Blackstone (BX) Rides on Rising AUM Amid Higher Expenses

Core Insights - Blackstone Inc. (BX) is well-positioned for growth due to increasing assets under management (AUM), a strong revenue mix, and improving fee income, despite concerns over rising expenses and fund outflows in a challenging macroeconomic environment [1][2]. Group 1: Financial Performance - Blackstone's segment revenues experienced a compound annual growth rate (CAGR) of 5.3% from 2017 to 2023, driven by improved management, advisory fees, and total investment income [1]. - Fee-earning AUM and total AUM grew at CAGRs of 14.7% and 15.7%, respectively, over the last six years, with both metrics showing an upward trend in the first half of 2024 [2]. - As of June 30, 2024, Blackstone had $181 billion in dry powder, primarily from global private equity and real estate funds, and allocated approximately $58 billion of capital in the first half of 2024 [2]. Group 2: Expense Management - Total consolidated expenses showed a 5% CAGR from 2017 to 2023, primarily due to increased general, administrative, and other expenses, with this trend continuing into the first half of 2024 [3]. - Elevated expenses are expected to persist due to ongoing investments in the franchise and an increasing headcount in well-performing funds [3]. Group 3: Market Position and Challenges - Blackstone's operations heavily depend on the commitment of investors in its alternative investment funds, with past performance suffering during the 2008 financial crisis due to reduced new commitments [3]. - The company successfully navigated the pandemic without funding issues, but any macroeconomic shifts could lead to a reversal of this trend, as evidenced by significant fund outflows last year [4].