The Blackstone Group (BX) Q4 2021 Earnings Call Transcript

The Blackstone Group (BX -0.43%)
Q4 2021 Earnings Call
Jan 27, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Blackstone fourth quarter and year-end 2021 investor call hosted by Weston Tucker, head of shareholder relations. My name is Leslie and I'm the event manager. During the presentation, your lines will remain listen-only. [Operator instructions] I'd like to advise all parties that the conference is being recorded for replay purposes, and I would like to hand you over to your host for today, Weston.

Please go ahead.

Weston Tucker -- Head of Shareholder Relations

Terrific. Thanks, Leslie, and good morning and welcome to Blackstone's fourth quarter conference call. Joining today, our Steve Schwarzman, chairman and CEO; Jon Gray, president and chief operating officer; and Michael Chae, chief financial officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website.

We expect t file our 10-K report later next month. I'd like to remind you that today's call may include forward-looking statements which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements. For the discussion of some of the risks that could affect results, please see the Risk Factors section of our 10-K.

We also refer to non-GAAP measures on this call and you'll find reconciliations in the press release on the shareholders' page of our website. Also, please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audio cassette is the copyrighted material of Blackstone. It may not be duplicated without consent.

On a result, we reported GAAP net income for the quarter of $2.9 billion. Distributable earnings were $2.3 billion, or $1.71 per common share. And we declared a dividend of $1.45 to be paid to holders of record as of February 7th. With that, I'll now turn the call over to Steve.

Steve Schwarzman -- Chairman and Chief Executive Officer

Thank you, Weston. Good morning, and thank you for joining our call. Today, Blackstone reported the most remarkable results in our history on virtually every metric. Distributable earnings rose 55% to $2.3 billion in the fourth quarter and increased 85% to $6.2 billion for the year.

Investment performance was exceptional, including over 40% appreciation in our opportunistic real estate and corporate private equity funds for 2021. And we raised $270 billion of inflows over of $0.25 trillion in one year, lifting assets under management by 42% to $881 billion. No other alternative firm in the world has approached this level of absolute growth in a single year. We told you in the second quarter that it was the most consequential in our history.

That assertion was not based on short-term results. It was reflective of the sea change underway in asset management and our positioning within it, which is now playing out even more powerfully than we had previously anticipated. Capital flows continue to shift toward two ends of a barbell. From one side to low-cost passive funds.

On the other side, flows are accelerating toward alternatives, a trend benefit. numerous firms in our industry, but none more profoundly than Blackstone. In the world of alternatives, Blackstone is a clear choice for global limited partners looking to invest in the asset class. Whether it's a retail distributor or an institutional investor that needs to deploy billions of dollars across the capital structure.

Today, we offered nearly 60 investment strategies, up from 35, five years ago. We have the deepest menu of available products with compelling performance across our platform and the largest flow of investment activity in the world. The result is a powerful network effect. Our customers are constantly in our store and our shelves are full, which results in Blackstone gaining a huge percentage of repeat business and a high likelihood it will choose our new products as well.

This network effect extends to new platforms that we launch. Our LPs know that when we launch a new product is with the intention of building the highest quality business and that our scale and reach can have an extraordinarily positive effect for them. For example, the clean energy transition has been a major investment theme across the firm for several years, and we are already one of the largest providers of private credit in this area. Last week, we launched the sustainable resources platform to pull together the full breadth of the firm's resources.

We see an opportunity to invest $100 billion in support for energy transition and climate change solutions over the next decade. Blackstone intends to be a global leader in investing and a force for good in this critically important area. Across the firm, we are exceptionally well-positioned to continue growing in a way that is unprecedented in the alternatives asset class, and I couldn't be more confident in our momentum. Despite the significant correction underway in the global markets, the average stock in the S&P has declined 17% from its recent peak.

Well, the average Nasdaq stock is down 44%. The alternative manager's stocks have not been immune to these pressures. And we've noted investor concerns around the impact of inflation, the prospect of rising interest rates, and the ability to continue raising capital. I believe the tremendous balance of our firm and the careful design of our portfolio will once again allow us to not only navigate this environment but to thrive in it as we have for 36 years.

In our $280 billion real estate business, which generated nearly half of our earnings last year. Over 70% of the equity portfolio is in the best areas logistics, rental housing, and life sciences office. Leases in this portfolio are shorter in duration, but the ability to reprice as we move through the inflationary period. Importantly, in the United States, we're now seeing rents in these sectors grow with two to three times the rate of inflation.

And as the cost of new construction rises with inflation, it greatly benefits the value of our existing holdings. And corporate private equity, our portfolio is also well positioned for inflation. Our holdings are concentrated in areas with strong secular growth that are more resilient to rising input costs. Our operating companies reported 23% year-over-year growth in revenues in the fourth quarter.

That's really stunning 23% revenues. And two-thirds saw a margin expansion in the year. In our nearly 200 billion corporate credit business, as interest rates move higher in response to inflation, we expect our returns to benefit. The vast majority of our investments in corporate credit are in floating rate debt, which helps protect capital and provides a better and better return as base rates increase.

And while higher rates can be a headwind for liquid markets with $136 billion of dry capital -- dry powdered capital across the firm, we can move quickly to invest when pricing becomes more favorable. From a fundraising perspective, I expect our strong momentum to continue in the current environment. In the institutional channel, LPs are increasing their allocations to alternatives. In fact, 80% of LPs according to a recent survey buy frequently.  In most cases, they are concentrating capital with fewer managers, which favors Blackstone.

In the retail channel, individuals in the US have accumulated $2.8 trillion of excess savings since the start of the pandemic. Our perpetual products in real estate and credit are uniquely designed with inflation in mind to protect capital and generate substantial current income. In total, we raised $50 billion of equity capital in this channel last year. And despite the uncertainty in the markets, financial advisors have very high confidence in the attractiveness of our products.

I have personally lived through many cycles here in Blackstone in the past 36 years, and each time our firm has come out stronger than before. Markets often overcorrect in a way that is disconnected from fundamentals. When you look at our firm's progression, including today's exceptional results, it should be clear that the fundamentals of Blackstone are dramatically accelerating. We've been telling you for years about these powerful trends and what we've told you, has come true.

At our Investor Day, a little over three years ago, we shared our vision of reaching $1 trillion of AUM in eight years. We now believe it will reach $1 trillion of AUM this year and half the time we predicted. We've nearly tripled annual FRE and doubled DE over this period. Our profit margins have continued to expand, and today are three times higher than the medium of the largest 100 US public companies.

Blackstone has an unrivaled position in our industry. Our prospects are extraordinary. We have the most recognized brand, which has been continually reinforced through market cycles. Our firm is regularly acknowledged by third parties with the strength of our franchise.

Including by Morgan Stanley was repeatedly selected us, as one of the 30 best companies in any industry. And our unique culture continues to set us apart, characterized by the highest standards of excellence and integrity, unwavering dedication to our clients, new product innovation, and a commitment to preserve capital. In closing, as we move into 2022, the market landscape will undoubtedly present challenges, but it will also provide opportunities that we are very well positioned to capitalize upon. The firm has never been in a stronger position.

Every part of our business has ambitious plans. Remarkable momentum and an unquestionable will to win. I have never had deeper confidence in our future and pride in our people. Thank you for your support.

With that, I'll turn it over to Jon.

Jon Gray -- President and Chief Operating Officer

Thank you, Steve, and good morning, everyone. It was another tremendous quarter for Blackstone in our investors highlighted by extraordinary growth. AUM increased $150 billion in three months, the equivalent of a top 10 global alternatives firm as we continue to expand the platform with a significant focus on perpetual capital strategies. This is driving a meaningful step up in the growth and quality of our earnings with both distributable earnings and FRE reaching record levels for the quarter and year.

We've achieved these results while sticking to our motto of managing third-party capital, relying on our brand and track record to grow. With minimal net debt, no insurance liabilities, we have no need to retain capital and have been able to return 100% of earnings to shareholders. Of course, the foundation of our business remains investment performance and our funds posted outstanding returns in 2021. We continue to benefit from our thematic approach to deployment emphasizing faster-growing areas of the economy, which were again the largest drivers of appreciation in our funds.

Nowhere is that more apparent than in real estate, which led the firm's returns in the fourth quarter. In my 30-year career, I've never seen real estate fundamentals in the sectors where we are focused as strong as they are today. The strength of our returns powers to Blackstone innovation machine, allowing us to expand who we serve and where we can invest. 10 years ago, our business primarily consisted of episodic drawdown funds pursuing opportunistic returns.

While this remains a terrific and vital business to us, we've added three more engines, all growing rapidly. I'll briefly touch on all four. Starting with retail investor demand for institutional quality income solutions, coupled with the Blackstone brand is a potent combination.  We raised over $13 billion of equity capital in the fourth quarter across 3 products: BREIT, BCRED, and BPIF, the equivalent of a large drawdown fund every quarter. BREIT more than doubled last year to $54 billion of NAV on the back of exceptional performance, generating a 30% net return and was the largest contributor to earnings in the quarter.

Moving to our institutional perpetual funds, this evergreen platform is approaching and should surpass the $100 billion milestone this year. There is significant investor demand for long-dated strategies that compound in value. In infrastructure, we reopened to the new capital in the fourth quarter, raising nearly $7 billion and bringing the strategy to $23 billion of perpetual capital after only four years. A few weeks ago, we announced a $3 billion investment in Invenergy, the largest private renewables company in North America.

In real estate, we talk a lot about BREIT, but don't forget the power of our institutional core plus strategy, BPP, which grew over 30% last year to $61 billion. Turning to our drawdown funds, given the strong pace of deployment across the firm, we're now moving into a new flagship fundraising cycle. Over the next 18 months, we expect to have launched and substantially complete fundraising for nearly all of the firm's major drawdown strategies. 17 funds targeting approximately $150 billion in aggregate, reflecting a 25% increase over the prior cycle.

We expect to start raising our two largest flagships global real estate and corporate private equity this quarter. Our third-largest private equity secondaries launched in the fourth quarter, raising $13 billion in Q4, and is on track to reach approximately $20 billion, which would be the largest secondaries vehicle ever raised. Other vehicles in this pipeline include real estate Asia, real estate Europe, real estate credit, private equity energy, growth equity, tactical opportunities, real estate, and infrastructure secondaries, SP's GP continuation strategy, European credit, clean energy credit, BAM ceding and stake strategies, and life sciences. The breadth of the firm today is truly remarkable.

Finally, in insurance, our business more than doubled last year to approximately $160 billion with the closing of the AIG and Everlake mandates. AIG has committed an additional $42 billion, and we expect to find additional growth opportunities in this area overtime on a capital-light basis. Together, these four engines helped drive total inflows of $155 billion in the fourth quarter and $270 billion for the year. This expansion has also opened up many new avenues to invest.

And the fourth quarter was our busiest ever, with $66 billion deployed and an additional $19 billion committed to pending transactions. The largest new commitments were in some of our favorite secular neighborhoods, including renewables, rental housing, logistics, and content creation. In closing, when we look at what's in front of us and our momentum in four distinct verticals, we could not be more excited about the future. We believe it is a mistake to underestimate the power of this brand and the potential of this business.

And with that, I will turn things over to Michael.

Michael Chae -- Chief Financial Officer

Thanks, John, and good morning, everyone. Over the past several years, we've been highlighting the transformation of the firm's capital base and earnings power with a focus on three important dynamics. First, the sustained robust AUM growth and the scaling of perpetual strategies would accelerate fee-related earnings. Second, that our growing breadth of funds and investment firepower, combined with strong returns on greater deployed capital would expand the firm's store of value and performance revenue potential.

And third, that we would grow in a capital-light way with a definitive focus on delivering value to shareholders. The firm's record results are a perfect reflection of these dynamics at work. First, with respect to FRE, which reached $1.8 billion in the fourth quarter and rose a remarkable 71% for the year to $4.1 billion or $3.37 per share. It was only a year ago that we effectively hit our Investor Day target of $2 per share.

And since then, AUM is up 42%, fee-earning AUM is up 38%, and perpetual capital AUM more than doubled to $313 billion across 18 separate vehicles. Petrol strategies now comprise 42% of the firm's fee-earning AUM, and their growth in number and scale is contributing to FRE in 2 important ways, management fees that compound with accelerating inflows and appreciation in NAV, and fee-related performance revenues that crystallize on a recurring basis without asset sales. In total, management fees rose 26% for the year to $5.2 billion. Fee-related performance revenues increased more than fivefold to $2 billion, driven by BREIT, which crystallizes these revenues annually in 4Q, along with a significant contribution from the BPP funds.

The direct lending platform and credit. And in the fourth quarter infrastructure. The combination of 60% year-over-year growth in total fee revenues and the firm's robust margin position drove FRE margins to 56.3% for the year, the highest level ever. Looking forward, the outlook for FRE is strong.

In the context of the four growth verticals that Jon discussed, across three of them, the majority of the capital is perpetual, with a significant and compounding financial contribution that I described. The combined NAV of BREIT and BCRED alone tripled in 2021, setting a higher baseline for fee revenue entering the year. Alongside that, we expect to see a material future benefit from the upcoming flagship fundraising cycle, with $150 billion targeted to be raised and respective investment periods activated over time. Moving to performance revenues and the growing store value.

Net realizations more than doubled in 2021 to $2.9 billion, powered by record fund realizations of $77 billion. For the fourth quarter, fund realizations were $21 billion, including the sale of consumer finance platform, Exiter; several holdings in Tac Opps, including specialty retailer, Diamonds Direct, an upstream energy platform in credit, and certain US logistics and multifamily assets. We also monetized stakes in various public holdings and refinanced a number of portfolio companies. The Blackstone innovation machine is creating a level of activity that is unprecedented for both the firm and our industry at large.

Driving a meaningful elevation of our performance revenue potential, the dramatic expansion of the firm's strategies has driven a more than threefold increase in aggregate deployment from $45 billion in 2018 to $144 billion in 2021. This, in turn, has led to a more than doubling of performance revenue eligible of value in the ground over this period to approximately $450 billion, despite almost $200 billion the realizations. Importantly, as the firm has grown there's been no diminution of investment performance, the measure of the ongoing value creation in the capital we've cumulatively deployed. On the contrary, the firm's returns in 2021 were some of our best.

The BREP opportunistic funds appreciated 44%; corporate private equity 42%; secondaries 50%; Tac Opps 35%; infrastructure 30%; growth equity 28%; real estate Core plus 25%; and private credit 22%. The BAAM Composite rose 8% gross for the year, outperforming the HFRX Global Index by over 400 basis points with significantly lower volatility than the broader market, consistent with BAAM's mandate. In BREP and corporate private equity, we reported the best annual returns in over a decade in secondaries, Core plus, and Tac Opps since the inception of the strategies and in private credit since 2013. Strong investment performance powered $2.2 billion of net performance revenues in the fourth quarter and lifted the balance sheet receivable to $8.7 billion or $7.28 per share, the highest level in our history.

This balance more than doubled year-over-year, notwithstanding $3.5 billion of realized distributions. Together, outstanding growth in both FRE and net realizations drove distributable earnings for the year up 85% to a record $6.2 billion or $4.77 per share. Finally, on delivering value to shareholders, our strong financial position and limited use of capital have allowed us to fully distribute our earnings to shareholders through dividends and share repurchases. These totaled $6.5 billion with respect to 2021.

A record year for the firm and we believe by far the largest capital return by any public asset manager in a single year. In closing, the firm is truly firing on all cylinders. Our momentum has never been stronger with enormous structural tailwinds and multiple engines of growth, we are very optimistic about the future of Blackstone. With that, we thank you for joining the call and would like to open it up now for questions.

Questions & Answers:

Operator

[Operator instructions] And your first question comes from Craig Siegenthaler from Bank of America. You are live in the call Craig, please go ahead.

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Thanks. Good morning, Steve, Jon, Michael. I hope you're all doing well, and congrats on the $155 billion rate this quarter.

Steve Schwarzman -- Chairman and Chief Executive Officer

Thanks, Craig.

Michael Chae -- Chief Financial Officer

Thanks, Craig.

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

So my question is on capital deployment. $66 billion is an impressive number over a 90-day period, but can you talk about some of Blackstone's scale advantages with investing? And how you can deploy so much capital across so many businesses in mostly private assets at scale?

Jon Gray -- President and Chief Operating Officer

The really important question, I think the key thing, Craig, is the expansion of the platform, we keep talking about. What's interesting, if you look at the fourth quarter, half the money we deployed was in strategies that didn't exist five years ago. So it was BREIT, BCRED, and our infrastructure business; two retail, one institutional, all perpetual. And those platforms, as you know, tend to have, I'd describe as maybe simpler products that are repeatable and scalable, which is different than what we do opportunistically.

Fortunately, our returns, as in private equity, real estate, private equity in those areas have been extraordinary. But these platforms allow us to deploy significant amounts of capital. And we own assets for long periods of time, particularly in equity-oriented funds. And so when we buy, for instance, a ports business, or a data center business, or an apartment platform, we can deploy capital through the existing portfolio companies, which is different than in a typical drawdown buy it, fix it, sell it, model.

So scale here and the nature of the capital is allowing us to deploy more capital. There's also just the breadth of the private markets. What we're seeing secondaries had a record deployment quarter, and that's not a surprise because we talked about it last quarter. Many institutions have seen an extraordinary performance from their private equity pools, and some are looking to make new allocations, but they're selling older funds and that's led to huge deal volume there.

And then I would say at our scale, there is this really interesting network effect that we talked about the last couple of weeks in our management committee. And we're now because we have so many different types of capital, so many different parts of the capital structure, geography. We're a full-service solution provider to anybody who needs capital. It could be controlled private equity, it could be a minority stake, it could be structured equity in Tac Opps, it could be credit.

Obviously, it runs across the gamut. And so that again is giving us more power. So it's the whole combination. It's sort of this flywheel that's been created here.

It's the intellectual capital we built up where we have great expertise in markets. It's the fact for so many counterparties we become a one-stop solution. Using real estate as an example, we may engage with somebody on something that starts as equity and then they decide they actually want to borrow money. We have our real estate debt business.

So there's something really powerful that's happening here at our scale and the way we work together is helping that. So our optimism of deploying capital is high. And obviously, if markets dislocate in that regard, it's helpful also.

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Thank you, Jon.

Operator

Thank you, and your next question comes from the line of Alexander Blostein from Goldman Sachs. You're live in the call, please go ahead.

Alexander Blostein -- Goldman Sachs -- Analyst

Hey, good morning, everybody. So appreciate the update at target on reaching $1 trillion in AUM this year, and obviously, $150 billion in the flagship is great. But I was hoping we could dig in a little more into the fundraising backdrop in the current environment. I guess understanding that the secular underpinnings remain quite strong.

But how sensitive do you think the momentum we've seen, particularly in retail for Blackstone over the last 12 months? And some of the other products will sustain in the more turbulent market backdrop that we see so far in January. So really, what do to get a little more of what you hear in real-time from your institutional LPs as far as your retail distribution partners?

Jon Gray -- President and Chief Operating Officer

Well, right now, we're not hearing any change. We talked to our institutional and retail customers every day. In fact, I tried to talk to a CEO at least one or two every day because it's important to stay close to your customers and to put things in context. Of course, the S&P, despite the trade-off total return is up nearly 40% in two years.

And also, I would say what's interesting is to remember our clients, institutional and retail clients have large exposure to fixed income. So many of them are thinking about how can I change that and think about our private credit business, which is so well positioned with direct lending. We're the leading player in leveraged loans and CLOs. So clients are thinking about those things.

I think I would also just point to the fact that alternatives have consistently delivered for customers, and that's built up a lot of loyalty over time. This year -- 2021, of course, was no exception. It was our best year for appreciation. And so I would say our clients tend to take a longer-term view, obviously, of markets trade off a lot that can have an impact.

But if you remember back in 2020, despite not being able to visit with our clients despite all the turmoil, we still had a very good year raising capital. And so I just think we've gotten to a place as you hear from us. You listen to that list of 17 drawdown funds. You think about all the different perpetual vehicles.

Think about all the different channels. This has really changed fundamentally as a business. We're just raising capital from many different sources. And I think for individual investors as context, that's an $80 trillion market that today is probably, I don't know, 1% to 2% allocated to retail.

And when you look at our products in those particular areas, focus on the larger ones now, BREIT and BCRED, those products are actually quite well targeted for a higher-growth, higher-inflationary environment. Steve talked about ownership in BREIT of the kind of assets. BREIT's more than 80% logistics and rental housing, the kind of assets -- the hard assets you want to own in a rising rate environment. BCRED is all floating rate debt.

So as the Fed raises rates, it benefits from that. And of course, the performance of those products has been remarkable. And so, yes, is it possible as markets trade off a lot, you'll see some slowdown. But I would say overall on the ground today, we're continuing to see very positive momentum in our outlook is quite good given where we sit.

Alexander Blostein -- Goldman Sachs -- Analyst

Great. Very helpful, thanks, Jon.

Operator

Thank you. Your next question comes from the line of Gerry O'Hara from Jefferies. You're live in the call, please go ahead.

Gerry O'Hara -- Jefferies -- Analyst

Great, thanks, and good morning. I wanted to pick up a little bit on the fundraising specific to the secondaries fund. But if I heard you correctly, roughly a $20 billion target, which looks to be roughly double, I think the prior vintage. So hoping you might be able to just kind of unpack the dynamics of that market a little bit and why you feel such a large fund is, I guess, appropriately positioned or sized for the opportunity? Thank you.

Jon Gray -- President and Chief Operating Officer

Yeah. We talk a lot about megatrends in good neighborhoods and people often associated just with maybe technology, or life sciences, clean energy. But one of the great neighborhoods is alternatives. Alternatives today are a $10 trillion industry which sounds big, except they're basically equal in size to five technology companies on the west coast of the United States, and they compare to $250 trillion of stocks and bonds that are out there.

And so the industry has been growing at double-digit rates for a long time. It feels like certainly based on our results, that's accelerating. And yet, at the same time, liquidity for those who want to exit early from funds is pretty limited. And so, there's a very small percentage of outstanding NAV that trades every year.

Today, it's between 1% and 2%. And so what's happening is you have an asset class that's growing very large and liquidity that was already too small for the existing asset class. And that's creating a huge tailwind. So what's interesting in our secondaries fund, is not only did we realize the most.

We also deployed the most capital because investors are trying to free up capacity. So we see this as a market that is going to continue to scale. We're not surprised investors are responding. What they've responded to -- Vern Perry and the team have delivered outstanding returns to customers, 16 net for a very long time, even higher in the most recent vintages.

So it's a market we like a lot. There seems to be some structural inefficiency because of the lack of liquidity, and it's growing fast. So this is another area of Blackstone that I think has a lot of potential relative to where it sits today.

Gerry O'Hara -- Jefferies -- Analyst

Great. Thanks for the context.

Operator

Thank you. Your next question comes from Brian Bedell from Deutsche Bank. You're live in the call, please go ahead.

Brian Bedell -- Deutsche Bank -- Analyst

Great, thanks. Good morning, folks, and congrats on a great quarter again in a year. Maybe just circling back on some of the inflationary comments made earlier. Just in thinking about the potential positive correlation of inflation and real estate performance and maybe in the context of BREIT, in particular, given the performance fees that were generated, how should we think about that return profile for BREIT as we go into '22 and potentially have an inflationary backdrop that persists for the year? And I guess the punchline is, should we think of inflation as being positively correlated with performance fees for BREIT? And then maybe if you just want to talk about the just capacity of BREIT as well in terms of where you -- if there are any capacity constraints on that fund in the next one to two years given the fundraising profile of it.

Jon Gray -- President and Chief Operating Officer

Great. So what I would say on BREIT, back to the earlier comments, is the fund has been really well-positioned by our real estate team. The leadership of our real estate group, Ken Caplan, Kathleen McCarthy, Nadeem Meghji who runs our US business. They've set up this product now with more than 80% in rental housing and logistics.

And yes, those asset classes are performing extraordinarily well. We said it -- Steve said it in his remarks, the rents are growing two to three times the rate of inflation. And not only are the market rents growing, in many cases, the rents, of course, in place are well below the market rents. And because we're in this inflationary environment and there are supply chain challenges, it's hard for a new supply to respond as quickly as one would expect.

In fact, in logistics, we think in some markets between landing cost -- replacement cost has gone up close to double. I'd say aggregately in the asset classes we like, it's probably up more than 30% in the last couple of years. So owning these kinds of short-duration, hard assets with pricing power is very positive. That being said, I wouldn't want to say we're going to produce the same kind of extraordinary performance that happened in 2021 because that was really special.

And there will be some headwinds from rising rates on values. But overall, we feel very confident about the BREIT portfolio and continuing to deliver for shareholders in the kind of environment we face today.

Brian Bedell -- Deutsche Bank -- Analyst

That's helpful. Thank you.

Operator

Thank you. Your next question comes from the line of Robert Lee from KBW. You're live in the call, please go ahead.

Jon Gray -- President and Chief Operating Officer

Good morning, Rob. Can you hear us?

Robert Lee -- KBW -- Analyst

Oh, sorry about that. Oh, thanks for taking my questions, and congrats on another good quarter. Just kind of curious. I guess the SEC recently came out with some proposals on new disclosure for private equity or private investments may be the way to describe it.

And since I guess in my experience, no good financial services business seems to go unpunished over time. What is it that kind of keeps you up at night, if anything? If you look at the kind of regulatory environment out there, both here and outside the US. Is there anything that kind of you're particularly focused on?

Jon Gray -- President and Chief Operating Officer

So what I'd say on that is technical -- I think, changed the way they announced yesterday that they're seeking comment on is mostly around systemic risk and reporting systemic risks. So I applied to a range of industries, private equity, hedge funds, and others. I think for us, what we focus on is the fact that we've done such a good job for customers, for such a long period of time that we've delivered solid returns. You obviously see that in our public financials, our investors get even more detail.

And that to us is really important. And the second factor that I think is very important is we're always striving. It's been something very important to Steve since the day I joined this firm 30 years ago and even going back longer for him, operating at the highest levels of integrity, transparency, and disclosure. That that is a core value of this firm and not, whatever comes out from a regulatory environment.

We will adapt and we will, of course, comply, and that's just the way we run our business. So we understand that we're in an environment of heightened scrutiny and we will obviously respond to it in the right way.

Robert Lee -- KBW -- Analyst

Great. Thank you so much.

Operator

Thank you. Your next question comes from Michael Cyprys from Morgan Stanley. You're live in the call, please go ahead.

Michael Cyprys -- Morgan Stanley -- Analyst

Hey, good morning. Thanks for taking the question. Just wanted to ask about retail more broadly, maybe just taking a step back, looking at retail client portfolios. They've seemed to face the challenge around providing income for an aging demographic for some time now.

I guess, to what extent do you see rising interest rates as alleviating those challenges and improving the relative attractiveness of more traditional fixed income products at a higher rate backdrop? And then bigger picture what unmet needs do you see from the retail client space and white space more broadly for Blackstone to provide other solutions to retail customers over time?

Jon Gray -- President and Chief Operating Officer

Thanks, Mike. I think the response from investors to this kind of environment as it relates to their fixed income portfolio is they're going to be looking for ways to maintain yield, but not take duration risk. And so the problem is if they go into long-term corporate or government fixed income, they may get some yield. Today it's still small maybe it goes up, but if rates continue to move, inflation stays high, they have the risk of capital impairment.

And so the idea of trading some liquidity for the yield-oriented products where yield actually grows with rising interest rates, I think becomes increasingly attractive. And that bodes, I think, very well for our credit products.  And we have obviously -- we have our nontraded BDC, BCRED. We also have a public BDC, Blackstone Secured Lending Trust. So I think both of these are well-positioned in this kind of environment.

More broadly in retail, what I would say is -- you're not going to be surprised that this place is focused on innovation and growth. We have gotten to a place in the retail market that is very differentiated. The fact that we've been at this for more than a decade, that we've got several hundred people already dedicated to private wealth under Jones Solotar. We should be the 300 people by the end of the year, that we've created products, not just our traditional drawdown but these perpetual vehicles that meet customer needs that have taken, I think, a much more investor-friendly approach on fees and also have delivered Blackstone best-in-class focus on returns has really made a difference.

And we've started -- Steve talked about shelf space. We've got really unique shelf space in these platforms, relationships with the distributors, the financial institutions, with the financial advisors, and with the underlying customers. And so because of the confidence we've built, that enables us to offer other products like a really great consumer brand company.  And so we're working on a number of things. Some are geographic in nature.

Use BPIF as an example. That is the European version of BREIT. It's just started. Nobody's talking much about it.

It's now at $700 million. It's on a couple of platforms. It will grow over time. And we're looking at different areas.

We're not ready to talk about those, but I could just say that don't be surprised if you see other introductions into this area as we try to meet client needs and try to create products that often offer yield, and they offer an element of liquidity that you can't see in traditional alternative drawdown products. And customers are responding in a positive way. So we see this area as having very significant potential.

Steve Schwarzman -- Chairman and Chief Executive Officer

Mike, this is Steve. If you look at it from the perspective of the distributors, they want to have products that are oriented to protecting capital, but going up continually along with increases from the Fed. And we've had some very unusual conversations because the retail channel is dramatically under-allocated to two alternatives and the kinds of increases that some of the distributors are hopeful of achieving is three times, four times increase. And this is a massive pool of capital.

And it's essential that they come up with good products and that's what we do. And so I think, the way this is less about us and more about them and what the world thinks it's going to need. Particularly, if you look forward to more volatility. And it's sort of where do you put your money, where you think it's safe and where you're playing with the trends? And that's what we're doing and we're doing it all over the world.

So I think this is an enduring kind of trend. As John said, we've taken the approach of bringing our institutional-quality products to the retail market. After 10 years of investment, plus the other thing we've been doing over that time period is running in the sector. We call it  Blackstone University, where we have the FAs from different firms at our firm, spending a day or two, learning about selling these types of products, which for some of them was new, and the fact they've been rewarded with performance.

So it makes them want to sell more of our products and so it's a virtuous circle. And we're really extremely engaged with new product development that will meet the needs of these types of customers. So when Jon's really excited about this, he's got a reason to be.

Michael Cyprys -- Morgan Stanley -- Analyst

Great, thanks so much.

Operator

Thank you. And your next question comes from the line of Devin Ryan Ryan from JMP Securities. You're live in the call, please go ahead.

Brian McKenna -- JMP Securities -- Analyst

Hi, thanks, this is Brian McKenna for Devin. So looking at the broader private equity portfolio. I know, you've been allocating more capital to growth investments, but I'm curious as to how the mix of the portfolio has evolved over time on this front? And then has there been any pick-up in deployment opportunities into growth recently, just given the dislocation in the public markets? Thanks.

Jon Gray -- President and Chief Operating Officer

Well, we've been really thematic, Brian, and where we redeploy capital. And so yes, technology has grown as a greater percentage of the mix. But it hasn't just been a technology story and that area has served us really well. It's one of the reasons when you look at our returns in our private equity flagship -- corporate private equity area, we've seen such great returns.

But it's also other thematic areas. We've been doing a bunch around sustainability in terms of investing in software and other businesses that provide support to the green energy transition that's underway. We've been deploying capital in the housing supply and construction chain in a very meaningful way. We have a large company in Europe that's done quite well.

We've been focused on leisure and all forms of travel, and we've done this in real estate, but also in private equity. We close on a sizable transaction with a company called VFS that processes visas for people from developing markets to visit developed markets. And what we're anticipating, of course, there thematically is a big recovery of travel as we come out of COVID. And so the good news is we haven't been really big into industrials and areas where exposure to rising input costs, labor, and materials can really squeeze margin.

We've tried to focus on businesses with secular tailwinds where we have pricing power, and that's why we feel quite good about the positioning of our private equity portfolio, even as we move into this bit of a different environment.

Brian McKenna -- JMP Securities -- Analyst

Thank you, Jon.

Operator

Thank you. Your next question comes from Finian O'Shea from Wells Fargo. You're live in the call, please go ahead.

Finian O'Shea -- Wells Fargo Securities -- Analyst

Hi, good morning, everyone. On the market environment again. Can you talk about the impact so far on market activity or deal flow? Are you seeing any changes in pricing or transaction volumes at this point?

Jon Gray -- President and Chief Operating Officer

So I think it's a little early. As I commented earlier, the real estate market certainly not -- I think in private equity there was just such a surge at the end of last year. Some of that people thought in anticipation of tax changes, there were probably more sellers. I think if the economy stays healthy, we'll still see decent transaction volume.

I do think in the technology and growth areas, as the public markets had a more dramatic reset than that there it may take a little bit more time to adjust the private market to the public market pricing. I think that bodes very well for our growth equity business that's positioned well. I would say the good news is from our teams on the ground, seeing stocks off materially has definitely engaged more conversations with us and companies out there. So sometimes this seed planning takes a little bit of time.

But my expectation is there should be a decent year for deal volume. We may see a little bit of a slowdown on the corporate side here as people readjust. But then I would expect at some point I'd probably pick back up.

Finian O'Shea -- Wells Fargo Securities -- Analyst

Thank you.

Operator

Thank you. Your next question comes from Glenn Schorr from Evercore ISI. You're live in the call, please go ahead

Glenn Schorr -- Evercore ISI -- Analyst

Hello there. Maybe I could just ask one quick follow-up on rates and growth stocks because you just touched on it. But -- so you mentioned in higher rates, you have a lot of inflation-protected assets that do well, rents going up two and three times inflation, and how BCRED is a lot of floating rates. So all that's great.

I think one, not all, but one of the reasons where lots of growth stocks have cracked, as you noticed, was just a higher discount rate and its impact on multiples. So Blackstone partially pivoted more toward growth investing as another avenue for growth. So just kind of curious about how you weigh what's happened in the market and the impact of rates on all kinds of levered investments versus the specific opportunities that you see ahead of you? Sorry if some of that is repetitive.

Jon Gray -- President and Chief Operating Officer

Yeah. Look, I think the question on tech is really important in some of these faster-growing industries, and I'd make a couple of comments. We tend to focus on companies that have positive cash flow and make money, particularly in private equity. When we invest in tech and it's often tech services businesses.

Even in our growth equity business, we focus on companies that either make money or have high gross margins. And the companies that are facing the greatest pressure today are those that are more speculative in nature that has to keep raising capital over time. And where the increase in discount rate impacts value. So where we focus, I think, is really important.

I would also point out that even in some of our tech companies, we've taken public as they've traded off. We still have very significant embedded gains given where we bought these businesses. And when you look at the performance of our more tech-oriented investments in the fourth quarter, revenues in our tech companies in private equity were up 20% and in growth up 40%. And that's not a surprise because even though there's been a pullback in markets, there are big secular trends that are still underway.

All of us are getting more Amazon boxes to our homes. E-commerce is growing 15%, 20%. Cloud migration continues to accelerate. I was talking to our head of technology, John Stecher yesterday, who estimates our portfolio companies are spending 15% to 20%more on technology this year.

That is an awfully big number. Consumers, educations moving online. When you talk about schools, what's happening? We've made a big push into edtech. They've gone from spending 5% to 7% more on software and digital today to 15% plus digital infrastructure, of course, benefiting because you need data centers and towers.

And so there is secular growth in these areas. Yes, some of these stocks certainly got to levels that didn't make sense. We've now seen a pullback, but I wouldn't now say therefore technology, technology, services, content creation, this stuff doesn't make sense to invest in. We think it could lead to more opportunities and more rational pricing, and we really like the portfolio of businesses we're invested in.

Michael Chae -- Chief Financial Officer

And Glenn, I just as -- this is Michael. I'd just add to that particularly in private equity, yes, these are businesses with great secular tailwinds that grew in the fourth quarter in the order of 20% top line, but they're highly profitable. They're at scale. And we importantly, we bought them at reasonable prices.

We still value investors since we bought them at reasonable prices and multiples of things like EBIT that you rarely -- in metric you really hear about in this space and cash flows. And as always with all investments, for 35 years. We underwrote them to long-term exit multiples that assumed normalization of rates and multiples and so forth. So.

And as a result, we feel we have significant embedded gain in the portfolio overall, notwithstanding fluctuations in markets.

Glenn Schorr -- Evercore ISI -- Analyst

Thank you for all of that. Thanks.

Operator

Thank you. And your next question comes from the line of Arnaud Giblat from BNP. You're live in the call, please go ahead.

Arnaud Giblat -- Exane BNP Paribas -- Analyst

Yeah. Good morning. Could I ask, please, on the wealth and mass affluent channels in Europe? They seem to be developing very well. Could you give us a bit more color on how on -- what you're doing in Europe? You mentioned earlier BPIF hitting $700 million.

How far could this go? What other products are you launching? Are you getting closer to entering partnerships with some of the key European wealth managers? Thank you.

Jon Gray -- President and Chief Operating Officer

Yes, Europe is -- I think, an area of real opportunity for us over time. But I do want to acknowledge that it's more challenging in the sense almost every EU country has its own regulations about private wealth. They are not all synchronized. Obviously, there are different languages as well.

And you have much less consolidation generally among distributors, wealth managers. And so the amount of boots on the ground, you need to distribute this and the legal work you need to do is significant. The good news is we've got some terrifically talented people leading that effort force in Europe, and we have been committing significant resources to this and we will continue to move. And I think this is another market where we could have a meaningful first-mover advantage where the strength of the brand really matters.

The products really matter. We have distributed with some of the global firms, our BREIT product, our BCRED products, but now having more targeted products in Europe in euros will make a difference. But I wouldn't expect it to move as quickly just because it requires a lot of effort country by country. But we are, as Steve likes to say, a persistent bunch.

So this is something we're really focused on.used on.

Operator

OK. Thank you. And your next question comes from Adam Beatty from UBS. You're live in the call, please go ahead.

Adam Beatty -- UBS -- Analyst

Good morning, thank you for taking the question. You gave some context earlier about how the firm has grown and evolved in the past few years since Investor Day. It would be great to get your thoughts on how the organization has grown and evolved at the same time to be able to support the much larger AUM, the doubling of a number of products, etc. And maybe, in particular, the role of technology in that.

Thanks very much.

Jon Gray -- President and Chief Operating Officer

So that is something you might imagine, we spend a lot of time talking about because the most important thing as we grow is to maintain our culture, attract great talent, making sure they have a wonderful experience here. The best people want to come, that we continue to be a meritocracy and also make sure we maintain our investment discipline. We never want to be a franchise business. We still have centralized investment control.

We've got to make sure we maintain process and discipline as we grow because that's the way investment managers get into trouble. So what are we doing in this regard? I would say there's a multitude of things. Obviously, at the bottom top, we've been expanding our analyst class meaning meaningfully, but also our training and onboarding something Steve's been really focused on. We put a lot of effort on to make sure we have people as integrated as possible.

We've been doing more in the way of lateral hiring. We've hired a number of senior leaders to lead new initiatives or to move into existing businesses something in the past we hadn't done as much of. But given our rate of growth, we need to do that. And then we stay highly integrated management committee, operating committee.

Every Monday morning, we do our BX TV. You might have seen our holiday video that made fun of us about it. We are focused on keeping this firm connected. And then, the investment committees are still run out of New York, centralized, different investment committees for different groups but a number of people who are similar, including folks on this call, on multiple of these investment committees.

And so we're thinking about our process, how to streamline it in certain ways, but maintain the same investment discipline that we've always had over time. And the great news is we've had a lot of continuity with people here, and we're also attracting all this wonderful talent. So the number we talk about, 29,000 young people last year applying for 120 jobs. That's an incredible number.

And I'm happy when I applied way back when that wasn't the number. But it's really important to maintain, control and discipline as we have these really tremendous levels of growth.

Adam Beatty -- UBS -- Analyst

That's perfect, right on. Thank you very much.

Operator

Thank you. And your final question comes from Chris Kotowski from Oppenheimer. You're live in the call, please go ahead.

Chris Kotowski -- Oppenheimer and Company -- Analyst

Yeah, good morning, and thank you. I guess it's a question for Michael, probably, but I wanted to understand the fee-related performance fees a bit better because I recognize obviously it was a great quarter and a great year, but the first nine months were pretty darn good. And as of the end of the third quarter, the -- I think the accrued performance fees in BREIT was something like $500 million. And then it ended up -- the year-end performance fee ended up being $1.5 billion.

And I'm -- was that just because you had kind of accrued too conservatively in the first part of the year? Or was there a jump in the fourth quarter? Or what drove that?

Michael Chae -- Chief Financial Officer

I think -- well, first of all, you have to look obviously the difference between gross and net. And so when you see the NAPR receivable that we disclose every quarter, that's obviously on a net basis. And what you see on a consolidated and by segment basis in our 8-K, when that becomes realized revenues, is gross revenues, and so with the cost and comp against that in the overall fee-related compensation line. So you can see it coming on a net basis in the prior quarter.

There was also an incentive fee in the fourth quarter from infrastructure that you would have also seen on the receivable in the prior quarter. But then add to that, of course, in the fourth quarter, you also get the benefit of the further appreciation and inflows in growth in asset base. So it's there. We were cognizant that over time and confident.

But over time, for a number of different factors, the visibility, and sort of predictability of this, I think, will only be enhanced over time, even as it scales and grows.

Chris Kotowski -- Oppenheimer and Company -- Analyst

OK, great. And on the private equity side, the $212 million is is that -- which category drove that, and what's our tracking mechanism toward that? And should that be a once-a-year thing? Or is that a quarter by quarter thing from here?

Michael Chae -- Chief Financial Officer

Right, Chris. So as I mentioned in my remarks, and then just now to the first part of the question that was the was the incentive fee from infrastructure -- from our infrastructure fund. And that is in that category along with the BPP funds that have periodic but recurring incentive fee events, typically three years from the -- three-year anniversary of the investor inflows. Or in some cases five years, but principally three years.

In the case of infrastructure, three years.

Chris Kotowski -- Oppenheimer and Company -- Analyst

OK. Great, thank you.

Michael Chae -- Chief Financial Officer

And I'd just say, overall, in terms of this area, as I mentioned, you saw NAV growth ingest BREIT and BCRED of a triple in the year. So $21 billion between those 2 strategies went to $67 billion entering this year. We had inflows on January 1st between the two strategies of $4 billion. And obviously, as we've talked about, we feel great about the positioning of the portfolios and the further appreciation.

So you combine those three factors, and notwithstanding that we have a tougher comparison relative to that terrific BREIT return, we feel really good about the growing fee base and the outlook ahead.

Chris Kotowski -- Oppenheimer and Company -- Analyst

Great. Thank you.

Operator

Thank you, and I would like to hand it back to Weston for closing comments.

Weston Tucker -- Head of Shareholder Relations

Great. Thank you, everyone, for joining us, and look forward to following up after the call.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

Weston Tucker -- Head of Shareholder Relations

Steve Schwarzman -- Chairman and Chief Executive Officer

Jon Gray -- President and Chief Operating Officer

Michael Chae -- Chief Financial Officer

Craig Siegenthaler -- Bank of America Merrill Lynch -- Analyst

Alexander Blostein -- Goldman Sachs -- Analyst

Gerry O'Hara -- Jefferies -- Analyst

Brian Bedell -- Deutsche Bank -- Analyst

Robert Lee -- KBW -- Analyst

Michael Cyprys -- Morgan Stanley -- Analyst

Brian McKenna -- JMP Securities -- Analyst

Finian O'Shea -- Wells Fargo Securities -- Analyst

Glenn Schorr -- Evercore ISI -- Analyst

Arnaud Giblat -- Exane BNP Paribas -- Analyst

Adam Beatty -- UBS -- Analyst

Chris Kotowski -- Oppenheimer and Company -- Analyst

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