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Blackstone Group's Stephen Schwarzman's income fell below $1 billion in 2023, down more than 30 percent from the previous year, as a slowdown in deal making made it difficult for the world's largest private equity group to sell investments for a profit.
Most of Schwarzman's close to $900 million of money came from about $780 million in dividends due to his ownership of about 20 percent of the private equity group he co-founded. In addition, he received approximately $120 million in “carried interest” and other salaries. Both numbers reflect sharp declines from the previous year as Blackstone sold fewer assets amid rising interest rates.
Schwarzman's income surpassed $1 billion for the first time in 2021, when he raised $1.1 billion. In 2022, it rose to a record level of $1.3 billion.
Top executives at private equity firms typically receive modest salaries compared to their entitlement to “carried interest,” which gives them a share of profits on successful investments. Founders and CEOs like Schwarzman are also major shareholders, meaning they receive income from dividends. The shares of Schwarzman and Jonathan Gray, president of Blackstone, are worth $29 billion and $5.2 billion, respectively, at current prices.
Blackstone executives can receive significant income in good years because the group traditionally pays almost all of its profits to shareholders in the form of dividends. By contrast, some competitors, such as KKR and Apollo Global, 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 asset sales fell by more than half. Last year, its distributable earnings – a measure that analysts prefer as a proxy for its cash flows – fell by about a quarter to $5 billion.
Blackstone's massive dividend payouts also helped Gray earn a nine-figure income in 2023. He earned more than $265 million in combined wages and profits, according to securities filings released Friday. Joseph Baratta, head of Blackstone's private equity unit, and Michael Chi, chief financial officer, each took home about $50 million in 2023, about half of which would come from dividends.
The previous year, income for Blackstone executives reached record levels, with the New York-based group selling more than $81 billion in assets and generating total profits of $6.6 billion.
Despite lower income at Blackstone, Schwarzman and Gray's net worth rose as the group's shares delivered a total return of more than 80 percent in 2023. The stock's gains were fueled by its rapidly rising assets under management, which topped $1 trillion for 2020. For the first time, And its inclusion in the S&P 500 index.
The value of Schwarzman's holdings in Blackstone has risen by about $12 billion since the start of 2023, while Gray's shares have gained more than $2 billion, according to Financial Times calculations.
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Shares in several U.S. private capital groups have soared in the past year as their drive to diversify beyond traditional buyouts into credit- and insurance-related investments has seen their total fee-based earnings rise rapidly.
Overall, the value of shares of founders and senior executives in Blackstone, Apollo, KKR, TPG, Ares and Carlyle rose by more than $40 billion between the beginning of 2023 and mid-February of this year, the Financial Times reported. Earlier this month.
The gains came as other parts of Wall Street struggled amid a slowdown in mergers, acquisitions and initial public offering activity. Major investment banks have cut bonuses and laid off staff in recent quarters, which has caused discontent among many major banks.
This disparity means that the wages earned by Schwarzman, Gray and other private equity executives dwarf those of bank chiefs such as JPMorgan's Jamie Dimon and Goldman Sachs's David Solomon.
“Blackstone has a performance-based compensation model built on long-term alignment with our investors,” the group said.
