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Stephen Schwarzman’s income from Blackstone Group fell below $1bn in 2023, a decline of more than 30 per cent from the previous year, as a slowdown in dealmaking made it harder for the world’s largest private equity group to sell investments for a profit.
Schwarzman’s near-$900mn haul came mostly from almost $780mn in dividend payments because of his ownership of nearly 20 per cent of the private equity group he co-founded. In addition, he earned about $120mn in “carried interest” and other pay. Both figures reflect steep declines from the prior year as Blackstone sold fewer assets amid rising interest rates.
Schwarzman’s income first topped $1bn in 2021, when he collected $1.1bn. In 2022, it increased to a record $1.3bn.
Top executives at private equity firms typically receive salaries that are modest compared with their entitlement to receive “carried interest”, giving them a share of the profits on successful investments. Founders and top executives such as Schwarzman are also large shareholders, meaning they receive dividend income. Schwarzman and Blackstone president Jonathan Gray’s shares are worth $29bn and $5.2bn, respectively, at current prices.
Executives at Blackstone can receive outsized income in good years because the group traditionally pays almost all of its profits to shareholders in dividends. Some rivals, such as KKR and Apollo Global, by contrast have more stable dividend policies and retain some of their profits to fund future expansion.
Blackstone’s profits fell in 2023 as the performance fees it earned from selling assets dropped by more than half. Last year its distributable earnings — a metric favoured by analysts as a proxy for its cash flows — declined by about a quarter to $5bn.
Blackstone’s hefty dividend payments also helped Gray receive a nine- figure income in 2023. He received more than $265mn in combined pay and dividends, according to securities filings released on Friday. Joseph Baratta, the head of Blackstone’s private equity unit, and Michael Chae, its chief financial officer, each received about $50mn in 2023, with nearly half coming from dividends.
The previous year, incomes for Blackstone executives reached record levels as the New York-based group sold more than $81bn in assets and earned an overall profit of $6.6bn.
Though incomes fell at Blackstone, the net worth of Schwarzman and Gray rose as the group’s stock generated a total return of more than 80 per cent in 2023. The share gains were fuelled by its fast-rising assets under management, which eclipsed $1tn for the first time, and its inclusion into the S&P 500 index.
Schwarzman’s holdings in Blackstone have increased in value by about $12bn since the beginning of 2023, while Gray’s shares have gained more than $2bn, according to the Financial Times’ calculations.
Shares in many US private capital groups rose last year as their push to diversify beyond traditional buyouts and into credit and insurance-related investments caused their overall fee-based earnings to rise rapidly.
Overall, shares for founders and top executives at Blackstone, Apollo, KKR, TPG, Ares and Carlyle gained more than $40bn in value between the start of 2023 and mid-February this year, the FT reported earlier this month.
The gains have come as other parts of Wall Street have struggled amid a slowdown in mergers and acquisitions and initial public offering activity. Large investment banks have slashed bonuses and laid off staff in recent quarters, causing discontent at many large banks.
The disparity has meant the pay earned by Schwarzman, Gray and other private equity executives has dwarfed those of banking chiefs such as JPMorgan’s Jamie Dimon and Goldman Sachs’ David Solomon.
“Blackstone has a performance-driven compensation model that is built on long-term alignment with our investors,” the group said.
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