies, $483.2 million from direct lending and $391.4 million from CLOs,
• $3.2 billion in our Real Estate segment driven by $1.7 billion from core+ real estate, $1.1 billion from BREP opportunistic funds and co-investment and $323.3 million from BREDS, and
• $1.6 billion in our Private Equity segment driven by $574.8 million from multi-asset products, $405.4 million from corporate private equity, $290.3 million from Tactical Opportunities, $191.6 million from Strategic Partners and $151.1 million from BXLS.
• Market depreciation of $7.0 billion driven in large part by the market impacts of COVID-19 on the fair value components of Total Assets Under Management unless otherwise noted:
• $4.3 billion of market depreciation in our Credit & Insurance segment driven by depreciation of $3.7 billion from certain long only and MLP strategies and $1.2 billion from distressed strategies, partially offset by market appreciation of $559.8 million from CLOs, all of which included $1.0 billion of foreign exchange depreciation across the segment,
• $1.2 billion of market depreciation in our Hedge Fund Solutions segment driven by reasons noted above in Fee-Earning Assets Under Management, and
• $969.5 million of market depreciation in our Real Estate segment driven by $2.9 billion from BREDS, partially offset by $1.4 billion of market appreciation from core+ real estate (including $449.0 million of foreign exchange appreciation) and $480.7 million of market appreciation from BREP opportunistic funds and co-investment (including $1.2 billion of foreign exchange appreciation and $674.3 million of market depreciation).

Dry Powder

The following presents our Dry Powder as of quarter end of each period:

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.

Net Accrued Performance Revenues

Effective January 1, 2020, Net Accrued Performance Revenues has been redefined to exclude Performance Revenues realized but not yet distributed as of the reporting date. This update aligns the presentation of Distributable Earnings and Net Accrued Performance Revenues. Prior periods have been recast to reflect this definition.

The following table presents the Accrued Performance Revenues, net of performance compensation, of the Blackstone Funds as of September 30, 2020 and 2019. Net Accrued Performance Revenues presented do not include clawback amounts, if any, which are disclosed in Note 17. “Commitments and Contingencies — Contingencies — Contingent Obligations (Clawback)” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing. See “— Non-GAAP Financial Measures” for our reconciliation of Net Accrued Performance Revenues.

(Dollars in Millions)

Note: Totals may not add due to rounding.

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

(b) Tactical Opportunities includes Blackstone Growth.

For the twelve months ended September 30, 2020, Net Accrued Performance Revenues receivable declined due to Net Accrued Performance Revenues of $439.5 million and net realized distributions of $932.4 million.

Invested Performance Eligible Assets Under Management

The following presents our Invested Performance Eligible Assets Under Management as of quarter end for each period:

Note: Totals may not add due to rounding.

Perpetual Capital

The following presents our Perpetual Capital assets under management as of quarter end for each period:

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 September 30, 2020:

(Dollars/Euros in Thousands, Except Where Noted)

Real Estate

continued...

(Dollars/Euros in Thousands, Except Where Noted)

Real Estate (continued)

continued...

(Dollars/Euros in Thousands, Except Where Noted)

Private Equity (continued)

Tactical Opportunities

continued...

(Dollars/Euros in Thousands, Except Where Noted)

Credit

97

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

N/M Not meaningful generally due to the limited time since initial investment.

N/A Not 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) Unless otherwise indicated, Net Internal Rate of Return (“IRR”) represents the annualized inception to September 30, 2020 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 of cash flows 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. Committed Capital and Available Capital are not regularly reported to investors in our core+ strategy and are not applicable in the context of these funds.

(h) Unrealized Investment Value reflects BREIT’s net asset value as of September 30, 2020. Realized Investment Value represents BREIT’s cash distributions, net of servicing fees. The 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. Committed Capital and Available Capital are not regularly reported to investors in our core+ strategy and are not applicable in the context of this vehicle.

(i) BREDS High-Yield represents the flagship real estate debt drawdown funds only and excludes BREDS High-Grade.

(j) Blackstone Core Equity Partners is a core private equity fund which invests with a more modest risk profile and longer hold period than traditional private equity.

(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 and therefore do not include the impact of economic and market activities in the quarter in which such events occur.

(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.

(m) Unrealized Investment Value reflects BGSL’s net asset value as of September 30, 2020. Realized Investment Value represents BGSL’s cash distributions. BGSL’s net return is annualized and calculated since inception starting on November 20, 2018, as the change in NAV per share during the period, plus distributions per share (assuming dividends and distributions are reinvested in accordance with the Company’s dividend reinvestment plan) divided by the beginning NAV per share.

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:

(Dollars in Thousands)

N/M Not meaningful.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Segment Distributable Earnings were $300.1 million for the three months ended September 30, 2020, a decrease of $101.7 million, compared to $401.9 million for the three months ended September 30, 2019. The decrease in Segment Distributable Earnings was primarily attributable to a decrease of $198.3 million in Net Realizations, partially offset by an increase of $96.6 million in Fee Related Earnings.

Segment Distributable Earnings in our Real Estate segment in the third quarter of 2020 were lower compared to the third quarter of 2019. This was primarily driven by decreased Net Realizations, partially offset by increased Fee Related Earnings due to the end of BREP IX’s fee holiday in 2019, the commencement of BREP Europe VI’s investment period in the fourth quarter of 2019 along with the end of its fee holiday in the first quarter of 2020 and growth in Fee-Earning Assets Under Management in core+ real estate. The third quarter of 2020 was characterized by continued market rebounds across many asset classes. However, the ongoing COVID-19 pandemic and related shutdowns or limitations in the operations of certain non-essential businesses have continued to cause disruption in the U.S. and global economies, and certain investments in our real estate portfolio, such as those in the hospitality and retail sectors and in certain geographies in the office and residential sectors, have been materially challenged and could continue to be adversely impacted. Following a more muted period since the onset of the COVID-19 pandemic, the continuing market recovery in the third quarter of 2020 has contributed to renewed momentum in capital deployment, realization and fundraising activity, although the resurgence in COVID-19 infection levels in certain geographies and a potential resulting market downturn may pose material risks. These risks potentially create additional pressure for certain of our portfolio companies’ and investments’ liquidity needs and their ability to meet financial obligations, including by adversely impacting rent collection and operational performance. In addition, to the extent the rate of global growth in certain sectors further decelerates, this would contribute to a more challenging operating environment. We have not, however, experienced a period of significant dislocation since the first quarter of 2020, during which the liquidity of certain assets traded in the credit markets was limited. Nonetheless, another period of such dislocation would impact the value of certain assets held by our funds, such funds’ ability to sell assets at attractive prices or in a timely manner in order to avoid losses and the likelihood of margin calls from credit providers. Furthermore, the economic recovery is likely to continue to be gradual, uneven and characterized by meaningful dispersion across sectors and regions, with uncertainty regarding its ultimate length and trajectory. For example, the recovery to date has been more pronounced in the U.S. than in the European Union.

We have also seen an increasing focus toward rent regulation as a means to address residential affordability caused by undersupply of housing in certain markets in the U.S. and Europe, as well as an increasing focus on the institution of eviction limitations in response to the COVID-19 pandemic in the U.S. 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. See “Part II. Item 1A. Risk Factors — The global outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economies and is adversely impacting, and may continue to adversely impact, our performance and results of operations.” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and the market and economic conditions risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

Fee Related Earnings were $283.6 million for the three months ended September 30, 2020, an increase of $96.6 million, or 52%, compared to $187.0 million for the three months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to increases of $76.7 million in Management Fees, Net and $24.7 million in Fee Related Performance Revenues.

Management Fees, Net were $409.2 million for the three months ended September 30, 2020, an increase of $76.7 million, compared to $332.5 million for the three months ended September 30, 2019, primarily driven by an increase in Base Management Fees. Base Management Fees increased $126.0 million primarily due to the end of BREP IX’s fee holiday in 2019, the commencement of BREP Europe VI’s investment period in the fourth quarter of 2019 along with the end of its fee holiday in the first quarter of 2020 and Fee-Earning Assets Under Management growth in core+ real estate.

Fee Related Performance Revenues were $55.3 million for the three months ended September 30, 2020, an increase of $24.7 million, compared to $30.6 million for the three months ended September 30, 2019. The increase was primarily due to a crystallization event in BPP Europe.

Net Realizations

Net Realizations were $16.5 million for the three months ended September 30, 2020, a decrease of $198.3 million, compared to $214.8 million for the three months ended September 30, 2019. The decrease in Net Realizations was primarily attributable to a decrease of $263.5 million in Realized Performance Revenues, partially offset by a decrease of $78.2 million in Realized Performance Compensation.

Realized Performance Revenues were $18.9 million for the three months ended September 30, 2020, a decrease of $263.5 million, compared to $282.4 million for the three months ended September 30, 2019. The decrease was due to lower realization activity as a result of market impacts of COVID-19 in the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Realized Performance Compensation was $7.3 million for the three months ended September 30, 2020, a decrease of $78.2 million, compared to $85.5 million for the three months ended September 30, 2019. The decrease was primarily due to the decrease in Realized Performance Revenues.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Segment Distributable Earnings were $848.5 million for the nine months ended September 30, 2020, a decrease of $64.6 million, compared to $913.1 million for the nine months ended September 30, 2019. The decrease in Segment Distributable Earnings was primarily attributable to a decrease of $360.9 million in Net Realizations, partially offset by an increase of $296.3 million in Fee Related Earnings.

Fee Related Earnings were $771.2 million for the nine months ended September 30, 2020, an increase of $296.3 million, or 62%, compared to $474.9 million for the nine months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to increases of $313.3 million in Management Fees, Net and $18.0 million in Fee Related Performance Revenues, partially offset by an increase of $30.5 million in Fee Related Compensation.

Management Fees, Net were $1.2 billion for the nine months ended September 30, 2020, an increase of $313.3 million, compared to $894.3 million for the nine months ended September 30, 2019, primarily driven by an increase in Base Management Fees. Base Management Fees increased $364.3 million primarily due to the end of BREP IX’s fee holiday in 2019, the commencement of BREP Europe VI’s investment period in the fourth quarter of 2019 along with the end of its fee holiday in the first quarter of 2020 and Fee-Earning Assets Under Management growth in core+ real estate.

The annualized Base Management Fee Rate increased from 1.00% at September 30, 2019 to 1.15% at September 30, 2020. The increase was principally due to BREP IX, the majority of which were under a Base Management Fee holiday in 2019, and BREP Europe VI, which commenced its investment period in the fourth quarter of 2019 and came out of its fee holiday in the first quarter of 2020.

Fee Related Performance Revenues were $66.4 million for the nine months ended September 30, 2020, an increase of $18.0 million, compared to $48.3 million for the nine months ended September 30, 2019. The increase was primarily due to a crystallization event in BPP Europe.

Fee Related Compensation was $375.3 million for the nine months ended September 30, 2020, an increase of $30.5 million, compared to $344.8 million for the nine months ended September 30, 2019. The increase was primarily due to an increase in Management Fees, Net on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $77.3 million for the nine months ended September 30, 2020, a decrease of $360.9 million, compared to $438.2 million for the nine months ended September 30, 2019. The decrease in Net Realizations was primarily attributable to decreases of $461.3 million in Realized Performance Revenues and $49.4 million in Realized Principal Investment Income, partially offset by a decrease of $149.9 million in Realized Performance Compensation.

Realized Performance Revenues were $96.8 million for the nine months ended September 30, 2020, a decrease of $461.3 million, compared to $558.1 million for the nine months ended September 30, 2019. The decrease was due to lower realization activity as a result of market impacts of COVID-19 in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Realized Principal Investment Income was $13.8 million for the nine months ended September 30, 2020, a decrease of $49.4 million, compared to $63.3 million for the nine months ended September 30, 2019. The decrease was primarily due to firm redemptions from Real Estate funds in 2019.

Realized Performance Compensation was $33.3 million for the nine months ended September 30, 2020, a decrease of $149.9 million, compared to $183.2 million for the nine months ended September 30, 2019. The decrease was primarily due to the decrease in Realized Performance Revenues.

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:

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

N/M Not meaningful generally due to the limited time since initial investment.

N/A Not 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) 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.

(d) BPP represents the core+ real estate funds which invest with a more modest risk profile and lower leverage.

(e) 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.

(f) BREDS Liquid represents BREDS funds that invest in liquid real estate debt securities, except funds in liquidation and insurance mandates with specific investment objectives. The returns presented represent summarized asset-weighted gross and net rates of return from August 1, 2008. Inception to Date returns are presented on an annualized basis.

(g) 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.

(h) 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.

Funds With Closed Investment Periods

Real Estate segment has eleven funds with closed investment periods as of September 30, 2020: BREP VIII, BREP VII, BREP VI, BREP V, BREP IV, BREP Europe V, BREP Europe IV, BREP Europe Ill, BREP Asia, BREDS Ill and BREDS II. As of September 30, 2020, BREP VII, BREP VI, BREP V, BREP IV, BREP Europe IV, BREP Europe Ill and BREDS II were above their carried interest thresholds and would still be above their carried interest thresholds even if all remaining investments were valued at zero. BREP VIII, BREP Europe V, BREP Asia and BREDS III are currently above their carried interest thresholds.

Private Equity

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

(Dollars in Thousands)

N/M Not meaningful.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Segment Distributable Earnings were $375.9 million for the three months ended September 30, 2020, an increase of $180.5 million, compared to $195.4 million for the three months ended September 30, 2019. The increase in Segment Distributable Earnings was primarily attributable to increases of $71.9 million in Fee Related Earnings and $108.6 million in Net Realizations.

Segment Distributable Earnings in our Private Equity segment in the third quarter of 2020 were higher compared to the third quarter of 2019. This was primarily driven by an increase in Net Realizations due to higher Realized Performance Revenue, partially offset by an increase in Realized Performance Compensation. The third quarter of 2020 was characterized by continued market rebounds across many asset classes. However, the ongoing COVID-19 pandemic and related shutdowns or limitations in the operations of certain non-essential businesses have continued to cause disruption in the U.S. and global economies, and certain investments in our private equity portfolio, such as those in the travel, leisure and events sectors, have experienced material reductions in value and could continue to be adversely impacted. Following a more muted period since the onset of the COVID-19 pandemic, the continuing market recovery in the third quarter of 2020 has contributed to renewed momentum in capital deployment, realization and fundraising activity, although the resurgence in COVID-19 infection levels in certain geographies and a potential resulting market downturn may pose material risks. These risks potentially create additional pressure for certain of our portfolio companies’ liquidity needs and their ability to meet financial obligations. In addition, to the extent the rate of global growth in certain sectors further decelerates, this may contribute to a more challenging operating environment for our portfolio companies. Furthermore, the economic recovery is likely to continue to be gradual, uneven and characterized by meaningful dispersion across sectors and regions, with uncertainty regarding its ultimate length and trajectory. For example, the recovery to date has been more pronounced in the U.S. than in the European Union.

In energy, oil prices have stabilized since the significant declines experienced in the first quarter of 2020. Nonetheless, weakened market fundamentals continue to pose challenges, particularly in upstream energy, which represents 3% of the Private Equity segment’s investment portfolio and less than 2% of Blackstone’s aggregate investment portfolio. An increased focus on energy sustainability, including potential alternatives to fossil fuels, has also exacerbated the impact of such weakened market fundamentals. The persistence of these weakened market fundamentals would further negatively impact the performance of certain investments in our energy and corporate private equity funds. In addition, factors such as 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 trade developments put pressure on our ability to increase profit margins at our U.S. portfolio companies through operational initiatives. See “Part II. Item 1A. Risk Factors — The global outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economies and is adversely impacting, and may continue to adversely impact, our performance and results of operations.” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and the market and economic conditions risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

Fee Related Earnings were $183.2 million for the three months ended September 30, 2020, an increase of $71.9 million, or 65%, compared to $111.3 million for the three months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to an increase of $92.9 million in Management and Advisory Fees, Net, partially offset by increases of $13.5 million in Fee Related Compensation and $7.5 million in Other Operating Expenses.

Management and Advisory Fees, Net were $348.2 million for the three months ended September 30, 2020, an increase of $92.9 million, compared to $255.3 million for the three months ended September 30, 2019, primarily driven by an increase in Base Management Fees. Base Management Fees increased $100.4 million primarily due to the end of BCP VIII, BEP III and BXLS V’s fee holidays during the three months ended September 30, 2020.

Fee Related Compensation was $119.3 million for the three months ended September 30, 2020, an increase of $13.5 million, compared to $105.8 million for the three months ended September 30, 2019. The increase was primarily due to an increase in Management and Advisory Fees, Net on which a portion of Fee Related Compensation is based.

Other Operating Expenses were $45.7 million for the three months ended September 30, 2020, an increase of $7.5 million, compared to $38.2 million for the three months ended September 30, 2019. The increase was primarily due to growth in our BIP, Tactical Opportunities and BXLS businesses, partially offset by less travel and entertainment expenses in the three months ended September 30, 2020 due to COVID-19.

Net Realizations

Net Realizations were $192.8 million for the three months ended September 30, 2020, an increase of $108.6 million, or 129%, compared to $84.2 million for the three months ended September 30, 2019. The increase in Net Realizations was primarily attributable to increases of $171.0 million in Realized Performance Revenues, partially offset by an increase of $60.7 million in Realized Performance Compensation.

Realized Performance Revenues were $295.2 million for the three months ended September 30, 2020, an increase of $171.0 million, compared to $124.2 million for the three months ended September 30, 2019. The increase was primarily due to higher Realized Performance Revenues in corporate private equity.

Realized Performance Compensation was $112.7 million for the three months ended September 30, 2020, an increase of $60.7 million, compared to $52.0 million for the three months ended September 30, 2019. The increase was primarily due to the increase in Realized Performance Revenues.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Segment Distributable Earnings were $747.3 million for the nine months ended September 30, 2020, an increase of $63.6 million, compared to $683.7 million for the nine months ended September 30, 2019. The increase in Segment Distributable Earnings was primarily attributable to an increase of $75.2 million in Fee Related Earnings, partially offset by a decrease of $11.6 million in Net Realizations.

Fee Related Earnings

Fee Related Earnings were $429.9 million for the nine months ended September 30, 2020, an increase of $75.2 million, or 21%, compared to $354.6 million for the nine months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to an increase of $97.9 million in Management and Advisory Fees, Net, partially offset by increases of $18.7 million in Other Operating Expenses and $4.0 million in Fee Related Compensation.

Management and Advisory Fees, Net were $883.9 million for the nine months ended September 30, 2020, an increase of $97.9 million, compared to $786.0 million for the nine months ended September 30, 2019, primarily driven by an increase in Base Management Fees, offset by a decrease in Transaction, Advisory and Other Fees, Net. Base Management Fees increased $137.8 million primarily due to the end of BCP VIII, BEP III and BXLS V’s fee holidays during the three months ended September 30, 2020 and a full nine months of Base Management Fees from Strategic Partners VIII. Transaction, Advisory and Other Fees, Net decreased $41.0 million primarily due to decreases in BIP and BXCM.

The annualized Base Management Fee Rate decreased from 1.09% at September 30, 2019 to 0.96% at September 30, 2020. The decrease was principally due to BCP VIII, BEP III and BXLS V, each of which commenced its investment period in the first quarter of 2020 and had a fee holiday during the first six months of 2020.

Other Operating Expenses were $131.5 million for the nine months ended September 30, 2020, an increase of $18.7 million, compared to $112.9 million for the nine months ended September 30, 2019. The increase was primarily due to growth in our BIP, Tactical Opportunities and BXLS businesses, partially offset by less travel and entertainment expenses in the three months ended September 30, 2020 due to COVID-19.

Fee Related Compensation was $322.5 million for the nine months ended September 30, 2020, an increase of $4.0 million, compared to $318.5 million for the nine months ended September 30, 2019. The increase was primarily due to higher fee related compensation in Tactical Opportunities, BXLS and BIP.

Net Realizations

Net Realizations were $317.5 million for the nine months ended September 30, 2020, a decrease of $11.6 million, compared to $329.1 million for the nine months ended September 30, 2019. The decrease in Net Realizations was primarily attributable to a decrease of $42.0 million in Realized Principal Investment Income and an increase of $37.7 million in Realized Performance Compensation, partially offset by an increase of $68.1 million in Realized Performance Revenues.

Realized Principal Investment Income was $38.0 million for the nine months ended September 30, 2020, a decrease of $42.0 million, compared to $80.0 million for the nine months ended September 30, 2019. The decrease was primarily due to a decrease of Realized Principal Investment Income in corporate private equity.

Realized Performance Compensation was $192.4 million for the nine months ended September 30, 2020, an increase of $37.7 million, compared to $154.7 million for the nine months ended September 30, 2019. The increase was primarily due to the increase in Realized Performance Revenues.

Realized Performance Revenues were $471.8 million for the nine months ended September 30, 2020, an increase of $68.1 million, compared to $403.7 million for the nine months ended September 30, 2019. The increase was primarily due to higher Realized Performance Revenues in corporate private equity.

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:

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

N/M Not meaningful generally due to the limited time since initial investment.

N/A Not applicable.

(a) Net returns are based on the change in carrying value (realized and unrealized) after management fees, expenses and Performance Revenues.

(b) BCEP is a core private equity fund which invests with a more modest risk profile and longer hold period than traditional private equity.

(c) Realizations are treated as return of capital until fully recovered and therefore inception to date realized returns are not applicable. If information is not available on a timely basis, returns are calculated from results that are reported on a three month lag and therefore do not include the impact of economic and market activities in the quarter in which such events occur.

Funds With Closed Investment Periods

The corporate private equity funds within the Private Equity segment have seven funds with closed investment periods: BCP IV, BCP V, BCP VI, BCP VII, BCOM, BEP I and BEP II. As of September 30, 2020, 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, BCP VII, BCOM and BEP I are currently above their respective carried interest thresholds. 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 II is currently below its carried interest threshold.

Hedge Fund Solutions

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

(Dollars in Thousands)

N/M Not meaningful.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Segment Distributable Earnings were $90.5 million for the three months ended September 30, 2020, an increase of $6.2 million, compared to $84.3 million for the three months ended September 30, 2019. The increase in Segment Distributable Earnings was primarily attributable to increases of $4.3 million in Fee Related Earnings and of $1.9 million in Net Realizations.

Segment Distributable Earnings in our Hedge Fund Solutions segment in the third quarter of 2020 were higher compared to the third quarter of 2019. This increase was primarily driven by increased Net Realizations due to increases in Fee Related Earnings and Net Realizations. Notwithstanding that the ongoing COVID-19 pandemic and related shutdowns or limitations in the operations of certain non-essential businesses have continued to cause disruption in the U.S. and global economies, the third quarter of 2020 was characterized by continued market rebounds across many asset classes, and our Hedge Fund Solutions segment has largely recovered from the losses in composite returns experienced in the first quarter of 2020. The resurgence in COVID-19 infection levels in certain geographies and a potential resulting market downturn, however, may pose material risks to our Hedge Fund Solutions segment, including by potentially causing investors to seek liquidity in the form of redemptions from our funds and adversely impacting Incentive Fees. We have not, however, experienced a period of significant dislocation since the first quarter of 2020, during which the liquidity of certain assets traded in the credit markets was limited. Nonetheless, another period of such dislocation would impact the value of certain assets held by our funds, such funds’ ability to sell such assets at attractive prices or in a timely manner in order to avoid losses and the likelihood of margin calls from credit providers. In addition, given continuing market uncertainty, we expect fundraising in our Hedge Fund Solutions segment in the near term to continue, but at a slower pace, which may result in a delay in management fees. Furthermore, the economic recovery is likely to continue to be gradual, uneven and characterized by

meaningful dispersion across sectors and regions, with uncertainty regarding its ultimate length and trajectory. A continuing market recovery, however, could contribute to increased momentum in the longer term.

In an equity market environment that generally has 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 expect 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. See “Part II. Item 1A. Risk Factors — The global outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economies and is adversely impacting, and may continue to adversely impact, our performance and results of operations.” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and “Part I. Item 1A. Risk Factors — Risks Related to Our Business — Hedge fund investments are subject to numerous additional risks.” and the market and economic conditions risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

Fee Related Earnings were $86.3 million for the three months ended September 30, 2020, an increase of $4.3 million, compared to $82.0 million for the three months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to an increase of $5.9 million in Management Fees, Net, partially offset by an increase of $2.5 million in Fee Related Compensation.

Management Fees, Net were $147.3 million for the three months ended September 30, 2020, an increase of $5.9 million, compared to $141.4 million for the three months ended September 30, 2019, primarily driven by an increase in Base Management Fees. Base Management Fees increased $5.4 million primarily driven by Fee-Earning Assets Under Management growth in our individual investor and specialized solutions platform.

Fee Related Compensation was $41.4 million for the three months ended September 30, 2020, an increase of $2.5 million, compared to $38.9 million for the three months ended September 30, 2019. The increase was primarily due to an increase in Management Fees, Net, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $4.2 million for the three months ended September 30, 2020, an increase of $1.9 million, or 81%, compared to $2.3 million for the three months ended September 30, 2019. The increase in Net Realizations was primarily attributable to an increase of $3.8 million in Realized Performance Revenues, partially offset by a decrease of $1.6 million in Realized Principal Investment Income (Loss).

Realized Performance Revenues were $5.6 million for the three months ended September 30, 2020, an increase of $3.8 million, compared to $1.8 million for the three months ended September 30, 2019. The increase was primarily driven by incentive crystallization in our individual investor and specialized solutions platform.

Realized Principal Investment Income (Loss) was $(0.2) million for the three months ended September 30, 2020, a decrease of $1.6 million, compared to $1.5 million for the three months ended September 30, 2019. The decrease was primarily due to the realized losses on our corporate treasury investments allocated to the segment.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Segment Distributable Earnings were $255.5 million for the nine months ended September 30, 2020, a decrease of $10.1 million, compared to $265.6 million for the nine months ended September 30, 2019. The decrease in Segment Distributable Earnings was primarily attributable to a decrease of $21.2 million in Net Realizations, partially offset by an increase of $11.2 million in Fee Related Earnings.

Fee Related Earnings were $249.9 million for the nine months ended September 30, 2020, an increase of $11.2 million, compared to $238.8 million for the nine months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to an increase of $17.3 million in Management Fees, Net, partially offset by an increase of $9.5 million in Fee Related Compensation.

Management Fees, Net were $434.0 million for the nine months ended September 30, 2020, an increase of $17.3 million, compared to $416.7 million for the nine months ended September 30, 2019, primarily driven by an increase in Base Management Fees. Base Management Fees increased $16.2 million primarily driven by Fee-Earning Assets Under Management growth in our individual investor and specialized solutions platform.

Fee Related Compensation was $127.9 million for the nine months ended September 30, 2020, an increase of $9.5 million, compared to $118.5 million for the nine months ended September 30, 2019. The increase was primarily due to an increase in Management Fees, Net, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $5.6 million for the nine months ended September 30, 2020, a decrease of $21.2 million, compared to $26.8 million for the nine months ended September 30, 2019. The decrease in Net Realizations was primarily attributable to decreases of $14.6 million in Realized Principal Investment Income (Loss) and $9.0 million in Realized Performance Revenues.

Realized Principal Investment Income (Loss) was $(1.1) million for the nine months ended September 30, 2020, a decrease of $14.6 million, compared to $13.5 million for the nine months ended September 30, 2019. The decrease was primarily due to the realized losses on our corporate treasury investments allocated to the segment.

Realized Performance Revenues were $8.9 million for the nine months ended September 30, 2020, a decrease of $9.0 million, compared to $17.9 million for the nine months ended September 30, 2019. The decrease was primarily driven by lower returns in customized solutions compared to the nine months ended September 30, 2019.

Operating Metrics

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

(Dollars in Thousands)

(a) Estimated % Above High Water Mark/Benchmark represents the percentage of Invested Performance 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 September 30, 2020, the incremental appreciation needed for the 62% of Invested Performance Eligible Assets Under Management below their respective High Water Marks/Benchmarks to reach their respective High Water Marks/Benchmarks was $1.4 billion, an increase of $915.8 million, compared to $439.3 million at September 30, 2019. Of the Invested Performance Eligible Assets Under Management below their respective High Water Marks/Benchmarks as of September 30, 2020, 61% 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 or composite. 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:

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 funds/accounts that comprise the BPS Composite are not managed within a single fund or account and are managed with different mandates. There is no guarantee that BAAM would have made the same mix of investments in a standalone fund/account. The BPS Composite is not an investible product and, as such, the performance of the BPS Composite does not represent the performance of an actual fund or account. The historical return is from January 1, 2000.

Credit & Insurance

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

(Dollars in Thousands)

N/M Not meaningful.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Segment Distributable Earnings were $58.5 million for the three months ended September 30, 2020, a decrease of $13.4 million, compared to $71.9 million for the three months ended September 30, 2019. The decrease in Segment Distributable Earnings was primarily attributable to decreases of $2.2 million in Fee Related Earnings and $11.2 million in Net Realizations.

Segment Distributable Earnings in our Credit & Insurance segment in the third quarter of 2020 were lower compared to the third quarter of 2019, driven by lower Net Realizations due to lower Realized Performance Revenues and Realized Principal Investment Income. The third quarter of 2020 was characterized by continued market rebounds across many asset classes, and our Credit & Insurance segment has largely recovered from the losses in composite returns experienced in the first quarter of 2020. However, the ongoing COVID-19 pandemic and related shutdowns or limitations in the operations of certain non-essential businesses have continued to cause disruption in the U.S. and global economies, and the COVID-19 pandemic has adversely impacted and could continue to adversely impact the performance of our Credit & Insurance segment. Following a more muted period since the onset of the COVID-19 pandemic, the continuing market recovery in the third quarter of 2020 has contributed to renewed momentum in capital deployment, realization and fundraising activity, although the resurgence in COVID-19 infection levels in certain geographies and a potential resulting market downturn may pose material risks. These risks potentially create additional pressure for borrowers with respect to their ability to meet their debt payment obligations or increase their focus on deleveraging. Our Credit & Insurance funds have, however, continued to actively manage their portfolios in order to limit downside and protect capital. Further, we have not experienced a period of significant dislocation since the first quarter of 2020, during which the liquidity of certain assets traded in the credit markets was limited. Nonetheless, another period of such dislocation would impact the value of certain assets held by our funds and such funds’ ability to sell such assets at attractive prices or in a timely manner, each of which would adversely impact performance revenues in our Credit & Insurance segment. Furthermore, the economic recovery is likely to continue to be gradual, uneven and characterized by meaningful dispersion across sectors and regions, with uncertainty regarding its ultimate length and trajectory. For example, the recovery to date has been more pronounced in the U.S. than in the European Union.

In energy, oil prices have stabilized since the significant declines experienced in the first quarter of 2020. Nonetheless, weakened market fundamentals continue to pose challenges, particularly in upstream energy, which represents 3% of the Credit & Insurance segment’s investment portfolio and less than 2% of Blackstone’s aggregate investment portfolio. An increased focus on energy sustainability, including potential alternatives to fossil fuels, has also exacerbated the impact of such weakened market fundamentals. The persistence of these weakened market fundamentals in the energy sector or in the credit markets more broadly would further negatively impact the performance of certain investments in our credit funds. See “Part II. Item 1A. Risk Factors — The global outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S. and global economies and is adversely impacting, and may continue to adversely impact, our performance and results of operations.” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and the market and economic conditions risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

Fee Related Earnings were $57.9 million for the three months ended September 30, 2020, a decrease of $2.2 million, compared to $60.1 million for the three months ended September 30, 2019. The decrease in Fee Related Earnings was primarily attributable to an increase of $8.6 million in Fee Related Compensation, partially offset by an increase of $6.0 million in Fee Related Performance Revenues.

Fee Related Compensation was $61.6 million for the three months ended September 30, 2020, an increase of $8.6 million, compared to $53.0 million for the three months ended September 30, 2019. The increase was primarily due to increases in Fee Related Performance Revenues and Management Fees, Net, on which a portion of Fee Related Compensation is based as well as changes in compensation accruals.

Fee Related Performance Revenues were $9.6 million for the three months ended September 30, 2020, an increase of $6.0 million, compared to $3.6 million for the three months ended September 30, 2019. The increase was primarily due to performance and growth in assets in our BDC.

Net Realizations

Net Realizations were $0.6 million for the three months ended September 30, 2020, a decrease of $11.2 million, compared to $11.8 million for the three months ended September 30, 2019. The decrease in Net Realizations was primarily attributable to decreases of $12.2 million in Realized Performance Revenues and $3.9 million in Realized Principal Investment Income, partially offset by a decrease of $4.9 million in Realized Performance Compensation.

Realized Performance Revenues were $0.2 million for the three months ended September 30, 2020, a decrease of $12.2 million, compared to $12.4 million for the three months ended September 30, 2019. The decrease was primarily attributable to a decrease in realized carry compared to the three months ended September 30, 2019.

Realized Principal Investment Income was $0.8 million for the three months ended September 30, 2020, a decrease of $3.9 million, compared to $4.7 million for the three months ended September 30, 2019. The decrease was primarily due to higher realized gains in our corporate treasury investments in the three months ended September 30, 2019 compared to the three months ended September 30, 2020.

Realized Performance Compensation was $0.4 million for the three months ended September 30, 2020, a decrease of $4.9 million, compared to $5.3 million for the three months ended September 30, 2019. The decrease was primarily due to the decrease in Realized Performance Revenues.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Segment Distributable Earnings were $182.4 million for the nine months ended September 30, 2020, a decrease of $31.9 million, compared to $214.3 million for the nine months ended September 30, 2019. The decrease in Segment Distributable Earnings was primarily attributable to a decrease of $32.6 million in Net Realizations, partially offset by an increase of $0.7 million in Fee Related Earnings.

Fee Related Earnings were $169.1 million for the nine months ended September 30, 2020, an increase of $0.7 million, compared to $168.4 million for the nine months ended September 30, 2019. The increase in Fee Related Earnings was primarily attributable to increases of $18.8 million in Fee Related Performance Revenues and $8.1 million in Management Fees, Net, partially offset by increases of $22.1 million in Fee Related Compensation and $4.0 million in Other Operating Expenses.

Fee Related Performance Revenues were $26.1 million for the nine months ended September 30, 2020, an increase of $18.8 million, compared to $7.3 million for the nine months ended September 30, 2019. The increase was primarily due to performance and growth in assets in our BDC.

Management Fees, Net were $449.6 million for the nine months ended September 30, 2020, an increase of $8.1 million, compared to $441.5 million for the nine months ended September 30, 2019, primarily driven by an increase in Base Management Fees. Base Management Fees increased $5.1 million primarily due to increased capital deployed in our most recently launched credit funds and vehicles, including our BDC, and inflows in our long only business, partially offset by a decrease in Harvest.

Fee Related Compensation was $188.1 million for the nine months ended September 30, 2020, an increase of $22.1 million, compared to $166.0 million for the nine months ended September 30, 2019. The increase was primarily due to increases in Management Fees, Net and Fee Related Performance Revenues, on which a portion of Fee Related Compensation is based.

Net Realizations

Net Realizations were $13.3 million for the nine months ended September 30, 2020, a decrease of $32.6 million, compared to $45.9 million for the nine months ended September 30, 2019. The decrease in Net Realizations was primarily attributable to decreases of $24.5 million in Realized Principal Investment Income and $17.4 million in Realized Performance Revenues, partially offset by a decrease of $9.2 million in Realized Performance Compensation.

Realized Principal Investment Income was $4.4 million for the nine months ended September 30, 2020, a decrease of $24.5 million, compared to $28.8 million for the nine months ended September 30, 2019. The decrease was primarily due to higher realized gains in our corporate treasury investments in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2020.

Realized Performance Revenues were $11.9 million for the nine months ended September 30, 2020, a decrease of $17.4 million, compared to $29.2 million for the nine months ended September 30, 2019. The decrease was primarily attributable to a decrease in realized carry compared to the nine months ended September 30, 2019.

Realized Performance Compensation was $3.0 million for the nine months ended September 30, 2020, a decrease of $9.2 million, compared to $12.1 million for the nine months ended September 30, 2019. The decrease was primarily due to the decrease in Realized Performance Revenues.

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 or composite. 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 for the Credit Composite:

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) Effective January 1, 2020, Credit returns have been redefined to present a composite return instead of separate returns for performing credit strategies and distressed strategies. The Credit Composite now also includes the long only strategy. The Credit Composite return is a weighted-average of (a) the return based on the combined quarterly cash flows of performing credit and distressed fee-earning funds and (b) the weighted-average quarterly return of all long only strategy fee-earning funds. Only fee-earning funds exceeding $100 million of fair value at the beginning of each respective quarter end are included and funds in liquidation are excluded. Credit returns exclude Blackstone Funds that were contributed to GSO as part of Blackstone’s acquisition of GSO in March 2008 and the pre-acquisition date performance for funds and vehicles acquired by GSO subsequent to March 2008. The inception to date returns are from December 31, 2005. Prior periods have been updated to reflect this presentation.

Operating Metrics

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

(Dollars in Thousands)

Non-GAAP Financial Measures

These non-GAAP financial measures are presented without the consolidation of any Blackstone Funds that are consolidated into the Condensed 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:

(Dollars in Thousands)

(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.

(Dollars in Thousands)

(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.

(Dollars in Thousands)

117

(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.

(Dollars in Thousands)

(h) This adjustment removes Equity-Based Compensation on a segment basis.

(i) This adjustment adds an amount equal 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.

(j) 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. See “— Key Financial Measures and Indicators — Distributable Earnings” for the full definition of Taxes and Related Payables.

(Dollars in Thousands)

(k) This adjustment removes Interest and Dividend Revenue less Interest Expense on a segment basis. The Segment Adjustment represents (1) the add back of Interest and Dividend Revenue earned from consolidated Blackstone Funds which have been eliminated in consolidation, and (2) the removal of interest expense associated with the Tax Receivable Agreement.

(Dollars in Thousands)

(l) This adjustment removes the total segment amount of Realized Performance Revenues.

(m) This adjustment removes the total segment amount of Realized Performance Compensation.

(n) This adjustment removes the total segment amount of Realized Principal Investment Income.

(o) 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:

(Dollars in Thousands)

(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 Performance Revenues realized but not yet distributed as of the reporting date and are included in Distributable Earnings in the period they are realized.

(d) 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 Condensed 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.

During the three months ended September 30, 2020, Blackstone deconsolidated nine CLO vehicles. See Note 9. “Variable Interest Entities” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing for additional details.

Total assets were $25.0 billion as of September 30, 2020, a decrease of $7.5 billion, from December 31, 2019. The decrease in total assets was principally due to a decrease of $7.3 billion in total assets attributable to the consolidated Blackstone funds. The decrease in total assets attributable to the consolidated Blackstone funds was primarily due to a decrease of $6.9 billion in Investments which was primarily due to the deconsolidation of nine CLO vehicles. The other net variances of the assets attributable to the consolidated operating partnerships were relatively unchanged.

Total liabilities were $11.5 billion as of September 30, 2020, a decrease of $5.9 billion, from December 31, 2019. The decrease in total liabilities was principally due to a decrease of $7.2 billion in total liabilities attributable to the consolidated Blackstone funds, partially offset by an increase of $952.2 million in total liabilities attributable to consolidated operating partnerships. The decrease in total liabilities attributable to consolidated Blackstone funds was primarily due to a decrease of $6.5 billion in Loans Payable. The decrease in Loans Payable was primarily due to the deconsolidation of nine CLO vehicles. The increase in total liabilities attributable to the consolidated operating partnerships was primarily due to an increase of $969.9 million in Loans Payable. The increase in Loans Payable was primarily due to the issuance of $900 million of notes on September 29, 2020. The other net variances of the liabilities attributable to the consolidated operating partnerships were relatively unchanged.

We have multiple sources of liquidity to meet our capital needs as described in “— Sources and Uses of Liquidity”. While our liquidity has not been materially impacted by the COVID-19 pandemic to date, we continue to closely monitor developments in the impact of the COVID-19 pandemic and actively evaluate our sources and uses of liquidity in light of such developments.

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 September 30, 2020, Blackstone had $2.6 billion in cash and cash equivalents and $2.4 billion invested in corporate treasury investments, against $5.7 billion in borrowings from our bond issuances, and no borrowings outstanding under our revolving credit facility.

On September 29, 2020, Blackstone issued $500 million aggregate principal amount of 1.600% senior notes due March 30, 2031 and $400 million aggregate principal amount of 2.800% senior notes due September 30, 2050. Blackstone intends to use the net proceeds from the sale of the notes for general corporate purposes. For additional information see Note 12. “Borrowings” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

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 shares 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 September 30, 2020 consisted of the following:

(Dollars in Thousands)

continued...

(Dollars in Thousands)

(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, revolver commitments and capital market commitments.

As of September 30, 2020, 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”):

in Thousands)

(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 three and nine months ended September 30, 2020, we repurchased 2.0 million and 9.0 million shares, respectively, of Blackstone Class A common stock as part of the repurchase program at a total cost of $105.6 million and $474.0 million, respectively. As of September 30, 2020, the amount remaining available for repurchases under the repurchase program was $307.2 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 2019 and 2020. Dividends are declared and paid in the quarter subsequent to the quarter in which they are earned.

With respect to the third quarter of fiscal year 2020, we paid to shareholders of our Class A common stock a dividend of $0.54 per share, aggregating to $1.30 per share of Class A common stock in respect of the nine months ended September 30, 2020. With respect to fiscal year 2019, we paid shareholders of our Class A common stock aggregate dividends of $1.95 per share.

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 note 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.

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

(Dollars in Millions)

126

Contractual Obligations, Commitments and Contingencies

The following table sets forth information relating to our contractual obligations as of September 30, 2020 on a consolidated basis and on a basis deconsolidating the Blackstone Funds:

(Dollars in Thousands)

(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 September 30, 2020, 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 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.

(e) 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 Condensed Consolidated Financial Statements and shown in Note 16. “Related Party Transactions” (see “Part I. Item 1 Financial Statements”) differs to reflect the net present value of the payments due to certain non-controlling interest holders.

(f) 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 $31.1 million and interest of $3.2 million; therefore, such amounts are not included in the above contractual obligations table.

(g) 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 17. “Commitments and Contingencies – Contingencies – Guarantees” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” 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 Condensed Consolidated Financial Statements as of September 30, 2020.

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 2029. 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 September 30, 2020, the total clawback obligations were $125.7 million, of which $100.8 million was related to Blackstone Holdings and $24.9 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 September 30, 2020, 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 $3.6 billion, on an after-tax basis where applicable, of which Blackstone Holdings is potentially liable for $3.1 billion if current and former Blackstone personnel default on their share of the liability, a possibility that management also views as remote. See Note 16. “Related Party Transactions” and Note 17. “Commitments and Contingencies” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing.

Critical Accounting Policies

We prepare our Condensed 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 Condensed 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 Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” 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 Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing 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 Condensed Consolidated Financial Statements. In our Condensed 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 Condensed 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 Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements”. 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” in our Annual Report on Form 10-K for the year ended December 31, 2019. 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 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 or 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:

• 0.24% to 1.50% of net asset value.

On credit and MLP-focused separately managed accounts:

• 0.24% to 1.50% of net asset value or total assets.

On real estate separately managed accounts:

• 0.65% 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 1.20% 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 — COVID-19 and Global Economic Conditions”, “Summary of Significant Accounting Policies — Fair Value of Financial Instruments” and “Summary of Significant Accounting Policies — Investments, at Fair Value” in the “Notes to Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” 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, if taken, 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 condensed 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 non-employee directors.

The global outbreak of COVID-19 required management to make significant judgments about the ultimate adverse impact of COVID-19 on financial markets and economic conditions, which may change over time. These judgments and estimates were incorporated into the valuation process outlined herein. Management’s policies were unchanged and critical processes were executed in a remote working environment.

Income Tax

For a description of our accounting policy on taxes see Note 2. “Summary of Significant Accounting Policies” in “Part II. Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 2019. For additional information on taxes see Note 13. “Income Taxes” in the “Notes to Consolidated Financial Statements” in “— Item 8. Financial Statements and Supplementary Data” of this filing and Note 15. “Income Taxes” in “Part II. Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 2019.

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 year ended December 31, 2019, 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.

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 Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” of this filing as follows:

• Note 9. “Variable Interest Entities”, and
• Note 17. “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 Condensed Consolidated Financial Statements” in “Part I. Item 1. Financial Statements” 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. Blackstone is evaluating the operational impact of such changes on existing transactions and contractual arrangements and managing transition efforts. 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.” in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our predominant exposure to market risk is related to our role as general partner or investment adviser to the Blackstone Funds and the sensitivities to movements in the fair value of their investments, including the effect on management fees, performance revenues and investment income.

Effect on Fund Management Fees

Our management fees are based on (a) third parties’ capital commitments to a Blackstone Fund, (b) third parties’ capital invested in a Blackstone Fund or (c) the net asset value, or NAV, of a Blackstone Fund, as described in our Condensed Consolidated Financial Statements. Management fees will only be directly affected by short-term changes in market conditions to the extent they are based on NAV or represent permanent impairments of value. These management fees will be increased (or reduced) in direct proportion to the effect of changes in the fair value of our investments in the related funds. The proportion of our management fees that are based on NAV is dependent on the number and types of Blackstone Funds in existence and the current stage of each fund’s life cycle. For the nine months ended September 30, 2020 and September 30, 2019, the percentages of our fund management fees based on the NAV of the applicable funds or separately managed accounts, were as follows:

134

Market Risk

The Blackstone Funds hold investments which are reported at fair value. Based on the fair value as of September 30, 2020 and September 30, 2019, we estimate that a 10% decline in fair value of the investments would result in the following declines in Management Fees, Performance Revenues, Net of Related Compensation Expense and Investment Income:

(Dollars in Thousands)

(a) Represents the annualized effect of the 10% decline.

(b) Represents the reporting date effect of the 10% decline.

Total Assets Under Management, excluding undrawn capital commitments and the amount of capital raised for our CLOs, by segment, and the percentage amount classified as Level III investments as defined within the fair value standards of GAAP, are as follows:

(Dollars in Thousands)

The fair value of our investments and securities can vary significantly based on a number of factors that take into consideration the diversity of the Blackstone Funds’ investment portfolio and on a number of factors and inputs such as similar transactions, financial metrics, and industry comparatives, among others. See “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019. Also see “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Fair Value”. We believe these fair value amounts should be utilized with caution as our intent and strategy is to hold investments and securities until prevailing market conditions are beneficial for investment sales.

Investors in our carry funds (and certain other of our funds) make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling their commitments when we call capital from them in order for those funds to consummate investments and otherwise pay their related obligations when due, including management fees. We have not had investors fail to honor capital calls to any meaningful extent and any investor that did not fund a capital call would be subject to having a significant amount of its existing investment forfeited in that fund; however, if investors were to fail to satisfy a significant amount of capital calls for any particular fund or funds, those funds could be materially and adversely affected.

Exchange Rate Risk

The Blackstone Funds hold investments that are denominated in non-U.S. dollar currencies that may be affected by movements in the rate of exchange between the U.S. dollar and non-U.S. dollar currencies. Additionally, a portion of our management fees are denominated in non-U.S. dollar currencies. We estimate that as of September 30, 2020 and September 30, 2019, a 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would result in the following declines in Management Fees, Performance Revenues, Net of Related Compensation Expense and Investment Income:

(Dollars in Thousands)

(a) Represents the annualized effect of the 10% decline.

(b) Represents the reporting date effect of the 10% decline.

Interest Rate Risk

Blackstone may have debt obligations payable that accrue interest at variable rates. Interest rate changes may therefore affect the amount of our interest payments, future earnings and cash flows. Based on our debt obligations payable as of September 30, 2020 and September 30, 2019, we estimate that interest expense relating to variable rates would increase on an annual basis, in the event interest rates were to increase by one percentage point, as follows:

(Dollars in Thousands)

(a) As of September 30, 2020 and 2019, Blackstone had no such debt obligations payable outstanding.

Blackstone has a diversified portfolio of liquid assets to meet the liquidity needs of various businesses. This portfolio includes cash, open-ended money market mutual funds, open-ended bond mutual funds, marketable investment securities, freestanding derivative contracts, repurchase and reverse repurchase agreements and other investments. If interest rates were to increase by one percentage point, we estimate that our annualized investment income would decrease, offset by an estimated increase in interest income on an annual basis from interest on floating rate assets, as follows:

(Dollars in Thousands)

(a) As of September 30, 2020 and 2019, this represents 0.5% and 0.2% of our portfolio of liquid assets, respectively.

Blackstone has U.S. dollar and non-U.S. dollar based interest rate derivatives whose future cash flows and present value may be affected by movement in their respective underlying yield curves. We estimate that as of September 30, 2020 and September 30, 2019, a one percentage point increase parallel shift in global yield curves would result in the following impact on Other Revenue:

(Dollars in Thousands)

Credit Risk

Certain Blackstone Funds and the Investee Funds are subject to certain inherent risks through their investments.

Our portfolio of liquid assets contains certain credit risks including, but not limited to, exposure to uninsured deposits with financial institutions, unsecured corporate bonds and mortgage-backed securities. These exposures are actively monitored on a continuous basis and positions are reallocated based on changes in risk profile, market or economic conditions.

We estimate that our annualized investment income would decrease, if credit spreads were to increase by one percentage point, as follows:

(Dollars in Thousands)

(a) As of September 30, 2020 and 2019, this represents 2.1% and 2.0% of our portfolio of liquid assets, respectively.

Certain of our entities hold derivative instruments that contain an element of risk in the event that the counterparties may be unable to meet the terms of such agreements. We minimize our risk exposure by limiting the counterparties with which we enter into contracts to banks and investment banks that meet established credit and capital guidelines. We do not expect any counterparty to default on its obligations and therefore do not expect to incur any loss due to counterparty default.

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective at the reasonable assurance level to accomplish their objectives of ensuring that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

No change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Unaudited Consolidating Statements of Financial Condition

(Dollars in Thousands)

65

Unaudited Consolidating Statements of Financial Condition - Continued

(Dollars in Thousands)

(a) The Consolidated Blackstone Funds consisted of the following:

Blackstone / GSO Global Dynamic Credit Feeder Fund (Cayman) LP

Blackstone / GSO Global Dynamic Credit Funding Designated Activity Company

Blackstone / GSO Global Dynamic Credit Master Fund

Blackstone / GSO Global Dynamic Credit USD Feeder Fund (Ireland)

Blackstone Real Estate Special Situations Holdings L.P.

Blackstone Strategic Alliance Fund L.P.

BTD CP Holdings LP

Collateralized loan obligation vehicles*

Mezzanine side-by-side investment vehicles

Private equity side-by-side investment vehicles

Real estate side-by-side investment vehicles

Hedge Fund Solutions side-by-side investment vehicles.

* Consolidated as of December 31, 2019 only.