Blackstone's pay suggests the glow has gone
As we noted earlier this month, junior bankers who moved into private equity and to the buy-side hopeful of basking in the warm yellow glow of carried interest payments are finding themselves disappointed. Buy side investments are not being exited. Carried interest is not being realized. And unrealized carried interest, on investments that have yet to be exited, is...negative.
Blackstone's Q1 results today highlight the issue. The firm's total spending on compensation was down from around $1.8bn in 2022 and $1.8bn in 2021 to around $763m in the first three months of this year. Discounting the extremely anomalous first quarter of 2020, it's like 2018. But a bit worse.
Why was this? It wasn't that Blackstone cut a load of heads - spending on salaries has relentlessly risen. Instead, it's both realized and unrealized performance compensation (carried interest) that's fallen.
Witness the chart below. Unrealized carried interest turned negative in the last quarter, meaning that investments that have yet to be exited will be generating negative rather than positive additions to employees' pay. Yes, this has happened before (in Q12020, again), but what the chart below doesn't show is that unrealized performance allocations at Blackstone have now been negative for four consecutive quarters. This used to be unheard of - in the 13 quarters preceding Q1 2019, it happened in only two.
This doesn't mean you'll be paid badly at Blackstone. The firm employs around 4,700 people; if it continues accruing compensation at the rate of Q1, this implies a 2023 average of $649k a head. Once, though, it was closer to $3m.
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