Q2 2026 Blackstone Inc Earnings Call

July 23, 2026

Speaker #1: Good day, and welcome to the Blackstone Q2 2026 investor call. Today's conference is being recorded. At this time, all participants are on a listen-only mode.

Speaker #1: If you require operator assistance, please press star 0. If you would like to ask a question, please signal by pressing star 1. If you are using a speakerphone, 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.

Speaker #2: Thank you, Katie, and good morning, and welcome to Blackstone Q2 conference call. Joining today are Steve Schwarzman, Chairman and Chief Executive Officer; John Gray, President and Chief Operating Officer; and Michael Che, Vice Chairman and 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 10Q report in a few weeks.

Speaker #2: I'd like to remind everyone 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 #2: For discussion of some of the factors that could affect results, please see the Risk Factors section of our 10K. We'll also refer to non-GAAP measures, and you'll find reconciliations in the press release on the shareholders' page of our website.

Speaker #2: Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund.

Speaker #2: This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of 2.4 billion dollars.

Speaker #2: Distributable earnings were 2 billion dollars, or $1.52 per common share. And we declared a dividend of $1.29 per share. Which will be paid to holders of record as of August 3.

Speaker #2: And with that, I'll now turn the call over to Steve.

Speaker #1: If you require operator assistance, please press *0. If you would like to ask a question, please signal by pressing *1. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker #3: Good morning, and thank you for joining our call. Blackstone reported outstanding Q2 results. With distributable earnings up 26% year over year, to 2 billion dollars as Weston mentioned.

Speaker #1: At this time, I'd like to turn the conference over to Weston Tucker, Head of Shareholder Relations. Please go ahead.

Speaker #3: Approximately the same rate of earnings growth we delivered in the first quarter. Few related earnings grew 22% year over year, in the second quarter.

Speaker #2: Thank you, Katie, and good morning, and welcome to Blackstone Q2 conference call. Joining today are Steve Schwarzman, Chairman and Chief Executive Officer; Jon Gray, President and Chief Operating Officer; and Michael Chae, Vice Chairman and Chief Financial Officer.

Speaker #3: While net realizations rose 27% despite the geopolitical volatility. Total inflows reached nearly $70 billion in the quarter. And over 260 billion dollars for the last 12 months.

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 #3: Lifting assets under management 11% year over year, to a record $1.35 trillion dollars. The most significant driver of these strong results continues to be the large-scale investments we made in artificial intelligence-related areas, including data centers, energy and power, and the frontier AI companies themselves.

Speaker #2: Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund.

Speaker #2: This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of $2.4 billion.

Speaker #3: These investments are leading to standout results in numerous strategies across the firm. And are supporting our momentum in fundraising, deployment, and as we start to monetize some of the substantial gains we've been building in these areas, in performance, revenues.

Speaker #2: Distributable earnings were $2 billion, or $1.52 per common share, and we declared a dividend of $1.29 per share, which will be paid to holders of record as of August 3rd.

Speaker #2: And with that, I'll now turn the call over to Steve.

Speaker #3: Over the past several years, we've been regularly sharing our views on the transformative potential of AI, and how we've been positioning the firm to benefit from the paradigm shift that is underway.

Speaker #3: Blackstone has become one of the largest private capital providers in the AI ecosystem, a position that gives our investors unique access to the remarkable opportunities emerging in this area, and allows them to share directly in the extraordinary potential upside.

Speaker #3: Few related earnings grew 22% year over year, in the second quarter, while net realizations rose 27% despite the geopolitical volatility. Total inflows reached nearly $70 billion in the quarter.

Speaker #3: Many of these opportunities, of course, can't be replicated in the public markets. We've built the largest data center development business in the world. And demand for compute is accelerating.

Speaker #3: And over 260 billion dollars for the last 12 management 11% year over year, to a record $1.35 trillion dollars. The most significant driver of these strong results continues to be the large-scale investments we made in artificial intelligence-related areas, including data centers, energy and power, and the frontier AI companies themselves.

Speaker #3: We became one of the most active private investors in power and utilities. And energy demand is significantly rising. And we invested directly in some of the fastest-growing private companies in the world, including Anthropic, OpenAI, and SpaceX.

Speaker #3: These investments are leading to standout results in numerous strategies across the firm. And are supporting our momentum in fundraising. Deployment, and as we start to monetize some of the substantial gains we've been building in these areas, in performance, revenues.

Speaker #3: And we're now creating new companies and platforms that we believe will play a critical role in the advancement of AI, including four in the second quarter alone.

Speaker #3: First, we teamed with Google to build a new AI cloud provider powered by their TPU chips. Investing up to $5 billion initially. We think this business has the potential to scale quite significantly over time, as the first NeoCloud for TPUs.

Speaker #3: Second, we partnered with Anthropic to form a company focused on driving enterprise adoption of their AI-powered solutions, helping firms to realize the vast potential of this technology.

Speaker #3: Third, we joined Broadcom, and another manager, to create a financing platform in support of Broadcom's deployment of large-scale AI compute for their end customers.

Speaker #3: Many of these opportunities, of course, can't be replicated in the public markets. We built the largest data center development business in the world. And demand for compute is accelerating.

Speaker #3: The platform provided 35 billion dollars initially, to deliver 1 gigawatt of compute, representing the largest private credit investment in history, with much more to come.

Speaker #3: And fourth, alongside these partnerships with leading AI companies, we launched a Blackstone REIT, known as BXDC. Something public market investors can access directly, to acquire stabilized, newly constructed data centers.

Speaker #3: And we're now creating new companies and platforms that we believe will play a critical role in the advancement of AI, including four in the second quarter alone.

Speaker #3: The $2 billion offering represented the largest blind pool REIT IPO in history, a testament to our leadership position in this sector. The market for long-term ownership of stabilized data centers is nascent today, but we think it could grow to $1 trillion over time.

Speaker #3: And beyond. Representing massive potential for BXDC. In addition to these new ventures, we're seeing extraordinary momentum in our data center platform, which has grown to 185 billion dollars of total value, including facilities under construction.

Speaker #3: Third, we joined Broadcom, and another manager, to create a financing platform in support of Broadcom's deployment of large-scale AI compute for their end customers.

Speaker #3: Up from 130 billion dollars at the start of just this year. We expect to lease over three times more capacity this year, than any other year in our history.

Speaker #3: The platform provided $35 billion initially to deliver 1 gigawatt of compute, representing the largest private credit investment in history, with much more to come.

Speaker #3: If we execute on our pipeline, our data center platform could double over the next few years. Growth of this type underpinned by long-duration leases with some of the highest quality and most creditworthy customers in the world is a compelling illustration of what can be created in private markets.

Speaker #3: And while it's still early in the life cycle of our data center investments, as one indication of their significant embedded value, we recently sold our stake in a collection of fully leased assets that are still under construction at a multi-billion dollar gain.

Speaker #3: Meanwhile, in energy, we continue to actively invest to help meet rising global demand. Including in utilities, utility services, renewables, pipelines, LNG, and electrical equipment.

Speaker #3: Across both equity and debt. We've generated highly differentiated returns for LPs in these areas as well. As highlighted by the performance of our energy-focused strategies.

Speaker #3: Up from 130 billion dollars at the start of just this year. We expect to lease over three times more capacity this year, than any other year in our history.

Speaker #3: Last week in credit, we announced a 5.3 billion dollar investment for leading energy infrastructure company Williams, to support multiple development projects to power data centers.

Speaker #3: If we execute on our pipeline, our data center platform could double over the next few years. Growth of this type, underpinned by long-duration leases with some of the highest-quality and most creditworthy customers in the world, is a compelling illustration of what can be created in private markets.

Speaker #3: This investment provides yet another example of Fortune 500 companies looking to private markets for customized long-duration capital solutions. I'm sharing these examples to highlight the remarkable scale of capital needed for the AI build-out, and the unprecedented opportunities it's creating for Blackstone and our investors.

Speaker #3: At the same time, their investment risks and uncertainties that accompany the rapid growth of AI, along with important societal considerations. In terms of risks, we're mindful of the potential for excessive exuberance in this area, and we've carefully chosen our spots leveraging our scale and knowledge advantage to build conviction.

Speaker #3: Meanwhile, in energy, we continue to actively invest to help meet rising global demand. Including in utilities, utility services, renewables, pipelines, LNG, and electrical equipment.

Speaker #3: We've focused on identifying compelling risk-adjusted returns, without side upside potential, and in many cases, meaningful downside protection. On the societal implications of AI, I've been extensively engaged on this topic.

Speaker #3: Across both equity and debt, we've generated highly differentiated returns for LPs in these areas as well, as highlighted by the performance of our energy-focused strategies.

Speaker #3: Since I made a major donation in 2018 to MIT establishing the Schwarzman College of Computing. And this includes a focus on AI safety. I've been spending a lot of time with leaders in the industry and various policymakers thinking about how to address this critical issue.

Speaker #3: Last week in credit, we announced a 5.3 billion dollar investment for leading energy infrastructure company Williams, to support multiple development projects to power data centers.

Speaker #3: While also preserving the advancement of America's AI leadership. In addition, the firm is working closely with our portfolio companies including our data center businesses, to address the workforce, environmental, and community implications of development.

This investment provides yet another example of Fortune 500 companies looking to private markets for customized, long-duration capital solutions.

I'm sharing these examples to highlight the remarkable scale of capital needed for the AI buildout and the unprecedented opportunities. It's creating for Blackstone and our investors.

Speaker #3: Through the creation of union jobs, workforce training, water-free cooling systems, expanded power generation, and significant local economic investment, our goal is for these projects to contribute to the success of the communities we serve.

at the same time, their investment risks and uncertainties that accompanied the rapid growth of AI,

Along with important, societal considerations.

In terms of risks.

And we've carefully chosen our spots.

Speaker #3: Overall, I believe the potential change from AI has precedent in the industrial revolution and the commercialization of electricity. Each time in history, there's been this type of dramatic change economies have adjusted, and the standard of living for virtually everyone in society is improved over time.

Leveraging our scale and knowledge advantage to build conviction.

We focused on identifying.

Compelling risk. Adjusted returns.

With outside upside potential.

In many cases, meaningful downside protection.

On the societal implications of AI, I've been extensively engaged on this topic.

Speaker #3: We believe the future impact of AI will echo these previous periods, but with more rapid implementation and complexity. Major change of this type also creates anxiety due to the uncertainties of how the technology will evolve and its ultimate impact.

Since I made a major donation in 2018 to MIT establishing

The schwarzman College of computing.

This includes a focus on AI safety.

I've been spending a lot of time with leaders in the industry and various policy makers. Think about how to address this critical issue.

Speaker #3: We will need to monitor these developments as a society and course correct when necessary. In closing, we are in the early days of what I believe will be the most consequential transformation in industry, and markets, in a generation.

While also preserving the advancement of America's AI leadership.

In addition.

The firm is working closely with our portfolio companies, including our data center businesses, to address the workforce.

Environmental.

And community.

Uh, implications of development.

Speaker #3: Private capital will play a vital role in these advancements, and Blackstone is the leading firm. I have great optimism for what's in store for our investors.

Through the creation of union jobs.

Workforce training.

Water-free cooling systems.

Expanded power generation and significant local economic investment.

Speaker #3: And for shareholders, our stock is on sale today. And we believe it represents one of the most inexpensive ways to participate in this extraordinary megatrend.

Our goal is for these projects to contribute to the existing success of the community's we serve

Overall.

I believe the potential change from AI.

Speaker #3: With that, I'll turn it over to John.

Has precedent in the Industrial Revolution and the commercialization of electricity.

Each time in history.

Speaker #2: Thank you, Steve, and good morning, everyone. The seed planting we've been doing across the firm around AI and AI infrastructure is generating outstanding returns.

There's been this type of dramatic change—economies have adjusted.

And the standard of living for virtually everyone in society is improved over time.

Speaker #2: A relentless focus on investment performance remains our true north. Our clients are responding with robust inflows across all of our major fundraising channels, institutions, insurance companies, and individual investors, the three I's.

We believe in the future impact of AI.

Will Echo these previous periods?

but with more rapid implementation,

And complexity.

Major change of this type.

Also creates anxiety.

Speaker #2: At the same time, the IPO market is strengthening, setting the foundation for greater realizations and performance revenues over time. I'll speak about each of these dynamics in detail.

2 to the uncertainties of how the technology will evolve.

And its ultimate impact.

We will need to monitor these developments, as a society, and course, correct.

When necessary.

Speaker #2: Starting with our institutional business, which remains the core engine of our firm. Investor affinity for Blackstone is as strong as ever, and we're seeing our momentum accelerate across numerous areas.

In closing, we are in the early days of what I believe will be the most consequential transformation in industry and markets in a generation.

Speaker #2: In infrastructure, we launched our dedicated platform eight years ago, and today it is a rocket ship. With AUM growing a remarkable 40% year over year, to $90 billion, AI is powering our investments in digital and energy infrastructure in particular, leading to 18% net annual return since inception for the co-mingled VIP strategy.

Private capital.

Will play a vital role in these advancements.

And Blackstone is the leading firm.

I have great optimism for what's in store for our investors.

and for shareholders,

Our stock is on sale today.

Speaker #2: Meanwhile, our multi-asset investing business, BXMA, is experiencing a renaissance. We originally entered the hedge fund of funds business in 1990, and effectively relaunched this platform in 2021 when we brought on Joe Dowling to lead it.

And we believe it represents 1 of the most inexpensive ways to participate in this extraordinary Mega trend.

With that.

I'll turn it over to John.

Speaker #2: BXMA has now delivered 25 consecutive quarters of positive returns for its largest strategy, which Q2 representing the best returns in six years. AUM reached a record $109 billion up 21% year over year, representing its fastest organic growth in nearly 15 years, when the segment was less than half of its current size.

Thank you, Steve. And good morning everyone. The seed planting, we've been doing across the firm around Ai and AI infrastructure is generating outstanding returns. A Relentless focus on investment. Performance remains our true north

Speaker #2: Post-quarter end on July 1st, BXMA reported an additional $4.8 billion of monthly inflows its best single month of fundraising in history. Turning to our institutional drawdown area, which is accelerating, we are raising a new cycle of funds across a number of highly differentiated strategies.

Our clients are responding, with robust inflows across all of our major fundraising channels: institutions, insurance companies, and individual investors—the three I's. At the same time, the IPO market is strengthening, setting the foundation for greater realizations and performance revenues over time.

I'll speak about each of these Dynamics in detail.

Starting with our institutional business, which remains the core engine of our firm.

Speaker #2: Three of these funds hit their hard cap so far in 2026, with excess demand. An opportunistic private credit, life sciences, and Asia private equity.

Speaker #2: And we expect our new private equity energy transition flagship to hit its hard cap soon as well. Taken together, these four strategies represent nearly $40 billion.

Investor affinity for Blackstone is as strong as ever, and we're seeing our momentum accelerate across numerous areas in infrastructure. We launched our dedicated platform 8 years ago, and today it is a rocket ship, with AUM growing a remarkable 40% year-over-year to $90 billion.

Speaker #2: Our Asia PE flagship held its final close in the second quarter, raising $13.1 billion more than double the previous vintage, on the back of a 27% net annual return in the prior fund since inception.

Strategy.

Speaker #2: Our decision to focus on India where we believe we have the largest alternatives business and Japan has been a key driver of this performance.

Meanwhile our multi-asset investing business bxm8 is experiencing a Renaissance. We originally entered the hedge fund of funds business in 1990 and effectively relaunched this platform in 2021, when we brought on Joe Dowling to lead it.

Speaker #2: Our fifth PE energy transition flagship closed on nearly $6 billion in the second quarter, already equal in size to the prior vintage, on its way to an expected $8.7 billion.

BXa has now delivered 25 consecutive quarters of positive returns for its largest strategy, with Q2 representing the best returns in six years.

Speaker #2: In secondaries, we've raised over $14 billion to date for our new buyout flagship with a target of at least $22 billion. And in credit, we held closings for new drawdown vehicles and direct lending and asset-based finance.

IAM reached a record. 109 billion up 21% year-over-year representing. Its fastest organic growth in nearly 15 years. When the segment was less than half of the current size.

Speaker #2: Overall, our institutional business has extraordinary forward momentum. Stepping back for a moment on credit, where our combined platform has grown to nearly $550 billion, cross corporate and real estate credit, up 13% year over year.

Post quarter end on July 1st bxa, reported an additional 4.8 billion, a monthly inflows. Its best single month of fundraising in history.

Turning to our institutional drawdown area, which is accelerating.

Speaker #2: Inflows were $33 billion in the second quarter, or nearly 50% of the firm's total. We're seeing continued strong engagement with institutions across our non-investment grade strategies, despite the market noise earlier in the year.

Speaker #2: At the same time, we're benefiting significantly from the massive secular shift underway toward investment grade private credit. A new direct-to-customer model has taken hold, which brings clients right up to borrowers, leading to a better experience for both.

We are raising a new cycle of funds across a number of highly differentiated strategies. Three of these funds have hit their hard cap so far in 2026, with excess demand—an opportunistic, private credit, life sciences, and Asia private equity. We expect our new Private Equity Energy Transition flagship to hit its hard cap soon as well.

Taken together these 4 strategies represent nearly 40 billion dollars.

Our Asia PE Flagship held its final close in the second quarter.

Speaker #2: In the insurance channel specifically, this model is resonating. As is our open architecture approach. Our insurance AUM reached $290 billion in the second quarter, up 15% year over year, representing the largest third-party focus platform in our sector.

Raising 13.1 billion dollars more than double the previous vintage on the back of a 27%, net, annual return in the prior fund. Since Inception, our decision to focus on India, where we believe we have the largest Alternatives business. And Japan has been a key driver of this performance.

Speaker #2: We announced a new partnership with Japan's largest life insurer, Nippon Life, in which we will deploy approximately $10 billion in private credit over the next several years, and also invest in their domestic real estate portfolio.

Our fifth PE energy transition Flagship closed on nearly 6 billion dollars in the second quarter already equal in size to the prior vintage on its way to an expected 8.7 billion dollars.

Speaker #2: This builds on our existing relationship with Nippon Life, through their investments, incorporates, and resolution life, both of which are major partners of ours. In total, we now have 40 clients in our dedicated insurance solutions area, a number which has nearly doubled in the past two years.

In secondaries we've raised over 14 billion dollars today for our new buyout Flagship with the target of at least 22 billion dollars. And in Credit, we held closings for new draw, down vehicles and direct lending and asset based Finance. Overall, our institutional business has extraordinary forward momentum.

Speaker #2: And we continue to add more on a global basis. We're building something highly differentiated in this channel, and have established a massive scale advantage with the combined strength of 40 of the leading insurers in the world, all without taking on insurance liabilities.

Stepping back for a moment on credit where our combined platform has grown to nearly 550 billion dollars across corporate and real estate credit up 13% year-over-year.

Inflows were $33 billion in the second quarter, or nearly 50% of the firm's total.

Speaker #2: Moving to private wealth, performance, and brand are the ultimate determinants of success in the wealth channel, and Blackstone is a leader in both. Despite the geopolitical turbulence and muted flows in credit, our AUM in the channel grew 16% year over year in the second quarter, to a record $324 billion.

We're seeing continued strong engagement with institutions across our non-investment grade strategies despite despite the market noise earlier in the year.

At the same time, we're benefiting significantly from the massive, secular shift underway, board investment grade private credit.

Speaker #2: Total sales were $8.6 billion in the quarter, with a slower pace in April and May, when sentiment related to the Iran conflict was most negative, but a strong recovery in June.

A new direct-to-customer model has taken hold, which brings clients right up to borrowers, leading to a better experience for both.

Speaker #2: This momentum has continued so far in Q3. BXP led the way again in the second quarter with $2.4 billion raise, bringing its NAV to over $25 billion in only 10 quarters.

In the insurance Channel. Specifically, this model is resonating. As is our open architecture approach. Our insurance AUM reached 290 billion dollars in the second quarter up. 15% year-over-year representing the largest third-party focused platform in our sector.

Speaker #2: June represented the best month of sales since launch at $1.2 billion. BXP has achieved a remarkable 20% net annualized return since inception, for its largest share class, including approximately 8% net in the second quarter.

We announced a new partnership with Japan's largest life insurance nipon life in which we will deploy approximately 10 billion dollars in private credit over the next several years and also invest in their domestic. Real estate portfolio.

This builds on our existing relationship with Nippon Life through their investments in Corebridge and Resolution Life, both of which are major partners of ours.

Speaker #2: Powered by its outstanding portfolio positioning. Our infrastructure vehicle and private wealth, BX Infra, raised approximately $900 million in the second quarter, bringing its NAV to $6 billion in just six quarters, underpinned by a 16% annualized net return in its largest share class.

In total, we now have 40 clients in our dedicated Insurance Solutions area, a number which has nearly doubled in the past two years. And we continue to add more on a global basis.

Speaker #2: BREET raised $1.2 billion in the second quarter, while repurchases continued to decline sharply, falling 42% year over year and down 33% sequentially, from Q1, resulting in the best regular way net flows in nearly four years.

We're building something highly differentiated in this Channel and have established a massive scale Advantage with the combined strength of 40 of the leading insurers in the world, all without taking on insurance liabilities.

Moving to private wealth, performance and brand are the ultimate determinants of success in the wealth channel, and Blackstone is a leader in both.

Speaker #2: The vehicle has generated a $9.4% net return for its largest share class since inception nine and a half years ago. Approximately 40% above the public REIT index, including 10.3% net for the last 12 months.

Speaker #2: BREET's investment in data centers, which now comprise 27% of the portfolio, has been particularly helpful. NAV increased 7% year over year, to $57 billion, BREET is clearly back in growth mode.

total sales were 8.6 billion in the quarter with a slower Pace in April and May, when sentiment related to the Iran, conflict was most negative, but a strong recovery in June

this momentum has continued so far in Q3

Speaker #2: Finally, BCRED's gross sales were $1 billion in the second quarter, repurchase requests remain elevated and exceeded the 5% limit, with approximately 50% fulfilled, resulting in net outflows of $1.2 billion.

BXP led the way again in the second quarter with $2.4 billion raised, bringing its NAV to over $25 billion in only 10 quarters.

June represented the best month of sales since launch, at $1.2 billion.

Speaker #2: The semi-liquid structure of BCRED and our private wealth perpetuals is designed to provide greater liquidity than traditional drawdown funds, while protecting performance. We have been here before with BREET, and while it is early in the third quarter, redemption requests are down materially.

BXP has a remarkable 20% net annualized return since inception for its largest share class, including approximately 8% net in the second quarter.

Speaker #2: Looking forward, our performance supports innovation. Yesterday, the first two funds in our alliance with Wellington and Vanguard officially launched, WVB All Markets and WVB Blackstone All Privates, with inflows expected to start later this quarter.

Our infrastructure vehicle and private wealth VX, infra raised the approximately 900 million in the second quarter. Bringing its NAB to 6 billion dollars in just 6 quarters underpinned by a 16% annualized. Net return in its largest share class

Speaker #2: These funds provide individuals with simplified access to three world-class asset management firms, including the full breadth of the Blackstone platform. Together, the alliance is actively exploring additional strategies, including for the retirement market, and later this summer, the firm expects to accept our first subscription to BXHF, our new perpetual multi-strategy hedge fund product targeting more liquid exposures.

B read raise 1.2 billion in the second quarter. While repurchases continue to Define sharply falling 42% year-over-year and down. 33% sequentially from q1. Resulting in the best regular way net flows in nearly 4 years.

The vehicle is generated a 9.4%, net return.

For its largest share class since inception, nine and a half years ago, approximately 40% above the public REIT index, including 10.3% net for the last 12 months.

Speaker #2: Adoption of private markets in the wealth channel remains on a structurally positive trajectory, and Blackstone continues to lead the way. Finally, turning to the IPO market, which has strengthened considerably.

B reads investment in data centers, which now comprise 27% of the portfolio has been particularly helpful.

NAV increased 7% year-over-year to $57 billion.

Beret is clearly back in growth mode.

Speaker #2: At the start of the year, we predicted that 2026 would be the year of the IPO. And that is what's playing out. In the first six months of the year, US IPO activity increased six-fold compared to the same time last year, while global issuance rose more than 3.5-fold.

Finally, berd's growth sales were 1 billion. In the second quarter were purchased requests remain elevated. And exceeded the 5% limit with approximately, 50% fulfilled resulting in net, outflows of 1.2 billion dollars.

Speaker #2: Against this backdrop, Blackstone has executed three IPOs since May, a mobile advertising business in the US, an office REIT in India, and the firm stabilized data center REIT, BXDC.

The semi-liquid structure of bcred and our private wealth perpetuals is designed to provide greater liquidity than traditional draw down funds while protecting performance.

Speaker #2: This week, we launched another significant IPO in the US. In total, we have eight IPOs on file globally, from a diverse range of sectors and geographies.

We have been here before with brie, and while it is early in the third quarter, Redemption requests are down materially.

Speaker #2: While geopolitical developments will continue to impact markets, we are optimistic on the direction of travel, with our IPO activity providing the foundation for greater realizations over time.

Looking forward, our performance supports Innovation yesterday. The first 2 Funds in our alliance with Wellington and Vanguard officially launched wwvb, all markets and wwvb. Blackstone, all privates with inflows expected to start later this quarter.

Speaker #2: In closing, our highly diversified, capital-light, performance-driven model continues to deliver I'm extremely confident about the future.

These funds provide individuals with simplified access to three world-class asset management firms, including the full breadth of the Blackstone platform.

Speaker #1: With that, I will turn things over to Michael Chay.

Speaker #3: Thanks, John, and good morning, everyone. Firms continued evolution and the expanding scope of our activity have fundamentally transformed our earnings power. Both in terms of the magnitude, as well as the breadth of sources of earnings.

Together, the Alliance is actively exploring additional strategies, including for the retirement market, and later this summer the firm expects to accept our first subscriptions to Bex.

Our new Perpetual multi-strategy hedge fund product targeting, more liquid, exposures.

Speaker #3: In the second quarter, we again delivered over 20% year-over-year growth across total revenues, fee revenues, fee-related earnings, net realizations, and distributed earnings. Following a similar trajectory for these metrics in Q1.

Adoption of private markets. In the wealth Channel remains on a structurally, positive trajectory, and Blackstone continues to lead the way.

Speaker #3: Meanwhile, our funds reported strong overall investment performance against a backdrop of significant geopolitical uncertainty. Highlighted by notable strength in our AI-related portfolio, as you've heard this morning.

Finally, turning to the IPO Market which has strengthened considerably at the start of the year, we predicted that 2026 would be the year of the IPO.

Speaker #3: Starting with results, distributed earnings increased 26% year over year to $2 billion in the second quarter, or $1.52 per share. Underpinned by one of the three best quarters of fee-related earnings in our history, along with robust growth in net realizations.

And that is what's playing out in the first 6 Months of the Year us IPO activity, increased 6-fold compared to the same time last year while Global issuance Rose, more than 3 and a half fold.

Speaker #3: First, with respect to FRE, which increased 22% year over year to $1.8 billion, or $1.43 per share. Fee revenues also rose 22% to $3 billion, double-digit year-over-year growth in all four of our segments.

against this backdrop Blackstone, is executed 3, IPOs, since May a mobile advertising business in the US in office, read in India and the firm stabilized data center, Arie BX DC,

This week, we launched, another significant, IPO in the US in total, we have 8 IPOs on file globally from a diverse range of sectors and geographies.

Speaker #3: 32% growth in private equity, 21% in real estate, 18% in BXMA, and 11% in credit. In terms of the underlying drivers of fee revenue growth, transaction and advisory fees for the firm nearly doubled in the second quarter, to a record $321 million, and we're up 52% sequentially from Q1.

While geopolitical developments will continue to impact markets. We are optimistic on the direction of travel with our IPO activity, providing the foundation for greater realizations over time.

In closing, our highly diversified, capital-light, performance-driven model continues to deliver. I'm extremely confident about the future. With that, I will turn things over to Michael Chae.

Thanks John and good morning everyone.

Speaker #3: The expansion of our platform and overall levels of financing and investment activity has led to a material step-up in these revenues. Representing an important and underappreciated engine of fee revenue generation.

Power.

Both in terms of the magnitude, as well as the breadth of sources of earnings.

Speaker #3: Further, fee-related performance revenues increased 68% year over year to $793 million in the second quarter, powered by the scaling and strong overall investment performance of our platform of perpetual strategies.

In the second quarter, we again delivered over 20% year-over-year growth. Total revenues, fee revenues, fee-related earnings, net realizations, and distributed earnings followed a similar trajectory for these metrics in Q1.

Speaker #3: These revenues increased nearly threefold for both BXP and BREET, alongside contributions from BCRED, BIP, BXINFRA, and other vehicles. Base management fees for the firm grew at a mid-single-digit rate year over year, in line with the trajectory we previously outlined.

Meanwhile, our funds reported strong overall investment performance against a backdrop of significant geopolitical uncertainty.

Highlighted by notable strength in our AI-related portfolio, as you've heard this morning.

Speaker #3: We saw strong double-digit growth in base fees and private equity and BXMA, some deceleration in year-over-year growth in credit, related to the BDC area, and a decline in real estate due to harvesting activity in the breadth opportunistic funds, and headwinds in our institutional core plus business, as I mentioned last quarter.

Starting with results, distributed earnings increased 26% year-over-year to $2 billion in the second quarter, or $1.52 per share. This was underpinned by one of the three best quarters of fee-related earnings in our history, along with robust growth in net realizations.

Speaker #3: We continue to expect similar year-over-year base management fee growth for the firm in the third quarter, as in Q2, with a return to double-digit growth in base management fees in 2027.

First with respect to F, which increased 22% year-over-year to 1.8 billion dollars for a143 Cent per share.

Fee revenues also rose 22% to $3 billion, with double-digit year-over-year growth in all four of our segments.

Speaker #3: Turning to net realizations, we reported $414 million in the second quarter, up 27% year over year. Gross performance revenues grew 32% year over year to $731 million, underpinned by a 20% increase in private equity.

32% growth in private Equity 21% in real estate 18% in BX SMA and 11% in credit.

In terms of the underlying drivers of fee revenue growth,

transaction and advisory fees for the firm nearly doubled in the second quarter to a record 321 million.

Speaker #3: While real estate performance revenues rose nearly fivefold to the highest level in four years. We noted last quarter that the geopolitical volatility had pushed out exit pipelines, and slowed realization activity in the near term.

And we're up 52% sequentially from Q1.

Speaker #3: Even so, we were able to execute a number of dispositions across the firm, including the data center sale that Steve discussed, along with multiple realizations in the energy portfolio.

The expansion of our platform and overall levels of financing and investment. Activity has led to a material step up in these revenues representing an important and underappreciated engine, a fee Revenue generation.

Further fee, related performance Revenue, increased 68% year rear to 70093 million in the second quarter.

Speaker #3: These included a manufacture of engineered structures for electric transmission, a natural gas pipeline, a Europe-based environmental services firm, and the public stock of an energy solutions company.

Speaker #3: Overall, the firm's embedded realization potential is significant. The net accrued performance revenue on our balance sheet are store of value, now stands at $7.5 billion, or $6 per share, the highest level in four years, up 13% year over year and up 7% sequentially from Q1.

These revenues increase nearly threefold for both BXP and VREAD, alongside contributions from BCRED, VIP, VX Infra, and other vehicles.

Base management fees for the firm grew at a mid-single-digit rate year-over-year, in line with the trajectory we previously outlined.

We saw strong double digit growth in base fees and private equity and bxa.

Speaker #3: And while we do expect a sequential deceleration in net realizations in the third quarter, we anticipate a robust fourth quarter and 2027. That brings me to investment performance.

Some deceleration in year-over-year growth in credit related, to the BDC area and a decline in real estate due to harvesting activity in the breath, opportunistic funds, and headwinds in our institutional core Plus business. As I mentioned last quarter,

Speaker #3: Which, as Steve mentioned, was highlighted by outstanding returns in numerous strategies driven in significant part by our AI-related portfolio. This was illustrated in our returns and infrastructure, our dedicated energy strategies, BXPE, BREET, and the most recent vintages of our corporate private equity and real estate opportunistic funds, which have favorable exposure to this area.

We continue to expect similar year-over-year based management fee growth for the firm in the third quarter, as in Q2 with a return to double digit growth in base management fees in 2027.

Turning to net realizations, we reported $414 million in the second quarter, up 27% year-over-year.

Speaker #3: BXMA's strong overall returns also benefited from its positioning in the AI area. For the firm, overall, AI-related holdings comprise nine of the 10 largest markups in the second quarter.

Growth performance: Revenues grew 32% year-over-year to $731 million, underpinned by a 20% increase in Private Equity. Meanwhile, Real Estate performance revenues rose nearly five-fold to the highest level in four years.

Speaker #3: Our dedicated infrastructure platform appreciated 7.2% in the quarter, and an exceptional 29% for the last 12 months. Our US and Europe-focused data center business, QTS, was once again the largest single driver of appreciation in infrastructure, real estate, and for the firm overall in Q2, driven by continued extraordinary leasing momentum.

We noted last quarter that the geopolitical volatility had pushed out exit pipelines and slowed realization activity in the near term.

Even so we were able to execute a number of dispositions across the firm including the data center sale that Steve discussed along with multiple realizations in the energy portfolio.

Speaker #3: We also saw significant gains across other data center investments in the US and Asia. The corporate private equity funds appreciated 3.7% in the second quarter and 14% for the last 12 months.

these included a manufacturer of engineered structures for electric transmission, natural gas pipeline, the Europe based Environmental Services firm and the public stock of an energy solutions company

Overall the firm's embedded realization potential is significant.

Speaker #3: Our holdings in power and electrification, both private and public, along with strong performance in Asia, were the largest drivers of Q2 returns. The most recent vintages of our corporate private equity strategies were the best performing, powered by these areas, including appreciation of 6.1% in the quarter for our latest global flagship, 8.8% for Asia, and 23.6% for our most recent fully invested energy fund.

Speaker #3: year and up 7% sequentially from Q1. And while we do expect a sequential deceleration in net realizations in the third quarter, we anticipate a robust fourth quarter and 2027.

The Neta crew performance revenue on our balance sheet, our store of value. Now stands at 7.5 billion or 6 dollars per share the highest level in 4 years, up 13% year-over-year and up 7% sequentially from q1.

Speaker #3: That brings me to investment performance. Which, as Steve mentioned, was highlighted by outstanding returns in numerous strategies driven in significant part by our AI-related portfolio.

Speaker #3: Overall, our private equity operating companies continue to report healthy underlying fundamentals, including revenue growth of 11% year over year. BXMA reported a 5.8% gross return for the absolute return composite in the second quarter, and over 15% for the LTM period.

Speaker #3: This was illustrated in our returns and infrastructure, our dedicated energy strategies, BXPE, B-REIT, and the most recent vintages of our corporate private equity and real estate opportunistic funds, which have favorable exposure to this area.

Speaker #3: BXMA has delivered positive composite returns in each of the last 25 quarters, as John noted, and in 38 of the remarkable achievement, notwithstanding the significant volatility in public markets over this period.

Speaker #3: BXMA's strong overall returns also benefited from its positioning in the AI area. For the firm overall, AI-related holdings comprise nine of the 10 largest markups in the second quarter.

Speaker #3: Strong investment performance across the BXMA platform in Q2 led to the segment's highest dollar fund appreciation in history, and is supporting robust inflows and continued double-digit year-over-year growth in AUM.

Speaker #3: In credit, our non-investment-grade private credit strategies reported a gross return of 1% in the second quarter, and 7% for the last 12 months, reflecting stable underlying credit performance across the vast majority of our holdings, with strong current income providing ballast to returns.

Speaker #3: Here too, our energy funds outperformed, with our most recent BGREEN III reporting a 4.5% gross return in the quarter. Finally, in real estate, overall values appreciated modestly in the second quarter, led by strength of data centers, partly offset by declines in life sciences office and certain other areas.

Speaker #3: While the recovery in commercial real estate has been impacted by the increase in base rates, our platform remains well-positioned, with data centers, logistics, and rental housing now comprising nearly 80% of the global equity portfolio.

Speaker #3: In logistics, our largest exposure real estate, we're seeing US leasing activity meaningfully re-accelerate. And for data centers, it's hard to overstate their importance and impact.

8.8% for Asia and 23.6% for our most recent fully invested energy fund.

Overall, our private equity operating companies continue to report healthy underlying fundamentals, including revenue growth of 11% year-over-year.

Speaker #3: The most recent vintages of our breadth global and Asia strategies, which appreciated 7% and 3.7% in the second quarter respectively, along with our BPP US institutional corplus vehicle and, of course, BREET, are benefiting significantly from their growing exposure to data centers.

That's a 5.8% return for the Absolute Return Composite in the second quarter, and over 15% for the LTM period.

Speaker #3: So overall, AI is helping to drive investment performance across the firm, particularly in the latest vintages of our funds. In closing, we're in a time of massive demand for capital, to fuel historic growth in the most critical areas, and private markets are the solution.

Bxa has delivered positive composite returns in each of the last 25 quarters as John noted. And in 38 of the past 39 months, a remarkable achievement not withstanding. The significant volatility in public markets over this period.

Strong investment performance across the bxm platform in Q2 led to the segment's, highest dollar fund appreciation in history and is supporting robust inflows. And continued double-digit year-over-year growth in AUM.

Speaker #3: For Blackstone, the breadth, scale, and reach of the business we built over four decades have put us in a unique position to be the leader in providing these solutions.

Speaker #3: Thank you for joining today's call, and we would like to open it up now for questions.

Speaker #1: Thank you. As a reminder, please press star one to ask a question. We ask you to limit yourself to one question to allow as many callers to join the queue as possible.

In credit our non-investment grade private credit Straight Credit Credit, strategies reported a gross return of 1% in the second quarter and 7% for the last 12 months. Reflecting stable, underlying credit reports, the vast majority of our Holdings with strong current income, providing ballast to returns,

Speaker #1: We will take our first question from Glenn Shore with Evercore.

Here, two of our energy funds outperformed, with our most recent, BREF, reporting a 4.5% gross return in the quarter.

Speaker #4: Hi. Thanks so much. Maybe we'll pick up where you just left off, Michael. I respect all the 20-plus percent growth numbers that you all ran through.

Finally, in real estate overall Valley's appreciated modestly in the second quarter led by strength and data centers, partly offset by declines, in life sciences office, and certain other areas.

Speaker #4: You got a lot of capital raising, a ton of dry powder, and all the seed planting. So the question on base management fees, I heard you on third quarter, but let's just go out to next year where we and the rest of the world is expecting more of a double-digit pickup.

While the recovering commercial real estate has been impacted by the increase in base rates, our platform remains well positioned with data centers, logistics, and rental housing now comprising nearly 80% of the global equity portfolio.

Speaker #4: Could you possibly talk through some of the building blocks and the pieces that get us there? If that happens, is deployment, the fee holiday rolloffs, credit stabilizing, things like that, that would be helpful.

Speaker #4: Appreciate it.

Speaker #3: Sure, Glenn. Thanks. And as you heard from my remarks, we have that expectation too. About double-digit growth next year. We feel very good about the foundation being put in place, in terms of the building blocks you mentioned.

And Logistics our largest exposure to real estate. We're seeing us leasing activity, meaningfully re accelerate and for data centers. It's hard to overstate their importance to impact the most recent vintages of our breath Global and Asia strategies, which appreciated 7% and 3.7% in the second quarter respectively, along with our BPP us, institutional, Corpus vehicle. And, of course, bee are benefiting significantly from their growing exposure to data centers.

Speaker #3: There are a number of fundamental and very positive drivers that support our view. And really, are about the embedded growth we see going into next year.

So overall AI is helping to drive investment performance across the firm, particularly in the latest vintages of our funds.

Speaker #3: So first, the full-year benefit of the private equity segment drawdowns that will activate we've activated or will activate this year, so that's our SP10 fund, our Asia III fund in BCP, our energy transition fund.

In closing, we're in a time of massive demand for Capital to fuel historic growth in the most critical areas and private markets are the solution.

For Blackstone, the breath scale and reach of the business. We built over 4 decades, have put us in a unique position to be the leader in providing these Solutions.

Speaker #3: The second I'd say, the seasoning and expansion of perpetual strategies, particularly across our flagship private wealth vehicles and our infrastructure platform. So as you know, as John said, our BXP NAV 25 billion dollars, that's up two times year over year.

Thank you for joining today's call, and we would like to open it up now for questions.

Thank you. As a reminder, please press star one to ask a question. We ask that you limit yourself to one question to allow as many callers to join the queue as possible.

We will take our first question from Glenn Shore with evercore.

Speaker #3: Our infrastructure business up 40% year over year, BX Infra new product introductions. So that is a very positive picture. And I would add to that, in BXMA, in a similarly NAV-based business, by and large, AUM is up 21%, and performance and net flow activity remain exceptionally strong.

Speaker #3: And then in credit, we see underlying positive growth in credit and insurance across the institutional insurance channels, we look to an eventual stabilization in retail flows, AUM, as you know, for the whole business is up 15% year over year.

Speaker #3: Inflows are healthy. The IABC portion of that business really private investment grade, up in the 20%. AUM area year over year. The insurance business, AUM up 15% year over year.

Hi thanks so much. Um maybe we'll pick up where you just left off Michael. Um I respect all the uh 20 plus percent growth numbers that you all ran through. Got a lot of capital raising a ton of dry powder and all the seed planting. So the the question on base management fees, I heard you on third quarter, but let's just go out to next year, where we, and the rest of the world is expecting more of like a double digit, uh, pickup. Uh, could you possibly talk through some of the building blocks and the pieces that get us there? Um, if that happens is deployment, the fee, Rolos credit, stabilizing things like that. Uh, that would be helpful, appreciate it.

Sure, Glenn. Thanks. And as you heard from my remarks, we have that expectation too.

Speaker #3: And importantly, and you referenced dry powder, our credit business overall ended the quarter with 84 billion dollars of dry powder, which, as you know, largely earns fees as it's invested.

Speaker #3: That dry powder balance is over double where it was at the beginning of 2024, and almost a third larger than just the beginning of this year.

Speaker #3: So that's really this built-in sort of coiled spring, as it relates to expanding management fee growth. And then finally, and importantly, we see stabilization in the real estate, base fee trends next year.

That will activate we've activated or will activate this year. So that's our uh sp10 fund our Asia 3 Fund in BCP our energy transition fund.

Speaker #3: So if you take those pieces together, we think we're well-positioned for a very strong 2027. And then I would just add, finally, in the meantime, as you know, beyond base management fees, the firm today really benefits from a significantly broader fee-generating platform.

Um the second I'd say the seasoning and expansion of Perpetual strategies particularly across our Flagship private wealth vehicles and our infrastructure platform. So as you know as John said our bxp nav 25 billion dollars that's up 2 times year-over-year our infrastructure business up, 40% year-over-year, BX infra new product. Introductions

Speaker #3: And as the results in this quarter demonstrated, that includes the growing scale and contribution from transaction fees and fee-related performance revenue. So in the first half of the year, total fee revenues were up 21%.

Speaker #3: So we think that it's a very positive picture about 2027. In the meantime, the overall fee revenue base showing strong momentum.

Um, so that is a very positive picture. Um, and I would add to that, um, in BX, um, in a similarly nav-based, um, business by and large AUM, up, 21% and performance in net flow, activity remained exceptionally strong,

Speaker #4: Thanks so much for that.

Speaker #1: We will take our next question from Alex Flosting with Goldman Sachs.

Speaker #5: Hi, good morning. Thank you for taking the question as well. I would love to double-click on what you guys are seeing in the wealth channel John, a couple of positive remarks or thank you mentioned as far as the third quarter goes.

Speaker #5: So maybe what you're hearing on the ground on BCRED performance year to date, I think is a little challenge still, but it sounds like you've seen some improvement in redemption.

Speaker #5: So we'd love to get into that a little more, and then ultimately also on the new products that you launched with Wellington and Vanguard, would love to just get your perspective on how you're planning to scale these products and flow through the management fees ultimately for Blackstone from them.

Uh, and then in credit, we see, underlying positive growth and Credit Insurance across the institutional Insurance channels. Um, we look to an eventual stabilization and Retail flows AUM as you know, for the whole business is up. 15% year-over-year, inflows are still healthy. Uh, the iabc portion of that business, really private investment grade up in the 20%, uh, AUM area year-over-year, uh, the insurance business AUM, 15% year-over-year and importantly, and you reference Drive Powder, our credit business overall ended the quarter with 84 billion dollars of dry powder, which as you know, largely earns fees as it's invested.

Speaker #2: Thanks, Alex. The wealth platform is in really terrific shape. AUM, as we mentioned, up 16% year on year to 324 billion dollars. We saw a recovery in flows certainly towards the end of the quarter, which we talked about, sort of in the heart of both the credit and the war.

That Dry Powder balance is over double where it was at the beginning of 2024 and almost a third larger than just the beginning of this year. So that's really this built-in sort of coiled spring as it relates to expanding management fee growth. And then finally, um, and importantly, um, we see stabilization in the real estate base fee trends next year. So, if you take those pieces together, we think we're well positioned.

Speaker #2: We did see a little bit of a deceleration. And we're now back to the levels we were in the first quarter on a monthly basis.

Speaker #2: The mix has changed. Obviously, with a lot of strength, as you heard in BXP, BX Infra, BREIT has much more momentum, but more muted inflows on BCRED, which, given the volume of noise, is to us not a surprise.

Um for a very strong 2027 and then I would just add finally uh, in the meantime. Um, as you know, you know beyond base management fees, The Firm today, really benefits from a significantly broader fee generating platform.

Speaker #2: I would reaffirm what I said, which is it's early in the quarter, but the redemptions in BCRED are down materially, which is positive. So I think you've got to look at this overall platform and think about it holistically.

Um and as the results in this core demonstrated that includes the growing scale and contribution from transaction fees in February performance Revenue. So, in the first half of the year, total fee revenues were up 21%. So um, we think that's it's um a very positive picture about 2027. In the meantime, the overall fee Revenue base showing strong momentum

Thanks so much for that.

We will take our next question from Alex Blowin. With Goldman Sachs,

Speaker #2: The strength of our brand, the strength of our distribution team are global reach, the performance we provided, the confidence we built with financial advisors and clients.

Speaker #2: This is a very special thing that's been built, and we think the potential for it to grow is quite enormous. With those initial sort of four flagships, but then with new product launches, the hedge fund product we talked about, and then to your point, Wellington Vanguard, these are two amazing firms who have long-storied histories, who are focused on investment performance as we are.

Hi, good morning. Thank you for taking the questions. Well, I would love to double-click on what you guys are seeing in the wealth channel. John, a couple of positive remarks, so thank you—you mentioned as far as the third quarter goes. So maybe, what are you hearing on the ground on BCRED performance year to date? I think it is a little challenged still, but it sounds like you've seen some improvement in redemptions. So I would love to get into that a little more. And then ultimately, also on the new products that you launched with Lington and Vanguard, I would love to get your perspective on how you are planning to scale these products and the flow-through to management fees, ultimately, for Blackstone from them.

Speaker #2: And the idea of creating products that are one-stop shopping, integrated, where you have all the Blackstone privates together, or the Blackstone privates along with actives, passives, equity, fixed income, putting that together, and making it easier for investors to access these products.

Speaker #2: They're also different standards in terms of where they sit in terms of because of the structures here, with Wellington as managers, as opposed to what we have today, a number of our products are limited to qualified purchasers.

Speaker #2: Here, there's a larger universe of potential buyers. And there are folks who want just to, I think, a simpler, easier solution. We're excited. It'll take time, like everything, to build these things, but it's a couple more engines we're adding.

Speaker #2: And I think we do offer something that is really unique. And again, performance, so important. If you look at BREIT relative to real estate products, if you look at how BCRED has performed since its inception, if you look at BXP and BX Infra over the last couple of years, that is remarkable, which is why we think we have built so much loyalty with the customers.

Thanks Alex. Um, the wealth platform is uh in really terrific shape uh AUM. As we mentioned up 16% year-on-year, to 324 billion dollars. Uh, we saw a recovery in flows. Uh, certainly towards the end of the quarter, which we talked about sort of in the heart of both the credit and the war did see a little bit of a deceleration. And we're now back to the levels. We were in the first quarter, on a monthly basis. The mix has changed obviously, with a lot of strength. As you heard in bxp, bxm for a b Reed has much more momentum but more muted inflows on bered, which given the volume of noise is to us not a surprise. Um, I would reaffirm what I said, which is it's early in the quarter but the redemptions, uh, in bered are down materially.

Speaker #1: Thank you. We'll take our next question from Michael Cypress with Morgan Stanley.

Speaker #4: Hey, good morning. Thanks for taking the question. I just want to ask about AI, if AI compute increasingly becomes a scarce economic resource. Could we eventually see compute capacity in your view emerge as a standalone investable asset class, similar to what we see in real estate infrastructure or energy?

Speaker #4: Can you talk about how you're positioning for that, and maybe that kind of dovetails with the new REIT, BXDC, where you mentioned a massive opportunity to get to a trillion?

Speaker #4: Maybe you could just unpack some of the building blocks and how you see some of the near-term versus medium-term milestones to make progress and sort of hit that over time.

Speaker #4: Thank you.

Speaker #2: It's a great question, Mike. We definitely see today a global shortage of compute. And there's obviously a lot of dollars being invested, but the dollars are not keeping up with the demand, and we see that on a lot of fronts today.

Speaker #2: When we talk to our hyperscaler friends, the large language model companies, our friends there, they all would want more capacity. And so as we have this energy shortage, in places there's now some community pushback.

Speaker #2: We obviously have chip shortages today in memory. It is making it harder to keep up with the pace of demand. And I do think ultimately that what that means is those things that are built and operating are worth more.

Idea of creating products that are 1-stop shopping integrated, where you have all the Blackstone privates together or the Blackstone privates along with active passives, um, Equity fixed income, putting that together and making it easier for investors to access these products. They're also different standards in terms of where they sit in terms of, you know, uh, because of the structures here, with Wellington as managers as opposed to what we have today, a number of our products are limited to qualified purchasers here. There's a larger universe of potential buyers and there are folks who want just I think a simpler easier solution. Um, we're excited. It'll take time like everything to build these things, but it's a couple more engines. We're adding and and I think we, we do offer something that is really unique and again performance. So important. If you look at B read relative to real estate products, if you look at how bcred has performed since it,

Speaker #2: Data centers are a great example of that. We've seen benefits, obviously, for the neoclouds, which can deliver compute more real-time. And I do think what this is going to mean is a market will grow to be very large in the real estate world.

It's inception—you look at BXP and BXM for A over the last couple of years. That is remarkable, which is why we think we have built so much loyalty with the customers.

Thank you. We'll take our next question from Michael Cyprus, with Morgan Stanley.

Speaker #2: We saw this in the mobile tower business. I think we'll see this here. I think BXDC has the potential to grow significantly because there's not just data centers that are owned by the developers and investors like us.

Speaker #2: There's also an enormous amount of data centers on the balance sheets of the big hyperscalers. So as they need more capital, I think you'll see some of these things sold.

Speaker #2: And then the energy assets also, I think, becoming increasingly valuable as well. And the infrastructure around that. We've done a lot of investments in the midstream space, pipelines, LNG.

Hey, good morning. Uh, thanks for taking the question. I just want to ask about AI of AI compute increasingly becomes a scarce economic resource. Could we eventually see compute capacity and your view emerge as a standalone? Investable asset class similar to what we see in real estate infrastructure or energy. Can you talk about how you're positioning for that and maybe that kind of Dubs tales with the new Reit BX DC, where you mentioned, a massive opportunity to get to a trillion. Maybe you could just unpack some of the building blocks and hey, you see some of the, the near-term, uh, verse medium term Milestones to make progress, uh, and, and sort of hit that over time. Thank you.

Speaker #2: That becomes more valuable. So I do believe the components of compute, because of the shortage of compute, will increase in value. And we positioned us, particularly in infrastructure, where Sean Klimzak and his team have done just a terrific job, but also in real estate and our energy transition business, we've got a bunch of places where we're exposed to what's happening here.

Speaker #2: And I do think it points to at least in the near term a continued shortage and therefore values going up.

Speaker #3: And Mike, it's Michael. I'd just add that basically almost every business at the firm that we've built over decades is now in position and has acted on this to be a capital solutions provider to this whole ecosystem.

It's a great question Mike. We, we definitely should see today a global shortage of compute. Um, and there's obviously a lot of dollars being invested but the dollars are not keeping up with the demand and we see that on a lot of fronts today, um, when we talk to our hyperscaler, uh you know, friends the large language model companies are friends there, they all would want more capacity. And so you know, as we have this um energy shortage in places, there's now some Community push back. We obviously have chip shortages today in memory. Um, it is making it harder to keep up with the pace of demand and I do think ultimately that what that means.

Speaker #3: So whether it's credit, infrastructure, real estate, energy private equity, hybrid capital and tech ops, or BXP vehicle, BXMA area as it relates to more liquid parts of the market, just this breadth, diversity, and scale of the business we've built puts us in position to basically have a capital pool that can be a solution for every need in this area, and the needs are massive.

Speaker #3: And so you mentioned the sort of the single pool of capital. I would just say we can keep innovating. You mentioned BXDC. Around this around the existing platform businesses in a really, I think, exciting way.

Speaker #4: Great. Thank you.

Speaker #1: We will take our next question from Craig Siegenthaler with Bank of America.

Speaker #5: Hey, good morning, everyone. My question is on real estate. And I know this hasn't happened in more than four years, but public REIT stocks are outperforming the S&P 500 year-to-date.

Speaker #5: And as you know, very few asset classes have been able to keep pace with US large caps. Now, despite this private real estate returns and opportunistic drawdowns and core plus have still lagged publics.

Is those things that are built and operating are worth more data. Centers are a great example of that. Um, you know, we've seen benefits, obviously for the Neo clouds, which can deliver compute more real time. And I do think what this is going to mean, is a market will grow to be very large in the real estate world. We saw this in the mobile Tower business. I think we'll see this here. I think bxd has the potential to grow significantly because there's not just data centers that are owned by the developers and investors like us. There's also an enormous amount of data centers on the balance sheets of the big hyperscalers, so if they need more capital, I think you'll see some of these things sold. Um, and then the energy assets also, I think becoming increasingly valuable as well and the infrastructure around that, you know, we've done a lot of investments in the Midstream space pipelines LNG that becomes more valuable. So I do believe the components of compute.

Speaker #5: So I'm wondering, do you have any line of sight into private returns? And also, how this could translate into demand for private real estate across your LP base?

Speaker #2: Well, Craig, I'd start with what's happening on the ground with fundamentals. There has certainly been a headwind last year with Liberation Day and now this year with the war that have kept rates elevated.

Because of the shortage of compute, it will increase in value, and we've positioned ourselves particularly in infrastructure, where Sean Klimczak and his team have done just a terrific job. But also in real estate and in our energy transition business, we've got a bunch of places where we're exposed to what's happening here. And I do think it points to, at least in the near term, a continued shortage and therefore values going up. And Mike—it's Michael—I'd just add that basically almost every business is a firm um that we've...

Speaker #2: But sort of underneath the covers, there are a number of positive things happening, which is why I think the public REIT market has moved.

Speaker #2: And you see that at times, that the public markets are more forward-looking. And what's happening is there's been a sharp reduction in new supply.

Speaker #2: And that is starting to have an impact. The area where it's moving first is in logistics and the warehouse business, which is our biggest asset class.

Speaker #2: We saw very strong leasing in the first half of the year at our link logistics platform in the US. Which is up 26% in leasing volume.

Built over decades, you know, is now in position and and and has acted on this to be a Capital Solutions provider to this whole ecosystem. So whether it's credit infrastructure, real estate energy, private Equity, hybrid capital, and Tac Ops or bxb vehicle. The bxm a via uh area uh in in as it relates to more liquid parts of the market just this um, breath diversity and scale of the business. We built puts us in position to basically have a capital pool. Um that can be a solution for every need in this area and the needs are massive.

Speaker #2: We're seeing occupancy now and rents start to increase. And investors are seeing this. We're now seeing some large-scale M&A in the public markets with Prologisis, what looks to be likely a successful takeover, of a $25 billion logistics company in the UK and SEGRO.

And so, um, you mentioned the sort of single pool of capital. I would just say we can keep innovating—you mentioned BXC, um, around this, um, around the existing platform of businesses in a really, I think, exciting way.

Great. Thank you.

We will take our next question from Craig, Sean dollar with Bank of America.

Speaker #2: I think these are good signs. I think this will be the first asset class that really starts to emerge in real estate and that is good for us over time.

Speaker #2: But yes, the public market anticipates this. We've also seen strength in hotels. Last year, we saw negative same-store red par. This year, nationally in the US, it's plus 5%.

Speaker #2: That's a very positive sign. We've leaned in in places like San Francisco. Again, a bit AI-derivative. We bought three hotels in the last six months.

Hey, good morning everyone. Um, my questions on real estate and and I know this hasn't happened in more than 4 years. But public Reit stocks are outperforming the SB of 100 year to date. And as, you know, very few asset classes have been able to keep Pace with us, large caps. Now, despite this private real estate returns and operators to draw downs and core Plus has still lagged. Publix. So, I'm wondering if you have any line of sight into private returns and also how this could translate into demand for private real estate across your LP base.

Speaker #2: We feel very good about that. And interestingly, in the office market, which has been in a tough spot for a number of years, in a place like New York, vacancies falling from 21 and a half to 14 and a half, which is a very good sign.

Speaker #2: We're also seeing, you mentioned the public REIT market, which is strong, but the public debt market, the CMBS market, volumes are up 23%. So I would say near-term headwinds slowing things down, slowing things down because of rates moving up.

Speaker #2: But I think once we get past the war and we see that start to settle down, the underlying strength in fundamentals and investors' desire to invest in hard assets in a world where there's a lot of uncertainty, I think you'll begin to see this real estate recovery in the private sector pick up pace.

Well, Craig, I I start with what's happening on the ground. Um with the fundamentals there, there has certainly been a headwind last year with Liberation day. And now this year with the war that have kept rates uh elevated but sort of underneath the coverage, there are a number of positive things happening which is why I think the public re Market has moved. And you see that at times that the public markets are are more forward-looking and what's happening is there's been a sharp reduction in new Supply. Um, and that is starting to have an impact, the area where it's moving first is in logistics and the warehouse business, which is our biggest asset class. Um, we saw a very strong leasing in the first half of the year at our link Logistics platform in the US, which is up. 26% in leasing volume. We're seeing

Speaker #5: Thanks, John.

Speaker #1: Thank you. We'll take our next question from Bill Katz with TD Cowan.

Speaker #4: Great. Thank you very much for taking the question. Maybe just a big picture question to change topics for a second. So I was listening to Steve's comments about Blackstone being a cheap way to play the opportunity in AI and infrastructure.

Speaker #4: And we would agree wholeheartedly with that. How does that inform your views on capital return from here? Stock is down significantly from its highs, obviously bouncing a bit today, which is great to see.

Speaker #4: You have a big payout. Any thoughts of maybe rejiggering the payout rate? Stepping in on buyback a little bit versus an overgrowth? And maybe how do you just think about capital allocation from here?

Speaker #4: Thank you.

Speaker #3: Hey, Bill. Thanks. It's Michael. Yeah, look, I think we've been committed to our capital policy for a long time, which, as you know, is basically returning 100% over time of our cash earnings, back in the form of our dividend.

Occupancy now and rents start to increase and investors are seeing this. We're now seeing some large-scale m&a in the public markets with progresses what looks to be likely as successful. Takeover of a 25 billion dollar, uh, logistics company in the UK in SEO. I think these are good signs. I think this will be the first asset class that really starts to emerge in real estate and that is good for us over time. But yes, the public market anticipates, this we've also seen strength in hotels last year. Uh, we saw negative same store rebar this year National in the US plus 5%, that's a very positive sign. Um, we've leaned in and places like San Francisco again, a bit AI derivative, uh, we bought 3 hotels in the last 6 months. We feel very good about that. And interestingly in the office Market, which has been in a tough spot for a number of years, in a place like New York, vacancies, falling from 21 and a half to 4.

Speaker #3: Which I think today is at like four times the S&P yield on a yield basis. And then also a more moderate but sort of consistent buyback program, all to add up to that sort of total return of our cash earnings.

Speaker #3: So we think over the long run, that's been a sound policy for us. It does reflect sort of our business model and the relative capital light orientation of it.

14 and a half, which is a very good sign. We're also seeing you mentioned the public re Market, which is strong, but the public debt Market to cnbs Market volumes are up 23%. So I would say near-term headwind, when slowing things down, slowing things down because of rates moving up. But I think once we get past the war and we see that start to settle down the underlying strength and fundamentals and investors desire to invest in hard assets in a world where there's a lot.

Speaker #3: We certainly have scope to look at that over time in more opportunistic use of capital as it relates to the stock. But we try to be consistent and committed to our policy.

Lot of uncertainty, I think you'll begin to see this real estate recovery in the private sector. Pick up pace.

Thanks John.

Speaker #3: And that's kind of where we are today on that.

Thank you. We'll take our next question from Bill Katz with TD Cowen.

Speaker #4: Thank you.

Speaker #1: Thank you. We'll take our next question from Brian Bedell with Deutsche Bank.

Speaker #6: Great. Thanks. Good morning. Thanks for taking my question. Maybe just to go back to the really strong momentum in fundraising. It looks like you're now on pace to potentially match or exceed your record year in 2021.

Great. Uh thank you very much for taking the question. Um maybe just a big picture. Question to change topics for a second. So I was listening to Steve's comments about black Zone, being a cheap way to play the opportunity in Ai and infrastructure and and we would agree wholeheartedly with that.

Speaker #6: So maybe just talk about the confidence of that. I know there's different timing, of course, with the drawdown funds. But as you think about it more broadly, just thinking about that growth momentum across private wealth, credit, obviously the whole AI and data center theme.

That inform your views on capital return from here. Um stock is down significantly from its highs, obviously bouncing a little bit today which is great to see. Um, you have a big payout, any thoughts of maybe rejigger the payout rate stepping in on buyback a little bit versus the overgrowth and maybe how you just thinking about Capital allocation from here. Thank you.

Hey Bill. Thanks, it's Michael. Um,

Speaker #6: And increasing flows inflows in insurance. Are you expecting that fundraising pace even after a potentially a really strong year this year to actually continue to grow into 2027?

Speaker #6: And yeah, longer term beyond.

Speaker #2: You know, Brian, it's a good question. It's hard to put your finger on it. What we can point to is that we've been in a world of pretty high volatility.

Speaker #2: And I think it speaks to the resilience and breadth of this franchise. And we managed to raise, obviously, very significant amounts of money. And we're doing it across all three of these channels.

Yeah, look, I think we um, uh, We've we've been committed to our Capital policy, uh, for a long time, which is, you know, is, um, basically returning 100% over time of our cash earnings back in the form of, uh, or dividend. Um, which I think today is at, like, 4 times, the S&P yield on a yield basis. And then also a, um, uh, a, a more moderate. But, um, sort of consistent, um, buyback program, uh, all to add up to that, uh, sort of Total return of our cash earnings. So, um, we think over the long run. That's been a sound.

Speaker #2: So you heard about it on the institutional side, where we have a number of funds that are exceeding their hard cap in terms of demand.

Speaker #2: We talked about our BXMA business, which has really renewed momentum. Our infrastructure business, which I think will continue to grow at a really breathtaking pace.

Policy for us. It does reflect sort of our, you know, our business model in the uh, the relative Capital light, uh, orientation of it. Um, we certainly have scope to, you know, look at, um, that over time and more opportunistic, um, use of capital as it relates to the stock. But, um, but we tried to be consistent and committed to our policy. And that's, that's, um, and that's kind of where where we are today on that.

Thank you.

Speaker #2: It is a bit slower in real estate, but remarkably, that business, despite its slowness in fundraising, we're still producing these very strong results. So when we get to the other side on real estate, that gives me a lot of confidence with the firm overall and where fundraising can move to.

Thank you. We'll take our next question from Brian Bedell with Deutsche Bank.

Speaker #2: On the insurance side, we continue to see clients responding. I mean, we were up 15% to $290 billion in insurance. Those clients really appreciate the premium return we can deliver over comparably rated investment-grade credit.

Speaker #2: And to Michael's point, we're doing these large corporate solutions that are so needed in the energy space, in the digital infrastructure space. And I think we'll continue to gain clients in that area as well.

Speaker #2: And then, wealth, despite all the negative headlines, everything, again, up 16% year on year to $324 billion. A range of existing products that have delivered.

Uh, thanks, thanks. Good morning. Thanks for taking my question. Um, maybe just to go back to the um, near the really strong momentum in um, in fundraising. Um, it looks like you're now on Pace to potentially um match or exceed your record year in 2021. So maybe just just talk about the confidence of that that I know there's different timing. Of course with the with the draw down funds. Um but but as you think about it, more broadly, um, just thinking about that growth momentum across private wealth credit. Um, you know, obviously the whole Ai and data center theme and and and increasing flows inflows and insurance. Um are are you expecting that fundraising Pace even after a potentially a really strong year this year to actually continue to grow into 27 and um, yep. The longer term Beyond

Speaker #2: And then new products coming online. And I think the thing about Blackstone is just the strength of the brand we've built. It is recognized globally by investors.

You know, Brian, it's a good question. It's hard to put your finger on it. What we can point to is that we've been in a world of pretty high, um, volatility.

Speaker #2: They trust the firm. They trust us across multiple channels. And that is enabling us to continue to grow without having to borrow money or utilize capital at scale.

Speaker #2: And we really like where we are. We do think in terms of outlook, if we get a more settled landscape, war ending, inflation, rates coming down, that'll be very helpful for the business.

And I think it speaks to the resilience and breadth of this franchise. We managed to raise, obviously, very significant amounts of money, and we're doing it across all three of these channels. So, you know, you heard about it on the institutional side, where we have a number of funds that are exceeding their hard cap in terms of demand. We talked about our BX...

Speaker #2: So we've got a lot of confidence on the fundraising outlook over time.

Speaker #6: Okay. That's a great perspective. Thank you.

Speaker #1: Thank you. We'll take our next question from Dan Fannon with Jefferies.

Speaker #5: Thanks. Good morning. I guess based on the outlook you gave for management fees for the second half and next year, how should we think about margins in that context?

Speaker #5: Particularly as we think about next year, given the growth rates that are expected from the management fee side.

Speaker #4: Dan, it's Michael. It's early around margins for next year. But as I said, we're pretty confident about the top line. And we're also confident about our ability to manage expenses and deliver over time operating leverage.

Speaker #4: So I think we're not going to give a specific viewpoint on that other than to reiterate structurally, we like our margin position.

Speaker #1: Thank you. We'll take our next question from Bart Jarski with RBC Capital Markets.

SMA business, which has really renewed momentum our infrastructure business which, um, I think will continue to grow at a, a really breathtaking Pace. Um, it is a bit slower in real estate but remarkably that business despite its slowness and fundraising, we're still producing these very strong results. So when we get to the other side, on real estate, that gives me a lot of confidence with the firm overall and where fundraising can move to on the insurance side. We can continue to see clients responding, I mean we were up, 15% 290 billion dollars in Insurance. Those clients really appreciate the premium return, we can deliver over comparably rated investment grade credit and to Michael's point we're doing these large corporate solutions that are so needed in the energy space in the digital infrastructure space and I think we'll continue to gain clients in that area as well and then wealth despite all the negative headlines. Everything

Speaker #7: Great. Thanks for taking the question. Good morning, everyone. I wanted to dive into the transaction fees. So very strong quarter, looked broad-based across private equity, real estate credit.

Speaker #7: Are there any lumpy items to call out there? And then Michael, you talked about this fee stream being underappreciated. Maybe unpack that a little bit for us.

Speaker #7: And what we should be expecting going forward. Thanks.

Speaker #5: Yeah. I think

Speaker #3: that it's really stepping back about the scaling of the firm, the broadening of the firm, the surface area for transaction activity, financings, advisory services that can generate these revenues.

Again, up 16% year on year to $324 billion—a range of existing products that have delivered, and then new products coming online. And I think the thing about Blackstone is just the strength of the brand we've built. It is recognized globally by investors; they trust the firm, they trust us across multiple channels, and that is enabling us to continue to grow without having to borrow money or utilize capital at scale. And we really like where we are.

Speaker #3: And that led to this record quarter. And a record first half. And that probably in recent years has been underappreciated, but it's obviously coming to the fore now.

We do think in terms of Outlook we get a more settled landscape or ending inflation rates coming down, that'll be very helpful for the business. So we've got a lot of confidence on the fundraising Outlook over time.

Okay, it's a great perspective. Thank you.

Thank you. We'll take our next question. From Dan Fannon with Jeffries.

Speaker #3: And in terms of lumpiness for the quarter, I think in particular, what's emerged as a really new avenue for this area are these customized capital solutions, these corporate solutions, private investment-grade in the credit insurance area.

Thanks, good morning. Um, I guess based on the outlook you gave for management fees for the second half and next year, how should we think about margins in that context? Um, particularly as we think about next year, given the growth rates that are expected from the management fees side.

Speaker #3: There's a substantial opportunity for investment-grade rated corporates where we've become a trusted solutions provider. And that as it relates to transactions in those areas, those can lead to attractive revenues in this area.

Speaker #3: And those there'll be some variability to that occurring from time to time. But that's a newer sort of strategic area. That will continue to grow.

Then it's, uh, it's Michael. I, you know, it's early around margins for next year. Um, but as I said, we're pretty confident about the top line, and we're also confident in our, you know, ability to manage expenses and deliver, over time, operating leverage. So I think we're not going to give a specific viewpoint on that other than to reiterate, structurally, you know, we like our margin position.

Speaker #3: So I'd just say while there will be quarter-to-quarter variability in this revenue stream, we do have a considerable pipeline in place for the second half of the year.

Thank you. We'll take our next question.

From Bart Jarki with RBC Capital Markets,

Speaker #3: And the underlying baseline just continues to grow in our trajectory has been upward. And it's really about the expansion of the ecosystem across areas like private credit, infrastructure, and so forth.

Speaker #7: Yeah. I would just say to Michael's point, as the asset base grows, there's just more activity around that asset base. So you can see that areas like digital infrastructure, energy, there's just more and more capital needs.

Great. Thanks for taking the question. Good morning everyone uh wanted to dive into the transaction fees so you know, very strong uh, quarter looked broad-based across private Equity, Real Estate credit. Are there any lumpy items to call out there and then Michael, you talked about this uh, fee stream being underappreciated, you know, maybe unpack that a little bit for us and what we should be expect.

Expecting uh, going forward, thanks.

Speaker #7: And it's really tied directly to our AUM in a lot of ways. So I do think you're beginning to see this really structural step up in earnings from this area.

Yeah, um, I think that it's really um, stepping back about uh, the scaling of the firm, the broadening of the firm.

Speaker #7: Great. Very helpful. Thanks so much.

Speaker #1: We will take our next question from Brendan Hawkin with BMO Capital Markets.

And that probably, you know, in recent years, has been underappreciated, but it's it's obviously coming to the 4 now.

Speaker #6: Good morning. Thanks for taking my question. We'd love to drill down a little bit on realizations. So we've been waiting for a covering realizations for some time.

Speaker #6: And you added some color about that ramping in Q4 and into 2027. But could you maybe help us contextualize that expectation? Are there any historical periods that you would point to as a proxy?

Speaker #6: And how reliant is it on a market conditions, which is sort of been, I think, part of the trouble with trying to nail down timing on this cycle?

Speaker #5: Well, I'll just comment on the history. If you recall, obviously, in '08, '09, we had very little in the way of realizations. And the engine didn't really ramp back up that time.

Um and uh in terms of lumpiness for the quarter, I think in particular, you know, what's emerged, as a really new Avenue for this area are these um customized Capital Solutions, these corporate Solutions, private investment grade um in the credit Insurance area, there's a substantial opportunity uh for investment grade rated corporates, where we've become a trusted Solutions provider. Um and that um as a relates to transactions in those areas though those can um lead to uh attractive revenues in this area, um, and those will there will be some variability to that occurring. Um, you know, from time to time but that's a newer sort of strategic area that will continue to grow.

Speaker #5: It was probably 2013. And then over that ensuing period, we had very significant realizations. Here, we've now been in a period of basically four years, with some similarities.

So I’d just say, while there will be quarter-to-quarter variability in this revenue stream, you know, we do have a considerable pipeline in place for the second half of the year, and the underlying baseline just continues to grow, and our trajectory has been upward.

Speaker #5: Maybe not as sharp a downturn, but this sort of long period of recovery. But short rates have come down. Obviously, the IPO market has started to reopen.

And it's really about the expansion of the ecosystem across areas like private credit, infrastructure, and so forth. Yeah, I would just say to Michael's point, as the asset base grows, there's just more activity around that asset base.

Speaker #5: And it felt earlier in the year pre the war that this was going to really accelerate. Now it's been delayed a bit. But ultimately, I think we know where this is heading.

Speaker #5: So I think we do have confidence as we look out towards the end of the year and into '27 that we are going to see a pickup.

So you can see that areas like digital infrastructure, energy—there’s just more and more capital needs, and it’s really tied directly to our AUM in a lot of ways. So I do think you’re beginning to see this really structural step-up in earnings from this area.

Speaker #4: And I'd just add on to that. I mean, broadly, that this has been an uneven recovery. In terms of the realization environment, it is one we think will continue to strengthen.

Right. Very helpful. Thanks so much.

We will take our next question from Brennan Hawin with BMO Capital Markets.

Speaker #4: But I guess a few particular areas where we're seeing particular momentum first, I'd say, obviously, and as John talked about, the IPO market strengthened considerably.

Speaker #4: We've made additional IPOs on file. We've been very active. And that's going to provide a foundation for greater realizations over time as these companies seize them.

Speaker #4: So in the corporate private equity complex, about a third of its receivable balance, its NAPR balance, is publicly traded and it's growing. And so as we do more IPOs, that will create more public market cap in our portfolio.

Good morning. Thanks for taking my question. Um, would love to drill down a little bit on realization. So we've been waiting for a recovery in realizations for some time, uh, and you added some color about that ramping in 42 and into 2027, but could you maybe help us contextualize that expectation? Are there any historical periods that you would point to as a proxy? And you know what, what how, how Reliant is it on a market conditions? Which is sort of been, I think part of the trouble with trying to nail down timing on this this cycle.

Speaker #4: And that'll continue to grow that public NAPR, which is obviously liquid in more easy to translate into net realization. Second, I'd say within energy transition, they're the receivable balance is roughly doubled in a year.

Speaker #4: And that really reflects the portfolio we've built around the AI and power ecosystem. And there is in that area an active M&A market. There's active private sales, both to strategics and other sponsors.

Speaker #4: We announced something yesterday on this front. So that is a sector that I think is very fertile right now. And then third, BXMA. We have a schedule.

Well, I'll just comment on the history. Uh, if you recall, obviously in '08-'09, um, we had very little in the way of realization, and the engine didn't really ramp back up at that time. And it was probably 2013, and then over that ensuing period, uh, we had very significant realizations. Um, you know, here we've now been in a period of basically four years with some similarities. Um, maybe not as sharp a downturn, but—

Speaker #4: As usual, year-end crystallizations in BXMA. It's performing very well year to date, as you've heard. And so that is scheduled for the fourth quarter.

Speaker #4: And where we sit today, that should be quite robust. So overall, if you step back, as I mentioned in my remarks, our despite the choppiness and the capital markets sort of volatility, the NAPR overall for the firm has grown to its highest level in four years.

It's sort of a long period of recovery, but short rates have come down. Obviously, the IPO market has started to reopen, and it felt earlier in the year—pre the war—that this was going to really accelerate. Now, it's been delayed a bit, but ultimately, I think we know where this is heading. So, I think we do have confidence as we look out towards the end of the year and into '27 that we are going to see a pickup.

and I just add on to that, um,

Speaker #4: So we like the position we're in. But as always, we're going to pick the right time to translate this into realizations and sales over time.

I mean, broadly, that this has been an uneven recovery. Uh, in terms of the realization environment, it is one we think will continue to strengthen, but I guess there are a few particular areas where we're seeing particular momentum.

Speaker #6: Thanks for that color.

Speaker #1: We will take our next question from Mike Brown with UBS.

Speaker #7: Great. Good morning. Thanks for taking my question. John, I wanted to dive in a little bit more to BCRED. You made comments about the withdrawals are slowing here and we're in the early stages of Q3.

Speaker #7: So curious if you think that some of these withdrawals will continue to ease as you move into the onshore redemption window. And maybe just unpack a little bit about what you're hearing from advisors?

Speaker #7: What do you think this kind of driving that reduction in the withdrawals? Has it been that performance has actually held up quite well? We haven't really seen much in terms of credit issues come through?

First I'd say Obviously name is John talked about the IPO Market strength and considerably we've made additional IPOs on file. We've been very active and that's going to provide a foundation for greater realizations over time as these companies season. So in the corporate private Equity complex about a third of its receivable balance, its Napper balance is publicly traded and it's growing. And so as we do more IPOs that will create more public market cap in our portfolio and that will continue to grow that public Napper, which is obviously liquid and more um easy to translate internet. Realization second, I'd say within energy transition, you know, their the receivable balance is roughly doubled in a year and that really reflects the portfolio. We built around the AI and power ecosystem.

Speaker #7: Or has that been some of the dialogue and education that you've been having with the advisor channel that has really helped ease some of that redemption pressure that we've observed in the prior couple of quarters?

Speaker #7: Thank you.

Speaker #5: I think it's an important question. I would say as much as anything, it's the level of noise has come down. I think a lot of people were calling for this massive calamity and when the calamity did not occur, I think sort of the press, what you see on TV or Twitter or in newspapers, that has calmed.

And there is, in that area, the active M&A market, there's active private sales, both to strategic and other sponsors. We announced something yesterday on this front. So that is a sector that I think is very fertile right now. And then third, BX Asia, you know, we have scheduled as usual.

Speaker #5: Which before, obviously, was getting clients understandably nervous. They would pick up the newspaper and say, "Private credit faces this massive problem." And they would call their financial advisor.

Speaker #5: And that did create a dynamic. I think the key here is what happens in the fullness of time. And do you protect investor capital?

Has grown to its highest level in four years, so we like the position we're in. But as always, we're going to pick the right time to, you know, translate this into realizations and sales over time.

Thanks for that color.

Speaker #5: Do you deliver positive returns despite all this noise? And I think that's what is going to actually happen. And so I would attribute to that, yes, we've done a ton of investor outreach, calls, meetings with investors, financial advisors around the world.

We will take our next question from Mike Brown with UBS.

Great morning. Thanks for taking my question.

Speaker #5: And yes, I think some of it's the reality. I think this is just natural when these sort of things occur. I actually think what's helpful, because we went through this with BeRead in the past, where obviously today in a very different place, we're going to go through this with BCRED.

Speaker #5: I'm sure at some point here, we're going to be in a very different place. And what financial advisors and their clients are going to realize, these are long-term products.

Speaker #5: And if they're in the hands of responsible managers, who understand valuation and liquidity, they can deliver a premium return. And that's been the key to BCRED over time, as it is with all of our products.

John I wanted to dive in a little bit more to uh be cred. Um, you made the comments about the withdrawals or slowing here, and we're in the early stages of 3 Q. So curious, if you think that some of these, um, withdrawals will continue to ease as you move into the Honore Redemption window. Um, and maybe just unpack a little bit about, you know, what you're hearing from advisors? What do you think this kind of driving that reduction in the in the withdrawals? Has it been that you know performance has actually held up quite well? We haven't really seen much in terms of credit issues come through um or has it been some of the dialogue and education that you've been having with the advisor channel? That has really helped ease some of that Redemption pressure. That's that, we've observed in the prior couple quarters. Thank you.

Speaker #5: So the short answer is the level of noise coming down is definitely been helpful. And I think the facts on the ground are also helpful.

Speaker #5: So I think we will work our way through this. There's obviously some carryover from unfulfilled redemptions last quarter. But we will work through that over time.

Speaker #5: And I feel when I look out, into the future, I think BCRED will continue to be a very strong product for us.

Speaker #1: Thank you. We'll take our we'll take our next question from Devin Ryan with Citizens Bank.

Speaker #6: Thanks. Good morning. Follow-up question on the data center opportunity. The scarcity dynamics that you described would seem very supportive of the value that's already in the portfolio.

Speaker #6: And what you already own as you think about deploying the next dollar do you see the prospective returns being as attractive as what's already in the portfolio?

Speaker #6: And essentially just trying to think about obviously higher exit prices, greater competition, potentially eating into that a little bit. Versus the flip side of that would just be the supply-demand dynamics you talked about.

I think it's an important question. I would say, as much as anything, it's the level of noise has come down. I think, you know, a lot of people were calling for this massive calamity, and when the calamity did not occur, um, I think, you know, sort of the press—what you see on TV, or Twitter, or in newspapers—that has calmed, uh, which before obviously was getting clients understandably nervous. They would pick up the newspaper and say, you know, "Private credit faces this massive problem," and they would call their financial advisor, and that did create a dynamic. Um, I think the key here is what happens in the fullness of time, and do you protect investor capital? Do you deliver positive returns, despite all this noise? And I think that's what is going to actually happen. And so I would attribute it to that. Yes, we've done a ton of investor outreach calls—um, you know, meetings with investors, financial advisors, around the world.

Speaker #6: And maybe it's just too early to start thinking about this, but we'd love just some sense on how you're thinking about return opportunity going forward there with the dollars coming in.

Speaker #6: Thanks.

Speaker #5: You know, it's a very different dynamic than typical investment cycles like this, where something generates very high returns and then you get an enormous supply shock coming back the other way, which drives down returns.

Um, you know, and and yes, I think some of its the reality um I think this is just natural when these sort of things occur, I actually think what's helpful because we went through this would be read in the past, where obviously today in a very different place. We're going to go through this with ber, I'm sure at some point here, we're going to be in a very different place and what financial advisors and their clients are going to realize these are long-term products. And if they're in the hands of

Speaker #5: In this case, because building the compute is so difficult, it's very hard to get the chips today. It's very hard to get the power.

Speaker #5: It's very hard to get the entitlement. That is meaning that the supply is not matching. The other thing worth noting is because these are very customized, they're very large, you don't get that sort of Miami condo effect.

Speaker #5: Prices go up and people go out and spec build. These are all long-term contracted for the most part. And so you're seeing at this point, the shortages does somebody have an entitled and powered site?

Responsible managers who understand valuation and liquidity, they can deliver premium returns and that's been the key to be credit over time as it is with all of our products. So the short answer is the level of noise coming down is definitely been helpful. Um, and I think the facts on the ground are also helpful. So I I think we will work our way through this. There's obviously some carryover from unfulfilled redemptions last quarter but we will work through that over time and I feel when I look at you know into the future I think bcred will continue to be a very strong product for us.

thank you, we'll take our

Speaker #5: And the fact that we've been doing this now for a long time, not just in the United States, but in Europe and Asia, where we're beginning to see data center demand really start to pick up, that's going to make a difference.

We'll take our next question from Devin Ryan with Citizens Bank.

Speaker #5: Today, we have 15 gigawatts of sites globally. That can support 200 billion dollars of data centers where we have the entitlements and we have the access to power.

Speaker #5: So that today is really the scarce commodity. And that's why the pricing for building these things and the returns has not changed. And I don't really see much going forward that's going to change that dynamic.

Speaker #5: It's why we've made such an enormous investment globally in this area. And why we think it'll continue to deliver very favorable returns. And we've expanded our capabilities with some of the investments we've made in NeoClouds around the globe as well.

Uh, thanks, good morning. Um, follow-up question on the data center opportunity. Um, the scarcity dynamics that you described would seem very supportive of the value that's already in the, the portfolio and what you already own. You know, if you think about the next dollar, do you see the perspective returns being as attractive as what's already in the portfolio and essentially just trying to think about, you know, obviously higher exit prices, greater competition, uh, potentially eating into that a little bit, uh, versus the flips out of that would just be the supply, demand Dynamic, you talked about and maybe it's just too early to start thinking about this, but would love just some sense on how you're thinking about return opportunity. Going forward there with the the dollars coming in. Thanks.

Speaker #5: So we're playing this in a number of different ways. But at the end of the day, there is a global shortage of compute. And if you can deliver that, you can earn attractive returns on capital.

Speaker #6: Great. Thank you.

Speaker #1: We'll take our next we'll take our next question from Steven Chubak with Wolf Research.

Speaker #7: Hi. Good morning. And thanks for taking my question. So I was hoping to drill down into the insurance opportunity I was hoping to just get an update on what you're seeing in terms of flow momentum, new partnerships, you're clearly seeing really strong growth this year in the mid-teens range.

Speaker #7: But wanted to just gauge whether based on the constructive outlook that you provided, whether the expectation is for that to be sustained or whether you envisage a potential acceleration as we look out to over the next couple of years.

Speaker #5: Well, I would say, as a baseline, what we're seeing now in insurers and obviously it started in the life annuity space, but it's starting to spread out to the P&C area as well is a recognition that you need these tools to compete in the marketplace.

Speaker #5: That private investment-grade credit can deliver to you higher returns at higher the same or higher ratings levels. And that is very intractive. And these clients have the ability to absorb ill liquidity for a portion of their portfolio.

Speaker #5: So that is sort of the underlying precept that is supporting what's happening here. And we're seeing more and more clients move in this direction as we form these SMAs.

Speaker #5: We typically start in one area, and then we start to do it in different areas. In terms of the rate of growth, that will be I think a function of both the continued growth of the platform, which we have a lot of momentum in, but then also when we get these new strategic partnerships, those can give you sort of a step function increase.

Somebody have an entitled empowered site and the fact that we've been doing this now for a long time, not just in the United States but in Europe and Asia, we're beginning to see data center demand, really start to pick up, that's going to make a difference. Today, we have 15 gigawatts of sites globally that can support 200 billion dollars of data centers, where we have the entitlements and we have the access to power. So that today is really the scarce commodity and that's why the pricing for building these things in the returns has not changed and I don't really see much going forward. That's going to change that Dynamic. It's why we've made such an enormous investment globally in this area and why we think it'll continue to deliver very favorable returns and we've expanded our capabilities with some of the Investments we've made in Neo clouds around the globe as well. So we're playing this in a number of different ways but at the end of the day, there is a global shortage of compute. And if you can deliver that you can earn attractive Returns on Capital.

Thank you. We'll take our next question from Stephen Tubac with Wolfe Research.

Hi, good morning, and thanks for taking my question.

Speaker #5: But I would say just as a general matter, spending a lot of time with these insurance clients, they like what's happening here. This is something they want to do.

Speaker #5: It's something they need for competitive purposes. They like the fact that they can actually reduce their risk level. Because if you're just dependent on liquid fixed income, you've got to migrate down to BBB or BBB minus you've got to take more risk there, and then you've got to have a very with your small alternatives or equity portfolio, take maximum risk.

So I was hoping to drill down into the, uh, Insurance opportunity. Um, I was hoping to just get an update on what you're seeing in terms of slow momentum new Partnerships. Um, you're clearly seeing really strong growth this year in the mid teens range, but wanted to just gauge whether based on the constructive Outlook that you provided. Whether the expectation is for that to be sustained or whether you envision a potential acceleration as we look out to over the next couple of years.

Speaker #5: Because liquid fixed income today, everything there that's investment-grade is basically sub-100 over. So the fact that we can produce things with meaningful premiums to that and in many cases better ratings that is attractive.

Speaker #5: So this is a structural trend. And then as you know, we do this with the open architecture model. So we're not out there competing against them.

Well, I would say as as a baseline, what we're seeing now and insurers and obviously it started in the Life, annuity space, but it's starting to spread out to the PNC area, as well. Is a recognition that you need these tools to compete in the marketplace.

Speaker #5: We're serving them. The way long-only fixed income managers have done for insurance companies for a long time. So and the other thing I would just add, the reason why I think we're scaling is you need scale, particularly in the world we're going into.

Speaker #5: You need to be able to write large checks. And today it's really us and some of our other private equity firms who've got a bit of a different model, who are out there competing in this arena.

Speaker #5: I think it's going to continue. I think the momentum will grow. It's hard to put a finger on exactly what the growth rates will be.

That, uh, private investment grade credit can deliver to you higher, returns at higher the same or higher ratings levels and that is very attractive. And these clients have the ability to absorb a liquidity for a portion of their portfolio. So that is sort of the underlying precept, that, that is supporting, what's happening here? And we're seeing more and more clients moving this direction, as we form. These smas, we typically start in 1 area and then we start to do it in different areas.

Speaker #1: Thank you. We'll take our next question from Ken Worthington with JPMorgan.

Speaker #8: Hi. Good morning. Maybe just following up on that. You announced a strategic partnership with Nippon Life. You've got 40 insurance partnerships. As you look to these existing insurance partnerships, what is the opportunity to take them beyond the initial scope of the agreements?

Speaker #8: Can you build on it? And does this play out sort of formally, or is it informally over time?

Speaker #5: It's a good question, Ken. I don't have the numbers in front of me, but I would guess that the majority of the growth that you see today certainly comes from the big strategics and then some of the original SMAs.

Speaker #5: So the propensity to want to do more is high. We typically start with, call it, 500 million dollars, a number of these partnerships have started to grow into the multiple billions.

Speaker #5: Because once they see and get comfortable with the risk return, there's always a little bit of like, hey, what are you doing here? You know, a sense, I want to understand this.

In terms of the rate of growth that will be, I think a function of both, the continued growth of the platform, which we have a lot of momentum in. But then also, when we get these new strategic Partnerships, those can give you sort of a step function increase. But I would say, just as a general matter spending a lot of time with these Insurance clients, they like, what's happening here, this is something they want to do. It's something they need for competitive purposes, they like the fact that they can actually reduce their risk level, because if you're just dependent on liquid fixed income, you've got to migrate down to Triple B or Triple B. Minus got to take more, um, risk there. And then you've got to have a very, with your small Alternatives or Equity portfolio. Take maximum risk because liquid fixed income today. Everything there that's investment grade is basically sub 100 over. So the fact that we can produce things with meaningful premiums to that, and in many cases, better ratings that is

Speaker #5: And we spend more and more time. Nippon Life is a great example of that. We've been building this partnership with them over five plus years.

Speaker #5: We've worked closely with them. It core bridge and it resolution. They see the way we operate. They see the various asset classes, our capabilities, and residential, consumer finance, commercial lending, digital, energy, traditional infrastructure.

Attractive. So this is a structural trend, and then, as you know, we do this with the open architecture model, so we're not out there competing against them. We're serving them, the way long-only fixed income managers have done for insurance companies for a long time. So, and the other thing I would just add—the reason why I think we're scaling is you need scale. Particularly in the world we're going into, you need to be able to write large checks. And today, it's really us and some of our other private equity firms. You've got a bit of a different model where...

Speaker #5: They see what we're doing and they're comfortable with the approach. Our underwriting approach. And I would say another advantage of our business is because we have such a large equity investing business, we have great insights on the credit side.

Out there competing in this arena, I think it's going to continue. I think the momentum will grow. It's hard to put a finger on exactly what the growth rates will be.

Thank you. We'll take our next question from Ken Worthington with J.P. Morgan.

Speaker #5: We also generate a lot of flow because we see things have access to things given our positioning in the marketplace. So I think what you'll see is growth in the existing relationship certainly.

Speaker #5: And every time we get a new client on, the path is to continue to serve them in a good way and expand the products they touch with us.

Speaker #5: So that's why this has become an area where we think we can do more. And we're also seeing some more and more interest from them in some of our traditional drawdown funds as well.

Hi, good morning, uh, maybe just following up on that. Um, you announced a strategic partnership with nepon life. You've got 40 Insurance Partnerships, as you look to these existing Insurance Partnerships. What is the opportunity to take them beyond the initial scope of the agreement? Um can you build on it uh and does this play out sort of formally or is it informally over time?

Speaker #5: They've become bigger buyers of that as we build this relationship. We spend more time with the key investment professionals in the CIOs. The key is to deliver returns.

Speaker #5: And of course, because it's investment-grade, not have losses.

The big strategic, and then some of the original SMAs.

Speaker #8: Thank you.

Speaker #1: We will take our next question from Benjamin Butish with Barclays Capital.

Speaker #7: Hi. Good morning and thanks for taking the question. You addressed this a little bit earlier in the discussion around realizations, but I'm curious if you could unpack a little bit more what you're seeing specifically in terms of sponsor and strategic-backed M&A?

Speaker #7: It feels like this is part of the market. You've been quite bullish on IPOs, but it feels like this is part of the market that's been a little slower to come back, especially on the sponsor-backed side.

Speaker #7: There's also implications for the direct lending business and your credit segment. So just curious if you could talk about what's going on there, what is the near-term outlook look like for specifically middle-market M&A?

Speaker #7: Thank you.

Speaker #5: You know, I'd say it's sort of a tale of maybe three cities. There's that those companies in the AI area electrical equipment, utility services, some of the energy businesses in and around natural gas, renewables.

So the propensity to want to do more is high. We typically start with call it 500 million a number of these Partnerships have started to grow into the multiple billions because once they see and get comfortable with the risk return, there's always a little bit of like, hey, what are you doing here? Um, you know, a sense I want to understand this and we spend more and more time nip on life is a great example of that. We've been building this partnership with them over 5 plus years. We've worked closely with them, it corebridge and it resolution, they see the way we operate. They see the various asset classes, our capabilities and residential Consumer Finance. Uh commercial lending uh digital energy traditional infrastructure. They see what we're doing and they're comfortable with the approach, our underwriting approach and I would say another advantage of our business is because we have such a large Equity investing business, we have great insights on the credit side, we also generate

Speaker #5: Obviously, the data centers, all of that, the suppliers into that chain. They're both in the IPO, the M&A market, private equity. The bids are strong.

Speaker #5: The pricing is good. And you've begun to see from us some sales. Michael referenced a $7 billion battery storage business. We sold just yesterday.

Speaker #5: I think that that's one part of the world. The second would be I'd call it sort of the AI unaffected businesses. So there, let's call that fast food chains, things in the medical supply area, things that are generally pretty unaffected by what's going on.

A lot of flow because we see things, have access to things given our positioning in the marketplace. So I think what you'll see is growth in the existing relationship, certainly. And every time we get a new client on, the path is to continue to serve them in a good way and expand the products they touch with us. So that's why this has become an area where we think we can do more. And we're also seeing more and more interest from them, and some of our traditional—

Speaker #5: And there, I would say the bid is pretty strong both in the IPO market and again in the private market, not as strong as the first category, but an area where there is liquidity and the debt and equity market.

Draw down funds as well. They become bigger buyers of that, as we build this relationship, we spend more time with the key investment Professionals in the cio's. The key is to deliver returns and of course, because it's investment grade not have losses.

Thank you.

We will take our next question from Benjamin Buddhist with Barclays Capital.

Speaker #5: I think the exception today is when you get into these sort of white-collar services, professional information services, enterprise software. Even if the businesses are performing well, we have a number of businesses in that area that are performing well.

Speaker #5: There's just a sort of high quotient of uncertainty. And it's making buyers more cautious. And that's where you've seen less liquidity. That's where you're seeing the part of the private equity market where you won't see a ton of DPI.

Hi, good morning and thanks for taking the question. Um, you addressed this a little bit earlier in the discussion around realizations, but I'm curious if you could unpack a little bit more, what you're seeing specifically in terms of, you know, sponsor and strategic backed, uh m&a. Um, it feels like this is part of the market. You, you've been quite bullish on IPOs, but it feels like this is part of the market. That's been a little slower to come back. Especially on the sponsored back side. Um, there's also implications for you know, the direct lending business uh, in your credit segment. So just curious if you could talk about what's going on there, what is the near-term Outlook? Uh look like for you know specifically Middle Market m&a, thank you.

Speaker #5: And I think that's going to be there for a while. And I think what you'll see is multiples have come down and people's expectations will have to come down.

Speaker #5: And I think people are going to have to understand better. Can some of these companies survive and thrive in some of them certainly will.

Speaker #5: And then they may get re-rated higher. But that's the part of the market which has definitely slowed down.

Speaker #7: Okay. Thank you for that, John.

Speaker #1: We will take our next question from Arnad Jiblat with BNP Paribas.

Speaker #6: Thank you. Good morning. Actually, my question might follow on this one. I was wondering if you could unpack the value creation private equity infrastructure for us.

You know, I'd say it's sort of a tale of maybe 3 cities, there's that those companies in the AI area, um, you know, electrical equipment, Utility Services. Um, some of the energy businesses in and around natural, gas Renewables. Um, uh, obviously the data centers, all of that, the suppliers into that chain. They're both in the IPO, the, the m&a market private Equity, the bids are strong. The pricing is good and you've begun to see from us some sales, Michael referenced, the 7 billion dollar battery storage business,

Speaker #6: I assume it's been strong in Q2. Perhaps it's following these three buckets.

Speaker #5: Well, I think the value creation story at our companies today is obviously about making them as AI forward as possible. We announced this new company.

Speaker #5: We created with Anthropic called ODE to accelerate deployment at our companies and ultimately service other companies as well. The idea here is how can we transform these businesses?

Speaker #5: In the case of some of the businesses, certainly the software companies, it's something that impacts the entire business. We've seen some really powerful examples.

Speaker #5: We own a company a software company called Energy Exemplar that helps utilities manage electricity traffic and simulate. That used to be a product that would take a week and the customer almost needed a PhD.

We sold, uh, just yesterday. Um, I think that that's 1 part of the world. The second would be, I'd call it sort of the AI, unaffected businesses. Um, so there, let's call that, you know, fast food chains, uh, things in the medical supply area, things that are generally pretty unaffected by what's going on. And there, I would say, the bid is, is pretty strong both in the IPO market. And again, in the private Market, not as strong as the first category, but an area where there is liquidity in the debt and Equity Market. I think the exception today is when you get into these sort of White Collar Services, professional Information Services, Enterprise software, even if the businesses are performing, well we have a number of businesses in that area that are performing. Well, there's just a sort of um, hi quotient of uncertainty and it's making buyers more cautious. And that's where you've seen, you know, less liquidity. That's where you're seeing the part of the private access.

Speaker #5: It was very complex. The AI is creating a much more simplified, faster, now it's something that takes basically hours. And the user can utilize this in a much more simple way.

Speaker #5: So it's a good example of what we're doing. We're bringing it to customer service and things like Great Wolf Resorts. We're innovating new products in our garage door opening business, Chamberlain, our digital doorman business that's been created.

Equity market where you won't see a ton of DPI, and I think that's going to be there for a while. And I think what you'll see is multiples have come down, and people's expectations will have to come down, and I think people are going to have to understand better: can some of these companies survive and thrive? And some of them certainly will, and then they may get re-rated higher, but that's the part of the market which has definitely slowed down.

Okay, thank you for that John.

Speaker #5: That's now a $40 million business from scratch. They think can grow 10 or 15 times over the next five years. I would say the value creation is how do you incorporate this?

We will take our next question from Arnold Jabot.

Speaker #5: And then for the businesses that are less affected, how can they serve their customers better? How can they operate more efficiently? And so we're fortunate to have a really terrific portfolio operations team led by Rodney Zemel.

Thank you, good morning. Um, actually uh my question about might uh, um, follow on, on this 1. Now I was wondering if you could unpack the value creation, private Equity infrastructure for us. Uh, I assume, um, our expense strong in Q2, perhaps is following these 3 buckets. Um,

Speaker #5: We used to run AI at McKinsey. And this is a key focus for us. So it's not just in the investing side of the business.

Speaker #5: It's also adding value to our portfolio companies.

Speaker #1: Thank you. We'll take our final question from Patrick David with Autonomous Research.

Speaker #7: Hey. Good morning, everyone. John, maybe this was blasted out of context, but I see I had a lane on the screen from, I think, a TV interview saying quote, "Deals from non-AI firms will be muted for a while." Do you unpack that comment and in particular add any color on what asset classes and/or strategies you expect to be most muted?

Speaker #7: Thank you.

Speaker #5: Well, we should correct that because what I said I think was on a Bloomberg interview this morning was I walked through that same sort of three different cities thing, which is the AI companies, the AI unaffected companies where there's a lot of interest in buying those.

Today is obviously about making them as AI forward as possible. We, we announced this, um, this new company we created with entropic called Ode to accelerate deployment at our companies and ultimately service other companies as well. Um, the idea here is how can we, you know, transform these businesses in the case of some of the businesses, certainly the software companies, you know, it's something that impacts the entire business. We've seen some really powerful examples. We own a company, a software company called Energy Exemplar, that helps utilities manage. Um, you know, electricity traffic and simulate that used to be a product that would take a week and the customer almost needed a PhD. It was very complex. The AI is creating a much more simplified faster. Now, it's something that takes basically hours and the user can can utilize this in a much more simple way. So, it's a good example.

Speaker #5: And then I talked about sort of the white-collar world. That is where I said there's less activity. The professional, the information, services, and the software companies.

Speaker #5: So that's the area where I said there'd be less activity. That's probably 30 to 40 percent of the overall private equity market. Software for us as a firm is around 6 percent of our exposures.

Speaker #5: Across the firm. But that's where I said there'd be less activity just because of the uncertainty that exists.

What we're doing, we're bringing it to customer service and things like Great Wolf Resorts. We're innovating new products in our garage door opening business, Chamberlain, our digital Doorman business that's been created. That's now a $40 million business from scratch. They think it can grow 10 or 15 times over the next five years. I would say the value creation is: how do you incorporate this? And then, for the businesses that are less affected, how can they serve their customers better? How can they operate?

Speaker #7: Okay. Makes sense. Thank you.

Speaker #1: Thank you. 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 or closing remarks.

More efficiently. And so we're fortunate to have a really terrific Portfolio Operations team, led by Rodney Zemmel, who used to run AI at McKinsey. And this is a key focus for us. So it's not just on the investing side of the business, it's also adding value to our portfolio companies.

Thank you, we'll take our final question from Patrick David. With the todtmoos research?

Uh hey good morning everyone. Um, John, maybe this was lasted out of context but I see I had a line on the screen from. I think a TV interview saying, uh, quote deals from. Non AI firms will be muted for a while. Do you unpack that comment? And in particular, add any color on what asset classes and or strategies? You expect to be most muted. Thank you. Well, we we should correct that because what I said, I think it was on a Bloomberg interview. This morning was I I walked through that same sort of 3, different cities thing, which is dye companies, the AI, um, unaffected companies where there's a lot of um, you know, uh, interest in buying those and then I talked about sort of the white collar world, that is where I said, there's less activity the professional and the information services and the software companies. So that's the area where I said, there'd be less activity. That's probably 30 to 40% of the overall private Equity Market, you know. So

Software for us as a firm is around 6% of our exposures, um, across the firm. But that's where I said there'd be less activity, just because of the uncertainty that exists.

Okay, makes sense. Thank you.

Thank you 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 or closing remarks.

Great. Uh, thank you everyone for joining us today. And look forward to following up after the call.

You have been added to the waiting room.

Operator: Thank you for standing by. You are on hold for the Blackstone Q2 2026 Investor Call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Q2 2026 investor call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance, please press star zero. If you would like to ask a question, please signal by pressing star one. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I would like to turn the conference over to Weston Tucker, Head of Shareholder Relations. Please go ahead.

Operator: Thank you for standing by. You are on hold for the Blackstone Q2 2026 Investor Call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Q2 2026 Investor call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance, please press star zero. If you would like to ask a question, please signal by pressing star one. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I would like to turn the conference over to Weston Tucker, Head of Shareholder Relations. Please go ahead.

Weston Tucker: Thank you, Katie, and good morning, and welcome to Blackstone Q2 conference call. Joining today are Steve Schwarzman, Chairman and Chief Executive Officer, Jon Gray, President and Chief Operating Officer, and Michael Chae, Vice Chairman and Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation which are available on our website. We expect to file our Form 10-Q report in a few weeks. I would like to remind everyone 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. For a discussion of some of the factors that could affect results, please see the Risk Factors section of our Form 10-K. We will also refer to non-GAAP measures, and you will find reconciliations in the press release on the Shareholders page of our website.

Weston Tucker: Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audiocast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of $2.4 billion. Distributable earnings were $2 billion, or $1.52 per common share, and we declared a dividend of $1.29 per share, which will be paid to holders of record as of 3 August. With that, I will now turn the call over to Steve.

Stephen A. Schwarzman: Good morning, and thank you for joining our call. Blackstone reported outstanding Q2 results, with distributable earnings up 26% year-over-year to $2 billion, as Weston mentioned. Approximately the same rate of earnings growth we delivered in Q1. Fee-related earnings grew 22% year-over-year in Q2, while net realizations rose 27% despite the geopolitical volatility. Total inflows reached nearly $70 billion in the quarter, and over $260 billion for the last 12 months, lifting AUM 11% year-over-year to a record $1.35 trillion. The most significant driver of these strong results continues to be the large-scale investments we made in artificial intelligence-related areas, including data centers, energy and power, and the frontier AI companies themselves.

Steve Schwarzman: Good morning, and thank you for joining our call. Blackstone reported outstanding Q2 results, with distributable earnings up 26% year-over-year to $2 billion, as Weston mentioned. Approximately the same rate of earnings growth we delivered in Q1. Fee-related earnings grew 22% year-over-year in Q2, while net realizations rose 27% despite the geopolitical volatility. Total inflows reached nearly $70 billion in the quarter, and over $260 billion for the last 12 months, lifting AUM 11% year-over-year to a record $1.35 trillion. The most significant driver of these strong results continues to be the large-scale investments we made in artificial intelligence-related areas, including data centers, energy and power, and the frontier AI companies themselves.

Stephen A. Schwarzman: These investments are leading to standout results in numerous strategies across the firm that are supporting our momentum in fundraising, deployment, and as we start to monetize some of the substantial gains we've been building in these areas in performance revenues. Over the past several years, we've been regularly sharing our views on the transformative potential of AI and how we've been positioning the firm to benefit from the paradigm shift that is underway. Blackstone has become one of the largest private capital providers in the AI ecosystem, a position that gives our investors unique access to the remarkable opportunities emerging in this area and allows them to share directly in the extraordinary potential upside. Many of these opportunities, of course, can't be replicated in the public markets. We built the largest data center development business in the world, demand for compute is accelerating.

Steve Schwarzman: These investments are leading to standout results in numerous strategies across the firm that are supporting our momentum in fundraising, deployment, and as we start to monetize some of the substantial gains we've been building in these areas in performance revenues. Over the past several years, we've been regularly sharing our views on the transformative potential of AI and how we've been positioning the firm to benefit from the paradigm shift that is underway. Blackstone has become one of the largest private capital providers in the AI ecosystem, a position that gives our investors unique access to the remarkable opportunities emerging in this area and allows them to share directly in the extraordinary potential upside. Many of these opportunities, of course, can't be replicated in the public markets. We built the largest data center development business in the world, demand for compute is accelerating.

Stephen A. Schwarzman: We became one of the most active private investors in power and utilities, energy demand is significantly rising. We invested directly in some of the fastest-growing private companies in the world, including Anthropic, OpenAI, and SpaceX. We're now creating new companies and platforms that we believe will play a critical role in the advancement of AI, including four in Q2 alone. First, we teamed with Google to build a new AI cloud provider powered by their TPU chips, investing up to $5 billion initially. We think this business has the potential to scale quite significantly over time as the first neocloud for TPUs. Second, we partnered with Anthropic to form a company focused on driving enterprise adoption of their AI-powered solutions, helping firms to realize the vast potential of this technology.

Steve Schwarzman: We became one of the most active private investors in power and utilities, energy demand is significantly rising. We invested directly in some of the fastest-growing private companies in the world, including Anthropic, OpenAI, and SpaceX. We're now creating new companies and platforms that we believe will play a critical role in the advancement of AI, including four in Q2 alone. First, we teamed with Google to build a new AI cloud provider powered by their TPU chips, investing up to $5 billion initially. We think this business has the potential to scale quite significantly over time as the first neocloud for TPUs. Second, we partnered with Anthropic to form a company focused on driving enterprise adoption of their AI-powered solutions, helping firms to realize the vast potential of this technology.

Stephen A. Schwarzman: Third, we joined Broadcom and another manager to create a financing platform in support of Broadcom's deployment of large-scale AI compute for their end customers. The platform provided $35 billion initially to deliver 1 gigawatt of compute, representing the largest private credit investment in history, with much more to come. Fourth, alongside these partnerships with leading AI companies, we launched a Blackstone REIT known as BXDC, something public market investors can access directly to acquire stabilized, newly constructed data centers. The $2 billion offering represented the largest blind pool REIT IPO in history, a testament to our leadership position in this sector. The market for long-term ownership of stabilized data centers is nascent today, but we think it could grow to $1 trillion over time and beyond, representing massive potential for BXDC.

Steve Schwarzman: Third, we joined Broadcom and another manager to create a financing platform in support of Broadcom's deployment of large-scale AI compute for their end customers. The platform provided $35 billion initially to deliver 1 gigawatt of compute, representing the largest private credit investment in history, with much more to come. Fourth, alongside these partnerships with leading AI companies, we launched a Blackstone REIT known as BXDC, something public market investors can access directly to acquire stabilized, newly constructed data centers. The $2 billion offering represented the largest blind pool REIT IPO in history, a testament to our leadership position in this sector. The market for long-term ownership of stabilized data centers is nascent today, but we think it could grow to $1 trillion over time and beyond, representing massive potential for BXDC.

Stephen A. Schwarzman: In addition to these new ventures, we're seeing extraordinary momentum in our data center platform, which has grown to $185 billion of total value, including facilities under construction, up from $130 billion at the start of just this year. We expect to lease over three times more capacity this year than any other year in our history. If we execute on our pipeline, our data center platform could double over the next few years. Growth of this type, underpinned by long-duration leases with some of the highest quality and most creditworthy customers in the world, is a compelling illustration of what can be created in private markets. While it's still early in the life cycle of our data center investments, as one indication of their significant embedded value, we recently sold our stake in a collection of fully leased assets that are still under construction at a multibillion-dollar gain.

Steve Schwarzman: In addition to these new ventures, we're seeing extraordinary momentum in our data center platform, which has grown to $185 billion of total value, including facilities under construction, up from $130 billion at the start of just this year. We expect to lease over three times more capacity this year than any other year in our history. If we execute on our pipeline, our data center platform could double over the next few years. Growth of this type, underpinned by long-duration leases with some of the highest quality and most creditworthy customers in the world, is a compelling illustration of what can be created in private markets. While it's still early in the life cycle of our data center investments, as one indication of their significant embedded value, we recently sold our stake in a collection of fully leased assets that are still under construction at a multibillion-dollar gain.

Stephen A. Schwarzman: Meanwhile, in energy, we continue to actively invest to help meet rising global demand, including in utilities, utility services, renewables, pipelines, LNG, and electrical equipment across both equity and debt. We've generated highly differentiated returns for LPs in these areas as well, as highlighted by the performance of our energy-focused strategies. Last week in credit, we announced a $5.3 billion investment for leading energy infrastructure company, Williams, to support multiple development projects to power data centers. This investment provides yet another example of Fortune 500 companies looking to private markets for customized long-duration capital solutions. I'm sharing these examples to highlight the remarkable scale of capital needed for the AI buildup and the unprecedented opportunities it's creating for Blackstone and our investors. At the same time, there are investment risks and uncertainties that accompany the rapid growth of AI, along with important societal considerations.

Steve Schwarzman: Meanwhile, in energy, we continue to actively invest to help meet rising global demand, including in utilities, utility services, renewables, pipelines, LNG, and electrical equipment across both equity and debt. We've generated highly differentiated returns for LPs in these areas as well, as highlighted by the performance of our energy-focused strategies. Last week in credit, we announced a $5.3 billion investment for leading energy infrastructure company, Williams, to support multiple development projects to power data centers. This investment provides yet another example of Fortune 500 companies looking to private markets for customized long-duration capital solutions. I'm sharing these examples to highlight the remarkable scale of capital needed for the AI buildup and the unprecedented opportunities it's creating for Blackstone and our investors. At the same time, there are investment risks and uncertainties that accompany the rapid growth of AI, along with important societal considerations.

Stephen A. Schwarzman: In terms of risks, we're mindful of the potential for excessive exuberance in this area, and we've carefully chosen our spots, leveraging our scale and knowledge advantage to build conviction. We've focused on identifying compelling risk-adjusted returns with outsize upside potential, in many cases, meaningful downside protection. On the societal implications of AI, I've been extensively engaged on this topic since I made a major donation in 2018 to MIT, establishing the Schwarzman College of Computing, and this includes a focus on AI safety. I've been spending a lot of time with leaders in the industry and various policymakers thinking about how to address this critical issue, while also preserving the advancement of America's AI leadership. In addition, the firm is working closely with our portfolio companies, including our data center businesses, to address the workforce, environmental, and community implications of development.

Steve Schwarzman: In terms of risks, we're mindful of the potential for excessive exuberance in this area, and we've carefully chosen our spots, leveraging our scale and knowledge advantage to build conviction. We've focused on identifying compelling risk-adjusted returns with outsize upside potential, in many cases, meaningful downside protection. On the societal implications of AI, I've been extensively engaged on this topic since I made a major donation in 2018 to MIT, establishing the Schwarzman College of Computing, and this includes a focus on AI safety. I've been spending a lot of time with leaders in the industry and various policymakers thinking about how to address this critical issue, while also preserving the advancement of America's AI leadership. In addition, the firm is working closely with our portfolio companies, including our data center businesses, to address the workforce, environmental, and community implications of development.

Stephen A. Schwarzman: Through the creation of union jobs, workforce training, water-free cooling systems, expanded power generation, and significant local economic investment, our goal is for these projects to contribute to the success of the communities we serve. Overall, I believe the potential change from AI has precedent in the Industrial Revolution and the commercialization of electricity. Each time in history there's been this type of dramatic change, economies have adjusted, and the standard of living for virtually everyone in society is improved over time. We believe the future impact of AI will echo these previous periods, but with more rapid implementation and complexity. Major change of this type also creates anxiety due to the uncertainties of how the technology will evolve and its ultimate impact. We will need to monitor these developments as a society and course-correct when necessary.

Steve Schwarzman: Through the creation of union jobs, workforce training, water-free cooling systems, expanded power generation, and significant local economic investment, our goal is for these projects to contribute to the success of the communities we serve. Overall, I believe the potential change from AI has precedent in the Industrial Revolution and the commercialization of electricity. Each time in history there's been this type of dramatic change, economies have adjusted, and the standard of living for virtually everyone in society is improved over time. We believe the future impact of AI will echo these previous periods, but with more rapid implementation and complexity. Major change of this type also creates anxiety due to the uncertainties of how the technology will evolve and its ultimate impact. We will need to monitor these developments as a society and course-correct when necessary.

Stephen A. Schwarzman: In closing, we are in the early days of what I believe will be the most consequential transformation in industry and markets in a generation. Private capital will play a vital role in these advancements, and Blackstone is the leading firm. I have great optimism for what's in store for our investors. For shareholders, our stock is on sale today, and we believe it represents one of the most inexpensive ways to participate in this extraordinary megatrend. With that, I'll turn it over to Jon.

Steve Schwarzman: In closing, we are in the early days of what I believe will be the most consequential transformation in industry and markets in a generation. Private capital will play a vital role in these advancements, and Blackstone is the leading firm. I have great optimism for what's in store for our investors. For shareholders, our stock is on sale today, and we believe it represents one of the most inexpensive ways to participate in this extraordinary megatrend. With that, I'll turn it over to Jon.

Jon Gray: Thank you, Steve, good morning, everyone. The seed planting we've been doing across the firm around AI and AI infrastructure is generating outstanding returns. A relentless focus on investment performance remains our true north. Our clients are responding with robust inflows across all of our major fundraising channels, institutions, insurance companies, and individual investors, the three Is. At the same time, the IPO market is strengthening, setting the foundation for greater realizations and performance revenues over time. I'll speak about each of these dynamics in detail. Starting with our institutional business, which remains the core engine of our firm. Investor affinity for Blackstone is as strong as ever, we're seeing our momentum accelerate across numerous areas. In infrastructure, we launched our dedicated platform 8 years ago, today it is a rocket ship, with AUM growing a remarkable 40% year over year to $90 billion.

Jon Gray: AI is powering our investments in digital and energy infrastructure in particular, leading to 18% net annual return since inception for the commingled BIP strategy. Meanwhile, our multi-asset investing business, BXMA, is experiencing a renaissance. We originally entered the hedge fund of funds business in 1990, effectively relaunched this platform in 2021 when we brought on Joe Dowling to lead it. BXMA has now delivered 25 consecutive quarters of positive returns for its largest strategy, with Q2 representing the best returns in 6 years. AUM reached a record $109 billion, up 21% year over year, representing its fastest organic growth in nearly 15 years, when the segment was less than half of its current size. Post quarter end on 1 July, BXMA reported an additional $4.8 billion of monthly inflows, its best single month of fundraising in history. Turning to our institutional drawdown area, which is accelerating.

Jon Gray: We are raising a new cycle of funds across a number of highly differentiated strategies. Three of these funds hit their hard cap so far in 2026, with excess demand in opportunistic private credit, life sciences, and Asia private equity, we expect our new private equity energy transition flagship to hit its hard cap soon as well. Taken together, these four strategies represent nearly $40 billion. Our Asia PE flagship held its final close in Q2, raising $13.1 billion, more than double the previous vintage, on the back of a 27% net annual return in the prior fund since inception. Our decision to focus on India, where we believe we have the largest alternatives business, and Japan, has been a key driver of this performance.

Jon Gray: Our fifth key energy transition flagship closed on nearly $6 billion in Q2, already equal in size to the prior vintage, on its way to an expected $8.7 billion. In secondaries, we've raised over $14 billion to date for our new buyout flagship with a target of at least $22 billion. In credit, we held closings for new drawdown vehicles in direct lending and asset-based finance. Overall, our institutional business has extraordinary forward momentum. Stepping back for a moment on credit, where our combined platform has grown to nearly $550 billion across corporate and real estate credit, up 13% year over year. Inflows were $33 billion in Q2, or nearly 50% of the firm's total. We're seeing continued strong engagement with institutions across our non-investment grade strategies despite the market noise earlier in the year.

Jon Gray: At the same time, we're benefiting significantly from the massive secular shift underway toward investment-grade private credit. A new direct-to-customer model has taken hold, which brings clients right up to borrowers, leading to a better experience for both. In the insurance channel specifically, this model is resonating, as is our open architecture approach. Our insurance AUM reached $290 billion in the second quarter, up 15% year over year, representing the largest third-party-focused platform in our sector. We announced a new partnership with Japan's largest life insurer, Nippon Life, in which we will deploy approximately $10 billion in private credit over the next several years and also invest in their domestic real estate portfolio. This builds on our existing relationship with Nippon Life through their investments in Corebridge Financial and Resolution Life, both of which are major partners of ours.

Jon Gray: In total, we now have 40 clients in our dedicated insurance solutions area, a number which has nearly doubled in the past two years, and we continue to add more on a global basis. We're building something highly differentiated in this channel and have established a massive scale advantage with the combined strength of 40 of the leading insurers in the world, all without taking on insurance liabilities. Moving to private wealth, performance and brand are the ultimate determinants of success in the wealth channel, and Blackstone is a leader in both. Despite the geopolitical turmoil, turbulence, and muted flows in credit, our AUM in the channel grew 16% year over year in the second quarter to a record $324 billion.

Jon Gray: Total sales were $8.6 billion in the quarter, with a slower pace in April and May, when sentiment related to the Iran conflict was most negative, but a strong recovery in June. This momentum has continued so far in Q3. BXP led the way again in the second quarter with $2.4 billion raised, bringing its NAV to over $25 billion in only 10 quarters. June represented the best month of sales since launch at $1.2 billion. BXP has achieved a remarkable 20% net annualized return since inception for its largest share class, including approximately 8% net in the second quarter, powered by its outstanding portfolio positioning. Our infrastructure vehicle and private wealth, BXINFRA, raised approximately $900 million in the second quarter, bringing its NAV to $6 billion in just six quarters, underpinned by a 16% annualized net return in its largest share class.

Jon Gray: BREIT raised $1.2 billion in the second quarter, while repurchases continued to decline sharply, falling 42% year over year and down 33% sequentially from Q1, resulting in the best regular way net flows in nearly four years. The vehicle has generated a 9.4% net return for its largest share class since inception nine and a half years ago, approximately 40% above the public REIT index, including 10.3% net for the last 12 months. BREIT's investment in data centers, which now comprise 27% of the portfolio, has been particularly helpful. NAV increased 7% year over year to $57 billion. BREIT is clearly back in growth mode. Finally, BCRED's gross sales were $1 billion in the second quarter. Repurchase requests remain elevated and exceeded the 5% limit, with approximately 50% fulfilled, resulting in net outflows of $1.2 billion.

Jon Gray: The semi-liquid structure of BCRED and our private wealth perpetuals is designed to provide greater liquidity than traditional drawdown funds while protecting performance. We have been here before with BREIT, and while it is early in the Q3, redemption requests are down materially. Looking forward, our performance supports innovation. Yesterday, the first two funds in our alliance with Wellington and Vanguard officially launched WVB All Markets and WVB Blackstone All Privates, with inflows expected to start later this quarter. These funds provide individuals with simplified access to three world-class asset management firms, including the full breadth of the Blackstone platform. Together, the alliance is actively exploring additional strategies, including for the retirement market. Later this summer, the firm expects to accept our first subscriptions to BXHF, our new perpetual multi-strategy hedge fund product targeting more liquid exposures.

Jon Gray: Adoption of private markets in the wealth channel remains on a structurally positive trajectory, and Blackstone continues to lead the way. Finally, turning to the IPO market, which has strengthened considerably. At the start of the year, we predicted that 2026 would be the year of the IPO, and that is what's playing out. In the H1 of the year, US IPO activity increased sixfold compared to the same time last year, while global issuance rose more than three and a half fold. Against this backdrop, Blackstone has executed three IPOs since May, a mobile advertising business in the US, an office REIT in India, and the firm's stabilized data center REIT, BXDC. This week, we launched another significant IPO in the US. In total, we have eight IPOs on file globally from a diverse range of sectors and geographies.

Jon Gray: While geopolitical developments will continue to impact markets, we are optimistic on the direction of travel with our IPO activity providing the foundation for greater realizations over time. In closing, our highly diversified, capital-light, performance-driven model continues to deliver. I'm extremely confident about the future. With that, I will turn things over to Michael Chae.

Michael Chae: Thanks, Jon, and good morning, everyone. The firm's continued evolution and the expanding scope of our activity have fundamentally transformed our earnings power, both in terms of the magnitude as well as the breadth of sources of earnings. In the Q2, we again delivered over 20% year-over-year growth across total revenues, fee revenues, fee-related earnings, net realizations, and distributed earnings, following a similar trajectory for these metrics in Q1. Meanwhile, our funds reported strong overall investment performance against a backdrop of significant geopolitical uncertainty, highlighted by notable strength in our AI-related portfolio, as you've heard this morning. Starting with results, distributed earnings increased 26% year-over-year to $2 billion in the Q2, or $1.52 per share, underpinned by one of the three best quarters of fee-related earnings in our history, along with robust growth in net realizations.

Michael Chae: First, with respect to FRE, which increased 22% year over year to $1.8 billion, or $1.43 per share. Fee revenues also rose 22% to $3 billion, with double-digit year-over-year growth in all four of our segments: 32% growth in private equity, 21% in real estate, 18% in BXMA, and 11% in credit. In terms of the underlying drivers of fee revenue growth, transaction and advisory fees for the firm nearly doubled in Q2 to a record $321 million, were up 52% sequentially from Q1. The expansion of our platform and overall levels of financing and investment activity has led to a material step-up in these revenues, representing an important and underappreciated engine of fee revenue generation. Fee-related performance revenues increased 68% year over year to $793 million in Q2, powered by the scaling and strong overall investment performance of our platform of perpetual strategies.

Michael Chae: These revenues increased nearly threefold for both BXP and BREIT, alongside contributions from BCRED, BIP, BXINFRA, and other vehicles. Base management fees for the firm grew at a mid-single digit rate year over year, in line with the trajectory we previously outlined. We saw strong double-digit growth in base fees in private equity and BXMA. Some deceleration in year-over-year growth in credit related to the BDC area, and a decline in real estate due to harvesting activity in the BREP opportunistic funds, and headwinds in our institutional core plus business, as I mentioned last quarter. We continue to expect similar year-over-year base management fee growth for the firm in Q3 as in Q2, with a return to double-digit growth in base management fees in 2027. Turning to net realizations, we reported $414 million in Q2, up 27% year-over-year.

Michael Chae: Gross performance revenues grew 32% year-over-year to $731 million, underpinned by a 20% increase in private equity, while real estate performance revenues rose nearly fivefold to the highest level in four years. We noted last quarter that the geopolitical volatility had pushed out exit pipelines and slowed realization activity in the near term. We were able to execute a number of dispositions across the firm, including the data center sale that Steve discussed, along with multiple realizations in the energy portfolio. These included a manufacturer of engineered structures for electric transmission, a natural gas pipeline, a Europe-based environmental services firm, and the public stock of an energy solutions company. Overall, the firm's embedded realization potential is significant.

Michael Chae: The net accrued performance revenue on our balance sheet, our store of value, now stands at $7.5 billion or $6 per share, the highest level in four years, up 13% year-over-year and up 7% sequentially from Q1. While we do expect a sequential deceleration in net realizations in Q3, we anticipate a robust Q4 and 2027. That brings me to investment performance, which as Steve mentioned, was highlighted by outstanding returns in numerous strategies, driven in significant part by our AI-related portfolio. This was illustrated in our returns in infrastructure, our dedicated energy strategies, BXPE, BREIT, and the most recent vintages of our corporate private equity and real estate opportunistic funds, which have favorable exposure to this area. BXMA's strong overall returns also benefited from its positioning in the AI area.

Michael Chae: For the firm overall, AI-related holdings comprised 9 of the 10 largest markups in Q2. Our dedicated infrastructure platform appreciated 7.2% in the quarter and an exceptional 29% for the last 12 months. For US and Europe-focused data center business, QTS was once again the largest single driver of appreciation in infrastructure, real estate, and for the firm overall in Q2, driven by continued extraordinary leasing momentum. We also saw significant gains across other data center investments in the US and Asia. The corporate private equity funds appreciated 3.7% in Q2 and 14% for the last 12 months. Our holdings in power and electrification, both private and public, along with strong performance in Asia, were the largest drivers of Q2 returns.

Michael Chae: The most recent vintages of our corporate private equity strategies were the best performing, powered by these areas, including appreciation of 6.1% in the quarter for our latest global flagship, 8.8% for Asia, and 23.6% for our most recent fully invested energy fund. Overall, our private equity operating companies continue to report healthy underlying fundamentals, including revenue growth of 11% year-over-year. BXMA reported a 5.8% gross return for the absolute return composite in Q2 and over 15% for the LTM period. BXMA has delivered positive composite returns in each of the last 25 quarters, as Jon noted, and in 38 of the past 39 months, a remarkable achievement notwithstanding the significant volatility in public markets over this period.

Michael Chae: Strong investment performance across the BXMA platform in Q2 led to the segment's highest dollar fund appreciation in history and is supporting robust inflows and continued double-digit year-over-year growth in AUM. In credit, our non-investment grade private credit strategies reported a gross return of 1% in Q2 and 7% for the last 12 months, reflecting stable underlying credit performance across the vast majority of our holdings, with strong current income providing ballast to returns. Here too, our energy funds outperformed, with our most recent BGREEN III reporting a 4.5% gross return in the quarter. Finally, in real estate, overall values appreciated modestly in Q2, led by strength in data centers, partly offset by declines in life sciences office and certain other areas.

Michael Chae: While the recovery in commercial real estate has been impacted by the increase in base rates, our platform remains well-positioned with data centers, logistics, and rental housing now comprising nearly 80% of the global equity portfolio. In logistics, our largest exposure to real estate, we're seeing US leasing activity meaningfully re-accelerate. For data centers, it's hard to overstate their importance to impact. The most recent vintages of our BREP Global and Asia strategies, which appreciated 7% and 3.7% in Q2 respectively, along with our BXPE US institutional core plus vehicle, and of course, BREIT, are benefiting significantly from their growing exposure to data centers. Overall, AI is helping to drive investment performance across the firm, particularly in the latest vintages of our funds.

Michael Chae: In closing, we are in a time of massive demand for capital to fuel historic growth in the most critical areas. Private markets are the solution. For Blackstone, the breadth, scale, and reach of the business we built over four decades have put us in a unique position to be the leader in providing these solutions. Thank you for joining today's call. We would like to open it up now for questions.

Operator: Thank you. As a reminder, please press star 1 to ask a question. We ask you limit yourself to 1 question to allow as many callers to join the queue as possible. We will take our first question from Glenn Schorr with Evercore.

Glenn Schorr: Hi. Thanks so much. Maybe we will pick up where you just left off, Michael. I respect all the 20%+ growth numbers that you all ran through. Got a lot of capital raising, ton of dry powder, and all the seed planting. The question on base management fees, I heard you on Q3, but let's just go out to next year where we and the rest of the world is expecting more of a double-digit pickup. Could you possibly talk through some of the building blocks and the pieces that get us there if that happens? Are deployment, the fee holiday roll-offs, credit stabilizing, things like that? That would be helpful. Appreciate it.

Michael Chae: Sure, Glenn, thanks. As you heard from my remarks, we have that expectation too about double-digit growth next year. We feel very good about the foundation being put in place. In terms of the building blocks you mentioned, there are a number of fundamental and very positive drivers that support our view, and really are about the embedded growth we see going into next year. First, the full-year benefit of the private equity segment drawdowns that we have activated or will activate this year. That is our SP 10 fund, our Asia III fund in BCP, our energy transition fund. The second, I would say the seasoning and expansion of perpetual strategies, particularly across our flagship private wealth vehicles and our infrastructure platform. As you know, as Jon said, our BXP NAV $25 billion, that is up 2 times year-over-year.

Michael Chae: Our infrastructure business up 40% year over year, BXINFRA new product introductions. That is a very positive picture. I would add to that, in BXMA, in a similarly NAV-based business, by and large, AUM's up 21%, and performance and net flow activity remains exceptionally strong. In credit, we see underlying positive growth in credit insurance across the institutional insurance channels. We look to an eventual stabilization in retail flows. AUM, as you know, for the whole business is up 15% year over year. Inflows are healthy. The IABC portion of that business, really private investment grade up in the 20% AUM area year over year. The insurance business, AUM up 15% year over year. Importantly, and you referenced dry powder, our credit business overall ended the quarter with $84 billion of dry powder, which as you know, largely earns fees as it's invested.

Michael Chae: That dry powder balance is over double where it was at the beginning of 2024, and almost a third larger than just the beginning of this year. That's really this built-in sort of coiled spring as it relates to expanding management fee growth. Finally, and importantly, we see stabilization in the real estate base fee trends next year. If you take those pieces together, we think we're well-positioned for a very strong 2027. I would just add finally, in the meantime, as you know, beyond base management fees, the firm today really benefits from a significantly broader fee-generating platform. As the results in this quarter demonstrated, that includes the growing scale and contribution from transaction fees and fee-related performance revenue. In the H1 of the year, total fee revenues were up 21%.

Michael Chae: We think that it's a very positive picture about 2027. In the meantime, the overall fee revenue base showing strong momentum.

Glenn Schorr: Thanks so much for that.

Operator: We will take our next question from Alex Blostein with Goldman Sachs.

Alex Blostein: Hi, good morning. Thank you for taking the question as well. I would love to double-click on what you guys are seeing in the wealth channel. Jon, a couple of positive remarks, I think you mentioned as far as Q3 goes. Maybe what you're hearing on the ground on BCRED performance year to date, I think is a little challenged still, but sounds like you're seeing some improvement in redemption. Would love to get into that a little more, and then ultimately also on the new products that you launched with Wellington and Vanguard, would love to just get your perspective on how you're planning to scale these products and the flow through the management fees ultimately for Blackstone from them.

Jon Gray: Thanks, Alex. The wealth platform is in really terrific shape. AUM, as we mentioned, up 16% year on year to $324 billion. We saw a recovery in flows, certainly towards the end of the quarter, which we talked about sort of in the heart of both the credit and the war. We're now back to the levels we were in Q1 on a monthly basis. The mix has changed obviously, with a lot of strength, as you heard, in BXP, BXINFRA. BREIT has much more momentum, but more muted inflows on BCRED, which given the volume of noise is, to us, not a surprise. I would reaffirm what I said, which is it's early in the quarter, but the redemptions in BCRED are down materially, which is positive.

Jon Gray: I think you've got to look at this overall platform and think about it holistically. The strength of our brand, the strength of our distribution team, our global reach, the performance we've provided, the confidence we've built with financial advisors and clients. This is a very special thing that's been built, and we think the potential for it to grow is quite enormous with those initial sort of four flagships. With new product launches, the hedge fund product we talked about, and then to your point, Wellington Vanguard.

Jon Gray: These are two amazing firms who have long storied histories, who are focused on investment performance as we are, and the idea of creating products that are one-stop shopping, integrated, where you have all the Blackstone privates together or the Blackstone privates along with actives, passives, equity, fixed income, putting that together and making it easier for investors to access these products. There are also different standards in terms of where they sit in terms of because of the structures here with Wellington as managers as opposed to what we have today. A number of our products are limited to qualified purchasers. Here there's a larger universe of potential buyers, and there are folks who want just a, I think, a simpler, easier solution. We're excited. It'll take time like everything to build these things, but it's a couple more engines we're adding.

Jon Gray: I think we do offer something that is really unique, and again, performance, so important. If you look at BREIT relative to real estate products, if you look at how BCRED has performed since its inception, you look at BXPE and BXINFRA over the last couple of years. That is remarkable, which is why we think we have built so much loyalty with the customers.

Operator: Thank you. We'll take our next question from Michael Cyprys with Morgan Stanley.

Michael Cyprys: Hey, good morning. Thanks for taking the question. Just want to ask about AI. If AI compute increasingly becomes a scarce economic resource, could we eventually see compute capacity in your view emerge as a standalone investable asset class similar to what we see in real estate infrastructure or energy? Can you talk about how you're positioning for that and maybe that kind of dovetails with the new REIT BXDC where you mentioned a massive opportunity to get to a trillion. Maybe you could just unpack some of the building blocks and how you see some of the near-term versus medium-term milestones to make progress and sort of hit that over time. Thank you.

Jon Gray: It's a great question, Mike. We definitely see today a global shortage of compute. There's obviously a lot of dollars being invested, but the dollars are not keeping up with the demand, and we see that on a lot of fronts today. When we talk to our hyperscaler friends, the large language model companies, our friends there, they all would want more capacity. So, as we have this energy shortage in places, there's now some community pushback. We obviously have chip shortages today and memory. It is making it harder to keep up with the pace of demand. I do think ultimately that what that means is those things that are built and operating are worth more. Data centers are a great example of that. We've seen benefits obviously for the neoclouds which can deliver compute more real time.

Jon Gray: I do think what this is going to mean is a market will grow to be very large in the real estate world. We saw this in the mobile tower business. I think we'll see this here. I think BXDC has the potential to grow significantly because there's not just data centers that are owned by the developers and investors like us. There's also an enormous amount of data centers on the balance sheets of the big hyperscalers. As they need more capital, I think you'll see some of these things sold. Then the energy assets also, I think, become increasingly valuable as well, and the infrastructure around that. We've done a lot of investments in the midstream space, pipelines, LNG. That becomes more valuable.

Jon Gray: I do believe the components of compute, because of the shortage of compute, will increase in value, and we've positioned us particularly in infrastructure where Sean Klimczak and his team have done just a terrific job, but also in real estate and our energy transition business. We've got a bunch of places where we're exposed to what's happening here. I do think it points to, at least in the near term, a continued shortage and therefore values going up.

Michael Chae: Mike, it's Michael. I'd just add that basically almost every business at the firm that we've built over decades is now in position and has acted on this to be a capital solutions provider to this whole ecosystem. Whether it's credit, infrastructure, real estate, energy, private equity, hybrid capital and tech ops, our BXB vehicle, the BXMA area as it relates to more liquid parts of the market. Just this breadth, diversity, and scale of the business we've built puts us in position to basically have a capital pool that can be a solution for every need in this area, and the needs are massive. You mentioned sort of the single pool of capital. I would just say we can keep innovating. You mentioned BXDC around the existing platform of businesses in a really, I think, exciting way.

Michael Cyprys: Great. Thank you.

Operator: We will take our next question from Craig Siegenthaler with Bank of America.

Craig Siegenthaler: Hey, good morning, everyone. My question's on real estate. I know this hasn't happened in more than four years, public REIT stocks are outperforming the S&P 500 year to date. As you know, very few asset classes have been able to keep pace with US large caps. Now despite this, private real estate returns and opportunistic drawdowns in core plus have still lagged publics. I'm wondering, do you have any line of sight into private returns and also how this could translate into demand for private real estate across your LP base?

Jon Gray: Well, Craig, I'd start with what's happening on the ground with the fundamentals. There had certainly been a headwind last year with Liberation Day and now this year with the war that have kept rates elevated. Sort of underneath the covers, there are a number of positive things happening, which is why I think the public REIT market has moved. You see that at times that the public markets are more forward-looking. What's happening is there's been a sharp reduction in new supply, and that is starting to have an impact. The area where it's moving first is in logistics, in the warehouse business, which is our biggest asset class. We saw very strong leasing in the H1 of the year at our Link Logistics platform in the US, which is up 26% in leasing volume.

Jon Gray: We're seeing occupancy now and rents start to increase. Investors are seeing this. We're now seeing some large-scale M&A in the public markets with Prologis' what looks to be likely a successful takeover of a $25 billion logistics company in the UK in SEGRO. I think these are good signs. I think this will be the first asset class that really starts to emerge in real estate. That is good for us over time. Yes, the public market anticipates this. We've also seen strength in hotels. Last year, we saw negative same-store RevPAR. This year, nationally in the US, it's +5%. That's a very positive sign. We've leaned in in places like San Francisco, again, a bit AI derivative. We bought three hotels in the last six months. We feel very good about that.

Jon Gray: Interestingly, in the office market, which has been in a tough spot for a number of years. In a place like New York, vacancy's fallen from 21.5 to 14.5, which is a very good sign. We're also seeing, you mentioned the public REIT market, which is strong, but the public debt market, the CMBS market, volumes are up 23%. I would say near term had the wind slowing things down because of rates moving up. I think once we get past the war and we see that start to settle down, the underlying strength in fundamentals and investors' desire to invest in hard assets in a world where there's a lot of uncertainty, I think you'll begin to see this real estate recovery in the private sector pick up pace.

Craig Siegenthaler: Thanks, Jon.

Operator: Thank you. We'll take our next question from Bill Katz with TD Cowen.

Bill Katz: Great. Thank you very much. Taking the question. Maybe just a big picture question to change topics for a second. I was listening to Steve's comments about Blackstone being a cheap way to play the opportunity in AI and infrastructure, and we would agree wholeheartedly with that. How does that inform your views on capital return from here? Stock is down significantly from its highs, obviously bouncing a bit today, which is great to see. You have a big payout. Any thoughts of maybe rejiggering the payout rate, stepping in on buyback a little bit versus dividend growth? Maybe how you're just thinking about capital allocation from here. Thank you.

Michael Chae: Hey, Bill. Thanks. It's Michael. I think we've been committed to our capital policy for a long time, which as you know, is basically returning 100% over time of our cash earnings back in the form of our dividend, which I think today is at four times the S&P yield on a yield basis. Also a more moderate, but sort of consistent buyback program all to add up to that sort of total return of our cash earnings. We think over the long run, that's been a sound policy for us. It does reflect sort of our business model and the relative capital light orientation of it. We certainly have scope to look at that over time and more opportunistic use of capital as it relates to the stock.

Michael Chae: We try to be consistent and committed to our policy, and that's kind of where we are today on that.

Bill Katz: Thank you.

Operator: Thank you. We'll take our next question from Brian Bedell with Deutsche Bank.

Brian Bedell: Great. Thanks. Good morning. Thanks for taking my question. Maybe just to go back to the really strong momentum in fundraising. It looks like you're now on pace to potentially match or exceed your record year in 2021. Maybe just talk about the confidence in that. I know there's different timing, of course, with the drawdown funds. As you think about it more broadly, just thinking about that growth momentum across private wealth, credit, obviously the whole AI and data center theme, and increasing inflows in insurance. Are you expecting that fundraising pace, even after a potentially a really strong year this year, to actually continue to grow into 2027 and longer term beyond?

Jon Gray: Brian, it's a good question. It's hard to put your finger on it. What we can point to is that we've been in a world of pretty high volatility. I think it speaks to the resilience and breadth of this franchise. We've managed to raise, obviously, very significant amounts of money, and we're doing it across all three of these channels. You heard about it on the institutional side, where we have a number of funds that are exceeding their hard cap in terms of demand. We talked about our BXMA business, which has really renewed momentum. Our infrastructure business which I think will continue to grow at a really breathtaking pace. It is a bit slower in real estate, remarkably, that business, despite its slowness in fundraising, we're still producing these very strong results.

Jon Gray: When we get to the other side on real estate, that gives me a lot of confidence with the firm overall and where fundraising can move to. On the insurance side, we continue to see clients responding. I mean, we were up 15% to $290 billion in insurance. Those clients really appreciate the premium return we can deliver over comparably rated investment-grade credit. To Michael's point, we're doing these large corporate solutions that are so needed in the energy space, in the digital infrastructure space, and I think we'll continue to gain clients in that area as well. Then wealth, despite all the negative headlines, everything again, up 16% year-on-year to $324 billion. A range of existing products that have delivered and then new products coming online. I think the thing about Blackstone is just the strength of the brand we've built.

Jon Gray: It is recognized globally by investors. They trust the firm. They trust us across multiple channels, that is enabling us to continue to grow without having to borrow money or utilize capital at scale. We really like where we are. We do think in terms of outlook, we get a more settled landscape, war ending, inflation, rates coming down, that'll be very helpful for the business. We've got a lot of confidence on the fundraising outlook over time.

Brian Bedell: Okay. That's a great perspective. Thank you.

Operator: Thank you. We'll take our next question from Dan Fannon with Jefferies.

Dan Fannon: Thanks. Good morning. I guess based on the outlook you gave for management fees for H2 and next year, how should we think about margins in that context, particularly as we think about next year, given the growth rates that are expected from the management fee side?

Michael Chae: Dan, it's Michael. It's early around margins for next year. As I said, we're pretty confident about the top line, and we're also confident about our ability to manage expenses and deliver over time operating leverage. I think we're not going to give a specific viewpoint on that other than to reiterate structurally, we like our margin position.

Operator: Thank you. We'll take our next question from Bart Jasinski with RBC Capital Markets.

Bart Jasinski: Great. Thanks for taking the question. Good morning, everyone. I wanted to dive into the transaction fees. Very strong quarter, looked broad-based across private equity, real estate credit. Are there any lumpy items to call out there? Then Michael, you talked about this fee stream being underappreciated. Maybe unpack that a little bit for us and what we should be expecting going forward. Thanks.

Bart Dziarski: Great. Thanks for taking the question. Good morning, everyone. I wanted to dive into the transaction fees. Very strong quarter, looked broad-based across private equity, real estate credit. Are there any lumpy items to call out there? Then Michael, you talked about this fee stream being underappreciated. Maybe unpack that a little bit for us and what we should be expecting going forward. Thanks.

Michael Chae: Yeah. I think that it's really, stepping back, about the scaling of the firm, the broadening of the firm, the surface area for transaction activity, financings, advisory services that can generate these revenues. That led to this record quarter in a record H1. That probably, in recent years, has been underappreciated, but it's obviously coming to the fore now. In terms of lumpiness for the quarter, I think in particular, what's emerged as a really new avenue for this area are these customized capital solutions, these corporate solutions, private investment grade. In the credit insurance area, there's a substantial opportunity for investment grade-rated corporates where we've become a trusted solutions provider. That, as it relates to transactions in those areas, those can lead to attractive revenues in this area.

Michael Chae: There'll be some variability to that occurring from time to time, but that's a newer sort of strategic area that will continue to grow. I'd just say while there will be quarter-to-quarter variability in this revenue stream, we do have a considerable pipeline in place for the H2 of the year, and the underlying baseline just continues to grow and our trajectory has been upward. It's really about the expansion of the ecosystem across areas like private credit, infrastructure, and so forth.

Jon Gray: Yeah. I would just say to Michael's point, as the asset base grows, there's just more activity around that asset base. You can see that areas like digital infrastructure, energy, there's just more and more capital needs, and it's really tied directly to our AUM in a lot of ways. I do think you're beginning to see this really structural step up in earnings from this area.

Bart Jasinski: Great. Very helpful. Thanks so much.

Bart Dziarski: Great. Very helpful. Thanks so much.

Operator: We will take our next question from Brennan Hawken with BMO Capital Markets.

Brennan Hawken: Good morning. Thanks for taking my question. Would love to drill down a little bit on realizations. We've been waiting for recovery and realizations for some time. You added some color about that ramping in Q4 and into 2027. Could you maybe help us contextualize that expectation? Are there any historical periods that you would point to as a proxy? How reliant is it on market conditions, which has sort of been, I think, part of the trouble with trying to nail down timing on this cycle?

Jon Gray: Well, I'll just comment on the history. If you recall, obviously in 2008, 2009, we had very little in the way of realizations, and the engine didn't really ramp back up that time. It was probably 2013. Over that ensuing period, we had very significant realizations. Here we've now been in a period of basically four years with some similarities. Maybe not as sharp a downturn, but this sort of long period of recovery. Short rates have come down. Obviously, the IPO market has started to reopen. It felt earlier in the year pre the war that this was going to really accelerate. Now it's been delayed a bit. Ultimately, I think we know where this is heading.

Jon Gray: I think we do have confidence as we look out towards the end of the year and into 2027 that we are going to see a pickup.

Michael Chae: I'd just add on to that. Broadly, that this has been an uneven recovery in terms of the realization environment. It is one we think will continue to strengthen. I guess a few particular areas where we're seeing particular momentum. First, I'd say obviously. As Jon talked about, the IPO market strengthened considerably. We've had additional IPOs on file. We've been very active. That's going to provide a foundation for greater realizations over time as these companies season. In the corporate private equity complex, about a third of its receivable balance, its NAPR balance is publicly traded and it's growing. As we do more IPOs, that will create more public market cap in our portfolio. That'll continue to grow that public NAPR, which is obviously liquid and more easy to translate into net realization.

Michael Chae: Second, I'd say within energy transition, there the receivable balance has roughly doubled in a year, and that really reflects the portfolio we've built around the AI and power ecosystem. There is in that area the active M&A market. There's active private sales both to strategics and other sponsors. We announced something yesterday on this front. That is a sector that I think is very fertile right now. Third, BXMA. We have a scheduled as usual year-end crystallizations in BXMA. It's performing very well year to date, as you've heard. That is scheduled for the Q4. Where we sit today, that should be quite robust. Overall, if you step back, as I mentioned in my remarks, despite the choppiness and the capital markets sort of volatility, the NAPR overall for the firm has grown to its highest level in four years.

Michael Chae: We like the position we're in, as always, we're going to pick the right time to translate this into realizations and sales over time.

Brennan Hawken: Thanks for that color.

Operator: We will take our next question from Michael Brown with UBS.

Michael Brown: Great, good morning. Thanks for taking my question. Jon, I wanted to dive in a little bit more to BCRED. You made the comments about the withdrawals are slowing here, and we're in the early stages of Q3. Curious if you think that some of these withdrawals will continue to ease as you move into the onshore redemption window. Maybe just unpack a little bit about what you're hearing from advisors. What do you think is kind of driving that reduction in the withdrawals? Has it been that performance has actually held up quite well, we haven't really seen much in terms of credit issues come through? Has it been some of the dialogue and education that you've been having with the advisor channel that has really helped ease some of that redemption pressure that we've observed in the prior couple quarters? Thank you.

Mike Brown: Great, good morning. Thanks for taking my question. Jon, I wanted to dive in a little bit more to BCRED. You made the comments about the withdrawals are slowing here, and we're in the early stages of Q3. Curious if you think that some of these withdrawals will continue to ease as you move into the onshore redemption window. Maybe just unpack a little bit about what you're hearing from advisors. What do you think is kind of driving that reduction in the withdrawals? Has it been that performance has actually held up quite well, we haven't really seen much in terms of credit issues come through? Has it been some of the dialogue and education that you've been having with the advisor channel that has really helped ease some of that redemption pressure that we've observed in the prior couple quarters? Thank you.

Jon Gray: I think it's an important question. I would say as much as anything, it's the level of noise has come down. I think a lot of people were calling for this massive calamity, when the calamity did not occur, I think sort of the press, what you see on TV, or Twitter, or in newspapers, that has calmed. Which before, obviously, was getting clients understandably nervous. They would pick up the newspaper and say private credit faces this massive problem, they would call their financial advisor, that did create a dynamic. I think the key here is what happens in the fullness of time, do you protect investor capital? Do you deliver positive returns despite all this noise? I think that's what is going to actually happen.

Jon Gray: I would attribute to that, yes, we've done a ton of investor outreach calls, meetings with investors, and financial advisors around the world. Yes, I think some of it's the reality. I think this is just natural when these sort of things occur. I actually think what's helpful, because we went through this with BREIT in the past. We're obviously today in a very different place. We're going to go through this with BCRED. I'm sure at some point here we're going to be in a very different place. What financial advisors and their clients are going to realize, these are long-term products. If they're in the hands of responsible managers who understand valuation and liquidity, they can deliver premium returns. That's been the key to BCRED over time, as it is with all of our products.

Jon Gray: The short answer is the level of noise coming down has definitely been helpful. I think the facts on the ground are also helpful. I think we will work our way through this. There's obviously some carryover from unfulfilled redemptions last quarter, we will work through that over time. I feel when I look out into the future, I think BCRED will continue to be a very strong product for us.

Michael Brown: Great. Thanks, John.

Mike Brown: Great. Thanks, John.

Operator: Thank you. We'll take our next question from Devin Ryan with Citizens JMP.

Devin Ryan: Thanks. Good morning. A follow-up question on the data center opportunity. The scarcity dynamics that you described would seem very supportive of the value that's already in the portfolio and what you already own. As you think about deploying the next dollar, do you see the prospective returns being as attractive as what's already in the portfolio? Essentially just trying to think about obviously higher exit prices, greater competition, potentially eating into that a little bit, versus the flip side of that would just be the supply and demand dynamics you talked about. Maybe it's just too early to start thinking about this, but would love.

Devin Ryan: Just some sense on how you're thinking about return opportunity going forward there with the dollars coming in. Thanks.

Jon Gray: It's a very different dynamic than typical investment cycles like this, where something generates very high returns, you get an enormous supply shock coming back the other way, which drives down returns. In this case, because building the compute is so difficult, it's very hard to get the chips today, it's very hard to get the power, it's very hard to get the entitlements. That is meaning that the supply is not matching. The other thing worth noting is because these are very customized, they're very large, you don't get that sort of Miami condo effect. Prices go up and people go out and spec build. These are all long-term contracted for the most part. You're seeing at this point the shortage is, does somebody have an entitled empowered site?

Jon Gray: The fact that we've been doing this now for a long time, not just in the United States, but in Europe and Asia, we're beginning to see data center demand really start to pick up. That's going to make a difference. Today, we have 15 gigawatts of sites globally that can support $200 billion of data centers, where we have the entitlements, we have the access to power. That today is really the scarce commodity, that's why the pricing for building these things and the returns has not changed. I don't really see much going forward that's going to change that dynamic. It's why we've made such an enormous investment globally in this area and why we think it'll continue to deliver very favorable returns. We've expanded our capabilities with some of the investments we've made in neoclouds around the globe as well.

Jon Gray: We're playing this in a number of different ways. At the end of the day, there is a global shortage of compute, and if you can deliver that, you can earn attractive returns on capital.

Devin Ryan: Great. Thank you.

Operator: We'll take our next question from Steven Chubuck with Wolfe Research.

Steven Chubak: Hi, good morning, and thanks for taking my question. I was hoping to-

Jon Gray: Good morning

Steven Chubak: drill down into the insurance opportunity. I was hoping to just get an update on what you're seeing in terms of flow momentum, new partnerships. You're clearly seeing really strong growth this year in the mid-teens range, wanted to just gauge whether based on the constructive outlook that you provided, whether the expectation is for that to be sustained or whether you envisage a potential acceleration as we look out to over the next couple of years.

Jon Gray: Well, I would say as at a baseline, what we're seeing now in insurers, and obviously it started in the life annuity space, but it's starting to spread out to the P&C area as well, is a recognition that you need these tools to compete in the marketplace. That private investment grade credit can deliver to you higher returns at the same or higher ratings levels. That is very attractive. These clients have the ability to absorb illiquidity for a portion of their portfolio. That is sort of the underlying precept that is supporting what's happening here, and we're seeing more and more clients move in this direction. As we form these SMAs, we typically start in one area, then we start to do it in different areas.

Jon Gray: In terms of the rate of growth, that will be, I think, a function of both the continued growth of the platform, which we have a lot of momentum in. Also when we get these new strategic partnerships, those can give you sort of a step function increase. I would say just as a general matter, spending a lot of time with these insurance clients, they like what's happening here. This is something they want to do. It's something they need for competitive purposes. They like the fact that they can actually reduce their risk level. Because if you're just dependent on liquid fixed income, you've got to migrate down to triple B or triple B minus.

Jon Gray: You've got to take more risk there, you've got to have a very, with your small alternatives or equity portfolio, take maximum risk because liquid fixed income today, everything there that's investment grade is basically sub 100 over. The fact that we can produce things with meaningful premiums to that, and in many cases, better ratings, that is attractive. This is a structural trend. As you know, we do this with the open architecture model. We're not out there competing against them. We're serving them the way long only fixed income managers have done for insurance companies for a long time. The other thing I would just add, the reason why I think we're scaling is you need scale, particularly in the world we're going into. You need to be able to write large checks.

Jon Gray: Today it's really us and some of our other private equity firms who've got a bit of a different model who are out there competing in this arena. I think it's going to continue. I think the momentum will grow. It's hard to put a finger on exactly what the growth rates will be.

Operator: Thank you. We'll take our next question from Ken Worthington with JPMorgan.

Ken Worthington: Hi, good morning. Maybe just following up on that. You announced a strategic partnership with Nippon Life. You've got 40 insurance partnerships. As you look to these existing insurance partnerships, what is the opportunity to take them beyond the initial scope of the agreement? Can you build on it? Does this play out sort of formally, or is it informally over time?

Jon Gray: It's a good question, Ken. I don't have the numbers in front of me, but I would guess that the majority of the growth that you see today certainly comes from the big strategics and then some of the original SMAs. The propensity to want to do more is high. We typically start with, call it $500 million. A number of these partnerships have started to grow into the multiple billions because once they see and get comfortable with the risk return, there's always a little bit of like, Hey, what are you doing here? A sense, I want to understand this. We spend more and more time. Nippon Life is a great example of that. We've been building this partnership with them over five-plus years. We've worked closely with them at Corebridge Financial and at Resolution. They see the way we operate.

Jon Gray: They see the various asset classes, our capabilities in residential, consumer finance, commercial lending, digital energy, and traditional infrastructure. They see what we're doing, and they're comfortable with the approach, our underwriting approach. I would say another advantage of our business is because we have such a large equity investing business, we have great insights on the credit side. We also generate a lot of flow because we see things, have access to things given our positioning in the marketplace. I think what you'll see is growth in the existing relationships, certainly. Every time we get a new client on, the path is to continue to serve them in a good way and expand the products they touch with us.

Jon Gray: That's why this has become an area where we think we can do more, and we're also seeing some more and more interest from them in some of our traditional drawdown funds as well. They've become bigger buyers of that as we build this relationship. We spend more time with the key investment professionals and the CIOs. The key is to deliver returns and of course, because it's investment grade, not have losses.

Ken Worthington: Thank you.

Operator: We will take our next question from Benjamin Budish with Barclays Capital.

Benjamin Budish: Hi. Good morning, and thanks for taking the question. You addressed this a little bit earlier in the discussion around realizations, but I'm curious if you could unpack a little bit more what you're seeing specifically in terms of sponsor and strategic-backed M&A. It feels like this is part of the market. You've been quite bullish on IPOs, but it feels like this is part of the market that's been a little slower to come back, especially on the sponsor back side. There's also implications for the direct lending business in your credit segment. Just curious if you could talk about what's going on there. What does the near-term outlook look like for specifically middle market M&A? Thank you.

Jon Gray: I'd say it's sort of a tale of maybe three cities. There's those companies in the AI area, electrical equipment, utility services, some of the energy businesses in and around natural gas, renewables, obviously the data centers, all of that, the suppliers into that chain. They're both in the IPO, the M&A market, private equity. The bids are strong, the pricing is good, and you've begun to see from us some sales. Michael referenced the $7 billion battery storage business we sold just yesterday. I think that's one part of the world. The second would be, I'd call it sort of the AI unaffected businesses. There, let's call that fast food chains, things in the medical supply area, things that are generally pretty unaffected by what's going on. There, I would say the bid is pretty strong, both in the IPO market and again in the private market.

Jon Gray: Not as strong as the first category, but an area where there is liquidity in the debt and equity market. I think the exception today is when you get into these sort of white collar services, professional information services, enterprise software. Even if the businesses are performing well, we have a number of businesses in that area that are performing well. There's just a sort of high quotient of uncertainty, and it's making buyers more cautious, and that's where you've seen less liquidity. That's where you're seeing the part of the private equity market where you won't see a ton of DPI, and I think that's going to be there for a while. I think what you'll see is multiples have come down, and people's expectations will have to come down.

Jon Gray: I think people are going to have to understand better, can some of these companies survive and thrive? Some of them certainly will. Then they may get re-rated higher. That's the part of the market which has definitely slowed down.

Benjamin Budish: Okay. Thank you for that, Tom.

Operator: We will take our next question from Arnaud Giblat with BNP Paribas.

Arnaud Giblat: Thank you. Good morning. Actually, my question might follow on this one. I was wondering if you could unpack the value creation private equity infrastructure for us. I assume that's been strong in Q2, perhaps it's following these three buckets.

Jon Gray: Well, I think the value creation story at our companies today is obviously about making them as AI forward as possible. We announced this new company we created with Anthropic called Ode to accelerate deployment at our companies and ultimately service other companies as well. The idea here is how can we transform these businesses. In the case of some of the businesses, certainly the software companies, it's something that impacts the entire business. We've seen some really powerful examples. We own a company, a software company called Energy Exemplar that helps utilities manage electricity traffic and simulate. That used to be a product that would take a week, and the customer almost needed a PhD. It was very complex. The AI is creating a much more simplified, faster. Now it's something that takes basically hours, and the user can utilize this in a much more simple way.

Jon Gray: It's a good example of what we're doing. We're bringing it to customer service and things like Great Wolf for George. We're innovating new products in our garage door opening business, Chamberlain, our digital doorman business that's been created that's now a $40 million business from scratch they think can grow 10 or 15 times over the next five years. I would say the value creation is how do you incorporate this. For the businesses that are less affected, how can they serve their customers better? How can they operate more efficiently? We're fortunate to have a really terrific portfolio operations team led by Rodney Zemmel, who used to run AI at McKinsey, and this is a key focus for us. It's not just in the investing side of the business, it's also adding value to our portfolio companies.

Operator: Thank you. We'll take our final question from Patrick Davitt with Autonomous Research.

Patrick Davitt: Hey, good morning, everyone. Jon, maybe this was blasted out of context, I see a headline on the screen from, I think, a TV interview saying, quote, "Deals from non-AI firms will be muted for a while." Could you unpack that comment and in particular add any color on what asset classes and/or strategies you expect to be most muted? Thank you.

Jon Gray: Well, we should correct that because what I said, I think it was on a Bloomberg interview this morning, was I walked through that same sort of three different cities thing, which is the AI companies, the AI unaffected companies where there's a lot of interest in buying those. Then I talked about sort of the white-collar world. That is where I said there's less activity, the professional, the information services, and the software companies. That's the area where I said there'd be less activity. That's probably 30% to 40% of the overall private equity market. Software for us as a firm is around 6% of our exposures across the firm. That's where I said there'd be less activity just because of the uncertainty that exists.

Patrick Davitt: Okay. Makes sense. Thank you.

Operator: Thank you. 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 or closing remarks.

Weston Tucker: Great. Thank you everyone for joining us today, and look forward to following up after the call.

Bill Katz: You have been added to the waiting room.

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