The limited partners (LPs) of Blackstone haven't even recouped their investment yet.
Recently, Restructuring, a well - known figure on the X platform, released a set of data stating: "The private equity fund of Blackstone's 2015 Vintage only has a DPI of 0.85 times." He also wrote in his tweet, "I guess no one will get fired for investing in Blackstone, but this is obviously terrible."
It has been exactly ten years from 2015 to now. Even for the global PE leader, the DPI has not reached 1 in ten years.
For other GP peers, this may help relieve the pressure from LPs: It's really not my fault. Look, even Blackstone can't do it.
From a longer - term perspective, an embarrassing question that easily arises is: If this is the best level in the industry, can the survival logic of the PE industry still hold? Or more straightforwardly, is it still necessary for LPs to invest in this asset class?
Blackstone's DPI Hasn't Reached 1 Either
The first question to ask is: Is this figure real? After all, as the global PE leader, Blackstone is the traffic code for marketing accounts. Restructuring didn't provide the specific data source or specify which funds. In the PE industry, the Vintage Year generally refers to the year when the fund has its first close or makes its first capital call. After sorting out the funds issued by Blackstone in history, only two funds meet the criteria.
One of them is Blackstone Energy II. The total committed capital of this fund is $4.93 billion. It started investing in February 2015 and entered the exit period in June 2020.
Blackstone's first - quarter report shows that as of the end of the first quarter of 2025, including reinvestment, the total deployed capital of this fund is approximately $4.52 billion. Meanwhile, its realized investment value is $4.75 billion.
Although the realized investment of this fund slightly exceeds the investment amount, DPI refers to the funds distributed to LPs, and management fees and carry need to be deducted. Blackstone doesn't disclose these data in detail for individual funds, so we have no way of knowing. Calculated with reference to the general level, its DPI should be similar to the 0.85 revealed by Restructuring.
The other fund is Blackstone Capital Partners VII (BCP VII for short), the flagship private equity fund of Blackstone, which had its first close in 2015. If not otherwise specified, Blackstone's 2015 Vintage usually refers to this fund.
As the flagship fund, BCP VII announced a scale of $18 billion at its first close, and the final total committed capital was as high as $18.87 billion. As of the end of the first quarter of 2025, the total investment amount of this fund is approximately $18.7 billion. Meanwhile, its realized investment value is $20.22 billion.
Similar to Blackstone Energy II, the realized investment of BCP VII is only slightly higher than the investment amount, which is also roughly consistent with the 0.85 - times DPI mentioned by Restructuring.
Old Funds Can't Exit, New Funds Can't Be Invested
Low DPI is not just a problem for Blackstone. Restructuring also listed the data of some other well - known mega - funds, and their DPIs are generally not high.
Among them, the DPI of KKR's 2016 Vintage is 0.90, the DPI of Hellman & Fridman's 2018 Vintage is 0.13, and the DPI of Silver Lake Partners' 2017 Vintage is 0.60.
It's not normal in the history of the PE industry for DPI to be difficult to reach 1 for a long time. Take Blackstone for example. By comparing Blackstone's flagship private equity funds issued in history vertically, BCP VII has the worst DPI performance ever. If we call the realized investment value divided by the investment amount "gross DPI", then the gross DPI of BCP VII in its tenth year is only 1.06. For BCP VI, which had its close in 2010, its gross DPI in its tenth year (2020) was 1.27; for BCP V, which had its close in 2005, its gross DPI in 2015 was 1.26.
It's worth mentioning that BCP V encountered the 2008 financial crisis and was the worst - performing flagship private equity fund in Blackstone's history. Even so, its DPI indicator is still much better than that of BCP VII.
How about the performance of the funds after BCP VII at Blackstone?
BCP VIII, raised in 2019, is the largest PE fund Blackstone has ever had, with a committed capital of $25.7 billion. Currently, its DPI is only 0.18, and its IRR is 9%. Of course, this fund has just entered the exit period, so the reference value of the data is not high. However, considering that its investment period was during the large - scale monetary easing period of the COVID - 19 pandemic, and the exit coincides with the interest - rate hike cycle after COVID - 19, its prospects may be even less optimistic than those of BCP VII.
Blackstone's next flagship fund, BCP IX, was raised at the end of 2023, and its scale dropped to $21.7 billion. This fund is even more interesting. As of the end of the first quarter of 2025, more than a year has passed since the investment period started, but only $290 million has been called. In terms of the amount, this money should only be used to pay the fund management fees. Since the investment has hardly started, there's no need to talk about DPI.
It can be seen that the situation of the global PE industry is similar: Old funds can't exit, and their DPIs are all extremely poor; new funds can't be invested, and the raised money just sits in the account earning management fees.
Of course, Blackstone can do this because US - dollar funds charge management fees based on the committed capital. If Blackstone raised a RMB - denominated fund, and the new "industry rule" is to calculate management fees based on the paid - in capital, then Blackstone would be in big trouble.
The Grand Strategy of Top - Tier PEs: Reducing Dependence on Carry
Regarding the current dismal DPI situation in the primary market, people have been discussing it so much in the past one or two years that their ears are calloused. So, I won't go into details here. In contrast, a more interesting topic may be the one mentioned at the beginning: How should PE institutions survive when the "J - curve" has become flatter than ever?
It can be seen that, completely different from the dismal situation in the domestic PE industry, without DPI, Blackstone can still make a lot of money.
In 2024, Blackstone's PE division generated $2.64 billion in distributable income, a year - on - year increase of 39.7%. You may wonder: No DPI means no carry. Why can Blackstone's income increase significantly?
The answer is simple. Blackstone has not relied on carry for its income for many years. I analyzed this in detail in "The Birth of the First Trillion - Dollar PE Giant". Those interested can take a look. Here, I'll just list two sets of data.
In 2015, the management scale of Blackstone's PE division was $94.3 billion, the fee - related income (mainly fund management fees) was $510 million, and the carry income was $1.47 billion.
In 2024, the management scale of Blackstone's PE division was $352.2 billion, the fee - related income was $1.83 billion, and the carry income was $1.39 billion.
See? In nine years, Blackstone's management scale and management fee income have both increased by more than three times, but the carry income is even lower than it was nine years ago.
However, this comparison has a problem - carry fluctuates greatly. 2024 was a slow exit year, while 2015 was a busy exit year.
To be more rigorous, we'd better take the average over several years. From 2013 to 2015, Blackstone's average carry income was $853 million. From 2022 to 2024, Blackstone's average carry income was $1.42 billion. In this way, the contrast is not so extreme, but with the management scale increasing by nearly four times, the carry income has only increased by 1.67 times, revealing the same trend - the importance of carry is far less than it was ten years ago.
The End of PE Is Dividends
LPs hope that GPs don't rely on management fees for survival. There's even a saying: "If you're not confident in getting carry, there's no need to be in this industry." But this is the wish of LPs. From the perspective of GPs, making money from carry is like farming, sowing in spring and harvesting in autumn, relying on the weather. Not to mention when it's difficult to exit, even in normal years, this is not a good business model.
Therefore, top - tier PEs like Blackstone make choices that are exactly the opposite of LPs' wishes. If you review their actions in the past decade, you'll find that they've been consistently reducing their dependence on carry.
In this regard, Blackstone has undoubtedly gone the farthest. Blackstone was the first to create and scale up the perpetual fund, a new type of capital tool. Through more than a dozen acquisitions, it has strategically built what is probably the strongest private wealth channel in the industry and is far ahead in terms of AUM.
But in recent years, the progress of another PE giant, KKR, has been more eye - catching.
KKR acquired the insurance company Global Atlantic in 2021 and proposed the strategy of "three growth engines": asset management, insurance business, and strategic holdings in the following year. Since 2024, KKR has elevated strategic holdings to a financial reporting segment on par with asset management and insurance.
The so - called strategic holdings are not the traditional leveraged buyouts in PE but are similar to the long - term holding and controlling investments of Berkshire Hathaway. This means that KKR's business model has undergone a major transformation, and it's no longer playing the "buy, transform, sell" game. At the beginning of this year, Joe Bae, the co - CEO of KKR, said at a forum that the investment targets of KKR's strategic holdings are enterprises with strong defensiveness and cash - flow orientation. The profits of these enterprises can be remitted to KKR in the form of dividends or retained earnings and directly included in KKR's overall income.
In a nutshell, KKR doesn't pursue carry but is interested in dividends.
So far, KKR has created a unique growth flywheel: Asset management provides stable fee cash - flows, the insurance business provides a large amount of permanent capital, and strategic holdings use the above - mentioned capital for long - term investments. The results are also very significant. Since 2020, KKR's AUM has tripled. In the stock market, investors are also very welcoming of KKR's transformation, and its market value has quadrupled in four years and is almost on par with Blackstone.
The End of VC/PE Is Low - Margin
While Blackstone, KKR and other companies have quietly completed their transformations, the domestic VC/PE industry is also thinking about this question: Can the business model of VC/PE continue?
In the public perception, VC/PE was once considered a highly profitable industry, and there were rumors of dozens or even hundreds of times of returns. However, somehow, this industry has become a low - margin industry.
Last year, a senior investor sighed to me that in the past, three or four people could manage a fund without even needing an office. Now, with a complete front - and back - office setup and several times more staff, the returns on the invested projects are not as good as before.
Chinese GPs are not only facing the problem of no carry but also the difficulty of collecting management fees. As mentioned in the article "In the Primary Market, Everyone Is Calculating More Carefully" published by China Venture Capital & Private Equity Association (CVCA) some time ago, now more than 70% of funds pay management fees based on the paid - in capital, and there are also those that pay based on the invested amount, which makes it difficult for GPs to survive. Of course, the scary thing about this is not that LPs have become more demanding, but that even with such strict terms, there are still many GPs willing to accept them. An investor complained that now VC has become like the "Pinduoduo model", which is a very accurate description.
It now seems that the "low - margin" situation of VC/PE is not just due to the cycle. It's not that when the US dollar interest rates are cut or the IPO market is opened up, the industry can return to its golden age.
On the industrial side, "intense competition" has become the norm. An investor complained that the gross profit margins of the "Four AI Unicorns" have become similar to those of the manufacturing industry, and the new "unicorns" are doing the same thing.
The competition on the capital side is even more intense. GPs have to invest in some less - attractive tracks and projects at inflated valuations, which may also become a new normal.
At a recent closed - door exchange held by China Venture Capital & Private Equity Association (CVCA), Ji Wei, the founding managing partner of Huaying Capital, put forward an interesting view. Ji Wei said that the era of rapid growth and high - valuation exits in the Internet age will not return. Carry is becoming slower and slower, and the traditional single business model of GPs, which is to invest and wait for the company to go public and exit, is currently facing huge challenges. One of the countermeasures proposed by Ji Wei is "operational ability", which is similar to KKR's third growth engine.
Previously, Feng Weidong, the founding partner of Tiantu Capital, put forward a rather subversive view when talking about exits: "Dividends are a long - term strategy, and transfers are a medium - term strategy."
It should be noted that VC and PE are very young industries, and most of their rules have emerged in the past two or three decades. In the next two or three decades, depending on the different genes and judgments of the founders, it's entirely possible for most GPs to develop into different business forms. For example, some GPs may become more like investment promotion agencies, some like investment banks, and some like MCNs...
This article is from the WeChat official account "China Venture Capital & Private Equity Association (CVCA)", author: Tao Huidong. It is published by 36Kr with permission.