Blackstone Inc. Q3 FY2024 earnings call

• Macro Environment: Fed rate cuts and easing cost of capital are positive for asset values and transaction activity.
• Investment Pace: Substantially increased investment pace starting Q4 2023, deployed $123 billion over 12 months, double prior year.
• AI/Data Centers: Largest data center provider, acquired AirTrunk for $16 billion, portfolio $70 billion with $100 billion pipeline.
• Commercial Real Estate: BREIT moving towards positive net flows, vehicle's largest share class outperformed public REIT index.
• Private Credit: Managed largest third-party private credit business, $432 billion AUM, inflows over $100 billion last 12 months.
• Private Wealth: Raised $21 billion year-to-date, BCRED, BXPE, BREIT seeing favorable flows.
• Fundraising: Launching new perpetual vehicles, closing fundraising for various flagship vehicles.

Blackstone reported GAAP net income of $1.6 billion for the quarter. Distributable earnings were $1.3 billion or $1.01 per common share. Total AUM increased 10% year-over-year to $1.1 trillion, with fee earning AUM at $820 billion. Funds generated the highest overall dollar appreciation in three years in Q3. Corporate private equity funds appreciated 6.2% in the quarter and 15% over the last 12-months. Infrastructure reported 5.5% appreciation in Q3 and 18% for the LTM period. Credit business had strong quarter with non-investment grade private credit strategies generating 3.6% gross return in Q3 and 17% for the LTM period. Real estate values were stable overall in Q3, supported by data centers, rental housing, and global logistics.

• FRE Outlook: Anticipate material step up in Q4 driven by full management fees from exiting fee holidays.
• 2025 Outlook: Positive momentum across firm, expectation of better fundraising environment as realizations pick up.
• Deployment: Continued active deployment in key areas like digital infrastructure, renewable energy, etc.

• Market Volatility: Impact of macroeconomic uncertainties on asset values and transaction activity.
• Competition: Challenges from other players in alternative investments.
• Regulatory Changes: Potential impact of regulatory shifts on business operations.

Q: Michael Cyprys asks about insurance platform growth and strategic partnerships.

A: Jon Gray responds about insurance business growth, strategic relationships, and SMA accounts.

Q: Mike Brown inquires about increase in operating expenses and FRE growth.

A: Michael Chae discusses operating expense components and FRE margin outlook.

Q: Glenn Schorr sizes asset-back opportunity and bank partnerships.

A: Jon Gray explains asset-back market size and partnership strategy.

Q: Craig Siegenthaler asks about election impact and real estate/private equity activity.

A: Jon Gray talks about election delay impact and activity pickup in real estate and private equity.

Q: Alex Blostein asks about Blackstone's real estate outlook as net buyer/seller.

A: Steve Schwarzman discusses net buying, sector preferences, and recovery in real estate.

Q: Dan Fannon asks about funds off holiday and fundraising into 2025.

A: Michael Chae and Jon Gray talk about funds off holiday size and better fundraising environment.

Q: Brian Bedell connects AI deployment to fundraising.

A: Jon Gray discusses data center deployment's impact on fundraising and sector momentum.

Q: Brennan Hawken asks about lower base rates impact on credit business.

A: Jon Gray and Michael Chae talk about credit business returns and fee-related performance revenue offsets.

Q: Benjamin Budish asks about FRE outlook and comp ratio.

A: Jon Gray discusses comp model and control over comp ratios.

Q: Steven Chubak asks about FRE and net flow outlook.

A: Jon Gray and Michael Chae talk about FRE drivers and momentum across business blocks.

Q: Ken Worthington asks about secondaries performance lag.

A: Jon Gray and Michael Chae explain secondary business performance and customer satisfaction.

Q: Bill Katz asks about wealth management platform evolution.

A: Steve Schwarzman talks about wealth management first mover advantage, brand, and growth potential.

Q: Crispin Love asks about M&A, IPO activity, and implications for Blackstone.

A: Jon Gray discusses M&A and IPO outlook, positive implications for Blackstone's realizations and DPI