Blackstone Profit Drops 9.2% as Rates, Inflation Curb Dealmaking

Blackstone Inc. reported a drop in third-quarter income as surging energy prices stoked inflation and higher interest rates subdued dealmaking.

Distributable earnings slid 9.2% to $1.72 billion, or $1.32 a share, Blackstone said in a statement Thursday. That beat the $1.26 average estimate of analysts tracked by Bloomberg.

“There was a fair amount of volatility in the quarter and in markets, and that showed up in slowing the IPO market a bit and muted transaction activity as well,” President Jon Gray said in an interview.

Infrastructure was again Blackstone’s best-performing strategy in the quarter, returning 6.4%. Strength in data-center leasing, logistics and hotels helped mitigate the pressure that interest rates exerted on some parts of the firm’s business, Gray said.

Real estate and private equity both struggled in the third quarter, with distributable earnings from those segments falling 10% and 7%, respectively.

Total assets under management climbed 10% to $1.37 trillion.

No ‘Apocalypse’

Distributable earnings at Blackstone’s credit and insurance arm, its biggest by assets, climbed 4% to $433 million, after declining in each of the previous two quarters. The business accounted for more than half of Blackstone’s $63.3 billion of inflows during the three months through September.

“There’s been no private credit apocalypse,” Gray said, adding that inflows at the Blackstone Private Credit Fund, or BCRED, remain “muted” and “will get better with time.”

Shares of Blackstone tumbled 29% this year through Wednesday.

Blackstone ended September with $228.9 billion of dry powder for future deployment, including $46.9 billion for real estate and $91.5 billion for private equity, businesses that were both challenged by higher rates.

The firm deployed $30.1 billion in the third quarter including its investment in Falcata, the defense-technology company it established by combining two entities it had bought, and its acquisition of a minority stake in five power plants being built by pipeline giant Williams Cos., as data centers fuel demand for electricity.

Deal exits, or realizations, totaled $33.1 billion in the period.

Gray said he expects a strong fourth quarter and year ahead: “We just have a lot of momentum across a number of different areas in the business.”