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Stephen Schwarzman’s revenues from Blackstone Group fell below $1 billion in 2023, a decline of more than 30% from the previous year, as a slowdown in deals made it tougher for the world’s largest private equity group sell investments for profit.
Schwarzman’s nearly $900 million haul came primarily from nearly $780 million in dividend payments due to his nearly 20% ownership of the private equity group he co-founded. Additionally, he earned approximately $120 million in carried interest and other compensation. Both figures reflect sharp declines from a year earlier as Blackstone sold fewer assets amid rising interest rates.
Schwarzman’s income topped $1 billion for the first time in 2021, when he raised $1.1 billion. In 2022, it increased to a record $1.3 billion.
Senior executives at private equity firms typically receive modest salaries compared to their right to receive “carried interest,” giving them a share of the profits on successful investments. Founders and top executives like Schwarzman are also large shareholders, meaning they receive dividends. Shares of Schwarzman and Blackstone Chairman Jonathan Gray are worth $29 billion and $5.2 billion, respectively, at current prices.
Blackstone executives can receive huge incomes in good years because the group traditionally pays out almost all of its profits to shareholders in the form of dividends. Some rivals, such as KKR and Apollo Global, in contrast have more stable dividend policies and retain part of their profits to finance future expansion.
Blackstone’s profits fell in 2023 as performance fees earned from asset sales fell by more than half. Last year its distributable earnings – a metric favored by analysts as a proxy for cash flows – fell by about a quarter to $5 billion.
Blackstone’s large dividend payments also helped Gray receive a nine-figure income in 2023. He received more than $265 million in combined pay and dividends, according to securities filings released Friday. Joseph Baratta, the head of Blackstone’s private equity unit, and Michael Chae, its chief financial officer, each received about $50 million in 2023, with nearly half of that coming from dividends.
The previous year, Blackstone’s executive incomes had reached record highs as the New York-based group sold more than $81 billion in assets and earned an overall profit of $6.6 billion.
Although Blackstone’s revenues fell, Schwarzman and Gray’s net worth rose as the group’s shares generated a total return of more than 80% in 2023. The stock gains were fueled by rapid growth in assets under management, which eclipsed $1 trillion for the first time and its inclusion in the S&P 500 Index.
Schwarzman’s holdings in Blackstone have increased in value by about $12 billion since the start of 2023, while Gray’s shares have gained more than $2 billion, according to calculations by the Financial Times.
Shares of many U.S. private capital groups surged 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 of the founders and top executives of Blackstone, Apollo, KKR, TPG, Ares and Carlyle gained more than $40 billion in value between the start of 2023 and mid-February this year, according to as reported by the FT earlier this month.
The gains came as other parts of Wall Street struggled due to slowing mergers and acquisitions and initial public offering activity. Big investment banks have cut bonuses and laid off staff in recent quarters, causing discontent at many big banks.
The disparity has meant that the salaries earned by Schwarzman, Gray and other private equity executives have 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 based on long-term alignment with our investors,” the group said.