18.

SEGMENT REPORTING

Blackstone transacts its primary business in the United States and substantially all of its revenues are generated domestically.

Blackstone conducts its alternative asset management businesses through four segments:

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Private Equity — Blackstone’s Private Equity segment primarily comprises its management of flagship corporate private equity funds, sector-focused corporate private equity funds, including energy-focused funds, a core private equity fund, an opportunistic investment platform, a secondary private equity fund of funds business, a multi-asset investment program for eligible high net worth investors and a capital markets services business.

•

Real Estate — Blackstone’s Real Estate segment primarily comprises its management of global, European-focused and Asian-focused opportunistic real estate funds, high yield real estate debt funds, liquid real estate debt funds, core+ real estate funds, a NYSE-listed REIT and a non-exchange traded REIT.

•

Hedge Fund Solutions — Blackstone’s Hedge Fund Solutions segment is comprised principally of Blackstone Alternative Asset Management (“BAAM”), which manages a broad range of commingled and customized hedge fund of fund solutions and also includes investment platforms that seed new hedge fund businesses, purchase minority ownership interests in more established hedge funds, invest in special situation opportunities, create alternative solutions in regulated structures and trade directly.

•

Credit — Blackstone’s Credit segment consists principally of GSO Capital Partners LP (“GSO”), which is organized into performing credit strategies (which include mezzanine lending funds, middle market direct lending funds and other performing credit strategies), distressed strategies (which include credit alpha strategies, stressed/distressed funds and energy strategies), long only strategies (which consist of CLOs, closed end funds, commingled funds and separately managed accounts), Harvest (which invests in publicly traded master limited partnerships holding primarily midstream energy assets in the U.S.), and Blackstone Insurance Solutions (which partners with insurers to deliver customizable and diversified portfolios of Blackstone products across asset classes, as well as the option for full management of insurance companies’ investment portfolios).

These business segments are differentiated by their various sources of income. The Private Equity, Real Estate, Hedge Fund Solutions and Credit segments primarily earn their income from management fees and investment returns on assets under management.

Blackstone uses Economic Income as a key measure of value creation, a benchmark of its performance and in making resource deployment and compensation decisions across its four segments. Economic Income represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s IPO and certain long-term retention programs outside of annual deferred compensation and other corporate actions, including acquisitions. Transaction-related charges include certain equity-based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. For segment reporting purposes, Performance Allocations and Incentive Fees are presented together and referred to collectively as Performance Revenues.

Senior management makes operating decisions and assesses the performance of each of Blackstone’s business segments based on financial and operating metrics and data that is presented without the consolidation of any of the Blackstone Funds that are consolidated into the Condensed Consolidated Financial Statements. Consequently, all segment data excludes the assets, liabilities and operating results related to the Blackstone Funds.

The following table presents the financial data for Blackstone’s four segments as of and for the three months ended March 31, 2018 and 2017.


	March 31, 2018 and the Three Months Then Ended
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total Segments
Revenues
Management and Advisory Fees, Net
Base Management Fees	$	182,961		$	226,526		$	129,228		$	168,441		$	707,156
Transaction, Advisory and Other Fees, Net		11,094			23,088			345			2,539			37,066
Management Fee Offsets		(3,193	)		(1,668	)		—			(3,317	)		(8,178	)

Total Management and Advisory Fees, Net		190,862			247,946			129,573			167,663			736,044

Performance Revenues
Realized Incentive Fees		—			4,375			8,171			20			12,566
Realized Performance Allocations		77,123			151,309			2,006			39,204			269,642
Unrealized Performance Allocations		397,316			226,442			5,061			(480	)		628,339

Total Performance Revenues		474,439			382,126			15,238			38,744			910,547

Principal Investment Income (Loss)
Realized		6,338			14,690			640			7,025			28,693
Unrealized		17,368			2,687			440			(6,517	)		13,978

Total Principal Investment Income		23,706			17,377			1,080			508			42,671
Interest and Dividend Revenue		8,543			15,128			4,812			7,902			36,385
Other		(16,408	)		(21,497	)		(10,288	)		(12,701	)		(60,894	)

Total Revenues		681,142			641,080			140,415			202,116			1,664,753

Expenses
Compensation		99,729			112,824			50,300			73,474			336,327
Performance Compensation
Realized Incentive Fees		—			2,210			4,034			418			6,662
Realized Performance Allocations		33,045			54,183			2,415			22,419			112,062
Unrealized Performance Allocations		178,802			79,170			2,186			(5,723	)		254,435

Total Compensation and Benefits		311,576			248,387			58,935			90,588			709,486
Interest Expense		10,133			14,149			6,271			7,685			38,238
Other Operating Expenses		31,151			29,417			18,785			27,739			107,092

Total Expenses		352,860			291,953			83,991			126,012			854,816

Economic Income	$	328,282		$	349,127		$	56,424		$	76,104		$	809,937

Segment Assets	$	6,579,983		$	7,569,600		$	2,092,808		$	3,777,269		$	20,019,660


	Three Months Ended March 31, 2017
	Private Equity			Real Estate			Hedge Fund Solutions			Credit			Total Segments
Revenues
Management and Advisory Fees, Net
Base Management Fees	$	176,706		$	197,879		$	128,468		$	139,905		$	642,958
Transaction, Advisory and Other Fees, Net		16,176			21,279			259			2,508			40,222
Management Fee Offsets		(12,190	)		(3,550	)		—			(17,859	)		(33,599	)

Total Management and Advisory Fees, Net		180,692			215,608			128,727			124,554			649,581

Performance Revenues
Realized Incentive Fees		—			2,882			14,087			29,542			46,511
Realized Performance Allocations		582,681			519,873			597			8,797			1,111,948
Unrealized Performance Allocations		(184,478	)		(8,046	)		18,815			49,631			(124,078	)

Total Performance Revenues		398,203			514,709			33,499			87,970			1,034,381

Principal Investment Income (Loss)
Realized		81,294			119,579			(632	)		2,653			202,894
Unrealized		(40,522	)		(83,853	)		18,293			7,147			(98,935	)

Total Principal Investment Income		40,772			35,726			17,661			9,800			103,959
Interest and Dividend Revenue		6,661			12,094			3,997			5,744			28,496
Other		(1,800	)		(3,150	)		(1,610	)		(1,727	)		(8,287	)

Total Revenues		624,528			774,987			182,274			226,341			1,808,130

Expenses
Compensation		83,603			102,702			47,604			55,118			289,027
Performance Compensation
Realized Incentive Fees		—			1,333			7,014			14,118			22,465
Realized Performance Allocations		181,633			179,956			303			4,586			366,478
Unrealized Performance Allocations		(39,356	)		17,792			6,422			22,675			7,533

Total Compensation and Benefits		225,880			301,783			61,343			96,497			685,503
Interest Expense		10,427			14,635			6,543			7,845			39,450
Other Operating Expenses		27,761			30,864			16,379			21,458			96,462

Total Expenses		264,068			347,282			84,265			125,800			821,415

Economic Income	$	360,460		$	427,705		$	98,009		$	100,541		$	986,715

The following table reconciles the Total Segments to Blackstone’s Income Before Provision for Taxes and Total Assets as of and for the three months ended March 31, 2018 and 2017:


	Three Months Ended March 31, 2018						Three Months Ended March 31, 2017
	Total Segments		Consolidation Adjustments and Reconciling Items		Blackstone Consolidated		Total Segments		Consolidation Adjustments and Reconciling Items		Blackstone Consolidated
Revenues	$	1,664,753	$	104,378(a)	$	1,769,131	$	1,808,130	$	106,588(a)	$	1,914,718
Expenses	$	854,816	$	128,115(b)	$	982,931	$	821,415	$	100,358(b)	$	921,773
Other Income	$	—	$	110,599(c)	$	110,599	$	—	$	66,132(c)	$	66,132
Economic Income	$	809,937	$	86,862(d)	$	896,799	$	986,715	$	72,362(d)	$	1,059,077
Total Assets	$	20,019,660	$	7,913,715(e)	$	27,933,375

(a)	The Revenues adjustment represents management fees and performance revenues earned from Blackstone Funds that were eliminated in consolidation to arrive at Blackstone consolidated revenues and non-segment related Investment Income (Loss), which is included in Blackstone consolidated revenues.

(b)	The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone unconsolidated expenses, amortization of intangibles and expenses related to transaction-related equity-based compensation.

(c)	The Other Income adjustment results from the following:


	Three Months Ended March 31,
	2018			2017
Fund Management Fees and Performance Revenues Eliminated in Consolidation and Transactional Investment Loss	$	(100,203	)	$	(102,701	)
Fund Expenses Added in Consolidation		54,985			24,872
Income Associated with Non-Controlling Interests of Consolidated Entities		154,224			140,685
Transaction-Related Other Income		1,593			3,276

Total Consolidation Adjustments and Reconciling Items	$	110,599		$	66,132

(d)	The reconciliation of Economic Income to Income Before Provision for Taxes as reported in the Condensed Consolidated Statements of Operations consists of the following:


	Three Months Ended March 31,
	2018			2017
Economic Income	$	809,937		$	986,715

Adjustments
Amortization of Intangibles		(14,873	)		(11,344	)
Transaction-Related Charges		(52,489	)		(56,979	)
Income Associated with Non-Controlling Interests of Consolidated Entities		154,224			140,685

Total Consolidation Adjustments and Reconciling Items		86,862			72,362

Income Before Provision for Taxes	$	896,799		$	1,059,077

(e)	The Total Assets adjustment represents the addition of assets of the consolidated Blackstone Funds to the Blackstone unconsolidated assets to arrive at Blackstone consolidated assets.