Q3 2019 Earnings Call
Any time, it's Darren favorite when Youre, telling sign on to coordinate we'll be happy [laughter] I wish I could vital parties. This company being recorded for replay Pepsi now I'd like to have Nikolaivich Weston Tucker head of Investor Relations. Please go ahead.
Great. Thanks, Julie and good morning, and welcome to Blackstone's third quarter Conference call.
Joining todays call, our Steve Schwarzman, Chairman and CEO , John Gray, President and Chief Operating Officer, Tony James Executive Vice Chairman, Michael J., Chief Financial Officer, and John So much Ari had a private wealth solutions.
Earlier. This morning, we issued a press release in slide presentation, which are available on our website, we expect to file our 10-Q report next month.
I'd like to remind you that today's call may include forward looking statements, which are uncertain and outside of the firm's control. It may differ from actual results materially we do not undertake any duty to update these statements.
Our discussion of some of the risks that could affect results. Please see the risk factor section of our 10-K, well also refer to non-GAAP measures and you'll find reconciliations in the press release ARNA shareholders page of our website.
Also note that nothing on this call constitutes an offer to sell or a solicitation up an offer to purchase and interesting any blackstone fine.
Audio cast is copyrighted material to Blackstone and may not be do duplicated without consent.
A quick recap of our results we reported GAAP net income of 1.2 billion for the quarter.
Distributable earnings were 710 million or 58 cents per common share we declared a dividend up 49 cents to be paid to holders of record as of November 4th.
With that I'll turn the call over to Steve X Weston and thank you for joining our call.
Blackstone's powerful momentum continued <unk> third quarter.
It's a clear leader in the rapidly growing alternative sector, we achieved and just to record a U M. A $554 billion up 21% year over year as well as record fundraising and deployment. So the first nine months of the year.
And our fee related earnings rose to a record for both quarter and year to date period, which Michael will discuss later.
We are the partner of choice for limited partner investors around the world.
Earned their trust by delivering extraordinary investment performance over decades.
Very minimal loss of capital.
We are incredibly proud of what we do with Blackstone and the vital role we play in Society for example.
A very strong returns we generate.
Typically in the current low interest rate environment.
Both teachers.
Police officers firemen, and other public and corporate sector employees to retire with sufficient savings and secure pensions.
Our funds protect and grow school wind down much in support of their students education.
And we helped many other institutional and individual investors realize their financial goals.
We achieved these results for our Lps.
Cruising the companies and assets and our portfolio.
And making them better places to work.
We invested capital.
Supplier operating expertise to create healthier companies to grow faster, which in turn or in a better position to hire and invest in their businesses.
The results of our ownership or clear.
Both in terms of investment performance, we've generated for all piece as well as the impact we pattern or companies and the communities in which we operate.
Our private equity portfolio companies added over 100000 net jobs during our ownership in the past 15 years.
Underlying they're good performance.
In fact.
Over 700 control investments we've made during this period across the firm.
There has been only one bankruptcy filing a rate of 110th of 1%.
And no liquidations.
It's a pretty remarkable.
Record.
Our largest investment ever Hilton worldwide, which we own for 11 years and just exit is last year with a 14 billion dollar profit.
Was very positively transformed during our ownership.
To give you a sense of our commitment to our companies in their people.
Hilton was recently named by Fortune magazine.
Because the number one company in America to work for.
As well as the best workplaces for women.
We also actively use the scale and reach of our portfolio to support and initiatives of national and global importance.
We made a commitment to the Obama administration in 2013 to hire veterans and since then we've hired 75000 veterans and veteran spouses across our companies.
The goal of reaching 100000 in the next few years.
We're driving best practices in terms of sustainability and E.S.G. throughout our portfolio.
Hard charitable foundation as committed over $100 million globally, primarily in support of entrepreneurship development for nearly 250000 college students.
Our from its truly an engine of economic growth globally.
Force for positive change.
We have an extraordinary story to tell at Blackstone.
And I feel privileged personally to be associated with our outstanding people and the work we do.
Our people operate with the highest standards of ethics and social responsibility.
And everyone is installed with our core values.
Meritocracy.
Entrepreneurial ism.
Excellence.
Check agree.
Teamwork.
Even if it's as even as we've grown.
We've worked hard to keep the from integrated and maintain our strong culture.
This includes our Monday investment committee processes in which our various offices our video conference together for collaborative discussions and everyone can learn how we analyze investments and evaluate risk.
We also move our people around the world to work and train new hires in those geographies.
Successfully built great and unique culture over the past 30, plus years, we're committed to preserving it to the next 30.
I recently wrote a book.
So you bought it.
If you haven't.
There's still time [laughter], it's called whatever it takes.
Lessons in the pursuit of excellence.
Which details how we've developed blackstone's distinctive culture.
You can get it on Amazon.
Our shareholders are increasingly recognizing blackstone.
As the during institution it is.
While we were focused on building a world class company.
We also did a great job, creating a security.
Simply too hard to own.
We finally fix that.
With our corporate conversion in July .
And we've been pleased with the positive market response with the stock up significantly since our announcement.
With the market cap nearly $60 billion Blackstone is now 150 largest U.S. public company.
Any new long only managers have initiated positions our stock.
Blackstone was also added several market indices, allowing index funds to own us for the first time.
With the restraints of our farmers structure now removed we believe the stock will continue to rewrite higher over time.
Like the trajectory of our business.
God.
Thank you for joining our call it I'll turn things over to John .
Thank you, Steve and good morning, everyone.
Lacks shown continues to deliver at our Investor Day last fall, we outlined several targets for the firm and I'm pleased to say that we are meeting and in many cases outpacing nodes objectives, we've raised more capital, including faster growth in our perpetual vehicles.
Successfully launched multiple new business lines in the areas, we outlined and advanced against our financial targets.
We had described the line of sight on $150 billion of capital inflows for the second half from 2018 in full year 2019.
We now expect that number to be approximately $190 billion.
Our four largest flagship funds totaling 67 billion have essentially been raised with demand beyond the caps we placed on then.
Importantly, the majority of our inflows over this period came from other strategies around the firm, including a growing mix of perpetual capital vehicles, which typically raise capital on a continuous basis.
This highlights a powerful trend in our business.
At the firm has diversified far beyond the more episodic nature of our traditional drawdown funds.
We now manage 97 billion of this perpetual capital up from 64 billion at the time of our Investor day.
Our real estate core plus platform has grown to $42 billion up 25% over the past year across four perpetual capital vehicles, including be reach our non traded REIT.
Inflows it be read reached $2.4 billion in the quarter in a U.M. now exceeds $10 billion up two and a half fold in one year.
Demand is growing as we add new distribution channels and partners.
This reflects a potent combination of retail investors desire to access private real estate the strength of the Blackstone brand and our differentiated investment approach.
We believe be read has the potential to become one of the largest economic contributors to Blackstone as a firm.
We're also adding other products to what is already the deepest in most diverse menu available to retail investors from any alternatives from.
We remain on track to achieve a record $25 billion of inflows from retail this year.
Other emerging areas of the firm are ramping nicely as well.
Our secondaries business is up a remarkable 60% year over year to $34 billion to be U.M. on the back of strong performance, 14% net returns annually since inception.
We continue to expand from private equity secondary into complimentary adjacent see such as infrastructure secondaries and now our new Impac business.
There was a structural shortage of capital in secondaries, creating enormous opportunities for deployment in fact, our new flagship fund launched earlier this year is already over 40% committed.
We've also talked about pushing into faster growth areas like life Sciences growth equity in Asia I'm pleased to say, we've now launched fund raises for dedicated vehicles in both life Sciences and growth equity and we expect to be back in the market next year with our success or private equity Asia Fund.
Overall, the fund raising pipeline remains very active.
Turning to investing the scale of our capital puts us in a differentiated position as we deployed globally.
In real estate with our new European Fund largely complete along with our global in Asia funds, we have nearly $40 billion of opportunistic investment capital by far the largest in the world in private equity we have over $30 billion with our new Global Fund Asia, and our energy business. Unlike.
I can in public markets scale in private investing is a key advantage.
Our size and reach allow us to better navigate a challenging investment environment.
We deployed $16 billion during the quarter and a record 62 billion over last 12 months with an additional 13 billion committed to pending deals.
Our real estate business was particularly active in the quarter and our new Global fund is nearly 20% committed only four months after launching.
Global logistics remain a key theme with the GLP in colony transactions. We also agreed to privatized that Canadian public company that owns German office buildings kicking off the investment period for our new European Real estate fund.
And just last week for be read we announced the sale lease back on the iconic biological hotel in Las Vegas. Another Great example of how scale and conviction set us apart.
All of this deployment is planting the seeds for future performance revenues and with nearly $150 billion of dry powder, we have significant firepower to find and create value for our limited partners.
In closing.
The farm is in terrific shape.
Investor affinity for the Blackstone brand is stronger than ever.
For our shareholders that conversion has made our stock much easier to own we remain committed to zero share count dilution and with no net debt in virtually no need for capital. We can continue to pay out essentially all of our earnings through dividends and share repurchases.
We believe this represents a highly attractive value proposition.
And with that I will turn things over to Michael.
Thanks, John and good morning, everyone.
Total AUM rose, 21% or nearly $100 billion year over year to new record levels as Steve mentioned fee, earning AUM grew 15% to $394 billion.
Along with a sustained pace a rapid growth the quality of the firm's am remains exceptional.
The vast majority is locked up under long term contracts, including the growing based perpetual capital that John discussed with recurring management fees that unlike traditional asset managers are not subject to daily movements in liquid markets.
The average remaining contractual life of our locked up capital exceeds 12 years, which is key to our ability to identify and create value around the world on a long term basis.
Fee related earnings increased 27% to record $440 million, reflecting strong double digit growth in every segment.
For the last 12 months, if our re totaled $1.7 billion or $1.39 per share up 21% trending well above our long term trajectory of mid teens growth in this ultra high quality earnings stream.
As the from expands into new business lines, we remain highly focused on profitable growth.
Indeed, despite launching numerous strategies recently third quarter Fr re margin expanded year over year to 48.2% and we expect the full year 2019 margin to be in this area.
I'll discuss the furry outlook in more detail in a moment.
Distributable earnings were $710 million in the quarter or 58 cents per share underpinned by the strong growth in fr rate.
Realizations were nearly $10 billion in active pace, reflecting a diverse number of public and private sales across the firm.
Realizations in our opportunistic real estate in private equity businesses were completed at an aggregate multiple of 2.1 times invested capital consistent with the strong long term historical poor performance of these platforms.
Turning to investment performance in real estate, the breadth opportunistic funds had another excellent quarter appreciating 3.8% with strong performance in the private holdings combined with significant gains in the public holdings.
In private equity corporate PE funds appreciated 2.6% with healthy overall performance in the private portfolio.
Partly offset by slight decline in the public's.
And our secondaries area. The SP funds had a standout quarter with depreciation of 9.6%.
This is reflective of the positive underlying fundamentals that John described as well as the market rebound that occurred in this year's first quarter, given the two quarter lag in the reporting timeline Sps underlying investments.
In credit against a more muted backdrop to performing credit funds reported gross return of approximately 1% in the third quarter.
The distressed credit cluster declined 3.9% largely due to decreases in certain upstream energy positions. It is worth noting our long term performance and energy credit has led to the ability to raise one of the largest dedicated capital pools for this strategy at four and a half billion dollars, putting us in a very favorable position to pursue opportunities.
In the years ahead and environment, where capital is scarce.
For the firm in total positive and depreciation in the quarter drove $377 million of net accrued performance revenues and push the balance sheet receivable up to $4.2 billion.
Highest level in over four years and up 18% year to date.
Fund depreciation along with our sustained record investment pace resulted in performance revenue in the ground of $236 billion up 13% year over year, and boding well for future realizations.
Moving to the FRG outlook, we continue confidently on the task order previously outlined targets of greater than $1.70 per share in 2020 and $2 per share thereafter.
At Investor Day, we talked about two key drivers underpinning. These targets first our four new flagship funds and second continued growth in the scale and financial contribution from real estate core plus including be read.
With respect to the flagship funds, we've raised $65 billion of the expected $67 billion or 97% with the balance to come from a few outstanding retail closings over the coming months.
We've now launched the investment periods for three of the four funds.
Secondaries and global real estate, our earning full fees.
The third European real estate was activated earlier this month and is now in its fee holiday and will earn full fees in February .
We expect to light up the fourth fund global private equity in the coming quarters dependent on the deployment pace and the predecessor fund BCP seven.
It is then also subject to a four month the holiday.
With respect to core plus the platform continues on its sharp positive trajectory as John described with base management fees benefiting from both accelerating inflows as well as appreciation in NAV.
These funds also generate fee related performance revenues that crystallize on a known timetable without asset sales in the case would be read every fourth quarter annually and for the other core plus funds on every third anniversary of each Lps initial investment the fund or every step for certain co investments in summary, we have.
Excellent line of sight to delivering on our fr re targets.
Close my remarks today with a comment on our balance sheet and financial condition.
Last month, we issued $900 million of tenure and 30 year notes with coupons of two and a half and 3.5% respectively.
We used a portion of the proceeds to retire our 2020 ones, resulting in a $10 million charge interest expense in the third quarter and $12 million in the fourth quarter.
These actions further reduced the firm's weighted average after tax cost of debt to below 3% and pushed out the average maturity to nearly 15 years with no maturities before 2023.
Zero net debt at our ample liquidity position our balance sheet remains a source of strength for the firm to continue to drive shareholder value.
With that we thank you for joining the call I would like to open it up now for questions.
Your question answer session will not I think if you wish to ask a question.
Then one on your telephone.
We totally your question from Teekay still okay, well question for the answer to me or to that is safe and get the advice. When your question just remind you can start than one on Youre telling sign. This question comes from the line of Craig dense.
Please go ahead.
Yes, Mike and coal.
Hey, good morning, everyone.
So one difference I think right now between Blackstone in your peers is you're fairly robust new investment pipeline.
And that's even after you just closed the GLP logistics portfolio. So when you look into when you look in the future here, we're tracking deals like Merlin Treen global Great Wall colony capital logistics portfolio. So my question is a lot of this activity looks to be more on the real estate side, but can you comment on current.
Valuations investment themes.
And maybe how your targets.
Our differentiated than what your competitors you're looking at.
Good question, Craig Hello, Good morning show I would say a couple things.
First it's obviously not an easy investment environment and I think our biggest advantage in many cases is our scale.
The ability to do very large transactions is helpful and all of those deals you listed I think the smallest of the group was probably $3 billion and so in an environment, where it's hard to find interesting opportunities focusing on larger ones, particularly given the scale of our funds is very helpful. The other thing.
I would say is we are increasingly thematic in the way, we're deploying capital showing a world where economic growth is pretty muted and multiples are high what you want to find a sectors you have real conviction around and show for US a global logistics has been a major theme we've talked about it.
Length, we bought more than a billion square feet around the world over the last nine years, and we continue to like that area in shot to Big transactions were also a big fan around live entertainment, because even though many things are moving online people still need physical activities things they want to do and so.
I see that with great Wolf and the Waterpark space, you see that with Merlin as the second largest theme park, operator, and even the biological which we didn't view. So I would say, it's a smaller number of big themes were believing and it's an emphasis on scale and as always businesses, where we think we can intervene to make.
Difference and I would I would finally say that the the expansion of sort of breast or the platform puts us at new unique position, if you're just narrowly focused in private equity or in certain parts of the credit.
Universe, you can't do as much but because we have capital that shorter runs up and down the risk return spectrum. We reached a great example.
Two years ago, we could not have done the baggio sale leaseback show as a platform broaden it gives us a broader universe to invest and so overall headline we're still finding interesting things, but it's not an easy environment to find them.
Thank you John .
Okay.
Thank you for your question.
We do have another question and it comes from the line of credit from Wells Fargo. Please go ahead sorry.
Thanks, Good morning.
Some recent ipos have been having some challenges here in the U.S. I think you guys know what those are can you talk about whether you view this as a risk to your ability to successfully exited investments as we look out over the course, the next year too.
So what I'd say, it's becoming increasingly a story of sort of haves and have nots and it's not only in the equity market Ipos. We're seeing the same thing in the debt markets as well, which is investors are now taking a closer look at underlying business models, particularly in the equity markets businesses.
That do not have a near term path to profitability and consume a lot of capital are facing headwinds and if you look at other faster growing companies that are profitable actually the market response is pretty good we were able to get some secondaries down in the last quarter in some healthy businesses, we own so I would say the equity markets.
Are still in pretty good shape investors are receptive to good companies, but the idea you can sort of show up with a business and say hey look I'll start, making six money six or seven years from now that's becoming increasingly difficult and I think for market participant thats a healthy sign I think the danger in markets is when you get.
Access is when you get bubbles the fact that stock market investors are saying you know deliver.
And now were award you, it's not going to be just to trust me environment with excess is building up I think thats good for the markets overall.
Great. Thank you.
Thanks, Chris Thank you for your question.
We do have it that the question when it comes from the line of Michael Cyprys from Morgan Stanley . Please go ahead.
Hey, good morning, guys. Thanks for taking the question.
Just with the low rate environment that we're in today that increasingly seems like it's going to be lower for longer and a lot of parts of the world with negative rates. It would seem like it's the perfect storm for the growth and private markets. So I guess I'm, just curious where you see the biggest risk to the private market growth.
To the industry's you look out over the next couple of years is it the opportunities on the deployment side that are maybe too few or is it more regulatory and political just curious how you're thinking about the risks to the sort of growth outlook and private markets.
Yeah, Mike I think you're right about the headline.
What we're seeing globally is low rates in the U.S.
Europe , Japan, frankly, all over the world the Koreans lowered their rates, we can have half ago as well is people are looking for for higher returns and we're seeing more capital flows into alternatives and as the market leader in the space. We're seeing the biggest flows so that is the pod positive backdrop in terms of the challenges.
Yeah, I think obviously deployment is a question. The good news is it is a big investable world. We have lots of pools of capital we have lots of geographies, we can invest in but thats always a challenge and particularly in things that are more fixed income oriented showing infrastructure and real estate.
There is probably makes it a little bit harder to deploy capital at times, although as I said earlier, our scale has proven again and again to be a real advantage for US and then I think you know in terms of economic growth.
It could be as a result of geopolitical factors trade factors, a slowdown obviously makes it harder to deploy capital although in impact your current values dislocation with our $150 billion a capital could reset prices. So that can also be a positive for us, but when we look at the overall market private.
We are still I think a relatively low percentage, particularly in the corporate world of the Investable universe. So we don't feel like we've sort of penetrated and therefore, we're limited in what we can invest in and back to this point of raising perpetual capital, which in many cases has lower return expectation.
Asians longer hold periods could be core private equity could be some of our direct lending platforms and credit core plus real estate that makes it easier as you know persist in a lower for longer environment.
If there wasn't an economic downturn, yes, it gets harder to produced the highest returning strategies, but overall today you know this short of low growth.
You know sort of environment. We we've been in has been pretty good for the business and if it continues I think we'll continue to be able to deploy capital and obviously continued to be able to raise a lot of capital.
Go ahead, Mike I might just Tony I might just to add that remember, we're not buying one hundreds of companies in markets and the season economies were buying a few idiosyncratic companies, but we can intervene operationally and create our own value and that allows us to get returns even an over priced markets are we decouple our results from the big.
Again, the season that way that's that's one of the core drivers of our business and there is always.
Always undermanaged or undercapitalized companies out there or relapsed or pieces of real estate, whether its value to be created if you have good management. So that's a really key driver to our being able to sustain activity and earn returns even in an over price environment.
Great. Thank you.
Thank you. Thank you for your question, we do happened at the question when it comes from the line does Mike.
Given that we could please go ahead sir.
Good morning, and thanks for taking the question.
Looks like realizations and performance fees have picked up a bit but still seem a bit muted for blackstone and the overall industry despite market levels.
Realize timing, it's tough to predict on these things, but has anything changed when you think about the typical like exit strategies.
No I would say nothing change I think the hard part as you know on realizations is they can be a little bit lumpy I mean, we have the good news is the net accrued carry as Michael pointed out is at the highest level in four years, which is a very good forward indicator, but predicting the timing is tough.
Because what we're focused on is maturing these investments maximizing value for our investors and when it's the right moment exiting and therefore, you can have individual quarters that are very strong. So nothing has fundamentally changed in terms of our approach to how we think about realizations, we're always thinking about our invest.
Stirs in generating the most favorable return for them and when the timing is right. We access and so I think over time, we'll continue to produce nice realizations, just predicting that timing is not easy.
Okay.
Yes.
Thanks, Mike.
Thank you we came out and that's a question any comes from the line up.
Citibank. Please go ahead.
Hi, good morning difference.
Hi.
Thanks, Good luck connection.
Just checking now we've got and Kevin Me. Okay. Please go ahead.
Hi, good disconnect well.
I just remind difficulties anybody would like to ask a question ill stop and wanting your telephone. Thank you.
Julie if we have a few more in the queue weekend, just pick up efficacy or maybe we should reprompt here for every one day give another chance to dial and how does that take and yet if anybody would like to ask a question Jonathan one on Youre telling sign.
Thank you all your questions syndicate, okay. Thank you.
Okay.
Right. We do have one question and it comes from the line of Alex Boasting any from Goldman Sachs. Please go ahead.
Hi, good morning, everybody.
Question for you guys around the opportunity you see in the secondaries business. So it sounds like the the latest fund, which I believe was around 11 billion is almost have committed so maybe talk a little about how you're thinking about timing and most importantly, sizing that business for Blackstone going forward.
Yes pricing look like I don't know if you guys can talk about sort of sense on the dollar in terms of commitments.
The your purchasing.
And most importantly guess like whats changed in the marketplace today.
To make it a more attractive opportunity for growth for Aflac. Thanks.
So what we've seen in secondaries is directly related to the growth in alternatives the market is growing at.
Hi single digits is all of you know and at the same time you also have relatively limited liquidity liquidity historically, it's been about 2% of the market did trades hands and I think there are more participants who would like liquidity. So you have that 2% growing and then the overall market growing.
And there is a relatively small number of scale players and the case of our SP business. They have a really unique footprint owning interest in thousands of funds, which gives them a real competitive advantage, particularly on larger scale transactions, where there's a large range of funds. So.
This is really part of this mega trend of growth in alternatives.
SP is uniquely I think well position here and as you know.
LP say, hey, I want to sell older vintage funds, a new CIO is hired wants to change their strategy and they say I want to clear out. These 40 fund interest with a weighted average seven year.
Vintage that creates an opportunity because there's a small number of competitors and we're seeing growing volume of sellers. So I think this business has the potential to continue to grow as I mentioned.
Infrastructures growing we're raising our next vintage there, we just completing raising our real estate secondaries platform, we have the impact and the mainline private equity vehicle has deployed quickly and I think could continue to scale as alternatives scale. It similar in our stakes business, which we haven't Bam, where we buy stay.
Makes an alternative managers again the growth in alternatives as we see this really large shift.
We're capitals moving increasingly to ETF managers in the liquid markets in passive strategies. It's also at the same time moving into alternatives. So for US Secondaries Stakes are beneficiaries beyond our core business, where we get directing flows and Alex I Thats, Michael I. Just said you asked about pricing and our team in SP would say basis.
The pricing and discounts to navy have been stable relative to history, so they've been able to deploy a lot of capital interest.
To that.
Pricing environment.
And they do it as John mentioned, both by having to capability to larger deals which are somewhat less efficient.
And then also a high volume of smaller deals, which has really been they're calling card for years. They can they really.
Heavy high throughput in that respect dinner or very efficient transactors.
Great. Thanks very much.
Thank you for your question.
We didn't happened at the question.
And it comes from the line of Glenn goal from Evercore ISI.
Hi, Thanks go ahead.
Hi, This is Tim and Chung sequentially.
Like some negative energy motion credit again, those not outsize.
I had been in your ability to raise capital but.
Last quarter's negative benchmarks will also driven by soon upstream positions in a large public holdings can you just can.
Yes, we lost the and I think you want sort of color on.
Energy and our credit business look overall.
You know energy in our credit segment is it's about 15% of the overall portfolio and.
And for the firm as a whole around the high single digits. The majority of our overall energy portfolio isn't the midstream sector, which is very healthy area of great fundamentals.
Part that we talked about more that's been more challenges upstream.
But that is a.
Relatively small percentage low single digit for the from overall and for G.S., So sort of maybe mid single digit percentage of the role of.
Their whole portfolio now the distressed cluster, we talk a lot about.
And we highlight energy as part of that that's because energy sort of Definitionally and structurally is a big part of distressed market I do want to highlight though as much as we talk about it just the distressed cluster with NGL. So it's only about 10, 11% of the overall business.
And so.
We need to sort of put that in context, we did mention that both last quarter in this quarter I'm sort of all of the.
Returned to traction in those results last quarter this quarter were from upstream and from certain discrete upstream energy investments.
And.
And overall, our we think our energy business in Gi DSO as wells in private equity is terrifically positioned as I mentioned.
We are sort of the affirming the guy with money in a market that doesn't have a thats out of it.
And we see substantial opportunities ahead in the environment great dislocations so.
So we're we're highlighting that as a driver that performance into distressed cluster, that's a relatively manageably sized portion of the overall Jia so business and.
And the and the performance challenges have really pertain to a couple of discrete investments I also want to mentioned that we are focused on monetization in the GSO upstream portfolio.
Two two of its portfolio company as announced on the last week.
Asset sale transactions that actually fully repaired debt in those.
Those deals with a Q4 close where an advanced discussions on another de leveraging transaction in that upstream portfolio and geo. So so.
So there's positive momentum as well within the portfolio.
Thank you for that.
We can happen that the question from the line of Kelly.
From Jefferies.
Please go ahead, Sir your line into the call.
Great. Thanks.
Touched on the launch of the the life Sciences fun and growth equity fund, but I guess specific to the till life Sciences. I know this is something as discussed on the Investor day, but perhaps you could give a little little sense of how you know maybe too early but how demand is shaping up and also anything around sizing I know there was kind.
Have a highlight if oh large capital pool kind of necessary to add to address the funding gap there, but any kind of any color you might provide on that initiative would be out would be helpful. Thank you.
So I would say the market response to the team in the strategy has been quite good we expect to have a first closing in this fourth quarter.
I just think it's something that.
Investors like because its differentiated and not correlated with many other things in their portfolio and we have a terrific team executing the strategy in terms of size I think I'll, probably stay away from that.
But this is a business that I think over time could grow to be very large.
With the opportunity to generate high multiples have invested capital.
Just because the life science area.
Such a big space and there is relatively little private capital and scale most of its in the very early stage VC area. So we're quite excited about our life Sciences business.
Great. Thank you.
Thank you Kevin.
We do have another question.
On the line of Craig.
Hello.
Please go ahead, Sir your line is cool.
Okay, great. Thank you sell through life.
Yeah, you guys you guys thing every okay. Okay. So now that you spent the last 12 months meeting with a large number of long only investors.
I just wanted to see if you have any updated thoughts on migrating to a fixed dividend that track separate has roughly no downside risk and also provides more capital flexibility.
Greg It's Michael and we've had this conversation in the past in our.
I think our perspective, it's consistent which is.
We're happy with and committed to.
Our current dividend policy.
As John mentioned our AR.
Our balance sheet light model and our cash flow.
Generation allows us to dividends basically 85% of our D. and also use the balance to repurchase shares so.
I think overall the market is happy with that right now.
And.
We have no plans to change at this point.
Thanks, Craig Julie I think we're ready for it looks like one more question setting and the final question comes from the line of Jeremy Campbell from Barclays. Please go ahead.
Great. Thanks.
Just given your commentary that back at your Investor day that.
In flows through 2019 would be about 150 billion like now given your commentary are running around 190, just trying to map that to your fr. Each target and then think about if that should kind of go higher than what you guys had previously put out there.
Jeremy.
Hi.
Great connecting the dots and.
I think we'll just refer you back to my comments on the on the call, which are we're quite confident about that target that we set out better than $1.70 and.
And so the outperformance on inflows over that time period that John alluded to 190 versus 150 is.
It is supportive of that Commons.
Alright, thanks, guys.
Great. Thanks, Jeremy Thank you I'd like to tend to coalesce I too.
Weston Tucker for any final remarks, thank you Sir.
Great. Thanks, everyone for joining us this morning, and documenting questions. Please call me after the call. Thank you.
Yes.
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