Q1 2023 Blackstone Group LP Earnings Call
Speaker 1: Good day and welcome to the Blackstone First Quarter 2023 Investor Call. Today's conference is being recorded. At this time, I'll participate in Journalist and Only Mode. If you require operator assistance at any time, please press star zero. If you would like to ask a question, please sign up by pressing star one on your telephone keypad.
Speaker 1: If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker 1: At this time, I'd like to turn the conference over to Weston Tucker, head of shareholder relations. Please go ahead. Great. Thanks, Katie. And good morning and welcome to Blackstone's first quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO , John Gray, President and Chief Operating Officer, and Michael Chey, Chief Financial Officer.
Speaker 2: Earlier this morning we issued a press release and slide presentation which are available on our website. We expect to file our 10-Q report in a few weeks.
Speaker 2: I'd like to remind you that today's call may include full-relooking statements which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the risk factor section of our 10K. We'll also refer to certain non-GAAP measures and you'll find recommendations in the press release on the shareholders page.
Speaker 2: or up to $211 million.
Speaker 2: Distributable earnings were 1.2 billion or 97 cents per common share and we declared a dividend of 82 cents per share Which will be paid to holders of record as of May 1st
Speaker 2: With that, I'll turn the call over to Steve. Thanks, Weston, a good morning, and thank you for joining our call. First quarter of 2023 represented a turbulent period from markets, frightening financial conditions, growing concerns of a recession. A recession.
Speaker 2: While the S&P 500 post had gained, it was concentrated in just a handful of large tech companies.
Speaker 2: Meanwhile, the median stock in the US was flat for the quarter, and is down 35% from recent peak levels.
Speaker 2: Capital markets activity remains muted. DiPOs, MNA, Activity, count 50 to 60% year over year.
Speaker 2: Combating price and the Fed has increased the Fed funds rate by 475 basis points.
Speaker 2: and the Fed has increased the Fed funds rate by 475 basis points just in one year.
Speaker 2: Representing the largest increase since 1980. There is not widespread distress in the real economy. This tightening campaign has led to significant challenges for investors.
Speaker 2: along with unintended consequences.
Speaker 2: which we saw with UK pensions last summer, more recently in the US and European banking systems.
Speaker 2: These challenges once again highlighted the exceptional strength and stability of Blackstone.
Speaker 2: Our clients and counter parties have learned there is inherent safety in dealing with us.
Speaker 2: We don't operate with the risk profile of financial firms that have fallen into trouble.
Speaker 2: Almost always due to the combination of a highly leveraged balance sheet and a mismatch of assets and liabilities.
Speaker 3: Blackstone.
Speaker 4: We have neither.
Speaker 4: We're an asset life manager of third party capital.
Speaker 4: distributed across hundreds of segregated investment vehicles. Our firm has minimal net depth.
Speaker 4: and know insurance viabilities.
Speaker 4: We don't take deposits. I'll say that one again. We don't take deposits. The vast majority of AUM is under long-term contracts or in perpetual strategies.
Speaker 4: In our funds, we seek to align the time horizon of our investment with the duration of the capital.
Speaker 4: which positions us to not be four sellers in difficult markets.
Speaker 4: This is true of our semi-liquid vehicles as well, such as Beary, which invests in longer-term assets.
Speaker 4: We designed this vehicle at its formation in 2017 with pre-determined limits for potential repurchases in order to be prepared for adverse market conditions.
Speaker 4: designed this vehicle at its formation in 2017 with pre-determined limits for potential repurchases in order to be prepared for adverse market conditions, creating a level of safety.
Speaker 4: so that it can continue to deliver strong outperformance over the long term.
Speaker 4: continue to deliver strong out performance over the long term as it has done historically.
Speaker 4: The safety of Blackstone's approach.
Speaker 4: the safety of Blackstone's approach extends to the way we invest.
Speaker 4: One of our core values is to avoid losing our customers' money.
Speaker 4: Of course, you also see to significantly outperform benchmarks over time.
Speaker 4: Because everyone knows we have.
Speaker 4: We've launched nearly 90 drawdown funds in our history.
Speaker 4: surprising approximately 500 billion dollars of aggregate commitments.
Speaker 4: which almost all.
Speaker 4: All I need percent of them.
Speaker 4: generated gains for investors, despite adverse investment environments during the lives at some point.
Speaker 4: generated gains for investors, despite adverse investment environments during the lives at some point, most of these funds.
Speaker 4: We have an extremely rigorous process for evaluating risk.
Speaker 4: with an investment committee framework designed to minimize the prospect of losses and ensure consistency of judgment.
Speaker 4: And our global scale in reach give us deep insights into what's happening in the real economy, which inform that we position the firm and our portfolio ahead of changing conditions.
Speaker 4: To paraphrase a quote often attributed to the hockey great Wayne Gretzky.
Speaker 4: You have to skate to where the puck is going.
Speaker 4: not to where it is. A blackstone.
Speaker 4: to where it is. At Blackstone, we follow the same approach.
Speaker 4: In real estate, an area of heightened external focus by the media and investors recently, our equity business has experienced realized losses in only 1%.
Speaker 4: a area of heightened external focus by the media and investors recently, our equity business has experienced realized losses in only 1% over 30 years.
Speaker 4: A truly remarkable result. This includes during the global financial crisis.
Speaker 4: A period which saw most of our competitors collapse.
Speaker 3: Or exit the market.
Speaker 4: In contrast, we bought the right assets.
Speaker 4: In contrast, we bought the right assets and put them place the right capital structures.
Speaker 4: more than doubling investor capital in that vintage of funds.
Speaker 4: We emerge from the crisis stronger and believe that this cycle...
Speaker 4: will have a similar outcome.
Speaker 4: Today, investor sentiment toward real estate has been quite negative again.
Speaker 4: largely due to the pressures as John explains on TV today.
Speaker 4: in the US office market. Vacancies in offices have reached all-time high levels and owners of many of these assets may be unable to extend financing in a more constrained capital environment.
Speaker 4: Bacon sees an offices of reach all-time high levels, and owners of many of these assets may be unable to extend finances in a more constrained capital environment. A Blackstone.
Speaker 4: We have minimal exposure.
Speaker 4: minimal exposure. Traditional US office.
Speaker 4: Having reduced our holdings from over 60%.
Speaker 4: of the real estate equity portfolio at the time of our IPO in 2007.
Speaker 4: less than 2% today.
Speaker 4: We instead emphasize sectors that are doing very well, including logistics.
Speaker 4: which now comprises 40%.
Speaker 4: now comprises 40% of the portfolio up from zero.
Speaker 4: In 2007, our real estate team has done a remarkable job of portfolio construction. In fact, I would call it some of Blackstone's finest work. Our positioning is the reason that Bereet, for example, continues to generate strong growth in cash flows, up an estimated 9% year over year in the first quarter.
Speaker 4: despite market headwinds. We expect our investors to have a highly differentiated experience as a result.
Speaker 4: that they have throughout our history. Incredit higher interest rates.
Speaker 4: and much higher available yields have led to significantly more investor capital being allocated to this area.
Speaker 4: John will expand on this opportunity for Blackstone. Simultaneously, the University of Prismas can be developed Sgt.
Speaker 4: John will expand on this opportunity for Blackstone. Simultaneously, there's an increased focus on Blackstone.
Speaker 4: on the potential for higher market defaults in an economic turn down. Blackstone's credit business as with real estate.
Speaker 4: We've delivered excess returns over long periods of time.
Speaker 4: We've delivered excess returns over long periods of time while protecting the downside.
Speaker 4: For example, we have the largest manager of leverage loans in the world.
Speaker 4: and our historic annual default rate in the US is less than 1%.
Speaker 4: annual default rate in the US is less than 1%. This record.
Speaker 4: and our standard of care should provide comfort to investors who are new to this asset class.
Speaker 4: Private credit disperses risk.
Speaker 4: Outside the government backstop banking sector.
Speaker 4: With capital typically raised in discrete long-term funds rather than a funding model that is reliant on deposits.
Speaker 4: which demand instant liquidity.
Speaker 4: This approach to credit extension makes the system safer and also supports the economy in challenging times.
Speaker 4: Our limited partners recognized Blackstone.
Speaker 4: a safe institution which allocates their capital, even as the world becomes more complex.
Speaker 4: In fact, especially so. We have learned that the best time to put money to work is in a risk-off world.
Speaker 4: when sediment becomes negative. Recent stress in the banking system has led to heightened levels of negativity along with diminished availability of credit.
Speaker 4: We should provide additional opportunity for us, given the firm's scale, available capital in both credit and equity areas.
Speaker 4: Overall, RLP's have entrusted us with an unprecedented
Speaker 4: Overall, RLP's have entrusted us with an unprecedented $194 billion.
Speaker 4: of dry power, and of what we believe could be a historic opportunity for deployment.
Speaker 4: One final note for me. Earlier this week, S&P Dow Jones updated the eligibility rules for their flagship indices to once again include companies with multiple share classes.
Speaker 4: This important development follows a consultation period in which they engage to broad universe.
Speaker 4: of market constituents.
Speaker 4: Blackstone is by far the largest company by market cap.
Speaker 4: Not included in the S&P 500 today.
Speaker 4: We are hopeful that this development takes the way for our inclusion.
Speaker 4: We are hopeful that this development takes the way for our inclusion, which would be very positive.
Speaker 4: for our shareholders. And with that, I'll turn it over to John . Thank you.
Speaker 4: Thank you, Steve. Good morning, everyone. Despite the challenges of the current environment, Blackstone's value proposition for customers and shareholders is stronger than ever. I'll discuss the key elements that underpin this confidence.
Speaker 4: First, our investment performance remains highly differentiated, as it has been for nearly four decades.
Speaker 4: This is the most important determinant of our success and is what allows us to attract more capital.
Speaker 4: We've delivered 15% net returns annually in corporate private equity, opportunistic real estate, and secondaries.
Speaker 4: 12% in tactical opportunities and 10% in credit.
Speaker 4: In Q1, our funds protected investor capital against the volatile market backdrop, which Michael will discuss. Over the past 12 months, nearly all our flagship strategies again meaningfully outperformed the relevant public indices.
Speaker 4: Second, our strong returns are the direct result of the way we've deployed capital and where we are very well positioned for the current environment. As we've said before, where you invest matters. No wonder is that more apparent than in real estate where 83% of the portfolio is in our high conviction sectors including logistics, rental housing, hotels, data centers, and life science warfare.
Speaker 4: for singing massive diversions, in performance in these areas compared to more challenge parts of the real estate market.
Speaker 4: In logistics, the largest exposure in our real estate portfolio and at the firm overall, we estimate the market market for our warehouse rent is approximately 50% in the United States, 30% in the UK and 100% in Canada. While at the same time, market rents are generally growing at double digit rates.
Speaker 4: In rental housing, the second largest concentration in our real estate portfolio rents have moderated in our US apartment buildings, but we're still seeing releasing spreads of approximately 4% and cash flow growth that's materially higher, while our student and other housing assets are showing even greater strength.
Speaker 4: At the same time, the pullback in capital markets is further constraining the new supply pipeline for most types of real estate, which is likely to intensify as regional banks provide a meaningful portion of U.S. construction lending. This is quite positive for real estate over time.
Speaker 4: Aside from the supply-demand dynamics, the single most important driver for real estate valuations is the level of the 10-year Treasury.
Speaker 4: While rising rates have been a significant headwind for real estate valuations recently, we've seen a reversal with the 10-year yield down 65 basis points from its high last year.
Speaker 4: In corporate private equity, our operating companies are showing continued strong momentum. Revenue grew 13 percent in Q1, reflecting our timely emphasis on travel, leisure, and energy transition companies. Meanwhile, we're seeing indications that cost pressures have peaked.
Speaker 4: While the broader economy remains resilient, we do anticipate a deceleration given the weight of the Fed's actions and pressure on the banking system. Our companies overall are well positioned to navigate such an environment.
Speaker 4: In credit, over 90% of our non-insurance portfolio is floating rate, and fundamentals remain healthy with the default rate of less than 1% across our non-investment-grade loans. Finally, BAMs' weightings, Instructured Credit,
Speaker 4: and quant strategies help drive positive performance once again in Q1 with much less volatility than broader markets. In the last two-plus years, since we brought in a new investment leadership team, FAM has beaten the typical 60-40 portfolio by nearly 1,500 basis points.
Speaker 4: remarkable outperformance in liquid markets.
Speaker 4: Third, as a result of our performance, our customers are entrusting us with more capital.
Speaker 4: The fundraising environment has become more challenging, but the breadth of our firm allows us to continue to raise scale capital, including over $40 billion in the first quarter and $217 billion over the last 12 months.
Speaker 4: We're seeing the greatest demand today for private credit solutions.
Speaker 4: given higher interest rates and wider spreads. Coupled with the pullback in regional bank activity, this is a golden moment for our real estate credit and insurance solutions teams, which accounted for 60% of the firm's inflows in Q1.
Speaker 4: Our four major insurance clients allocated an additional $8 billion to us in the first quarter, and we expect a strong pace of inflows from them throughout the year.
Speaker 4: In the case of resolution, the $3 billion external fund raise is now fully committed and the repositioning of their asset base is underway.
Speaker 4: We also launched a new US Direct lending product in Q1 for both institutional and insurance clients, targeting $10 billion for this first vintage.
Speaker 4: We've raised nearly $6 billion to date for our green energy-oriented private credit vehicle and expect to hit the $7 billion cap in June .
Speaker 4: Our new real estate debt vehicle has strong initial momentum with $3.5 billion of commitments so far. And in private wealth, Beecred's monthly subscriptions on April 1st reached their highest level since October at nearly $500 million.
Speaker 4: As one of the largest private direct lenders in a world of growing capital constraints, we see this as an extremely favorable environment for deployment.
Speaker 4: More broadly, as regional banks experience outflows of deposits, we are seeing real-time opportunities to partner with them at scale, utilizing our insurance capital in areas like auto finance, home improvement lending, and equipment finance.
Speaker 4: We expect private credit and insurance to grow significantly from here. Moving to our private wealth platform, which overall had a solid first quarter against a difficult backdrop.
Speaker 4: We raised $8.1 billion in the channel, including $4.5 billion from the University of California.
Speaker 4: We're seeing stabilization in VREACH repurchase trends with requests down 16% in March compared to the January peak.
Speaker 4: But obviously it depends in the near term on market conditions.
Speaker 4: We remain confident in the reacceleration of growth in this channel once volatility recedes, given the exceptional positioning and performance of our products.
Speaker 4: Turning to our Drawdown Fund business, a few weeks ago we held the final close for our global real estate flagship, which reached $30.4 billion, the largest private equity or real estate private equity fund ever raised. We also commenced fundraising for the next vintage of our European strategy.
Speaker 4: targeting a similar amount as the prior fund, which was 9.5 billion euros of third-party capital, with the first close expected this summer.
Speaker 4: In corporate private equity, we've raised $15.5 billion to date for our latest flagship with additional closings expected in the second quarter.
Speaker 4: The environment has remained difficult, but we continue to target a vehicle of substantially similar size as the prior fund.
Speaker 4: Overall, we are affirming our $150 billion target with approximately 70% raised to date.
Speaker 4: We anticipate having substantially achieved this by early next year.
Speaker 4: Fourth, our latest fundraising cycle has positioned us very well for the current environment. We have nearly $200 billion of dry powder to take advantage of this location.
Speaker 4: With stock markets under pressure, we did agree to privatize two public companies in an otherwise muted deployment quarter, including a leading provider of events management software and a logistics read in the UK.
Speaker 4: We also continued our push into the energy transition space with a commitment to acquire a portfolio of wind and solar assets through our infrastructure portfolio company, Invenergy.
Speaker 4: Finally, we remain true to our asset-like brand-heavy strategy, relying on our people and track record to grow. We continue to operate with minimal net debt and no insurance light abilities.
Speaker 2: Over the past five years, we've generated $22 billion of distributable earnings and have paid out 100% of these earnings through dividends and buybacks.
Speaker 4: Our share count has remained flat over this period despite AUM more than doubling.
Speaker 4: There are few firms in the world with such a shareholder-friendly approach to returning capital to investors.
Speaker 4: Our unleveraged Capital Light model is especially valuable in a time like this. In closing, despite the market's near-term challenges, we remain focused on being long-term investors.
Speaker 4: patient with our existing assets, and lightning quick as opportunities emerge. And our model allows us to do both.
Speaker 4: With that, I will turn things over to Michael.
Speaker 4: I will turn things over to Michael. Thanks, John , and good morning everyone.
Speaker 2: The firm's first quarter results reflected steady performance against a challenging external operating environment.
Speaker 4: Our funds protected capital in volatile markets, and we continue to expand the foundation of the firm's earnings power across multiple drivers of growth.
Speaker 4: funds protected capital in volatile markets, and we continue to expand the foundation of the firm's earnings power across multiple drivers of growth. I'll discuss each of these areas in more detail.
Speaker 5: Starting with results, the unique breadth of our platform and the power of our brand have led to continued strong momentum across connection, very strong momentum across and semester on linear mobility activity.
Speaker 5: AUM and management. Total AUM rose 8% year-over-year to $991 billion, with $217 billion of influence over the last 12 months.
Speaker 5: This is the period in which the S&P 500 declining percent of the public rate index was down nearly 20%.
Speaker 5: The earning AUM also increased 8%, driving base management fees up 13% year-over-year to a record $1.6 billion in Q1.
Speaker 5: marking the 53rd consecutive quarter of the year.
Speaker 5: Fee related earnings were $1 billion and a quarter or 86 cents per share, stable with Q4, supported by the growth and management fees and firm strong margin.
Speaker 5: The year-over-year FRE comparison was affected by decline in fee-related performance revenues. We highlighted previously we expect these revenues to accelerate in the second half of this year.
Speaker 5: With respect to margins, FRE margin for the trailing 12 months expanded 80 basis points.
Speaker 5: from the prior year comparable period to 57.4 percent. Selective of the firm's discipline focus on managing expenses in a difficult environment.
Speaker 5: Tribute earnings were $1.2 billion in the first quarter, or 97 cents per share. Again, largely stable with Q4.
Speaker 5: Net realizations declined year over year, as last year's market turbulence had the effect of reducing the realization pipeline entering 2023.
Speaker 5: declined year over year, as last year's market turbulence had the effect of reducing the realization pipeline entering 2023. Notwithstanding these headwinds.
Speaker 5: The firm's ability to generate approximately $1 per share of DEs again in Q1, a level met or exceeded now for seven straight quarters, illustrates the elevation and earnings power that has been underway at Flagstone.
Speaker 5: Terms of realizations, during the quarter, we took advantage of the favorable window of parking liquidity before the SBP-related turbulence.
Speaker 5: to sell $3 billion of public stock across a number of portfolio companies and private equity, at an aggregate multiple of investor capital approximately three times. These sales included the full Exeter stake in Sonacomstar.
Speaker 5: Company we transform from a traditional auto parts supplier to India's largest electric vehicle components provider.
Speaker 5: including prior sales, we generated 1.4 billion dollars of gains on this investment and 11 times our LP's money.
Speaker 5: While the environment for realization is likely to remain challenged in the near term, our long term fund structures allow us to benefit patients.
Speaker 5: We can focus on building value while we wait for market conditions to improve. In the meantime, the firm's performance revenue potential continues to grow.
Speaker 5: Performance revenue eligible AUM in the ground is nearly 500 billion dollars to quarter end.
Speaker 5: At accrued performance revenue on the ballot sheet, the firm's store of value stands at $6.4 billion or $5.27 per share.
Speaker 5: while down from a record level in Q1 of last year, primarily due to realizations. The receivable is still up 22% in two years, has nearly tripled in three years. We hold $16 billion dollars in public stock in our private equity and real estate drawdown funds.
Speaker 5: When markets ultimately stabilize, we are well-positioned for an acceleration in realizations.
Speaker 5: markets ultimately stabilize, we are well positioned for an acceleration in realization. Turning to investment performance.
Speaker 5: First quarter, corporate private equity funds appreciated 2.8 percent, and overall, our portfolio companies reporting strong revenue growth and resilient margins. In real estate, the BRAP Opportunistic Fund were largely stable in the quarter, while the core plus funds appreciated 1.6 percent. We are seeing sustained strength in our key sectors in terms of cash
Speaker 5: Within Core Plus, BREED's class I shares reported a modest negative net return of 0.5%. However, BREED's return was a positive 0.6%, excluding the effect of its interest rate edge, which was impacted by the dramatic decline in the tenure-treasure use.
Speaker 5: The head overall has generated substantial gains for investors, locking in low cost fixed rate debt ahead of last year's rise in interest rates. Since inception, BRETA has delivered net returns of approximately 12% per year or nearly three times of public read-intox.
Speaker 5: In credit, the private and liquid credit strategy is appreciated 3.4% and 3% respectively in the first quarter.
Speaker 5: reflective of the healthy portfolio generating attractive current income. And in BAM, the BPS gross composite return was 0.9% in Q1, the 12th quarter in a row of positive performance.
Speaker 5: coming to the out pit.
Speaker 5: We remain highly confident in the multi-year expansion of the firm's earnings power and FRE of several embedded growth drivers. First, in our dry-down fund business, we continue advanced toward our $150 billion target across 18 months. Second, our perpetual capital platform continues to expand at UM-Up 13% year-to-300-day-1 billion dollars.
Speaker 5: including more than 30% growth in our VIP infrastructure and becredstredigings. Third, in the insurance area, AUAMPR dedicated platform has reached nearly $170 million, up $9 billion sequentially from Q4. To be in by robust endless, our major clients.
Speaker 5: In 2023 in total, we expect inflows of $25 to $30 billion from these clients. We anticipate substantial, largely contractual growth for our insurance platform in the years ahead. To summarize, the firm has significant momentum of multiple engines driving us forward. In closing, we are very optimistic about the future of Laxed.
Speaker 5: Our business model is designed to protect us in difficult times. Can we upgrade our investment firepower than it ever before?
Speaker 5: We remain totally focused on delivering for our investors. So that's it. Thank you for joining the call. I would like to open up now for questions.
Speaker 1: Thank you. As a reminder, please press star 1 to ask a question. We ask you limit yourself to one question, so we may take as many questions as possible.
Speaker 1: We'll take our first question from Glenn Shore with Evercore.
Speaker 1: first question from Glenn Schor with Evercore. Hi, thanks very much.
Speaker 6: So I'm curious. You mentioned that 20% AUM thereabouts that you're sitting on, almost 200 billion.
Speaker 6: And in the comments, you both said ahead of what we believe will be an attractive environment for deployment. Are there any leading indicators that would give us any confidence that it's coming in the near term? I know it's a lot. I know it's eventually going to happen. But what are you looking at to see closing of bid-ask spreads, or is it a funding environment thing?
Speaker 6: I'm curious to get more color on that. Thanks. Glenn, I think it's a good question. I think the answer is not one size fits all. I think what we will see is more activity on the private credit insurance side because there, because of the tightness in the banking system, I think deployment there should accelerate.
Speaker 4: to get below sort of their target allocation levels. I do think for private equity, real estate private equity, those things take a little bit of time. There tends to be a need for a little more sort of confidence in markets, a little more stability. And I think that'll be a little while in the making.
Speaker 4: A lot of it does tie the sentiment overall. Obviously, as inflation comes down, I think that's a very important indicator to give markets confidence. Right now, people are concerned about the banking system. They're concerned about a slowdown. And that does intend to lead to a lot of transaction activity. So I think it will happen in waves, in different segments. It ultimately will happen. It always does.
Speaker 4: but it's hard to point to any one thing as we sit here today. Okay, thanks. We'll take our next question from Craig Seigenthaler with Bank of America.
Speaker 7: Thank you. Good morning, Steve, John . Hope you're both doing well. Thanks. So if you add the $5 billion of real estate debt SMA's plus the contribution on credit, it looks like the insurance channel probably drove about $10 billion in net flows or about a quarter.
Speaker 7: of the total this quarter. So I'm wondering, did I get that right? And then extending this thought from here, we wanted your perspective on the insurance channel's ability to generate outsized flows over the next year before we see markets recover and then flows in the retail and institutional channels reaccelerate.
Speaker 4: So I think the number is a little over 8 billion, but you're close, Craig, from insurance. I think the nice thing about insurance, as Michael pointed out, is we have these contractual relationships with large clients, notably with Corebridge.
Speaker 4: We're just starting to ramp up the flows from the resolution partnership we have. There are strong inflows at Fidelity Guarantee as they grow their business. And all of that gives us a lot of confidence in terms of the outlook from our major clients.
Speaker 4: I think additionally, there are others in the space who see what we're able to do in areas like asset-backed finance, corporate direct lending, and they're looking to do some SMAs targeted in areas. And as we get more scale, it creates a bit of a virtuous cycle. And then of course, there are...
Speaker 4: the episodic moments where we find a larger potential customer. We now have four. We also have Everlake as well, the former Allstate life and retirement platform. So I think we've got multiple engines. We've got this contractual growth that will continue to grow over time and take us up to 250 billion basically on its own. Our clients could find other strategic things to do. We've got these.
Speaker 4: SMA opportunities with insurance companies really around the globe. And then we can find new large scale clients. And I think that's really the beauty of our model, which is we're not an insurance company, we're an asset manager. And so we can serve multiple clients just like we do in our institutional business. So I would say our confidence level around the insurance area remains extremely high.
Speaker 4: We'll take our next question from Adam Beattie with UBS. Thank you and good morning. Just wanted to follow up on the opportunity in private credit. Very interesting and attractive. I want to get your thoughts on another source of private credit which has been...
Speaker 2: syndicated lending that's been fairly weak or even totally stuck over recent periods. So how do you see that part of the environment? Is there a recovery in the offering in the offing there? And would that affect kind of the growth trajectory you see for private credit at Blackstone? Thanks.
Speaker 4: So, the syndicated lending market, its challenges are that there's a lot of volatility in the system. So, if you're a bank today and you're generally in the moving business, right, you commit to a non-investment grade corporate credit or private equity deal.
Speaker 4: You're trying to sell that down, but given the volatility, you're going to say to the borrower, hey, look, I need a lot of flex in the pricing. I need to be able to gap out the pricing 200, 300 basis points. When there's this kind of volatility, that makes it hard. Even as a borrower putting on our private equity cap, we'd prefer to do things.
Speaker 4: on a direct basis where we know we have certainty. At some point, of course, volatility will come down and the syndicated market will become more competitive. But I do think structurally over time, direct lenders have a competitive advantage because they're in the storage business.
Speaker 4: And I think they will continue to gain more share on newly originated deals, where you've got to make a commitment for a public to private that lasts a long period of time. I think once a borrower is in the marketplace, it's established there's not an intermediary who has to take a bunch of near-term credit risk.
Speaker 4: the syndicated market has a lot of competitive advantages. So I think they both coexist, but I think in the new origination market, more and more of that will move to direct lenders.
Speaker 4: Great perspective. Appreciate that. I would just point out we're big players in both. We're the leading investor in CLOs and we're the leading direct lender as well. Sorry, go ahead. Excellent. Fair enough.
Speaker 7: We'll go next to Mike Cypress with Morgan Stanley . Great, thank you. Good morning. So, question on investment performance. Blackstone has generated very strong returns historically, but just as you look out over the next decade, I'm just curious to hear your perspective around Blackstone's ability and also the overall private markets industry's ability to move forward.
Speaker 7: and also harnessing artificial intelligence.
Speaker 4: So, I would say for the last 30 plus years we've been at this now, we've continued to have durable advantages over public markets in our investing. And I think it comes down to our sector selection.
Speaker 4: the advantages of scale and often inefficiencies in marketplaces, our ability to intervene in companies, which is really important with our portfolio operations team, and then our capital allocation decisions for these companies.
Speaker 4: And that formula has continued to work extremely well in very good environments and very challenging environments. And I don't see any reason why that goes away. In fact, we think as we get larger, we get better at this. We get better at scale because of the competitive advantage of size in the private markets.
Speaker 4: But we also have more inputs. If you think about investing as pattern recognition, connecting dots, I don't think there's any firm in the world who gets to see more dots than we do. And so we can see something that's happening in the United States and how it's relevant in other parts of the world. You can see that in our global logistics investing. I think there are real powerful advantages from our scale.
Speaker 4: and our model. So we think these return premiums will persist over time. In terms of technology, Steve can comment, but I would just say we've made a huge investment here on data scientists. We've got more than 40 of them. Every time we do a deal in private equity, in real estate infrastructure. We've got a data scientist on the deal team. We're embedding them in our...
Speaker 4: and we started a department here, fantastic people. We use them on due diligence, interestingly, because when you accumulate large databases, sometimes it's hard to figure out what's going on with them and we have that ability to do it.
Speaker 4: This whole generative AI area, which is fascinating, we've had our people sort of
Speaker 4: California meeting with a lot of people. I've been involved in the whole AI area, funding colleges, computing at MIT.
Speaker 3: ethics area at Oxford, and so we have a very unusual network here.
Speaker 3: Commercial firm of knowing what's going on and. With somebody last night.
Speaker 3: of knowing what's going on with somebody last night.
Speaker 3: involved in the sector. Outside of the Blackstone earnings call, just a dramatic increase in the number of people
Speaker 3: Um, our, uh. Hi.
Speaker 3: That kind of power applied to databases.
Speaker 3: No, very.
Speaker 3: will have very important outcomes.
Speaker 3: Some of these large language models will be a little erratic for a while, but as this is applied to the
Speaker 3: For example, more individual businesses can set up their own.
Speaker 3: I hope time
Speaker 3: over time.
Speaker 3: That was one of the risks.
Speaker 3: you'll be able to do really very, very unusual things analytically of that model, which most people don't even know. So strap yourself in on this one. It's kind of a test.
Speaker 3: very, very unusual things analytically of that model, which most people don't even, so strap yourself in on this one.
Speaker 8: Next question, please, Kate. Thank you. We'll go next to Ken Worthington with JP Morgan. That is
Speaker 5: Hi, good morning. Thanks for taking the question. I'd like to focus on Breds. The pace of inflows has really picked up over the last two quarters, I assume helped in part by your insurance relationships. So maybe first, how is demand for Breds developing from your non-insurance clients? K connections found inimmergents.Kentu incorrectly That is including answering that as highest listedI buds
Speaker 5: Secondly, how are commercial real estate conditions impacting the size of the addressable market for breads from the investment perspective? And then lastly, deployment remains very light, similar to the other parts of your real estate business. Can you share the outlook for deployment for breads?
Speaker 5: And are the factors impacting deployment any different from core or opportunistic real estate?
Speaker 4: Well, I think our real estate debt business has a really great spot today. Banks are quite focused on CRE exposure, shareholders, regulators, and that is leading to a pullback. So if you have fresh capital to deploy in that area.
Speaker 4: I think it's quite positive. It can be on the new origination side in our latest breads fund, which we're in the process of raising. It can also be in liquid real estate securities, debt securities, where people are just cautious in trying to reduce exposure. We talked here at the beginning of the call about the massive differentiation across real estate.
Speaker 2: And now at times you see people just pulling back regardless of the sector they're exposed to. So I think the opportunity in real estate debt will come first. And I think it's a very favorable time to be a lender in that space.
Speaker 4: Obviously, the office sector in the US is the one cautionary area where there's more exposure, although debt, loan to value levels were much lower than they were in the last downturn. I think overall, the opportunity exists here with insurance clients and with regular way institutional clients. I think overall, the opportunity exists here with insurance clients and with regular way institutional clients.
Speaker 4: We're going to continue to pursue it broadly. It's one of the great things about Blackstone is we have so many different engines out there. In real estate, we not only have this equity business, we have a very big real estate debt business, which alone is $60 billion. In most firms, that would be quite sizable, but inside our nearly trillion dollars, it doesn't get a lot of attention.
Speaker 4: But I do think it's an area of growth for us. I think we're obviously raising the next drawdown. And for the insurance clients and institutional clients in more liquid areas, I think there's a lot of opportunity.
Speaker 4: I think it's an area of growth for us. I think we're obviously raising the next drawdown. And for the insurance clients and institutional clients in more liquid areas, I think there's a lot of opportunity. Great, thank you.
Speaker 9: We'll go next to Brian Bedell with Deutsche Bank. Great, thanks. Good morning, folks. Maybe just to pivot to B. Read, John , you talked about the potential for market improvements in rent. How would you think that kind of layers through over the course of the year? I mean, obviously, the hedge on the long bond hurt a little bit in the first quarter, but as we...
Speaker 4: Redempting Request and potentially turn this product Neflo positive later this year? Well, ultimately, Brian , it's performance that matters. And I think what's remarkable, there's a lot of attention, as you know, on the redemptions. What's quite remarkable is that in the first quarter,
Speaker 2: We saw a 9% estimated same store cash flow growth against this very large $100 billion plus portfolio of commercial real estate. And it speaks to the positioning of the fund, our exposure in rental housing, not just traditional rental housing, but also in single family rentals, in student housing where there's real strength. It's the logistics where you have this big marked market.
Speaker 2: We have some hotel exposure. And one area we haven't talked a lot about, B-Read has a data center business that is doing extraordinarily well. And we believe that the positioning of B-Read in those sectors and its focus on the Sunbelt, again, the fact that we chose to invest most of this in the Sunbelt in places like Texas and Florida is a real difference maker.
Speaker 2: And we think, as you look over time, that's what really matters here. Now, as you look forward, what's going to impact the redemptions? I think it's a combination. I think it will be, you know, multiple months of positive performance. We'll show people and give them confidence.
Speaker 2: as well as volatility in the marketplace coming down. Right now we're seeing investors cautious really towards all equity vehicles. And we're seeing something, as you know, better in terms of flows today in BCRED because investors are more open to the debt business. But we think this is just a question of time.
Speaker 2: If we deliver, given the portfolio we built, the structure we've got here, this is working for investors, as we've talked about, 12% since inception, triple the public read index. That's ultimately what matters, the portfolio positioning, what matters. And then as that performance shows up, we're going to be able to deliver.
Speaker 4: as markets become a little less volatile, then I think you'll see a resumption of more positive flows here. Well, one thing that John mentioned was data centers, and we own one of the largest data center companies in the world. The growth in that area.
Speaker 4: as a result of the changes with AI are going to be really, really substantial. The need for data centers is going to escalate. I point that out just as an area of competitive advantage for us in our funds.
Speaker 8: Great, thank you for all the time. We'll take our next question from Alex Blostein with Goldman Sachs.
Speaker 5: Hey guys, good morning. Thanks for the question. So I was hoping we could expand the credit discussion a little broader to sort of all things private lending in prior periods of dislocation. Blackstone really used it as an opportunity to sort of build out new businesses and direct lending has been going there that direction for a while.
Speaker 2: CRE, as we talked about, looks interesting. But what else is out there that you think is currently performed by the banks that could fit the private model? What do you see the biggest kind of disconnect between supply and demand? And maybe talk a little bit about your ability to raise capital around those initiatives. Great question, Alex. I would say the asset backed area is the greatest area of opportunity today beyond what we've talked about in direct lending to corporates as well as commercial real estate. The regional banks generally play a very large role in home improvement loans and auto loans.
Speaker 2: equipment, finance, those are all areas of opportunities. I'd also say nav lending to funds is another area in the asset backspace. We see a lot of opportunity. And what's happening today is there are banks out there who have very good relationships with borrowers who want to continue to generate this flow, and we can be a long-term partner to them.
Speaker 2: and take a share of that flow. We're in a number of discussions. And I think what you'll see here is some potentially funds, but a lot of more targeted SMAs, particularly with insurance clients, and I think also with some of our traditional pension clients. And what's happening here is, you know, the private equity and alternatives business started in the equity space.
Speaker 2: taking money out of public equity allocations. I think the opportunity today is in fixed income to convince institutional investors to take a little less liquidity and to partner with somebody like us. So I think you could see this with our large institutional clients scaling up quite a bit and certainly in the insurance arena and that's why we said we really think it's a golden moat.
Speaker 2: Competition with cash and how you're positioning products for success against higher money market yields. Thank you Well what I'd say is in our drawdown funds that we sell we're obviously targeting much higher returns So there there's less of an issue If you look again at what we produce in in our private credit vehicle be cred
Speaker 2: If you look at what we've done in B-Read, again, meaningful premiums over cash, I would point out that B-Cred in particular is a floating rate lender. And as a floating rate lender, it's benefiting. Its returns this year have been extremely strong because defaults remain low and base rates have moved up quite a bit. We're now also seeing spreads gap out on new originations, which helps. So thank you.
Speaker 2: BCRED perfectly positioned benefiting as rates move up. BRE still has a favorable yield because if you remember we pay out north of a 4% dividend for US investors because of the tax shield here, it's an effective current yield close to 7%. So we think these products are still very well positioned.
Speaker 7: That is increased competition for us today, but over time we think it's total return that really matters. Thank you. We'll take our next question from Jerry O'Hara with Jefferies.
Speaker 10: Great, thanks. Perhaps one for Michael. You mentioned sort of FRPR to likely accelerate in the back half of the year, so kind of hoping you might be able to maybe give us a little bit of color, what could be your confidence or visibility there. And then I guess thinking about it on a related basis, X to FRPR, any sense of how we could think about incremental FRE margin expansion throughout the next year.
Speaker 5: 12 to 18 months would also be helpful. Thank you. All right, Jerry on FRPRs. We talked about this before in my remarks, but we definitely see an acceleration and specifically points to things, BPC, burpurs in the second half of the year. We have a schedule. It's known what will be eligible for. For incentive the events.
Speaker 5: I think we mentioned last quarter, four times more AUM will be crystallizing this year than last year. There was very little in the first quarter. There will be a modest amount in the second quarter. So it's a really second half event. The ultimate dollars in that will obviously be a function of the event gains at that time, but we have decent visibility on that. And I'd also note on B-CRED, which is sort of a little bit below the radar as it relates to FERPERS.
Speaker 5: That is obviously a steadily expanding base of both management fees and perbers, and those perbers are based on investment income. You know, borrowers paying interest is very stable and crystallizes corporate's very stable source of Incentive fees and, you know, I know that for a perbers from BCRED we don't break it out, but those doubled year over year in the 1st quarter actually. So.
Speaker 5: So there's important underlying momentum, I think, from multiple areas, not just the ones that get a lot of attention. On margins, as I said in my remarks, I'm just saying the big picture is we, you know, I think stepping back, we, I think it's fair to say we've demonstrated the ability to generate significant operating coverage over time. So.
Speaker 5: And that comes from strong underlying management fee growth for long periods of time and disciplined approach to cost management and our biggest area cost compensation. You know, we fundamentally have a performance aligned structure over which we have considerable control. So. You know, in terms of the outlook is always, I would focus on all your delivery, not entry or quarter quarter. I refer you back to my comments from last quarter regarding. Confidence about Martin stability and so for the full year 2023 relative to 2022, I think we can.
Speaker 2: most significant thing. We generally are operating funds these days at far lower leverage than we had in the past and we have ample reserves in these funds and because we're positioned in the strong sectors cash flow growth has been very significant which really helps when you get to refinancing.
Speaker 2: Had we positioned heavier obviously in US office buildings, had we done a lot in retail, I think we would be more vulnerable. It doesn't mean there aren't specific situations and at times we have walked from assets when we don't see equity value. But when you look at our portfolios as a whole, we've used a very disciplined approach to
Speaker 5: process, locking in, you know, floating rates, fixing floating rates at attractive moments. And so just in terms of some metrics, you know, across our real estate and private equity portfolios, these are our portfolio companies.
Speaker 5: You know, the average maturity remaining life in the maturities. Or about 4 and a half here, so we're talking about the end of 2027. So really good runway there as John said. Minimal maturity across the portfolio this year and in a business like private equity. Even though there's typically on the face of it.
Speaker 5: Essentially, it's a fixed high yield component, but also a floating rate. Senior debt component, as I mentioned, our teams work to have worked in the past to. You know, fix those floating rates of attractive time. So. You know, approximately probably 2 thirds of our, you know, our private equity debt is essentially fixed rate at attractive levels. So. So, we're very conscientious about managing capital structures.
Speaker 4: Great, thanks so much. We'll go next to Patrick Divitt with Autonomous Research. Hey, good morning, everyone. PE fundraising remains pretty anemic and you mentioned it remains tough, but there was a poll out from BlackRock this week, which I think had the fairly surprising conclusion that the respondents by far most wanted to increase allocations to private equity this year.
Speaker 2: That gives me an outline versus other polls we've seen. So through the lens of that. Do you sense like, in your more broad discussions with LPs that they're starting to step in more to P allocations and thus we could see a bigger uptick sometime later this year. Or is that post surprising to you as well? Yeah, it's interesting. Our clients. Love private equity, that's the bottom line. And why do they love private equity?
Speaker 2: It's because it's been the best performing part of their portfolio for a long period of time at virtually every one of our clients. When you have something that does well, you generally want more of it. Their challenge, of course, is that it's grown to be above their target. They could have.
Speaker 2: 10% or 12 or 15% target, they're above that. And so they're constrained. And therefore, you know, in some cases, they're doing some secondaries. In some cases, they're raising the allocations. We talked last quarter about New York State raising allocations to private equity. But it's making them more cautious in the sense they only have so much budget to allocate. But it's not because of a lack of desire.
Speaker 2: And I would make the broader point, which is so important to our firm overall. Our clients like alternatives. Our institutional clients, insurance clients, individual investors. And so the mega trend is intact. We're in a more challenging moment, but clients' desire for alternatives is very strong. But there are some structural challenges just in the near term because they may be over-allocated right now. And those things tend to go away over time.
Speaker 4: and their desire will become reality. And so that's what gives us a lot of confidence. But yes, near term, a more challenging private equity fundraising environment. But in the same survey, credit was up 52%. What it said is that 52% of institutional investors haveayaed absorbed their equity activated by Browseplate Fiat. But what is it? After a year of collecting over 100 shares of capital, the information service down
Speaker 4: want to increase their allocation to credit. And we're feeling that. And that's a theme that both John and Michael really amplified on. And the BlackRock survey indicates, and it's quite logical, that that's a place to go and...
Speaker 4: That's not something historically that has been a first choice kind of decision at a time of low interest rates, obviously. That's all changed. We'll take our next question from Michael Brown with KBW. Hi, great. I just wanted to ask on the real estate segment. Just over one decades ago, as a real estate percent,
Speaker 5: How should we think about the interplay of the growth in the equity and debt funds here and how that could play out for the fee rate for the segment overall? So, I know the fee rate is generally an output here, but given the growth of breadth and the strength of the insurance SMA business, is it fair to assume that?
Speaker 5: those, the strength there could actually put a little bit of a downward mix shift on the fee rate overall for the segment? Michael, overall, I think zooming out on the firm and on the real estate segment, as you probably know, management fee rates over long periods of time have been remarkably stable and in fact, if anything, tilting upwards.
Speaker 5: Probably the 1 sort of diluted factor is frankly the great growth of insurance and that, you know, and that. That sort of by a couple of basis points overall effects, the terms overall management fee rate, I think for the real estate segment. And John can chime in on relative growth rates of long term positive tailwinds obviously around the growth rates of both.
Speaker 5: The actual management fee rates, I think, on the breads business. Are not are not such that I think you would see the overall segments and weighted average management fee to loop by very much of the time.
Speaker 8: Okay, great. Thanks. We'll take our next question from Bill Katz with Credit Suisse. Okay, thanks very much for taking the question this morning. Just circling back to the retail opportunity, so I'm wondering if you could sort of think through or help us think through the evolution of the opportunity.
Speaker 8: as it relates to product design in terms of the liquidity nature of the business, any shift in the pricing, and then from here, what products do you think will drive incremental growth and any update around private equity opportunity for that? Thank you.
Speaker 4: Thanks, Bill. I would say we still see this as an enormous area of opportunity.
Speaker 2: There's $85 trillion of wealth in accounts where people have more than a million dollars to invest. On average, folks in the individual investor space are only allocated 1 or 2%, to alternatives as opposed to our institutional clients who are 25 or 30%.
Speaker 2: So there seems to us to be a lot of runway in this area. It does tend to lend itself a little better to yield-oriented products. So real estate and credit, not a surprise, we started in these areas. I think as it relates to the liquidity features, I think we've done a very good job creating these products.
Speaker 2: So we were match funded. I think Beecred for us, which has quarterly redemption features and a bit of a delay on when those redemptions come out, is probably a little bit of a better structure. That being said, you've seen with Beeread, we've done a terrific job managing this, running it with appropriate liquidity, and delivering great returns for investors.
Speaker 2: And I do think as these products evolve over time, they'll be a little more focused on how potentially they can be tweaked to optimize both return and risk. Also, when you sell these products, what kind of program and setup can you use to make sure investors...
Speaker 2: you know, recognize this should be a long-term holding for them like it is for institutional investors. In terms of new products, yes, I think private equity broadly is an area of opportunity. It's corporate private equity for us. It could be secondaries. It could be life sciences, growth, tactical opportunities. We really have a unique platform that can source a lot of
deal flow. Again, this is a less liquid area than real estate and credit, so the structure would have to align with that. And then I think infrastructure is something we haven't talked about on the call. Could be an area of opportunity. As you all know, we've grown that business in five or so years to $36 billion of assets, outstanding performance, really delivered for institutions.
Again, it's a long-term compounder with a yield component, should be attractive. Then I think there are subcategories, who knows, real estate debt, other areas, multi-asset credit. I think as we build relationships with individual investors and deliver for them, their confidence in investing in a range of products and having a mix of both the semi-liquid vehicles and then for some drawdown vehicles, I think all of that will grow.
You know, people are focused on the near term, the volatile market, there's more caution today, but the long term trends, as I said, are very much intact, I think particularly in the retail space. Thank you. We'll go next to Rufus Hone with BMO.
Hi, thanks very much. I wanted to ask about credit and insurance, maybe focusing in on origination. Can you talk about the build-out of your origination capabilities? You've mentioned a few key areas already, like asset backs, but is there also maybe a longer-term margin expansion opportunity? Assuming you've had to invest quite a significant amount to scale that front-end origination.
Capacity so significantly, and if you could put some numbers around the size of your origination capacity, that would be really helpful. Thank you. The numbers, the total amount of credit origination across real estate asset back corporates. I don't know Michael. Do you have that number? The number on it in terms of the.
Our deployment numbers are more around the private strategies and our liquid credit strategies. In some cases, they're effectively trading strategies. The origination numbers are multiple. Yeah, and I would say overall, you know. These are in the 10s of billions of dollars in terms of the scale of this. We have made an enormous investment in people. I don't know to the specific numbers how much margin improvement. I think this is mostly about the growth in assets and fees overall. Like all our businesses, there tends to be a margin improvement over time.
Really, since we've gone public over the last 15 years, you've seen steady improvement in margin. I would expect in this area, you would see margin improvement over time, but we just see a lot of white space in this area. Once you have these engines of origination, once you have a large commercial real estate origination capability, a direct lending capability, once you're doing things and all sorts of these asset backed areas we talked about, then you can attract more assets. I would just say overall, still early days in our minds. We're getting very excited about that, Michael.
I guess three things are true. One is we entered this insurance dedication turn space a number of years ago with the advantage of having these platforms and direct origination for both corporate and real estate credit very well developed and built out so they were there to be leveraged with some but not an undue amount of incremental investment. The second thing is we have been investing so beneath the surface of the margin we've been producing.
we've been investing in this area generally, both in terms of sort of depth and breadth, and also in newer asset areas like asset backed finance. And then third, I would say, as we've commented before, the sort of incremental margin profile of this insurance capital is very attractive.
generally, both in terms of sort of depth and breadth and also in newer asset areas like asset backed finance. And then third, I would say as we've commented before, the sort of incremental margin profile of this insurance capital is very attractive. Thank you.
We'll take our final question from Anand Jibbalant with BNP. Good morning. Thanks for the question. If I could come back to the private wealth space, a number of your competitors are entering or looking to enter the space there. I'm just wondering if you could touch a bit more on your competitive – how you see the competitive situation evolve there. What's your competitive advantage? Maybe in light of the fact that today they – might be a bit less allocated so maybe there might be less of a brand advantage. I'm just wondering how you're thinking about really positioning –
We've built up relationships with financial advisors around the world, particularly here in the United States. They've been investing in a range of Blackstone products for a long period of time, both drawdown and semi-liquid products. And of course, most importantly, they've had good experiences, and that really matters. And then, I do think the brand makes a difference.
When you go and you talk to a financial advisor or their end customer, the fact that they know who Blackstone is does make the likelihood of purchase much greater. And finally what I'd say in this space, unlike the institutional space where you can have thousands of private equity firms, you can't have large numbers of firms on these platforms. They're going to have a handful in private credit, private real estate, maybe in private equity.
We think we'll have a slot in almost all of these places because of our brand, our reach, the track record. I think that's a very good spot to be in. We've invested here early. We think we're going to continue to build on what we've done. If you ask financial advisors out there about Blackstone, I generally think you'll hear very positive things about the way we've done this. We brought fees down pretty dramatically when we entered the space. engine c
because we were focused on net returns. We've added a whole new level of transparency and engagement in all of this. All this investment over a decade plus is going to pay big dividends over time. One other thing, we've been doing this for like 10 years roughly.
And when we started, hardly anybody in that channel knew what we were doing or what the program was. And so we started a series of in-person, what we call BX universities, Blackstone universities.
And we have had, I don't know the number, whether it's 10,000 or, you know, FAs who've been at the firm, and they usually come for a day. And we introduce them to each of our different business areas. We teach them how alternatives work.
the differences between that and other types of, you know, immediately liquid types of investments as well as why the returns are higher. And I can't overestimate for you.
how important this is. Because when somebody comes and spends a day, and sometimes it's more than a day, and learns something from the ground up, they go back and they talk to people who work with them. People who are in the same office. And they say, you should really be doing this.
And that sort of viral kind of internal marketing is pretty remarkable. And since we've been doing it, when no one was doing this, I mean, we're just alone.
We have a group of people who really trust what we're doing and our fulfillment organization, which is different and service. You know, for customers of that type is totally unlike institutional.
who really trust what we're doing and our fulfillment organization, which is different and service, you know, for customers of that type is totally unlike institutional.
type of support. And we built that over a very long period of time. No one else had that who competes with us. And so there is a, when John mentions a first mover advantage, it's really about people and reputation. Be PO Be J J J V Y B O
knowledge and performance and that type of thing really is quite enduring. So I leave you with that one.
Thank you, Arnaud. And thank you everyone for joining us today. If you have any follow-up questions, I look forward to connecting after the call. Thank you.