Market Views

Q&A with Joe Dowling, Global Head of Blackstone Alternative Asset Management

Joe Dowling shares what drew him to Blackstone, his approach to leadership and what he believes has driven BAAM’s remarkable performance over the last two years.

Joe Dowling

Joe Dowling left his role as Chief Investment Officer of Brown University to join Blackstone Alternative Asset Management (BAAM) in early 2021 – less than 18 months before the Federal Reserve embarked on a historically aggressive hiking cycle. Yet Joe rose to the challenge: since taking the helm, a composite of BAAM’s strategies has outperformed the traditional 60/40 stock-bond portfolio by 5% annually.1

We sat down with Joe to discuss his approach to investing and the changes he implemented to position BAAM for today’s macroeconomic environment.

Q: You joined Blackstone after managing Brown University’s endowment for years. What drew you to the firm?

Two things: the competitive advantage of the Blackstone platform and the people. First – Blackstone’s global reach, scale, brand and proprietary data facilitate sourcing investments and market insights.

Second – I work alongside some of the most talented investors that I’ve met in my career. The high-performance culture of rigor and excellence they’ve created demands continual learning and development – and that’s what I love about working here.

Q: How would you describe BAAM?

BAAM’s mandate is to create value for our investors through customized exposures and differentiated access to alternative investments. Many people refer to BAAM as a “fund of funds,” but I don’t like that term. I don’t think it’s representative of the breadth of what we do, which is a combination of many different strategies. We invest in special situations and other uncorrelated opportunities; we’ll seed promising investors so they can launch a new franchise; and we’ll take minority stakes in other private market investment firms – and these are just a few of the strategies we operate. It’s a large, complex business – that’s both the challenge and the fun of leading it.

Q: You’ve been closely watching monetary policy, including the Fed’s commitment to shrinking its balance sheet and unwinding years of quantitative easing. What is BAAM’s investment approach as we move into a period of quantitative tightening?

We always strive to build balanced, resilient portfolios that can thrive across multiple economic scenarios. In a quantitative tightening (“QT”) environment, a traditional 60/40 portfolio can be greatly enhanced by adding absolute return strategies. These strategies are designed to deliver regardless of what is happening in the markets, can help diversify portfolios and take advantage of market dislocations.

Q: During your tenure as Global Head of BAAM, a composite of BAAM’s strategies has outperformed the traditional 60/40 stock-bond portfolio by 5% annually.1 How did you achieve this?

The formula is relatively simple: choose the right investments, implement and size appropriately and build a diversified portfolio. In the current environment, we have leaned into quantitative strategies, which benefited from increased volatility; macro strategies, which benefited from strong macroeconomic trends, such as elevated rates; and certain credit strategies, which have experienced equity-like returns higher up in the capital structure. Our strong performance also stems from our close integration with the broader Blackstone portfolio – the knowledge-sharing across groups, anchored by regular meetings with senior leadership, has strengthened our decision-making.

Q: Let’s talk more about teams. Despite leading the business, you often refer to yourself as “just the quarterback.” How do you encourage teamwork within BAAM?

When I first joined BAAM, one of my priorities was to rearrange our floors so that all investment teams physically sit in the same area. We’ve been able to unlock new investment opportunities thanks to real-time sharing and interaction. I also hired two people to focus full-time on professional development for BAAM – including our first-ever head of talent development – so our people have the tools and support they need to get better at their jobs.

More generally, I encourage colleagues at all levels to speak up. Teams always outperform individuals, and teams that welcome different opinions and perspectives make better decisions. I also try to set a good example of unplugging to reset every now and then. It’s really important to me to spend time with my family, set personal reading goals, and be present for events – as big as my daughter’s graduation or as small as a regular family dinner. A balanced personal life shows through in our people’s commitment to the business, their individual performance, and their contribution to the team. It really is a great time to be at Blackstone, and I’m excited to see all we can do as a team to build on our track record and deliver for our investors.

(1) Past performance does not predict future returns. Figures represent the net annualized returns of the BAAM Principal Solutions (“BPS”) Composite vs. a hypothetical 60/40 stock-bond portfolio (represented by 60% exposure to the MSCI World TR index and 40% exposure to the Bloomberg Global Aggregate index) over the period from January 2021 to June 2023, approximating the time period since Mr. Dowling joined BAAM. The BPS Composite is not an investible product and, as such, its performance does not represent the performance of any Blackstone fund or account. The funds/accounts that compose the BPS Composite are not managed within a single fund or account and are managed with different mandates by different managers. The BPS Composite includes only BAAM-managed commingled and customized multi-manager funds and accounts; it excludes BPS-managed funds in liquidation and all other platforms/strategies managed through the Blackstone Hedge Fund Solutions Group. This performance comparison is presented for illustrative purposes only. Actual returns experienced by BAAM investors may be materially lower than those of the BPS Composite presented herein, and the BPS Composite may be of limited utility in evaluating a potential investment with BAAM. There can be no assurance that any future Blackstone-sponsored funds will achieve comparable results or avoid substantial losses.

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