One year after Blackstone CEO Steve Schwarzman told investors the firm would reach $1tn (€920m) in assets under management in 2022, it's shy of that mark.
The world's largest alternative asset manager commanded $975bn at the end of last year, up from $951bn in the prior quarter, short of the milestone its senior leaders once thought was just around the corner. The target was originally set for 2026, but was accelerated amid a market boom.
Now the private equity giant is feeling the weight of higher interest rates on its valuations of some past investments and confronting an era of investor caution as it tries to gather cash for new bets. President Jon Gray said he wasn't disappointed over missing the target, expressing confidence that investors will entrust more money if the firm delivers.
"I'm most focused on returns," Mr Gray said in an interview. "Inflows follow performance."
The tougher environment dragged down distributable earnings 41pc to $1.3bn as the firm's dealmakers slowed sales in the three final months of 2022, according to the company's quarterly earnings report on Thursday.
That amounted to $1.07 a share, topping the average analyst estimate of 94 cents. The company declared a dividend of 91 cents a share, short of Bloomberg's forecast of $1.02.
Shares of Blackstone slid 1.1pc to $87.90 in early trading in New York. The stock had rebounded 20pc this month through to Wednesday, after tumbling 43pc last year.
Blackstone, a heavyweight investor in everything from consumer brands to transmission lines to student dorms and apartments, is first among the largest private equity firms to report results for the period. That makes it a bellwether for the broader industry and the economy.
The New York-based firm grew rapidly in an era of low interest rates as pensions, endowments and wealthy savers flocked to the promise of higher returns from private equity and real estate. But the Federal Reserve's battle with inflation is giving individuals more investment options, such as products that track rising interest rates. Economic uncertainty is limiting institutional appetite for private equity investments that can take years to mature and be hard to sell.
Blackstone took in $28bn of net inflows in the quarter, compared with $147bn a year earlier.
Redemptions from the iconic $69bn Blackstone Real Estate Income Trust (BREIT) contributed to outflows.
The firm limited redemptions from that vehicle in December to prevent forced selling. Changes to the timing of how BREIT books profits in 2022 also made the decline in distributable earnings steeper. Real estate bets took hits in the fourth quarter, with opportunistic wagers depreciating 2pc and core investments down 1.5pc.
Still, the firm held about $371bn in so-called "perpetual" pools, such as BREIT, up 18pc from a year earlier.
Another bright spot was corporate private equity, which appreciated by 3.8pc, more than other investment units.
Individual investors remain an important driver of growth, Mr Gray said. Assets managed for individuals and private bank channels totalled $239bn at the end of 2022, up 25pc from the year-ago period, executives said.