Blackstone (BX) 25 Jan 242023 Q4 Earnings call transcript

Good day, and welcome to the Blackstone Fourth Quarter and Full Year 2023 Investor Call. Today's conference is being recorded. [Operator Instructions]

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

Great. morning, to good Conference Fourth and Call. you, and Blackstone's welcome Quarter Thank

Steve CEO; Financial Chairman and today available release Schwarzman, Joining are which presentation, and we a Officer; are Michael and slide morning, our Chief and Jon Chae, this Chief website. Officer. Earlier on issued press Operating President Gray,

our file to next expect report later month. We XX-K

do duty differ I'd which are statements, update like include from results may actual forward-looking to any remind call you not materially. statements. these We and to that may undertake today's uncertain

a affect our discussion the in We'll and Risk website. of of that For measures, some of of reconciliations XX-K. results, Factors press factors the release our also could non-GAAP find the refer on to please the see you'll page section shareholders

that copyrighted offer this Blackstone and solicitation of note an nothing a or to is an any may interest be an without in sell cast material constitutes of audio call consent. to offer fund. duplicated Blackstone not This purchase on Also

We X. With share, million. the common Distributable be holders as Quickly on $X.X which $XXX quarter a of per were over $X.XX February turn $X.XX, of reported the for results. Steve. to dividend or of will billion we earnings that, of declared and I'll paid income net call record GAAP to

Blackstone geopolitical earnings with year including indices underpinning volatile for morning, of thank a yields, in of instability. but distributable the our XXXX, earnings Good rebounded our distributable X year, the this of swings which movements from you backdrop, $X.X call. joining $X.X capped treasury highest steady Blackstone fee-related declines for by uncertainty wide driven billion. intrayear generated markets. Most for billion earnings in and historic and global healthy Against quarter economic reported XXXX, strong major significant fourth results quarters, for in equity

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positioned well Looking navigate is ahead. to Blackstone exceptionally the forward, road

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with And Jon? I'll over to that, throw the ball

business. to heading how it. Steve, right happy good Steve we've navigated across inflation moderating. This we're better Thank I'm I'm to by of headwinds X few the and markets our on dynamics the of years believe proud of capital cost backdrop challenging past into the with now sectors. as of powerful leading environment, catch morning, We the emergence noted, is a focusing everyone. and you,

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X has FRE reached and Jon going $XXX in and year-over-year, XX% principally revenues we underpinning anticipate by inflows channel. channel, as major strong insurance AUM driven up this substantial fee from the our them in clients, in growth forward billion, Third, noted,

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us affords investors. to As always, value time over the our markets capital to our order optimize as heal exits in for our patience maximize long-term

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Craig first Instructions] Siegenthaler [Operator of We'll America. with Bank go to

first on market capital reopening, today in but Jon question investing. at your are commentary the week, comments the My I last with Steve, really of bullish spreads tighter. think is heard Davos supported cost falling, CMBS I it prepared

call, seem that's new does when hosted you lot backdrop up to the October. were your too. deployment And with So to better commitments and a also, nicely, be in them a last

versus billion is year? last your it $XX what broadly the double. deployments outlook could So XXXX for in sounds a be like It

What love numbers moving I of we of got are right? lots is place, coming We've lowering business. into good would the say the the rates. question. say things I putting given to Fed hard, on can from is Craig, the this tightening nature very

got You've down spreads a bit. market come to starting debt

that got rallied. equity You've an market has

as companies market of been firms, out sell volume years. to are particular. who've there is well. There who picking real private here IPO frozen estate couple for folks of M&A I going There things, and then up think lots in we're like in see to are pickup a the equity would

but things. to time deal hard, expect to It putting course, would we takes on is So up. sometimes, it numbers these pick of activity do

in right a on But tough. up number, of you we've bunch sort putting exact think, some for activity, been deals the saw private the the here an just of in is and time. travel of terms I deal working So to path is of equity

Sandler. Crispin We'll with Love from take our next Piper question

give you now. apartment on sector your us the right just Can views

last pretty week. a made sized deal the You space in good

that that if in, estate. general sectors in So you the XXXX, stack just activity could active I'm real in you're curious on breaks most and in head other views see And your as into apartments additional how against we space. and deal on that

low So That component, a but was company apartments. here. couple The majority place rate single-family week of when had a modestly lot. The down multifamily pretty an up announced vast And included during X/X. of that And much is down values was The level going longer multifamily where transaction moved through. Right apartment we've is surge a for been that Canadian a probably rent. in to they're the XX said, of shortage flat. we've noted little the some some take what space, news things I new is stronger. In maybe of to in we last space period work of has that negative. put focused single-family as In on is a months, moved cases, supply to as take will because the that's good mostly now, the about here, rents time. homes construction now seen have

United one and in so better backdrop housing a much through place, of the in And be is the once this, overall we you should work a of States. shortage sort

stronger constructive activity, view multifamily a overall you a got see definitely environment housing if multifamily the terms our investment weakness single-family long-term into constructive So near-term, in near-term an could because we've even weaker, but some there it's invest possible in are us of headwinds. little bit

with go Morgan next We'll Michael Cyprys Stanley. to

set a about bit lending estate and the you're the SMAs. broadening facing of BXMT how the given CRE could about ask talk market platform and banks opportunity you I platform as how And as BREDS U.S. certain from end have existing pressures and other institutional you certain an real the investors. to see was hoping that commercial wanted the out do you capabilities? I constraints well big

sentiment a real think to definitely back, to banks poor. we pulled commercial Michael, lender point, has reduce so be mortgage exposure. because your estate the to a it's And trying time capital Well, good is are

that I business nice little really runs it think, thing is the capital the gamut. we billion the Our in $XX a about is have space. And over today,

CMBS mortgages that. We Blackstone our in who Mortgage vintage We're funds, have Then and then do also And high transitional this securities debt. insurance real we the clients the fifth estate more clients, do more that our lagged. raising to and has in is insurance liquid of and we what a think which clients want we sector really Trust. other are nature. have the we We estate. for do yield BREDS real around have market stabilized And

values happens at have spreads, natural that they're fallen. after thing It's If by historic to a look downturn. wide the pretty loan you standards,

I is we're an that can to earn year. good into because And side, grow like to attractive a area we you relative can so is area think And this on I leaning think this as this the clip just at move an continue returns equity the pretty risk. just to very going be into

go Wells We'll next to Securities. with O'Shea Finian Fargo

or flagship the to as smooth in management if of it stable journey Michael, should the more course, step holiday or flagship terms color and downs fees. from year. touch be of improving here of periods course come through your Can the more this I over otherwise appreciate you on to if on go given, there's perhaps you of of a headwind a deployment

of in I activity of mentioned X-month think in fit sort year. the you there year, in year there that was fee Almost an year. But the category. X- holiday. of a significant to, the be will the that throughout we flagships Sure, Yes, anticipate funds the as for multiple series them, we year, or alluded as of last late have a I all exceptional sort outlined more where an of half second lighting a of absence to as Europe opposed being Finian. this of

growth that on pressure else I equal that. So of we'll course marginal be of And the in sort But to because although opposed when the in, accelerate will seeing ramp and see the we fee unfold of holiday, we all next you few quarters. embedded management think some layer as rate later the fees, earlier. will in see year it look at how on the will an overall upward that

We'll to Goldman Blostein Alex with go next Sachs.

for about Another that or products of sort rates and reigniting thinking see estate real maybe really core where compelling be second. BREIT? to retail lower part how should it's for one whether and become estate interest investor the are again a here, need of BPP to level real on of real we those obviously, market. But estate on perspective? And is both And you some demand from the appetite helpful zoning rates interest what the institutional maybe investor from core in an for allocation of

don't I necessarily if Alex, certain it's exactly a know level. So

about it's momentum. I think

materialize, As headlines you year. if lag we'll to on have out because caution there losses the coming the challenges a estate losses, even taken they're know, after when the real course of over of be modest negative investors of number tends have

so what terms in to think investors 'XXs. in back time of space. And is, 'XX, happens their take the happened That's That's to early 'XX. what tend I what happened the certainly pivoting in

caution. so And there's

because rates results of into get to back then the better, investing for as see opportunities in safe you can consensus to sort you you sort capital of a is of huge like start start new of So period have go surge see I growth to people capital they end in dime. What a at happens then first, down to because get the the starts to tunnel, in get, What you on then get space. And some feel time as effect, of this you but light back greatest recovery, the limited flowing think, in the the over tend flown there's don't this supply, is values time, and bottoming then do. change. happens come it's hasn't

looking So the quarters the side, performance. I'm a answer people on the will where comfortable in And this but I that we this." of confidence be lack investor it's In should individual performance to time to the both and meantime, advantage "Hey, institutional take tied multiple short of it marketplace. of take the will think strong doing of bit take say, is

Bank. to Bedell next go Brian We'll with Deutsche

Great. Maybe Jon a maybe of well. talking the Michael, and question for But just, -- the as of the about activations Michael funds. pace the in

then impact revenue, the pace to your said, you but Just for on in create revenue, base -- know confidence excluding confidence you like business growing And had performance 'XX. just fee-related of I that just 'XX, comment sense wanted will that, double-digit can scaling sounds your if get for maybe year? fees, in the fee-related of activations to margin that noise, not including view also they FRE the throughout in pace a XXXX. And have the actually margin fee-related timing can performance the the of accelerate based the calendar on would of 'XX, expansion a on the it

parts Sure, Brian. Two to question. that

structurally, fee On have We for the management 'XX we it. embedded -- the crystal don't of like short quarter-to-quarter. But ramp. about that is can't of we first growth necessarily one trajectory answer have 'XX. ball terms sort in feel good we the and The of on

business funds. also many this of scaling about as inflows industry in mentioned, partners really dry think, lot -- down we I and positive were the in of throughout point among clients, X and the given the which on funds where optimism focused year see ago had visibility XXXX, Obviously, accelerate -- credit is half of it contractual strength started will of latter we the year series the in we factors that scaled in As engine insurance insurance other are lot and articulated business. of we've important sort the and area. from That's and it sort with pursuing of large an other out. We're the a a insurance the I our light, good years you couple cases, key in, of in overall, built a since

through early more And year I again, what to is sort So it's the the guidepost. that the as And say outlook stability with on accelerate of XXXX. course the year. in But I the our would reinforce new outset I full think, quarter-to-quarter. year about into you at engines, we're drawdowns We encourage margins on there, not execution always, we'd I will of are, general the although, look would think it of in feel sort environment. margins, the firing said, that challenging not good of measure there about the a a margin again, of in as message basis, year macro obviously, a multiple just 'XX. On it

to next Hawken Brennan UBS. go We'll with

little But on a I'm about stability of mechanically. curious one sort with You the touched just this bit thing margin point.

XXX comp ratio. revenue, points, FRE ratio over basis yet XXXX comp year down X%, FRE full up So almost

think just help suggest to Just compress just generate margins comp might FRE mechanics. positive those about is are that down. FRE Or it So that Does should how ratio we leverage when margin me possible stable? maybe grow? revenues revenues understand when

sort take real and long-term also structure. we cost from into about leverage of a we rate in of account take of model. At operating approach our in -- that Brennan, There a -- which course, feel control margin in the fair in wouldn't and terms the saw of disciplined about. we've couple I noncomp of Yes, our a demonstrated year. And financial good with structurally think, the just we to actually cost think the cost of firm And I significantly of prior we collectively management very given you it compensation I believe operating part position degree growth built to that, into performance operating same time, would over ability also is, sort saw expenses robust as the world, do of our that think a manage lower business I structure, of management our each the have underlying costs you years. XXXX a of

about think manage not really that's environment, So business. of the takers it. we We're of actively our sort we how

We'll JPMorgan. go with next Worthington Ken to

of then How or could get Or for this at estate obviously expect to possibly that depressed could I Jonathan, sort wanted 'XX to picture bounce valuations. of normalized Is estate the outlook normal for estate XXXX 'XX? more sort back macro you it could point? bounce real And the into does do expect a bottoming more you to And into carry take 'XX? to back real take sort do this it something of real to in mentioned dig estate like look real when does of event? later longer back this what the you level, XXXX. in was It carry. you clearly see carry levels? Is long

ball this, But a process securities, talked have to like lends shelf lot clearly, public bit even cycle crystal always have and a a you're it hard take as about, when of And estate, sell the that itself Well, you don't takes it's the through real going Okay. liquid we've where develop. things time. of are time. you to a going sales where off in to

a get look expect do back year will as big pick the surge it in done. Certainly, the confidence could real half the you wouldn't in I It's first yes, estate about we our as you We companies over in of into would out realizations larger So of get and up. better expect, the year. to to half 'XX, some possible feel public you with transactions things that. time,

for terms would lower keep a this And I say out so year I the I expectations would in transitional look guess what in a real as of generally estate. better lot I or new is side. I over realizations would is environment feel time. And where lower on we results. in environment rate and people that it's modest have limited this growth is macro the are modest we're supply delivering favorable because back class a asset we're and at again to growth, investing

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So when wants. do kinds the when we the are environment things have appropriate. it market think think we we'll values we'll the And gets better, of

thing. as real we we out returns of don't emerge have performance even will last as competitors, we this is come us We cycle, the think know, you kind want stronger. grow our and cycle, the of like to important we share. further did of going because, customers out same maximize believe to returns just market for our And we're the estate most help Other will

in but feel to want way, we the ultimate may confident of very right and do a we So take the time, it bit outcome. this about

We'll to go Autonomous next Research. Davitt Patrick with

observers negative are saying still need your markets confidence, that that there a view here, much recovery competitors senior in pretty a including and private on even lot this better of some out that a realizations PE reset. be some is marks going there, the of cautious equity to at Despite the executives seem still

you stand your appears there PE disparity be And You on debate? the why remarks, hinted amongst thoughts prepared broader that in that wide you you could have on at in the do but where outlook on a such expand peers? any to

start generated from I the year, and sector, that it private equity actually about the with guess which strong think march there. Last we I were and also we realizations in I'd something Well, positioned facts. our portfolio realizations year-on-year says where up

than life the a optimism fourth comes overall So that X% had I positioned, the and some quite sectors businesses energy of what's in fact where of migration, happening have in favorable well. sort it's we bunch more good and think growth, sectors portfolio about, that expansion coming done our underlying of greater the as cost transition, digital think good from we right The And rates we're pretty sectors sciences, in revenue I our of in we've with terms our growth environment say inflation feel a down. I'd quarter. combination, about down. as a margin We saw came markets portfolio. capital and economic now of talked

as in us rates today, So good. as last sit feel we year Things moving with summer here. change we last to that the some leads confidence But the have bank with March late quickly saw of crisis up. year can we in

that level terms to I you believe. relative leads what think your so I where you of in it, you of And confidence, own, carry

about private so we still And the outlook pretty in feel good equity.

next Dan Fannon Jefferies. with to go We'll

typically addressable question about for this to My and the exclusive maybe you -- I start. at have relationships market talk the distribution is on was BXP, I believe product. hoping

So that broadly how available and scale. wondering when think will be potentially this could you

corporate with in start the clients. investors. but performance backdrop is it evolution strong of natural plays We on our past, grow. We've estate have on wealth who in credit versus, just that, call, that to private I'd institutional as the that's life private X% a these but more folks here this calls talked really equity, it, private trillion think vehicle, alternatives investable estimate lot traditional assets. XX%, opportunities, the Well, think vehicle, not we strategy individual equity broad-based room call we we about obviously our private and with our have. broad has The than of growth, tactical $X We've of that there's success of the allocated globally, with about a to $XX platform real million strength XX% about to about vehicle. sciences shown secondaries, talked on our is We

a forward over here, time. reflects close, And as which a will course, time. it's billion over built how deliver $X.X first the start we we that investors very look think respond. individual Initially, up relationships we function so of we've of had And we strong with

a had already I BCRED, allocated an loyalty allocated who to to allocated is was think our that fact had and customers pointed higher that advisers cumulatively to yesterday, BCRED, to BXP and out feel us. percentage showing that tremendous first close showing even XX% between interesting the of financial in and BREIT BREIT

these confidence have developed delivered relationships deep we've we've long performance. the So fact we that

this in and which years, got all that like lends It is creating draw be access we have to of investors BCRED, you positioned receptivity a the who smaller and XX-plus BREIT going private with in the there's the a don't space. invest to space get of with bit for equity did to for us product. We're capital back We There of be we customers. a down will funds. But course, format think do think us I that And universe. in it's semi-liquid a retail lot itself to to little to and will a delivered different be investor makes individual attractive. still uniquely more going investor will structure. think

scale. BCRED, in opportunity product think engage the as to out think we've grow and has to $XX at time. well, billion today of the grow We're billion we customers, there, to this we $XX got get in product deliver And can for we do gross As billion that, assets. do this over $XX BREIT, roughly but equity of it

next go with Budish Barclays. to We'll Ben

indicated the a inflows kind to your up wanted came least quarter, at quarter, ask where you I and bit guess, first versus I were nicely you picked quite the insurance looking really last the QX, had ahead of of I in initially think for for on year. inflows.

you sort So $XXX get you that Does forward? any then change to the Can the just tactically, How mean? fine-tuning we billion years. more we're over as should X does we you'd kind is any pull be years? was several thinking there How outlook like X, should our indicated what several thinking models? over be sort of specific, XXXX? And $XX next of of think next, for -- million this about $XX the the billion, that just

And also Ben, credit it's seeing. To interest inflows, in clients platform think in the Michael, insurance institutional was good I drivers but the just time, a from clients, sort our lending, highlighted attack of ABS our so your think embedded from across pulling inflows not we're the insurance of a terms answer our -- real -- which of of I involve BCRED, really our in $X.X of there's then the CLO sort sort credit It XXXX. and in from just don't we don't direct platform, first between insurance billion, business. balanced X-K, forward momentum question, and overall, we on.

you will. of sort balanced diversified So I'd a very say attack, if

bit about specifically, think major talked I inflows of We the XXXX, area general we see I target of earlier in terms of billion billion actually partners. the of insurance to X we the sort $XX a from $XX range in in of better. think that inflows, year, point, ending see say a as I'm range. those a just the And starting I'd in above or end inflows in point, came X this but high expected that certainly baseline we starting clients from the point, range

a clients. doing plan, significant. And think managing the we're run there is for large know, necessarily architecture, and to we that partners. variety course, just other SMAs looking individual do which you for strategic opportunity clients, with these X out our would our money is add, And to given is of open not insurance strategics, it of in I as a model, other capital-light business wide insurance the opportunity

been yield Given we terms to of able companies. quality, premium, credit we've performance, and deliver the in attract what will more insurance think

So to multiple very growth, engines these an and of think momentum, anchor of going we're having this believe and X real and we added area is be is have we we helpful. clients

to KBW. next go Mike Brown We'll with

lower noticed view can business. and I fee the off Great. quarter-over-quarter. maybe an We wanted that and noisy in ask real this declined point you think and push can the rates fee higher the about kind blending as high inflows. the basis us just understanding jumping rate be just go-forward fee, the estate the and worth right they output you fourth the in that's of about a as with insurance XXXX? And AUM AUM we of the net into of the rates maybe fee contrasted Do on quarter pull to think on credit help the

overall, at our Sure, our think, Mike. across the our I the fee management Look, sort -- multiple been, whole I of math look years. think of rate the -- average if it's you firm, over firm, stable remarkably across average

the more last just I math, in the mentioned, If insurance, do specific you a you basis credit recently the down quarter segments you was at if it at like point. in think look

that trend sort even does weighted come area our stable, high I and growth, though attractive an growth fee. think margin it is lower insurance a So average is in of management I the quite the think at

fee real fees estate, aggregate think dilution years. sort last margin been over And debt or that we'll if you the of of -- portfolio the lowering I that. is I take coming the stable. In Solutions obviously, at Insurance lot there's portfolio, tiers really, we're look fee $XX transaction. We BREDS exciting really fees flows. the think in. have been is most AUM. was putting That's We the earning a in, which to do extent obviously the And And billion effect earn of across there the the It's signature We at so the assets. of quarter-over-quarter, few the actually of business, margin earn asset excluding these at different rate, been rates portfolio. lower from a those debt insurance at earn fee equity asset which on of sort capital which overall with our is is fee an and that the large-scale how then a on works different co-invest

little think, explainer, management is bit of largest that fee the had that -- of So the quarter-over-quarter. I lowering a between of

to We'll Steven Chubak with go next Wolfe Research.

I And likelihood But changes theory. you question given game have wanted that. I Jon, that already covered what a policies, ball, to just a recognize, ask on you. don't rematch, transition, the energy Trump-Biden in So crystal have of election infra, you protectionist a potential

the deployment we of your across air does your risk get just the it accelerating managing dry strategies? inform pocket own but the different across You platform, alluded and election until powder improved activity approach And you an to see clarity. do portfolio any how to

intense on not election, starts obviously be transaction but it there'll focus keeps interest down, think rates. coming inflation Fed deter I the and particularly think Well, the will I activity, if cutting

more or sectors may on be which depending so are although one here, in terms that party dispositive. There possible might in wins forth. be affected and more another the of and win think house the I which will less wins that it's of terms presidency party very party

overall up And more with are so government and you policy divided changes moderate. end

delivered caught But from up we firm approach, for politically. activity news any if prospects on governments thing that if we've I'd the keeping going we in had long-term is we're it think in but you going I our a when just activity the we're the since nearly approach day. And shareholders, been be a be purple look standpoint sensitive deploy over the it's election. this investing election and good the here, not overall, customers capital, we've to the eye are are to let us. transaction we most and blue, is our time than Steve our at important think expect that areas the Fed's long-term an in dissuade years more for to and founded capital, take remember of also environments there get more to to for firm delivered where not tied it's try our red, since we've to XX XXXX, us, And those to we say don't different. But taking

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

credit platform So for maybe the to a circling back while.

syndicated growth the of think the as in you been do banking competitive result fact that market market. How plays opportunity in lending of spreads? starting stabilize in appreciate I you fund lending terms the in a as loan pickup through unit there's appreciate process and direct sort to that have the of opportunity of multi-vectored thought it some there, a set are as it out from building you but in of Certainly, that direct a So issues broader around have very but in the for sort just terms and well a outlook a around the your perspective. big perhaps how return market, debate plays the light of system both

Bill. Thanks,

into capital I is there more market think lending front, the on the specifically, direct coming today.

There appetite lending time, is of the little long we're As direct transaction limited. the conversation into periods for good news in earlier a think going still other their coming coming are I pickup for seeing is space. The bridging are back, a you back although more said, to banks things players the activity.

may ability significant a large think also the although so I with write the capital will capital advantage. for the in here, billion to for us, specifically $XXX-plus demand is of be grow. I'd competitive supply our very up space, very checks say picking And that

borrower because a some I paper. vehicles, private advantage They to to think they certainty. they've lending's because on our ability own various From BDCs, got certainty. across So our flex the the losses can our bank to can is really want take commit distribute don't is fact offer borrowers we're the business, competitive that to want have to multibillion-dollar our standpoint, we, helpful. And direct give that in of that storage we course, that transaction structurally,

that And think continue scale strong will we we certainly We an helpful to originations, be think helpful. for deal is on be the will so in will that lending. and our pickup new activity think here, particularly, direct area be

the is was, are originated the value still yes, competitive. only a news what's environment loan direct little last I credit the look which quite very of more get let's I quality us average to you So ago. And good think good. years is what our year and portfolio feels direct being almost say, does XX%, mean for lending remarkable. it nonexistent, in across XX defaults our was fraction of lending a in The

coming There the may space, to well. there'll think in good platform flow be seems be more more deal to capital but I So shape. the be as

And so that's a positive.

question come Our line Arnaud Giblat will the of BNP. final from with

given fee-related what I discuss performance was wondering that if you competition and in BPP the for in in does also the of high we outlook for U.S., think growth? hedges? levels rates what and lower you potential given on at valuations should potential movement rates the multi-times cap in to revenues BREIT about rent for how could the said And versus XXXX, falling and the

is which talked sort in this. values, we bottoming some say V-shaped we think seeing about, we here, do would of I don't is a we're the think Well, this I go picture which but back to big recovery.

tough deployment. to good supply would to so down my But expect think exactly coming it move it's us, fundamental helpful is this, rates we to be for But said on there we've down, valuation very relative on exactly do. new finger happening will from this But year good will coming certainly ground. do the your certainly, would I would year. what hard for are And think a Putting values time say early this the I in sector. I for a some are on that's making the expectation predictions be better where lands, things standpoint 'XX. to

for Tucker over session. like Weston I'd conclude additional question-and-answer or will the call turn our closing back remarks. to to That any

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