Q1 2025 Blackstone Inc Earnings Call
Good day and welcome to the Blackstone first quarter, 2025 Investor Coal,
today's calls being recorded at this time all participants are in a listen only mode.
If you require operator assistance at any time, please press star zero. If you'd like to ask a question, please signal by pressing star one on your telephone keypad.
Speaker Change: If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I'd like to turn the call over to Weston Tucker, head of Scherholder Relations. Please go ahead.
Weston Tucker: Thank you, 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 Chae, Vice Chairman and Chief Financial Officer.
Speaker Change: Earlier this morning, we issued a press release and slide presentation which are available on our website. We expect to file our 10Q report in a few weeks.
Speaker Change: I'd like to remind you that today's call may include forward-looking statements which are uncertain and may differ from actual results materially
We do not undertake any duty to update these statements.
Speaker Change: for discussion of some of the factors that could affect results, we see the risk factor section of our 10K. We'll also refer to non-GAAP measures and you'll find recommendations in the press release on the Shareholders page of our website.
Speaker Change: Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any Blackstone fund. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent.
Speaker Change: Quickly on results, we reported gap net income for the quarter of $1.2 billion. Distributable earnings were $1.4 billion or $1.9 per common share, and we declared a dividend of 93 cents per common share, which we paid the holders of record as of April 28.
With that, I'll now turn the call over to Steve.
Thank you.
Steve Schwarzman: Good morning, and thank you for joining our call, and thank you, Weston. Blackstone reported strong first quarter results with this trivial earnings of 11% year over year to 1.4 billion West inventions.
C-related earnings grew 9%
and represented one of the best courtiers in our history.
He raised $62 billion in inflows in Q1. [inaudible]
Steve Schwarzman: Highest level in three years, at approximately $200 billion over the last 12 months.
Steve Schwarzman: Reflecting the broad-based momentum across the institutional, insurance and private wealth channels.
Steve Schwarzman: He is fundraising success with an essence under management 10% year-over-year to a new record nearly $1.2 trillion.
I'd say it's 62 billion in a quarter. [inaudible]
Thank you. Thank you.
Speaker Change: The firm delivered these results against a turbulent market backdrop, which of course has further intensified since quarter-end.
Speaker Change: uncertainty around tariffs and their potential impact on economic growth and inflation has dramatically impacted investor
Speaker Change: It's early, it's too early to assess the full implications of tariffs, which depend on the outcome of unprecedented multilateral negotiations with perhaps over a hundred countries around the world. [inaudible]
Speaker Change: The complexity of the situation means that patience and staying balance are key.
Speaker Change: importantly, the economy entered this period in a fundamentally strong position.
Productivity is increased significantly over the past several years.
and Technological Innovation is accelerating with your powerful tailwinds.
The most important question is on.
How sustained will this period of uncertainty be?
And what are the second order consequences?
both domestically and for foreign countries.
Speaker Change: We believe that fast resolution is critical to mitigate risks and keep the economy on your growth path.
Speaker Change: Blackstone, it is the challenging environments that best showcase strength and stability of our minds.
Speaker Change: We built our business to navigate periods of uncertainty and dislocation.
Speaker Change: with the vast majority of our assets under management committed under long-term contracts.
Green Perpetual Strategies,
Police structures report as the flexibility to invest.
Patients to sell from the time is right. [inaudible]
RLP is of the US, as in the Central Party.
Speaker Change: and they've entrusted us with 177 billion of dry power positioning us exceptionally well to take advantage of the opportunities that arise.
Power experience with many economic and market downturns.
Speaker Change: As taught us, some of the best times to deploy capital are in a risk of horrible when sentiment is most negative.
Speaker Change: and for our shareholders, Blackstone is an asset light manager of Third Party Capital.
with minimal net debt, no insurance liabilities.
Speaker Change: Be there for Aubrey to be different risk profile than most other financial firms.
giving us enormous flexibility to respond to changing conditions.
Speaker Change: In terms to announce tariffs, we believe that the direct first-order exposure across our portfolio is limited.
Speaker Change: Although there is potentially material impact to a relatively small group of our contents.
Speaker Change: In real estate specifically, tariff effects are likely to drive up construction costs and further reduce new supply, which is supportive for real estate values, absolute recessionary conditions.
Speaker Change: construction students in our two largest sectors in real estate, U.S. logistics and apartments.
Speaker Change: have already fallen to their lowest levels in more than a decade.
We also benefit from many of our problems.
Speaker Change: from the strengthening of foreign currencies relative to the U.S. dollar.
to respect to new investments.
Speaker Change: We look to take advantage of this moment to capture value for our LPs. We continue to lean into areas where we have high conviction.
He's invested $36 billion. $36 billion.
Speaker Change: in the first quarter. He committed 13 billion to new deals, concentrated in areas benefiting from long-term secular talents.
You're creating the foundation for future value.
We believe this is a favorable time.
Speaker Change: For all of the markets doing you're less likely to sell in the near term, although that can change if conditions improve.
Speaker Change: Hugh Mayn, focused on building a long-term value of mindfulness. [inaudible]
Meanwhile...
Blackstone Innovation, engine continues to power our growth.
Speaker Change: The firm's unique diversity and breadth with over 80 distinct investment strategies.
positions us well to navigate any environment.
Speaker Change: who is always working to identify the next paradigm shift in the market.
and the best thing in our future career.
Speaker Change: We continue to see the substantial benefits of the decisions we've made in the past, including establishing a dedicated both business, discern individual investors nearly 15 years ago.
Speaker Change: and nobody in your alternative business is even thinking about that idea.
Speaker Change: Today we manage over $270 billion in the private wealth show.
Speaker Change: Comprising near a quarter of the firm's total AUM, which we believe is multiples of the size of our next largest pier. Thank you.
Speaker Change: Our vision in this area from the beginning was to provide individuals the same access to private market solutions that many institutions have enjoyed for decades.
Speaker Change: This week we announced a significant development in our mission to democratize private markets.
and Strategic Alliance with Wellington and Van Vaughan. [inaudible]
two exceptional leaders in liquid asset management. [inaudible]
Speaker Change: Declan to draw on the tremendous capabilities of our respective firms to collaborate on Integrated Public Private Investment Solutions.
Blackstone is a ideally position to this initiative. Thank you.
Speaker Change: Steven, our leadership in private markets, and our expansive product, Guarna,
including large scale perpetual strategies, private equity, private credit.
Lewis St, Neil Destruction,
Speaker Change: I'm very excited for this next frontier for our private wealth business.
Speaker Change: Jason Lyons, if you have another example of Blackstone, has been a pioneer in standing in the horizon of private markets.
Ross Strategies,
Diabetes and New Customer Channels. [inaudible]
Remain is innovative today. [inaudible]
at any point in our history. [inaudible]
Closing, although the path ahead is now more unsure.
Speaker Change: and the highly-confident, our firm, our people, to navigate it, to be half of our investors.
and Ford Wings. We have the significant advantages of long-term committed capital.
Speaker Change: Leap brand, incredible talent, with an unmatched will to win.
Speaker Change: to do some of our best works in times of volatility.
and I have no doubt that will happen once again. [inaudible]
Thank you. Bye.
turn it over to our television star. Thank you.
Thank you, Steve. Good morning everyone.
Speaker Change: Despite the challenges of the current environment, Blackstone has multiple powerful engines that continue to drive us forward.
Speaker Change: I will highlight three of these areas this morning. One are continued growth in private credit, two are accelerating innovation in private wealth, and three are strength in the institutional channel across key open ended and drawdown strategies.
Speaker Change: Starting with our growth in private credit, there is a profound expansion underway in the traditional model of providing credit to borrowers, which is creating tremendous structural tailwinds for Blackstone.
Speaker Change: We've established a world's largest third party focus credit business with $465 billion across corporate and real estate credit up more than two and a half fold in the past four years.
Speaker Change: Inflows for the combined credit platform were $113 billion over the last 12 months comprising nearly 60% of the firm's total, driving these inflows, as always, is performance. [inaudible]
Speaker Change: We continue to see outstanding results across both our investment grade and non-investment grade strategies, including direct lending, asset-based finance, leverage loans, and real estate high yield lending.
Speaker Change: One of the most exciting opportunities before us today is an investment grade private credit where our business grew 35% year-over-year to $107 billion.
Speaker Change: Here we're focused on financing the real economy, including energy and digital infrastructure, real estate, commercial and consumer finance, fund finance and other types of asset-based credit.
Speaker Change: Blackstone scale and reach in these areas, across both debt and equity, position us extremely well.
Speaker Change: We've also established numerous contractual relationships and forward-flow agreements with banks and other originators and we expect to do more.
Speaker Change: In addition, one of the most significant areas of opportunity emerging is with large investment in grade-rated corporates who are looking for customized capital solutions.
Speaker Change: Two weeks ago, we announced a $5 billion solution for leading Canadian telecom company Rodgers alongside the country's preeminent pension plans,
Speaker Change: This follows a $3.5 billion solution we designed for natural gas producer EQT Corp in the fourth quarter with respect to their pipeline infrastructure.
Speaker Change: In both cases, we leveraged the expansive breadth of our credit platform to create something bespoke for our partner without taking on any balance sheet exposure at Blackstone.
Speaker Change: For our clients, these transactions represent yet another avenue to access high quality, directly originated investments.
Speaker Change: Since the start of last year, we've placed our originated $55 billion of credits, rated a minus on average for our private investment grade folks clients, which generated nearly 200 basis points of excess spread over comparably rated liquid credits.
Speaker Change: This activity has been mostly on behalf of insurers, although pensions and other limited partners are starting to explore moving a portion of their liquid fixed income assets to private IG credit.
We believe the potential here is enormous.
Speaker Change: Meanwhile, in the insurance channel specifically, we continue to see strong traction with our open architecture multi-client model.
Speaker Change: Our insurance AUM grew 18% year-over-year to $237 billion across IG private credit, liquid credit and other strategies.
Speaker Change: We have four large strategic relationships today, along with 24 separately managed accounts, and expect this number will continue to grow.
Speaker Change: Last month, one of our four strategic partners, Resolution Life, announced the acquisition of a nearly $10 billion block of life insurance and annuities from protective life.
Speaker Change: We expect to manage nearly half of these assets over time on resolution's behalf. This transaction is another illustration of Blackstone's ability to scale our insurance platform with key partners on a capital-like basis. [inaudible]
Speaker Change: and for resolution it further affirms their strong competitive position in the closed block acquisition market. A position we expect will be meaningfully enhanced under their new parent Nippon Life, one of the world's leading insurers.
Turning to private wealth, our innovation is accelerating.
Speaker Change: Blackstone has built the largest private wealth alternative platform in the world that Steve noted, with over 270 billion dollars of AUM. [inaudible]
Speaker Change: We've continued to expand our product lineup, which now includes four large-scale perpetual vehicles in the US providing individual investors deep access to the scale and breadth of the firm.
Speaker Change: Following a very strong 2024, our fundraising and private wealth grew significantly in the first quarter of 2025, and while it's still early in the second quarter, overall across private wealth, we have not seen a pullback in sales. [inaudible]
Speaker Change: We raised $11 billion in the channel in the first quarter up nearly 40% year over year to the highest level in nearly three years.
Speaker Change: Becred again, led the way with almost $4 billion raised on the back about standing performance, achieving 10% net returns annually for its largest share class since inception over four years ago.
Speaker Change: BXPE raised to a half billion in the first quarter, and has grown to over $10 billion in only five quarters, delivering an annualized platform net return of 15% through February for its largest share class. [inaudible]
Speaker Change: CX Infra, received strong investor reception in its debut quarter with $1.6 billion, despite only being on a small number of distributors to date.
Speaker Change: and Beary has continued to perform remarkably well through volatile markets with its best quarter of returns in 18 months in Q1.
Speaker Change: B. Reed has generated a 9.4% annualized net return for its largest share class since inception over eight years ago,
Speaker Change: It's hard to overstate how valuable the Blackstone brand is in this channel, built on our differentiated performance and extensive network of relationships.
Speaker Change: Our brand positions us extremely well to bring new products to market. We plan to launch our fifth perpetual flagship,
Speaker Change: This diversified strategy reflects the evolution of private lending into many different areas beyond non-investment-grade corporate loans and will invest across our credit platform.
Speaker Change: B-Max will also have a ticker execution and daily subscriptions as compared to monthly sales and subscription documents for our existing perpetuals.
Speaker Change: We look forward to adding this new vertical to our product suite.
Speaker Change: Finally, we are particularly excited to collaborate with industry leaders Wellington and Vanguard and developing simplified access to public private solutions.
Speaker Change: Overall, we see a huge opportunity ahead for us in the Welsh market.
Speaker Change: In addition to our private wealth and credit businesses, multiple other areas of the firm are showing strong results. Our dedicated infrastructure platform continues on its powerful growth trajectory with AUM of 36% year over year to $60 billion.
Speaker Change: Performance has been outstanding with the co-mingled BIP strategy achieving 17% net returns annually since inception.
Speaker Change: Our multi-asset investing business, BXMA, generated the 20th straight quarter of positive composite performance in its largest strategy.
Speaker Change: These returns drove BXMA's fastest growth in over six years with AUM of 12% year-over-year to $88 billion.
Speaker Change: In our drawdown fund area, we raised significant capital in the first quarter. We expected the market volatility and geopolitical concerns will have some effect, but we entered this period with a lot of momentum.
Speaker Change: In Q1, we held the final closings for both our European real estate fund, the largest of its kind ever raised based on third party commitments, at approximately 10 billion euros overall.
and our nearly $8 billion real estate credit fund. [inaudible]
Speaker Change: These are particularly remarkable achievements given the challenging environment for real estate, which speaks to the strength of our franchise in this area.
Speaker Change: We also held final closings for our $21 billion global private equity fund along with our private equity energy transition fund which reached more than $5.5 billion.
Speaker Change: We held a first close of $4.4 billion for our new private equity Asia flagship for which we're targeting a substantially larger size than the prior $6 billion vintage.
Speaker Change: Other strategies were raising or expect to begin soon include private equity secondaries, life sciences, opportunistic credit, infrastructure secondaries, GP stakes, and tactical opportunities.
Speaker Change: Despite high levels of market uncertainty, we move forward with the strength of our brand and the confidence of our limited partners.
Speaker Change: In closing, we continue to lean in. We believe our brand-heavy, capital-like, open architecture model is the best way to serve both our clients and our shareholders. And with that, I will turn things over to the capable Michael Chae.
Michael Chae: Thanks, John , and good morning everyone. In the first quarter, the firm delivered strong financial results and resilient fund performance despite volatile markets.
Michael Chae: starting with results. The expansive breadth of our platform and the power of our brand drove excellent performance across the inflows, AUM, and management piece.
Speaker Change: Total AUM rose 10% your a re-eir to nearly $1.2 trillion as Steve noted, with $199 billion of employees in the last 12 months.
Speaker Change: The earning AUM also increased 10% year-over-year, lifting management fees 11% to a record $1.9 billion in Q1.
Speaker Change: B-related earnings rose 9% year-rear to $1.3 billion, or $1.3 per share, one of the three best quarters in our history.
Speaker Change: Distribute Learning's increased 11% year-a-rear to $1.4 billion in the first quarter or $1.9 per share driven by the favoral growth in FRE, along with a 22% increase in that realizations.
Speaker Change: While overall sales activity remained muted, as expected, principal investment income increased significantly due to the sale of Beastro, a portfolio of visualization software platform developed in-house at Blackstone to clear water analytics.
Speaker Change: We originally created Beastro as a portfolio management tool to provide our insurance clients with a comprehensive view of their private credit holdings.
Speaker Change: It will now be integrated into clear water of world-class technology offerings with continued access for our clients.
Speaker Change: Blackstone's culture of innovation is usually associated with new investment strategies. The monetization of Beastra reflects how that culture of innovation pervades the firm, including respect to our internal technology capabilities.
Speaker Change: Looking forward, a Steve noted, we expect realization activity in the near term to be affected by policy-driven uncertainty and market volatility.
Speaker Change: Ultimately, we believe the firm's ability to deliver significant realizations in more constructive markets is considerable.
Speaker Change: Netacrued Performance Revenue on the Balance Sheet, our store of value stood at $6.4 billion at quarter end, or $5.24 per share, while Performance Revenue Eligible AUM in the ground reached record $583 billion dollars.
up 13% year-over-year.
Speaker Change: Meanwhile, fee-related earnings remain a powerful ballast to earnings and dividends for shareholders.
Speaker Change: FRE for the last 12 months reached a record $5.4 billion, up 20% from the prior year comparable period, and has doubled in the past 4 years. [inaudible]
Speaker Change: We expect management fees to continue on a strong positive trajectory. Our platform for petrol strategies continues to expand substantially, widening the aperture for generating high-quality fee-related performance revenues, and our underlying margin position to scrawge.
A firm significant embedded running's power continues to build.
Turning to Investment Performance. [inaudible]
Speaker Change: We enter this period of external uncertainty with a portfolio that we believe is fundamentally well-desitions.
Speaker Change: with respect to the first quarter, the firm reported positive returns across all of our major strategies.
Speaker Change: Infrastructure led with 7.5% appreciation in the court, and 24% for the last 12 months.
Speaker Change: including continued significant momentum in our data center portfolio, which benefited real estate and other areas of the firm as well.
Speaker Change: The Corporate Private Equity Funds appreciated 1.1% in the quarter, and 14% for the LTM period. The Corporate Private Equity Funds appreciated 1.2% for the LTM period.
Speaker Change: Our operating companies reported mid-single digit revenue growth in resilient margins in key one, underpending appreciation that was partly offset by declines in certain public holdings to mid-the-market turbulence.
Speaker Change: and Credit are not named up to grade private credit strategies delivered a gross return at 2.7% in the quarter and 15% for the LTM period.
Speaker Change: BXMA reported a 2.6% gross return for the absolute return composite in Q1, including positive performance in every month of the volatile first quarter.
Speaker Change: For the last 12 months, the composite return was 11%, and notably in each of the last 24 months, we generated positive returns.
Speaker Change: Finally, in real estate, the Core Plus funds appreciated 1.2% in the first quarter, while the brand opportunistic funds were up slightly, supported by positive cash load growth across nearly every area of the park volume.
Speaker Change: Overall, these returns reflect the resilience and strength of the current portfolio position.
Speaker Change: With respect to the environment going forward, that positioning provides a strong foundation as we enter a complex backdrop that will continue to evolve. It will take time to see a terror development unfold as Steve noted and how they translate to the real economy and corporate earnings. [inaudible]
Speaker Change: As always, the breadth and diversity of our global portfolio is a source of strength.
Speaker Change: and Closing, as with the many other challenging periods the firm has lived through in our four decade history, we are well prepared to have to navigate this one as well.
Speaker Change: Our long-term committed capital provides us the staying power to weather storms and we have enormous investment firepower to take advantage of the opportunities that arise. With multiple engines of growth and support of our investors, we are confident in the future.
Speaker Change: With that, we thank you for joining the call, and I would like to open up now for questions. [inaudible]
Thank you.
Speaker Change: Thank you. As a reminder, please press star one to ask for a question. We ask you limit yourself to one question to allow as many colors to join the key risk possible.
our first question comes from Michael Cyprys with Morgan Stanley .
Michael Supras: Great, thank you. Good morning. Maybe just a question on the deployment opportunity set here with nearly 180 billion of dry power across the platform. You've mentioned that this could be an attractive deployment opportunity and environment for Blackstone, but given that it is highly uncertain and volatile. Can you talk about how you find the confidence?
Michael Supras: to put capital to work here and how you see the cadence and type of deployment playing out near term versus medium term and also curious around any sort of leading indicators that would give you confidence that this is coming. Thank you.
Speaker Change: So Mike, I guess I'd say a couple of things. What tends to happen in periods of dislocation is you see the reaction on the screen first and we've certainly seen that the last couple weeks. Let's take a look.
Michael Supras: Leavage Loans, High Yield, bonds, public equities, those have moved, and in our areas where we have appropriate capital for that, we have accelerated deployment because in some cases there are some of our ...
Michael Supras: Opportunities where we think they have value the security has maybe decoupled on the screen just given the technical so that's the first area.
I'd say the next area is looking at public companies. [inaudible]
Michael Supras: Roberts. And as you can imagine, we're across our different platforms, often having discussions with public companies. And when Stockprices trade off...
Michael Supras: You know, the receptivity from boards to our prices may may be better and so you're looking for those things and then over time there may be people who want to sell assets. Thanks for watching, see you next time.
Michael Supras: There does overall kind of be a bit of slowness as you know in these periods, but this can change.
Michael Supras: Pretty significantly, we saw this in 2020 where the year started off with no transaction activity and by Q4 things to turn. And in this case, given how fluid the tariffs are, you could have a shift in sentiment. But I'd say for us having a $177 billion of dried powder.
Michael Supras: and some real long-term conviction in the sectors we like, digital infrastructure, energy and power, life sciences, alternatives, the recovery and commercial real estate, which happening in India and Japan, we were going to see this as an opportunity to put out more capital. So it will take a little bit of time, but in terms of seed planting, this is certainly a better environment. [inaudible]
Great, thank you.
We'll take our next question from Brian McKenna with Citizens. Thank you very much.
Brian McKenna: Thanks, good morning everyone. So there's clearly been a lot of focus on the private markets over the past several weeks.
Brian McKenna: I think it would be helpful, you know, to get your perspective on why private market solutions [inaudible]
Brian McKenna: who works so well in any and all environments, some of the underlying characteristics of the business that allow you to be offensive when others are pulling back.
Brian McKenna: and then if you looked at, you'll pass cycles or periods of volatility, the largest alternative asset managers including Blackstone have always emerged from these periods in an even stronger position with greater levels of market share. So why is that, and then is there any reason to believe this time around will be any different?
Brian McKenna: No. In short, look, I think the model is very well designed for periods of stress. You know, it starts with us at the top, of course, we're earning a business with, you know, almost no net debt at all, no insurance liabilities so that we can weather a storm.
Brian McKenna: It then goes to the fact that for most of our vehicles, we have the capital. We have 177 billion of dry powder. So when the dislocation occurs, we're not prosyclical.
Brian McKenna: We can do the opposite of what's happening in markets and that allows you to generate access returns. You want to be able to lean in when the price is coming down.
Brian McKenna: and the problem is, on just flow related businesses so often, you don't have the money at the moment you most want it. And I think that's very important.
Brian McKenna: I also think the long-term nature of our investing, what we do with our companies and private equity, where we buy a business, we intervene in this business, we add value, we work with the management teams [inaudible]
Brian McKenna: Those things are always positive, I believe, to the outcomes of the company. And that in good weather, bad weather, that proves to be the case.
Brian McKenna: Also on the sail side, because we have these long-duration vehicles, we're not a four-seller, so we're not liquidating assets at the wrong moment.
Brian McKenna: and then we take as I mentioned the last thing, a long-term approach. Where do we see the global economy going? Where do we see the big opportunities? How do we take advantage of it? And I do think it's this lens that is longer. We're going to see the global economy. Where do we see the global economy going? [inaudible]
and the staying power we have, the patience.
Brian McKenna: That really works. We have the fire power to move quickly in dislocation, but the staying power with our structures to hold. [inaudible]
Brian McKenna: and that's one of the reasons why again and again investors have seen the power of private assets, it's why you've seen this growth in the institutional business now over almost four decades, and why we have so much confidence, individual investors will also be attracted to this. So, the strengths of the model, there are always questions, the stocks always trade down. Thank you very much.
Brian McKenna: and yet when we re-emerge, because of the ultimate returns we produce for the customers, we get even more strength. And so the short answer to your question is, we absolutely believe the same thing will happen here again.
Very helpful. Thanks, John .
Speaker Change: Thank you. We'll take our next question from Craig Siegenthaler with Thanks America.
Good morning, Steve John . Hope everyone's doing well. Thank you.
Speaker Change: We wanted to get your perspective on the North American Institutional Channel.
Speaker Change: It's the most mature market for privates globally. They've been facing DPI headwinds for three years and it's likely now that 2020-5 will be the fourth.
Speaker Change: So, what is your outlook for fundraising this channel? Just given continued realization headwinds.
Speaker Change: and if you can differentiate between private equity and then other segments like Infra and private credit where allocations are low, that will be helpful. Thank you, guys.
Good question, Craig.
Speaker Change: The North American Channel is the most mature. I would also say that it has the most perspective, having been through these cycles before, and, you know, versus 20 years ago,
Speaker Change: There's a strong sense when we're with our big clients in North America that they're staying with private, that this asset class has delivered for them.
Speaker Change: and yes, they may slow decision making a little bit in this environment or they may anticipate getting less back in the way of DPI, but they're long-term committed to the asset class and I think that's very important.
Speaker Change: Within the various alternative areas, there are definitely certain segments in more favor today.
Speaker Change: I think secondaries will be seen as attractive, given the liquidity providing, if it's difficult to exit through an IPO and M&A market.
and then obviously in credit. [inaudible]
Speaker Change: First, in, you know, non-investment grade, but I think over time in investment grade, we've been having a lot of interesting discussions with some of our pension fund clients in North America about getting exposure. [inaudible]
Speaker Change: I would say near term for the North America clients, yeah you may see a little bit of a slowdown in decision making, there may be a little bit of a denominator effect, but the overall bias is towards more alternatives, certain areas will be stronger, and I just feel like we'll continue to this migration with them because of performance, and that is the underlying thing for everything. Thank you.
Speaker Change: If you deliver strong returns, you attract more assets, and that's certainly been the case for North American funds.
Speaker Change: Thank you, we'll go next to Bill Katz with Stephen Cowin. Thank you.
Bill Capps: Okay, thank you very much, and I did join the call over late so I apologize if you may have covered this in your prepared commentary.
Bill Capps: I was wondering if you could comment a little bit on...
Bill Capps: Just the opportunity to continue to expand the global wealth management business and in particular, I think those announcements just a couple days ago, working with Wellington and Vanguard. It's funny if you could maybe flesh out how that may come together in terms of products or opportunities. [inaudible]
Bill Capps: and then some of the larger distributors including Schwab have continued to expand their selling arrangements. I was wondering if you are part of their initial foray into the high net worth segment. Thank you.
Speaker Change: So Bill, I think the wealth area is a very, very large potential growth opportunity for this firm. Steve did a good job laying out our history of going at this much earlier than others.
Bill Capps: The fact that, you know, we have a 300-plus-person global team focused on the distribution, the fact that we started long ago
Bill Capps: doing our drawdown funds in the Private Wealth channel. Then we created really this semi-liquid
Ed Sheer,
Bill Capps: perpetual model that has grown obviously quite a bit. We did that eight plus years ago.
Bill Capps: and then I'll talk about what I think is the next evolution here with Wellington and Vanguard and where this can go. But we've positioned ourselves I think really well with both financial advisors and their underlying customers given the strength of our brand.
and what we've delivered over time.
One under, I think, underpins all this. [inaudible]
Bill Capps: is that individual investors want the same experience as pension funds. [inaudible]
Gat or those who are in defined benefit plans.
Bill Capps: They want to have the diversification, they want to have the higher returns, and I think the last-
Bill Capps: Three months have been a good example. The U.S. stock market. The U.S. stock market.
Bill Capps: The S&P 500, which contained amazing companies, but if you looked at it, at the peak, 35% of the value was with seven great companies, but it was still pretty concentrated.
Bill Capps: and shouldn't individual investors have the benefit of private equity and infrastructure, private credit, real estate, as ballast and diversification and strong returns, and the fact that we've delivered very strong net returns in our flagship products I think is so important.
Bill Capps: In terms of where this is going, we are continuing to try to enhance access to these products. I can't say a lot about specifically what we're going to do with Vanguard and Wellington, but the basic idea is to take two great world class leaders in liquid asset. [inaudible]
Bill Capps: in both passive and active equities and fixed income and put that together with what we do in private assets and try to create holistic solutions for individual investors and expand the market in the process. [inaudible]
and I think the potential of this is quite significant.
Bill Capps: because if you can offer enhanced returns and enhanced diversification to individual investors,
Bill Capps: in a more accessible way, more simplified way, I think that is powerful. So, we feel really good about the Wealthmark, and then again, the strengths of the brand, the Blackstone name, and what it enables us to do with various distributors.
Bill Capps: and with financial advisors is really quite impressive. I don't think we're going to comment on any specific platforms we may or may not be on, but I would just say in general, we continue to push out our distribution globally. Thank you very much.
Speaker Change: Thank you. We'll go next to Glenn Schorr with Evercore ISI.
Thank you.
Hello, thanks.
Speaker Change: So, you pick my interest in your comments. You said there's limited direct first-order tariff impact on your portfolio. I'm very curious on how you define that and how you assess it. And then big picture, we don't see big high yield maturity walls. We haven't seen a huge push out in high yield spreads.
Speaker Change: So those have been well-behaved. So I'm curious on what type of stress as you see out there and how specifically your direct lending business is holding up in the face of that. Thank you.
affected by costs in the supply chain.
Speaker Change: So those are businesses who are often manufacturers or retailers where this is really going to hit their margins, their profitability.
Speaker Change: and that is not a large percentage. It's limited as we said in our comments.
Speaker Change: but we do have to note, of course, that the second order effects exist.
Speaker Change: One being what happens in the capital markets to cost the capital the ability to have realizations, you know, when you have a volatile market that's certainly a knock on effect.
Speaker Change: and then, thirdly, just more broadly what happens with the economy.
Speaker Change: Does this lead to a real economic slowdown? And if it does, that of course will impact—
many more businesses in our portfolio.
Speaker Change: I do believe the push by the administration, the comments by the Treasury Secretary this week that they were hopeful to make some quick deals with some of our major trading partners. I think that will be very helpful because I do think that the faster this tariff diplomacy can play out, the better be for the economy and markets. But that's sort of the basis of how we see the exposure on the credit side.
Speaker Change: The reason you're not seeing I believe credit stresses as you have in the past is because the overall system is much less leveraged. [inaudible]
Speaker Change: If you look at the typical direct lending loan we've made in our BDCs, they've been in the low 40 to 45% range of LTV.
Speaker Change: compared to going back O607 when it was 70 plus percent. So the overall amounts of leverage are much lower.
Speaker Change: and I also think, you know, today people are much more focused on capital intensity of businesses. They're looking at EBITDA minus cat-backs.
Speaker Change: More Chicago businesses are less leverage. You're looking commercial real estate again even though we've been through a cycle other than office buildings. There's been very little on the way of problems again because there wasn't a lot of leverage going in. So the lessons from the financial crisis have really carried over and that's why even when we get a shock there may be individual industries that are impacted but you tend to have much less systemic risk and I would not expect based on looking at our portfolio that you're going to see [inaudible]
Major Issues,
just because we're starting off with low baits.
Speaker Change: Today, we're at 50 basis points of default across our non-credit portfolio. I expect that's definitely going to go up over time, but I don't think this is anything like what we saw, let's say in the GFC just because we go in with such much lower leverage. I also don't think we're going into that kind of economic environment. [inaudible]
That was great, thanks Sean [inaudible]
Speaker Change: We'll take our next question from Alex Blostein with Goldman Sachs.
Alex Blosing: Hey, good morning, everybody. Thank you for the questions. Well, I was hoping we could double click into the investment grade opportunity, John , that you talked about in your in your prepare remarks.
Speaker Change: Treasury Secretary earlier last week, I think, talked about some pretty meaningful regulatory changes to bank capital requirements. And one of the things he mentioned, I think specifically, was something along the lines of leveling the plane field between banks and on banks. Now, I think he was talking mostly around mortgages, but curious to kind of how you think about the origination opportunity for Blackstone in IG, private credit, in light of potentially elusive lending requirements on the bank side.
Alex Blosing: to the investment grade borrower, with going with a Blackstone solution versus Cap Markets or a bank.
Alex Blosing: Well, I think for the borrowers, I'll start there that the pitches you describe is really about the flexibility of the Capitol.
Alex Blosing: So if you look at what we were able to do with EQT and Rogers is we could come up with very bespoke solutions for them that I think are much harder to execute
in the public market. [inaudible]
Alex Blosing: and that's I think very powerful. I also think we're able to deliver...
A level of certainty. [inaudible]
Alex Blosing: that these counter parties appreciate. So if you think about the Rogers Transaction, we announced it after April 2nd in the midst.
Alex Blosing: of all this market dislocation. So the fact that we're showing up, we're placing this in long-term hands, primarily insurance companies, I think that's very helpful for the underlying borrowers.
Alex Blosing: I also believe on the flip side the question is why does this work for investors? [inaudible]
Alex Blosing: and you know the banks are going to continue by the way to have a very important role and in many cases the banks are helping us set up transactions they can be origination partners so this is an environment where the two sides can collaborate a lot but what's really driving the investment grade private credit like everything in our business is a return. And that's why it's important.
Alex Blosing: and the fact that we can bring up, let's say, a large group of insurance companies directly to borrowers.
and they end up with gross 200 basis points. [inaudible]
of a higher return for an A-rated credit.
That is very compelling if you're an insurance company.
Alex Blosing: and, as I said, I think it'll expand to pension funds and sovereign wealth funds as well, so...
Alex Blosing: I think the banks will face a different regulatory environment and in certain cases they may be more competitive, but ultimately what they're trying to do I believe is drive there are we's higher shown many cases. .
Alex Blosing: If we can be a partner to them, if they can do consumer finance, or other types of finance...
Alex Blosing: They can hold a portion of the loan, continue to get fees, but give the bulk of the loan, which is a low ROE business for them. That makes a lot of sense. So I just think this is a structural shift. [inaudible]
Alex Blosing: It's moving towards a play that generally works for borrowers, it's working for investors and that's why you see this very fast growth. The fact that investment grade private credit grew 35% to over 100 billion dollars. [inaudible]
Alex Blosing: That is a powerful sign of what's happening. And again, we're doing this on a capital-like basis.
Alex Blosing: For us, it's about the relative return we can deliver here. It's not about we've made promises in terms of borrowings or some other form of financing and we're trying to earn a spread. We're just trying to deliver for our underlying insurance clients. Thank you very much.
Greg Haller, thanks for that.
Speaker Change: We'll take our next question from Brian Bedell with Deutsche Bank.
Oh, great. Thanks. Good morning, folks.
Speaker Change: If you could comment a little bit more on the international backdrop, I guess both in the terms of, you know, the corporate decision making with the tariff negotiations.
Speaker Change: but more importantly, on your view on your ability to deploy...
Speaker Change: C&E, Friction in the system, as a result of some of the tariff back and forth. Dr. Schwarz.
Speaker Change: and maybe if you can comment on that situation in both Europe and Asia. And if I can ask a second part to that on the other side of retail demand, I know you've been trying to...
Speaker Change: DeMoran in Japan in terms of broker sales, and also considering the European capital markets efforts internally in Europe to expand their capital markets, is that expand your opportunity for retail sales there? Bye bye.
Well, there definitely are questions from- from-
Speaker Change: Over Time. But this environment has created a bit of uncertainty, again, which is why I think a resolution of the issues outstanding the tariff diplomacy would be very helpful.
Speaker Change: We have not really seen on a broad base, you know, clients globally or private wealth, as you mentioned in Japan, seen sort of any material pullback as a result of some of these tensions.
Speaker Change: at this juncture, and our companies continue to operate on a global basis. Interestingly,
Speaker Change: You know, we have benefited as a large foreign investor from, you know, currency strengthening in places like the UK, Europe and Yen. But right now, I would say there's mostly just questions about where this is heading. [inaudible]
some with with more heightened concerns but mostly just questions.
Speaker Change: It may end up facilitating some things as investors diversified, but I'd still say it's early days and my hope would be some of this stuff settles and we can sort of get back to terra firma.
Thank you.
Great thing, thank you very much.
Great, thanks for taking my question.
Speaker Change: John , the wealth flows were tremendous as you're on the first quarter. April sounds like it's off to a good start, but I believe the subscriptions would be April 1, so before liberation day and we're in a fundamentally different world now. So how do you expect the wealth flows to hold up broadly and which asset classes you think could remain in favor here just given the uncertainty. Thank you.
Speaker Change: Well, we're only two weeks into the quarter, basically, and what we've seen so far overall is we haven't seen a pullback in sales in the wealth channel.
So that has been encouraging to us. [inaudible]
Speaker Change: It's hard to make a lot of predictions about the future given the volatility in markets, but I think it does say something about financial advisors and clients growing affection for alternatives in their portfolios. [inaudible]
In terms of specifics...
Speaker Change: And thank you guys very much for watching. We appreciate it.
Speaker Change: I would expect there'll be a move towards a little more caution, so you would expect credit.
Speaker Change: But again, I think the performance is really what matters, you know, over time I mean the fact that we see mentioned it be reached delivered 9.4% over eight and a quarter years.
Speaker Change: that's nearly double cumulatively what you've seen in the public read market. Investors have seen this experience and it makes a difference with them. So I think we're going to have to wait and watch, but at least for the first two weeks it's been encouraging. Thank you.
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: We'll take our next question from Stephen Chubak with Wolf Research.
Speaker Change: So I just want to get a sense as to how much this pitch is resonating with your LPs at the moment and maybe how appetite for real estate has evolved.
Speaker Change: Well, look, we were able to raise a large European fund in a period of time when both Europe and real estate were out of favor, and similarly on the real estate credit.
side. So that was promising.
Speaker Change: I would say the conversations with institutional LPs around real estate have really improved over the last six months. The tone now is much more open.
but it's still a sector that has under-perform. [inaudible]
and you tend to see less allocation to those sectors.
You know, my gut is...
Speaker Change: You know, this period of time may slow, some of the movement towards real estate. [inaudible]
Speaker Change: But as this recovery begins to take hold, I think you'll see the capital flow back. We've seen this historically in the 90s after the financial crisis. I don't really expect this to be any different.
Board of Early Recovery, Faith.
We'll take our next question from Ben Budish with Barclays.
Ben Budish: Hi, good morning, and thank you for taking the question. I wanted to ask one for Mike, just on some of the financial targets for the year. Last quarter, you indicated Q-1 manganities would grow 10% year-over-year. I was wondering if you could give us an update. I realize there's a lot of moving parts, wealth flows, realizations, what it means for fearing AUM, but just curious if there's anything else you can share in terms of your expectations for management fee growth through the rest of the year, and along the same lines, I think you indicated stable margins year-over-year. I think this quarter shook out a little bit better than most expected. Thank you.
Speaker Change: so curious if there's an update there as well. Thank you.
Speaker Change: Yeah, Ben, thanks. I'll just start with that. I think the picture is solid, obviously they're uncertainties in the world, but...
Speaker Change: sort of underlying baseline of management fees, our margin position, sort of the broadening array of strategies eligible to earn fee-related foreign revenues. That's a really positive picture over time. I'll just start a management fees and it's probably worth clarification from relative to last.
Speaker Change: Corridor. Last quarter we said a reasonable starting point for the year would be 10% which was the fourth quarter management fee growth rate and by that we meant quarter one. [inaudible]
and that's exactly what we produce, 10%.
Speaker Change: In terms of the full year, we try to stay away from giving as a specific guidance, but the key variables to think about remain in place and remain really the same as I talked about last quarter. We're going to see the fist embedded in this, the fiscal year benefit, the full year benefit of having activated number of flagships over the course of last year. [inaudible]
Speaker Change: We talked about we're now raising new drawdown funds, which will later in demand for peace over time.
Speaker Change: So I mentioned we're continuing to see expansion in broadening and perpetual strategies.
significant sort of management fee growth from that broadening array. Thank you very much.
and then also fee-related performance revenues. Thank you.
Speaker Change: and then significant momentum in our credit insurance segment. So the exact growth rate for the whole year will be a function of these variables.
Speaker Change: But I think underlying this is a very, you know, fundamental stable picture on margins.
Again, we were pleased with our performance in the quarter.
Speaker Change: results of healthy double-digit management fee growth, strong underlying cost position.
Speaker Change: As I said last quarter, the number of factors I could affect that this year. And so it's early in the year, we always guide you to look at the full year. Thank you very much.
Speaker Change: and we would just reiterate Martian's stability as a guidepost, notwithstanding the overall uncertainties in the operating environment. Thank you very much for your time.
Alright, thank you very much.
Speaker Change: We'll take our next question from Ken Worthington with J.P. Morgan.
Speaker Change: Hi, good morning. Thanks for taking the question. John , last year you referred to it being a gold movement for private credit.
Speaker Change: What is your assessment today? Are we still in that golden moment or if we moved outside it? And you mentioned to a prior question, less leverage and less downside in the outlook. But what does a normalization in the credit outlook mean for the outlook for growth in private credit? Well, that's what we're going to do today.
Speaker Change: So I guess I'd break it into two parts, the golden moment...
Park was...
Speaker Change: Related to the fact that bass rates were very elevated, spreads were quite elevated, you could earn equity-like returns, you know, mid-teens returns, owning credit, senior credit, and some of that of course goes away as the fedeased, ten years come down, spreads of tighten, and so the returns you can earn are not as high on an absolute basis.
Speaker Change: But this really is more of a golden era when you think about the durable spread difference relative to liquid fixed income.
and there you continue to see a meaningful premium.
Speaker Change: and you can see it in our performance in the quarter, you can see it in our various BDCs that are out there that you're still able because of this farm to table model, basically bringing the investors right up to the borrowers, you capture that incremental spread, that's not going away.
Speaker Change: and that started, of course, in direct lending, non-investment grade lending, and it's moving quickly to investment grade lending.
Speaker Change: and so I think that area of private investment-grade lending is very early days. I think the non-investment-grade will continue and it just feels to me there are a lot of tailwinds, tailwinds and banks think about optimizing their balance sheets.
Speaker Change: Company's look to these large bespoke corporate solutions, and we also have this reindustrialization happening, what's happening in data centers and what's happening in energy and power.
Speaker Change: Those things are going to demand a lot of credit, and it works really perfectly for private credit.
Speaker Change: and so I just see a lot of engines in this direction, the adoption from the clients both in
Speaker Change: and Pension Funds is accelerating. I still think we have a long way to go here. In terms of the credit cycle question,
Speaker Change: You know, yes, there's lower leverage. Whenever you get an economic slowdown, a dislocation, in this case, if a certain portion of the economy, manufacturing, retailers, face some headwinds, yes, you're likely to see some elevated defaults in that area, but I just don't see it on a really broad base unless the economy slows much more than we expect. Thank you very much.
Speaker Change: He's just lower leverage, and by the way we've seen this over the last three years, if we said to people, the Fed's going to take rates up 550 basis points. [inaudible]
Speaker Change: You would have expected to see a pretty meaningful default cycle across non-investment-grade credit and you haven't seen that so I do don't see in the course of the little higher defaults. [inaudible]
Speaker Change: I do think we'll see particularly fun employment starts to move up in the consumer area on, you know, lower FICO scores higher defaults there, but overall it does not feel nearly as problematic as maybe some have speculated.
Great, thank you for the color.
Walter Garnex, question from Kyle Voigt with KBW. Thank you.
Kyle Voigt: Hi, good morning. Maybe just a follow up on the Vanguard Wellington partnership. Vanguard obviously has a substantial presence in the 401K channel. So really just wanted to get your updated thoughts on how close the 401K opportunity could be. And with this partnership announced how do you feel about Blackstone's current positioning to capitalize on that opportunity? Thank you very much.
Speaker Change: Well, I think the 401K opportunity scale is going to require some regulatory changes and so we're going to have to wait and see when that occurs.
but it seems very logical to us. [inaudible]
Speaker Change: that opening up access to individual investors to the returns of private assets and the benefits of diversification makes a ton of sense.
Speaker Change: and so I would guess I don't know when, but I would guess this is going to come and it does feel like it'll be a large opportunity.
Speaker Change: I do think these two groups who we've created a strategic alliance with are excellent when it comes to liquid assets.
Speaker Change: Both of them, both in fixed income and equities, and I think that offers a lot of potential, and of course, the fact that Blackstone has this slate of perpetual products at scale.
Speaker Change: and the 401k market is a scale market and I think it'll be a brand focus, high standard market. I think that positions us extremely well but I wouldn't want to comment much beyond that.
Great. Thank you. Thank you.
Speaker Change: We'll take our next question from Patrick Davitt with Atonomous Research.
Craig Good morning, everyone.
Speaker Change: I have a follow-up on the deployment question earlier. I think historically, one impediment, particularly for PE, has been that bank loan market sees up in delay, managers' ability to step in quickly.
Speaker Change: So do you think that is still the case, or does private credit now having enough scale and dry powder to fill in that void and make it easier to step in quicker than in past drawdowns? And in that vein, is your direct lending business going to step in now to fund other sponsors deal or still more on wait and see mode? Thank you . . .
Speaker Change: That is a great last question, Patrick. It's absolutely, oh, we've got one more after this. I was hoping to be done here, but anyway, I would say
Speaker Change: It's fundamentally different. As you know in the past, when you'd have volatility in public markets, high yield spreads and leverage loans would gap out. And that's exactly what's happened.
Speaker Change: As a result, banks logically would say, hey, look, the pricing now for loans, 150 basis points wider, plus I need additional flex, and that of course would make doing transactions too punitive. Both the cost of capital would go up and often the availability would go down. [inaudible]
Speaker Change: This time, because of the size and importance of private credit, you've seen things continue to move.
Speaker Change: and so you've seen a number of deals announced, including several by us in our private credit area where we finance and the pricing and private credit has not really moved materially at this point.
and I would expect...
Speaker Change: That private credit will continue to be there. It'll be available to our private equity businesses to borrow money and then we'll provide it to other private equity firms. And I do think that is really a substantive difference from the way the world worked in the past. I think it's an improvement because it allows to cost the capital to stay reasonable in periods of dislocation. It allows transaction activities to continue and I think it's part of the reason the last few weeks. You've seen a number of an announcement in a different environment. [inaudible]
Speaker Change: You just would not have seen that. And I just add to put a fine point on that, Patrick's Michael, that part of the essential proposition of private credit and direct lending if they deliver certainty.
Speaker Change: certainty of cost to capital without flex and on rates and so forth, and I think that will be transformational for the ability of the private equity M&A market to continue to function even in time of uncertainty.
Speaker Change: Thank you. We'll take our final question from Crispin Love with Piper Standler.
Kristen Love: Thank you, and sorry, John , not quite done yet, but hopefully this is the last one, now, how was it now?
Kristen Love: How would you characterize the capital market's environment today just from your seat? Is the window shut on M&A and IPOs? Is it slightly open? And then what do you expect a drive of a better or worse environment in the coming months? And can it change relatively quickly with a change in policy or even with policy changes? Yes.
could still be delays just as uncertainty looms. [inaudible]
Kristen Love: I think it can change very quickly with policy changes. There's just a lot of underlying momentum. There was, if you looked at our portfolio in the first quarter, if you looked at what was going on in M&A and IPOs, I think if we get back, as I said earlier, to Terra firma, if this Terraf diplomacy is resolved more quickly, I think you could see markets recover and we've seen it in the past and then you could see things open up again. [inaudible]
Kristen Love: I think I differentiate maybe different subsets of the capital market. The IPO market, which is the most sensitive to market confidence and conditions, that right now is probably been the most impacted and need a better dynamic. [inaudible]
Kristen Love: As it relates to M&A, I would bifurcate it, I would say, strategics who may have been thinking of using their stocks are probably a little more cautious.
Speaker Change: Financial Buyers with dedicated discretionary capital are still in the market and to Patrick's earlier question have access to direct lending.
Speaker Change: and so that area we continue to see deals getting done. And so I think to me the key is do we get back to a place that's more stabilized, more less volatile, people have clarity more about the capital markets? Yeah, that's it.
Speaker Change: There's less risk about the economic outlook, and then I think you'll see people want to transact. We have been operating for the last three years well below historic levels. [inaudible]
in terms of M&A and IPOs.
Speaker Change: and I don't think that is the permanent state of affairs. I think when we get back to better conditions, those things will improve and as your question about the current conditions, I'd say they've slowed but this is not completely shot. The IPO is in one area where the conditions are probably the toughest. [inaudible]
Thank you, John , appreciate it.
Speaker Change: That will conclude our question and answer session. At this time, I'd like to turn the call back over to Weston Tucker for any additional closing remarks.
Speaker Change: Gray, thank you everyone for joining us today and look forward to following out that for the call.
Michael Schwarzman, John McVeigh, John McVeigh, John McVeigh, John McVeigh