Blackstone (NYSE:BX) Vice Chair and Chief Financial Officer Michael Chae told attendees at Bank of America’s 34th Annual Financial Services Conference that the firm is seeing “quite strong” fundamentals across its portfolio despite recent market “noise,” and he outlined expectations for an active 2026 for deployment, fundraising, and fee growth.
Macro view: investment boom, moderating inflation, and resilient portfolio trends
Chae said Blackstone believes the economy is undergoing a “historic investment boom,” which the firm expects will be followed by a productivity boom. He pointed to continued strength in Blackstone’s portfolio, including 9% revenue growth in its corporate private equity companies in the fourth quarter, with “resilient margins.”
On inflation, Chae said Blackstone views it as “basically under control,” with stable labor costs and a labor market “in balance,” though potentially cooling gradually. He also said shelter inflation “in real time is running well below” lagging CPI measures. Chae added that CEO optimism in Blackstone’s quarterly survey is at the highest level in over a year, and “virtually none” expect a recession in the next 12 months.
He said the capital markets environment appears robust, supported by healthy growth and moderating inflation. Chae noted that high-yield and investment-grade spreads are tight, and said Blackstone subscribes to the view that AI-driven productivity could have a “meaningful deflationary pull over time.”
Deployment: $138 billion invested in 2025, with momentum into 2026
Chae said Blackstone expects 2026 to be a very active year for investment deployment after investing about $138 billion in 2025, its highest annual level in four years, including $42 billion in the fourth quarter. He said the firm leaned into public market volatility and completed eight public-to-private transactions across real estate and private equity in 2025, alongside record deployment in credit and secondaries.
He described several “megatrends” driving the firm’s opportunity set:
- AI and digital infrastructure: Chae cited forecasts that data center capital expenditures could rise 3.5x over the next five years versus the prior five, and referenced a $7 trillion capital requirement.
- Power and electrification: He said sector capex is expected to grow more than 50% over the next five years versus the last five, and noted Blackstone has completed 31 investments representing over $10 billion of equity in the space over the last two years. He also referenced the recent sale of a majority stake in an electrification-themed investment called Saber.
- Life sciences: Chae pointed to innovation in drug development alongside funding constraints at large pharmaceutical companies, creating what he described as an annual R&D funding gap of more than $200 billion.
- Private credit: He characterized private credit as expanding as a financing source for the real economy and described a $30 trillion market opportunity.
- Secondaries and liquidity solutions: Chae said private markets have grown to $13 trillion and that less than 2% turns over annually in the secondary market, which he called a significant opportunity.
He also highlighted Asia as an area of focus, noting it represents about 40% of the global economy but roughly 8% of global AUM, and said Blackstone has leaned into India and Japan.
Fundraising: $239 billion of inflows in 2025 and expectations for strength in 2026
Chae said Blackstone generated $239 billion of inflows in 2025, up 40% year-over-year, with growth across its “three I’s” client channels: institutional, individual investors, and insurance. He said institutional inflows rose over 50%, individual investor sales grew over 50%, and insurance inflows were up about 20%.
In institutional, Chae said Blackstone’s institutional AUM exceeds $700 billion, up about 60% over five years, and the firm is raising a new cycle of drawdown vehicles. He said Blackstone expects 2026 drawdown fundraising to be “well above 2025 levels.” He also cited infrastructure AUM of $77 billion, up 40% year-over-year, and said the firm’s hedge fund solutions business (BXMA) posted 23 consecutive quarters of positive performance and had its best year of organic net inflows in nearly 15 years.
In insurance, Chae said AUM is over $270 billion, up four times in five years, and described Blackstone as the largest non-captive insurance asset manager globally. He pointed to partnerships including Nippon Life in Japan and Legal & General in the UK, and said demand for “excess spread” from private assets is important in an environment of tight liquid-market spreads.
In private wealth, Chae said Blackstone surpassed $300 billion of AUM in the fourth quarter, up three times in five years. He said the firm’s private equity strategy for individuals has grown to over $18 billion in two years, its infrastructure strategy reached significant scale about a year after launch, BCRED posted a record year of sales, and BREIT has “very positive momentum,” with the firm “as optimistic as we’ve been in years” about demand.
Financial outlook: fee growth drivers and a 2027 incentive fee tailwind
Chae said Blackstone expects “a multi-year picture of strength” and noted mid-teens growth in base management fees in three of four segments in the fourth quarter. For 2026, he said the firm expects five private equity drawdown funds totaling over $50 billion to be launched and to be fully fee-earning by year-end. He emphasized the growth potential of Blackstone’s private equity strategy for individuals as an engine for management fee and fee-related earnings (FRE) growth.
Chae also said the firm expects a strong year for transaction fees in its capital markets business as the transaction environment improves. He added that Blackstone’s perpetual capital platform is now almost half of firm-wide fee-earning AUM, supporting management fees that compound with net asset value and also incentive fees. He said the transaction environment has improved significantly, and the firm expects disposition activity to ramp through the year.
Looking to 2027, Chae cited the full-year impact of 2026 fund launches and said Blackstone anticipates a “large-scale scheduled crystallization” of incentive fees in its institutional infrastructure business. He noted that in 2024 the crystallization generated $1.1 billion of fee revenues and said it is expected to be “quite substantial again” in 2027.
Credit, real estate, and AI: positioning and operational use cases
In private credit, Chae said Blackstone has a $520 billion platform across liquid credit, direct lending, infrastructure and asset-based finance, private investment grade, and real estate debt. He said the credit segment grew FRE 16% in 2025 and distributable earnings (DE) by 37%, with record deployment and near-record fundraising. He cited 11% gross performance in non-investment-grade private credit and 17% in real estate high yield, and said the firm has delivered 0.1% annualized realized losses over two decades.
Addressing concerns around AI disruption in software, Chae said sector-wide trading has been “indiscriminate” and “overdone.” He said software represents 7% of Blackstone’s total AUM and 10% of its credit platform. He also described protections including an average loan-to-value of less than 40% at origination and a focus on larger companies, with an average total enterprise value above $4 billion. He said the software portfolio has produced high single-digit revenue growth and low double-digit EBITDA growth in the most recent period.
In real estate, Chae said the recovery has taken longer than expected, but values have improved from a trough about two years ago and remain down about 16% since the 2022 rate cycle began. He pointed to strength in data centers, industrials, and signs of improvement in multifamily fundamentals as supply is absorbed. He also cited improving indicators in some office markets, including Manhattan leasing activity at a six-year high and double-digit rent growth for trophy properties in San Francisco. Chae said BREIT returned 8.1% net in 2025, its best annual performance since 2022.
On the firm’s internal use of AI, Chae said Blackstone is deploying AI tools in software development, cybersecurity, legal and compliance, and valuations and portfolio management. Examples he cited included AI coding assistants that have made engineers “about two times more efficient,” a cybersecurity tool from Seven AI that he said improves investigation speed and accuracy by about 30%, and use of Norm Ai to review marketing materials with an estimated 50% efficiency opportunity for that use case. He also referenced use of 73 Strings to automate data extraction and model building, which he said has been “transformational” for efficiency. Chae said Blackstone’s proprietary private market data could represent a key strategic advantage as public market data becomes increasingly commoditized.
About Blackstone (NYSE:BX)
Blackstone Inc (NYSE: BX) is a global investment firm focused on alternative asset management. Founded in 1985 by Stephen A. Schwarzman and Peter G. Peterson and headquartered in New York City, the firm organizes and manages investment vehicles that acquire and operate businesses, real estate and credit investments, as well as provide hedge fund solutions and other alternative strategies for institutional and individual investors.
Blackstone’s business is organized around several principal investment platforms.
