Blackstone is a leading global alternative asset manager. As stewards of public
funds, we look to drive outstanding results for our investors and clients by
deploying capital and ideas to help businesses succeed and grow. Our alternative
asset management businesses include investment vehicles focused on private equity,
real estate, hedge fund solutions, non-investment grade credit, secondary funds
and other multi-asset class strategies. We historically also provided a wide
range of financial advisory services, including financial and strategic advisory,
restructuring and reorganization advisory, capital markets and fund placement
services. In October 2015, however, we completed the previously-announced spin-off
of these businesses, other than our capital markets services business, which
was retained.
All of Blackstone’s businesses use a solutions oriented approach to drive
better performance. We believe our scaled, diversified businesses, coupled with
our long track record of investment performance, proven investment approach
and strong client relationships, position us to continue to perform well in
a variety of market conditions, expand our assets under management and add complementary
businesses.
Two of our primary limited partner constituencies are public pension and corporate
funds. As a result, to the extent our funds perform well, it supports a better
retirement for millions of pensioners.
In addition, because we are a global firm with a footprint on nearly every continent,
our investments can make a difference around the world. We are committed to
making our family of companies stronger in ways that can have transformative
impacts on local economies.
Our four business segments are: (a) Private Equity, (b) Real Estate, (c) Hedge
Fund Solutions and (d) Credit.
We maintain a rigorous investment process across all of our funds, accounts
and other investment vehicles. Each fund, account or other vehicle has investment
policies and procedures that generally contain requirements and limitations
for investments, such as limitations relating to the amount that will be invested
in any one investment and the types of industries or geographic regions in which
the fund, account or other vehicle will invest, as well as limitations required
by law. In addition, the chief investment officers of our businesses play a
central role in the evaluation of investment opportunities, including by serving
as members of their respective investment committees.
Our business’ investment committees review and evaluate investment opportunities
in a framework that includes a qualitative and quantitative assessment of the
key risks of each investment. For example, considerations that the investment
committees of our private equity funds take into account when evaluating an
investment include the quality of a business in which the fund proposes to invest
and the quality of the management team of such business, expected levered and
unlevered returns of the investment in a variety of investment scenarios, the
ability of the company in which the investment is made to service debt in a
range of economic and interest rate
environments, environmental, social and governance, or ESG, issues and macroeconomic
trends in the relevant geographic region. In addition, considerations that the
investment committees of our real estate funds take into account when evaluating
an investment include current and anticipated market fundamentals (including,
for example, supply and demand fundamentals) and macroeconomic trends in the
relevant geographic region, the quality of the asset in which the fund proposes
to invest, the appropriateness of existing or planned leverage levels of the
business or asset and our ability to successfully implement operational plans
and improvements and exit the investment at an expected rate of return.
Our Private Equity investment professionals are responsible for selecting,
evaluating, structuring, diligencing, negotiating, executing, managing and exiting
investments, as well as pursuing operational improvements and value creation.
After an initial selection, evaluation and diligence process, the relevant team
of investment professionals (i.e., the deal team) submits a proposed transaction
for review by the review committee of our private equity funds. Review committee
meetings are led by an executive committee of several senior managing directors
of our Private Equity segment. Following assimilation of the review committee’s
input and its decision to proceed with a proposed transaction, the proposed
investment is vetted by the investment committee. The investment committee of
our private equity funds is composed of Stephen A. Schwarzman, Hamilton E. James
and selected senior managing directors of our Private Equity segment as appropriate
based on the location and sector of the proposed transaction. The investment
committee is responsible for approving all investment decisions made on behalf
of our private equity funds. Both the review committee and the investment committee
processes involve a consensus approach to decision making among committee members.
Our Tactical Opportunities business has a substantially similar process to the
Private Equity process described above, with the exception of the composition
of the review and investment committees. The Tactical Opportunities review committee
is comprised of the senior managing directors and managing directors of the
Tactical Opportunities business and a senior managing director of our Private
Equity business, and the investment committee is comprised of Mr. Schwarzman,
Mr. James, the business heads of Blackstone’s Private Equity, Real Estate
and Credit businesses, and certain other senior managing directors.
The investment professionals of our private equity funds are responsible for
monitoring an investment once it is made and for making recommendations with
respect to exiting an investment. In addition to members of a deal team and
our portfolio operations group, which is responsible for monitoring and assisting
in enhancing portfolio companies’ operations and value, all professionals
in the Private Equity segment meet several times each year to review the performance
of the funds’ portfolio companies.
Our Strategic Partners secondary private equity investment professionals seek
capital appreciation through the purchase of secondary interests in mature,
high-quality private equity funds from investors seeking liquidity. After rigorous,
highly analytical investment and operational due diligence, the Strategic Partners’
investment professionals will present a proposed transaction to the group’s
Investment Committee. The Strategic Partners Investment Committee is made up
of senior members of the Strategic Partners team, including all of the group’s
Senior Managing Directors. The Investment Committee meets on an ad hoc basis
as needed to review transactions. After reviewing the investment team’s
Investment Committee Memorandum and discussing the contemplated transaction
with the deal team, the Investment Committee decides whether to approve or deny
the investment. The investment professionals on the Strategic Partners team
are responsible for monitoring each investment once it is made. In addition
to members of the investment team, and given the large number of underlying
investments, the Strategic Partners Finance team will also track investment
valuations pursuant to the group’s valuation policies and procedures.
Our Real Estate investment professionals are responsible for selecting, evaluating,
structuring, diligencing, negotiating, executing, managing, monitoring and exiting
investments, as well as pursuing operational improvements and value creation.
Our real estate operation has an investment committee similar to that described
under “— Private Equity Funds.” After an initial selection,
evaluation and diligence process, the relevant team of investment professionals
(i.e., the deal team) will present a proposed transaction at a weekly meeting
of the investment committee. The real estate investment committee, which includes
Mr. Schwarzman, Mr. James and the senior managing directors in the Real Estate
segment, scrutinizes potential transactions, provides guidance and instructions
at the appropriate stage of each transaction and approves the making and disposition
of each BREP and BPP fund investment. The committee also approves significant
illiquid investments by the BREDS funds. Additionally, BXMT has an investment
risk management committee comprised solely of independent directors, which is
responsible for approving certain significant BXMT investments. In addition
to members of a deal team and our asset management group responsible for monitoring
and assisting in enhancing portfolio companies’ operations and value,
senior professionals in the Real Estate segment meet several times each year
to review the performance of the funds’ portfolio companies and other
investments.
Before deciding to invest in a new hedge fund or with a new hedge fund manager,
our Hedge Fund Solutions team conducts extensive due diligence, including an
on-site “front office” review of the fund’s/manager’s
performance, investment terms, investment strategy and investment personnel,
a “back office” review of the fund’s/manager’s operations,
processes, risk management and internal controls, industry reference checks
and a legal review of the investment structures and legal documents. Once initial
due diligence procedures are completed and the investment and other professionals
are satisfied with the results of the review, the team will present the potential
investment to the relevant Hedge Fund Solutions Investment Committee. The Investment
Committees are comprised of relevant senior managing directors and senior investment
personnel. The Hedge Fund Solutions’ Executive Committee reviews and approves
all investment allocations where there is limited capacity or there are other
unusual circumstances for compliance with the relevant allocation procedures.
Existing investments are reviewed and monitored on a regular and continuous
basis, and J. Tomilson Hill, CEO of Hedge Fund Solutions and Vice Chairman of
Blackstone, and other senior members of our Hedge Fund Solutions team, generally
meet bi-weekly with Mr. Schwarzman and Mr. James for a high-level review of
the group’s business and affairs.
Each of our credit-focused funds has an investment committee similar to that
described under “— Private Equity Funds.” The investment committees
for the credit-focused funds, which typically include Bennett J. Goodman and
J. Albert Smith III and senior members of the respective investment teams associated
with each credit-focused fund, review potential transactions, provide input
regarding the scope of due diligence and approve recommended investments and
dispositions. These investment committees have delegated certain abilities to
approve investments and dispositions to credit committees within each operation
which consist of the senior members of the respective investment teams associated
with each fund. In addition, senior members of GSO, including Mr. Goodman and
Mr. Smith III, meet regularly with Mr. Schwarzman and Mr. James to discuss investment
and risk management activities and market conditions.
The investment decisions for the customized credit long-only clients and other
clients whose portfolios are actively traded are made by separate investment
committees, each of which is composed of certain of the group’s respective
senior managing directors, managing directors and other investment professionals.
With limited exceptions where the portfolio managers wish to capitalize on time
sensitive market opportunities, the investment committee approves all assets
that are held by the applicable client. The investment team is staffed by professionals
within research, portfolio management, trading and capital formation to ensure
active management of the portfolios. Investment decisions (including the approval
of the asset for the initial purchase) follow a consensus-based approach. Industry-focused
research analysts provide the committee with a formal and comprehensive review
of any new investment recommendation, while our portfolio managers and trading
professionals provide opinions on other technical aspects of the recommendation
as well as the risks associated with the overall portfolio composition.
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