Blackstone set up BREIT as a semi-liquid product. It has an overall limit on investors cashing out of 2% of the fund’s net asset value each month, or 5% each quarter, although the fund’s board has final discretion to raise or lower these thresholds. In June, the most recent date where monthly data was publicly available, the REIT had redemption requests of 1.96% of the fund. If BREIT were to limit investors’ ability to take out money, it would send ripple effects through the real estate world because of the fund’s size and importance as a bellwether for financial markets.

“It doesn’t mean it’s bad, wrong, or it’s going to happen tomorrow,” said Rob Brown, chief investment officer for Integrated Financial Partners, a wealth advisory firm based in Waltham, Massachusetts. But some retail investors may be caught off guard if they assumed they could get their money when they wanted, he said.

Concerns about sluggish fundraising and a broader slump in dealmaking have been weighing on Blackstone shares: The stock is down 31% this year, after dipping 2.8% to $89.76 at 11:48 a.m. on Thursday, exceeding the 22% decline in the S&P 500.

BREIT’s launch in 2017 was seismic for nontraded real estate investment trusts. That was a corner of finance with a tarnished reputation because of high fees, low returns and an accounting scandal that roiled the then-largest sponsor of such REITs.

The pitch for the trusts can be compelling: A person can take a stake in a swath of properties and collect dividends, benefiting from rising real estate values without stock-market gyrations.

BREIT stood out. It let smaller investors come in with as little as $2,500 and stay on as long as they wished, allowing for limited redemptions each month. That’s a contrast to most buyout funds that take in money from pensions and big investors, which require multiyear commitments. BREIT was less expensive than unlisted REITs of its time but more expensive than typical mutual funds.

At first, people inside the firm weren’t sure if BREIT could live up to the ambitions of top Blackstone leaders.

Kevin Gannon, chief executive officer of real estate investment bank Robert A. Stanger & Co., recalls telling Blackstone staffers just after the fund’s launch: “If you don’t raise $20 billion, you should be ashamed of yourselves.”

Blackstone employees at the meeting looked concerned, Gannon said, “as though I put a target on their backs.” Gray, one of the fund’s masterminds, had a different response, telling lieutenants: “I told you so.”

BREIT gave Blackstone an early mover position in the untapped multitrillion-dollar market for individual investors. It was a key plank of the firm’s bid to become a bigger retail brand. Other private equity firms followed suit over the years in pursuit of individuals’ cash, while the fundraising circuit for pensions and large investors’ money became more crowded.

The entry of the world’s largest alternative-asset manager into nontraded REITs sparked an arms race, with Starwood Capital Group, KKR & Co. and others launching similar funds. When markets surged, BREIT and other rivals in 2021 and early 2022 were key players in a fundraising boom “as action-packed as Pete Davidson’s love life,” analysts with real estate analytics firm Green Street wrote in May, referring to the comedian who dated Kim Kardashian and Ariana Grande.

When someone invests money in BREIT, they put in more than $150,000 on average, according to a person familiar with the matter. The constant flows fueled a hunt for acquisitions that one Blackstone real estate staffer described as unrelenting.

BREIT was Blackstone’s biggest driver of earnings in the last quarter of 2021. The fund takes in 1.25% of assets in fees and 12.5% of returns — higher fees than traditional stock-and-bond funds. Advisers have won big too, collecting upfront commissions on some BREIT customers.