Blackstone Leaders on the Developments Shaping 2022
The breadth and scale of Blackstone’s business affords us a unique perspective on the global economy and the sectors where we invest. We sat down with leaders across several of Blackstone’s business groups to hear more about the developments they see impacting private equity, real estate, private credit, ESG and technology in 2022.
In a world of rising inflation and long-term interest rates, equity valuations will be under pressure. To drive strong returns in the future, private equity owners will need to help transform companies to drive their growth. At Blackstone, we possess global scale, deep sector insights and networks and value creation resources that I believe will support our companies’ growth and help us deliver for our investors.
Inflation and rising rates are top of mind for investors. Real estate has historically been an attractive investment during periods of inflation and rising rates given it is underpinned by hard asset value that generates a current yield and benefits from underlying cash flow growth. Further, inflation leads to increases in the cost to build which generally constrain new supply and support real estate values. We believe we remain extremely well-positioned in this environment, with 70% of our portfolio¹ concentrated in logistics, rental housing and life science office – three of our best performing sectors where growth has thus far outpaced inflation.
I believe 2022 will be remembered as the end of the 40-year bull market in rates. After experiencing a long period of low interest rates and supportive monetary policy, market participants are pricing in as many as six rate increases by the Federal Reserve this year. This reversal means credit investors have to be more cautious of taking long-duration risk – as rates increase bond value will degrade. We believe we’re well- positioned to help our investors in this environment, as we’re focused on private credit, which is most often floating-rate and therefore doesn’t have long-duration exposure that can put pressure on returns as rates rise.
I believe we’re going to see regulators around the world accelerate the shift from voluntary to mandatory ESG reporting. Some might describe this as a burden, but I see it as an opportunity. It has the potential to reshape uncoordinated and chaotic market activity into controlled, intentional fiscal policy that can help drive capital towards investments in a more sustainable and equitable society. Entire sectors stand to benefit. Blackstone is already driving value for its investors by investing thematically in companies that are developing the solutions, technologies and infrastructure required to help the world make progress on ESG initiatives.
- On a fair market value basis as of 12/31/2021.
The views expressed in this commentary are the personal views of Joe Baratta, Kathleen McCarthy, Dwight Scott, Jean Rogers, and John Stecher, and do not necessarily reflect the views of Blackstone Inc. (together with its affiliates, “Blackstone”). The views expressed reflect the current views of these individuals as of the date hereof, and neither these individuals nor Blackstone undertake any responsibility to advise you of any changes in the views expressed herein.
This commentary does not constitute an offer to sell any securities or the solicitation of an offer to purchase any securities. This commentary discusses broad market, industry or sector trends, or other general economic, market or political conditions and has not been provided in a fiduciary capacity under ERISA and should not be construed as research, investment advice, or any investment recommendation. Past performance is not necessarily indicative of future performance.