Blackstone Inc. — Call Transcript 2025

All right. Good afternoon, everybody. Thank you for joining us. We'll get started with our next session. Hopefully everybody's well-fed. Next up, it's my pleasure to introduce John Gray, President and COO of Blackstone. With more than $1.2 trillion in assets under management, Blackstone is the world's largest and most diversified alternative asset manager, distinguished by its expertise across effectively all major sub-verticals within private markets. The firm also has had an enormous amount of success, growing in the wealth channel, as that market continues to expand as well. So, lots to talk about, hopefully lots of good cyclical things to talk about as well, looking out into 2026. So, John, thank you for being here. Always fun to have the conversation with you. Alex, I'm happy to be back. It's great. Look, why don't we start with a bit of question on the macro side first with economic outlook. Given Blackstone's breadth of investment capabilities, you always have very unique perspectives in terms of what's going on on the ground, real-time, with respect to corporate health. So, talk to us a little bit about that and what 2026 looks like for the corporate world. You know, I think we're a little more optimistic than most people are. The U.S. economy has been incredibly resilient. We had Labor Day, we had a government shutdown, we've had pretty high absolute level of short rates, and yet in Q3, our private equity companies saw 9% revenue growth. I'm sure we're gonna get into private credit. Default rates among non-investment-grade borrowers have been low, profit margins have been increasing, and globally, it's a pretty good picture too. I would say, you know, the things powering it obviously are this AI CapEx cycle. That is clearly the biggest engine of growth, and it's been a great thing, obviously, for our business, I think for the alternative space overall. I'd say the weakness is in Europe and then also, around some of the consumer businesses we have, particularly middle and lower income. So, water parks, theme parks, hotels. If you looked in the November Smith Travel data for hotels, revenue in luxury was up 6-7%. It was down the same in economy. You're definitely seeing a bit of this K-shaped economy, but overall, I'd say it's a pretty good picture when I look at it net from our company's vantage point. I'd say the other encouraging thing is the inflation data, to us, has continued to look better than what you read about, and I—we often find that our 270 companies and the 13,000 pieces of real estate give us better insight, so rental housing, inflation is running well below the 4% that's in the CPI data today. In the labor market, what I would say we see is basically the difficulty of hiring has gone way down. 93% of our CEOs three years ago would've said it's hard to hire. Today, it's 30%. Hourly wages have gone from 4.1% a year ago to 3% at our U.S. companies. So, there's a bit of stickiness in goods inflation, but I think the Fed will actually get data here over time that will allow them to cut rates, so if you've got a resilient economy, cost of capital coming down, obviously we have spreads that have tightened a bunch in investment-grade and high-yield, that's helpful, and then we're on the cusp of this massive both investment boom followed by what I think will be a very significant productivity boom from the technology, and I think it's hard to get really negative in aggregate when you overlay that with the other set of facts, so that makes us all more inclined, which is why you see us active investing. Great. Let's translate that into the investment activity, which has really accelerated for you guys over the last couple of quarters. I think about $140 billion of capital deployed over the last 12 months, and again, the pace of that deployment has really accelerated. I guess looking out into 2026, can we talk a little bit about key themes and investment areas where you're finding the most attractive, risk-adjusted returns, and also by the same token, talk a little bit about areas you're trying to avoid? Yeah. I mean, if you subscribe to our worldview that bringing superintelligence at scale at very low cost is gonna be transformative, you try to figure out how can I invest in that and take the least amount of risk. And I think we've become the leading investor in the infrastructure around this. Massive investments on data centers, but long-term lease data centers where you don't put a shovel in the ground until you have a 15-plus-year lease with a very large market cap company. Huge investments in energy and power. So that's generation, transmission, utilities, electrical equipment, everything we're gonna be doing, the data centers, the robots, the autonomous vehicles, it's gonna plug into the wall. So, making huge bets. And in our business, what's great is we can express it in infrastructure, in energy transition, in real estate, on the equity side, on the debt side. So, I would say that infrastructure around what's happening continues to be a huge theme for us. I would say, coming to alternatives, we really like the secondary space. We're the largest player in that. There's a lot of push, obviously, for DPI. Alternatives continue to grow. Being able to provide liquidity there at scale is a real advantage. We like that area. I would say, some of these big corporate solutions deals we're doing on the private credit side. We've done with Rogers and EQT in the midstream space and Sempra Energy, where you're helping them in very capital-intensive businesses do things that are capital-efficient for them and lower their cost of capital, and that at our scale on the credit side is an area that is. There's a relatively small number of competitors to do that. I would say commercial real estate, which I'm sure we'll hit on, has had a tough three-and-a-half-year run, but you can sort of see the pillars of this recovery starting to come in place, and we're definitely getting closer to that, and then geographically, I would point out in Asia, two places we love, India, which has been hugely successful for us, both in real estate and private equity. That is an economy that I think will continue to be the fastest growing of the big 20 economies out there, where the physical capital markets, legal infrastructure continues to improve, and then Japan, where the growth won't be as high, but there's a real openness to foreign capital coming in, and that is unlocking all sorts of assets. We bought a $3 billion luxury real estate complex from a railroad Company this year. We did a couple of privatizations, and that is a market we also like, so one of the great things about our business is having global scale and being able to play in different markets, different parts of the capital structure. What I don't love, I would say, emerging markets generally away from India and maybe the Middle East, that has been a tough place. We haven't done a lot of it, but we just haven't, over time, achieved real return premiums for the risk, and perhaps, and definitely much more importantly, businesses at risk of disruption from AI. Everybody's talking about bubbles in AI, and yes, there'll be plenty of losers in AI, but in the race, what's happening to legacy businesses? Yeah. If autonomous vehicles continue to gain share, which I suspect, well, what does that mean for an auto insurance company? What does that mean for a company who's focused on collisions? And yes, it may take 15 or 20 years, but what begins to happen to multiples? We saw that in the media business. Or we've seen that in other industries. So, I would say disruption around, you know, horizontal enterprise software companies, IT services businesses, and then lots of rules-based businesses, legal, accounting, transaction processing. I think you've got be very mindful. And if I was giving one piece of advice as investors, this is the main thing to focus on. Yeah. No, lots, lots to unpack there. Thank you for that. Why don't we double-click, only leave that first theme and probably the biggest theme, which is around AI. Blackstone was very early in identifying the secular opportunity. We've talked about it, feels like for years, but it's finally kind a here. Talk to us, I guess, maybe a little bit more about how you envision this market evolving from an investment perspective, where it feels like other people are onto this as well and the opportunity set is still there, but there's a lot more capital, obviously, chasing that around right now. So what are the parts of the market where you still feel comfortable deploying capital? What do you see in terms of performance of these assets relative to your expectations? And then within AI, what are the risks? Yeah. So, this has been the best-performing area for our firm. There's no question, you know, we bought QTS in 2021 for $10 billion, and its lease capacity's up 12-fold. And we did that in our infrastructure business. We did that in BREIT and our institutional real estate core plus funds. That turned out to be a really good decision. We bought the biggest data center player in Asia. I would say, surprisingly, despite the capital that's moved there, because of the constraints of power, it's still an attractive place to deploy capital. And as I said, you're not really investing the capital at scale until you have a long-term lease. So, these are not condos in Miami. This is a much safer underlying activity. And so, I continue to believe that's a really good way to invest in this. I do believe, and by the way, again, both on the equity side and the debt side, we talked about the energy. I just, if there was one theme you could believe in, it is power. Yeah. I just, I can't come up with a scenario where we're not using significantly more power five years from today, 10, 15 years. It feels like we're going to a world where there's a lot of need for electricity. I'd say, as you move up into more of the direct business, we are investing, but obviously we recognize the risk. It's with different pools of capital. We've invested in a couple of large language models, companies. We have begun to invest in a few of the application software companies, companies like OpenEvidence in the medical field or Norm Ai in the legal field. And some of these companies have the opportunity, if they're able to execute, to grow to be very big and very profitable, but we recognize not everyone's gonna win. What we're trying to do is figuring out how to play this, recognizing what's coming, and again, not taking too much risk. On the traditional sort of private equity side, we're also looking at businesses where we think we can potentially transform them. Have sort of an AI or DIE strategy where you could buy a healthcare claims processing business or an accounting firm and bring this technology to bear and make them much better in serving their customers and much more productive. So, every investment memo, in the first two pages of the memo, there's at least one paragraph about the AI risk for that business. We've gone through all our portfolios, yellow, red, green, where do we have the most risk? We just see this. Look, it's taking time. That it's a little bit like basic science where they've invented some unbelievable therapies, but getting 'em to the hospital, the clinic is hard. But it's going to happen. And when it does, it's gonna radically change, like we saw with yellow pages and taxi cabs. And I think usage is gonna continue to go up. So, I think for us as a firm, it's a great opportunity because the needs in capital around the chips and data center and power are so enormous, and we're really uniquely set up to go after that. And then in some of our growthier strategies, we can also make some very interesting investments on things that have a lot of upside. And at the same time, we've gotta look at our legacy portfolios and try to limit the risk and push to get those companies to transform. Great. Well, it'll be fascinating to watch for sure, so all right. Another hot topic, credit, not surprisingly, and it feels like the news flow around that has died down a little bit, but it's clearly still very much top of mind for investors. When we sort of take ourselves out of the day-to-day news flow related to this topic, talk to us maybe a little bit of what you guys are seeing as far as credit trends across the portfolio, not just in direct lending, but maybe in your private credit holistically. That's part one, and then part two, the development with Bank of England. You and I think some of the others are effectively volunteering to participate in this stress test, which might be. Yeah. Quite helpful to the ecosystem. Yeah. What do you think it's gonna look like? Well, I would step back and try to focus on what's happening and why is it happening here? What we've really seen is an innovation that's been taking place now, really in an accelerating way over the last five, seven years, but started earlier than that. We've been at direct lending now for two decades. You know, we have a private credit business that doesn't use balance sheet. That between corporate and real estate credit is $500 billion and is growing very rapidly, and we have competitors who are obviously growing as well. They may be using a different approach in how they do things. Why is it happening? It's happening because what you're basically doing is bringing investors directly up to borrowers. It's not that much different than what Amazon did to revolutionize the delivery of goods to consumers. And obviously, we still have a large brick-and-mortar retail world, but we have other players now who do this online at scale. And why are borrowers embracing this, both on the investment-grade and non-investment-grade side? It's because we're able to do things with speed and flexibility that at times you can't do in the public markets. Why are investors embracing it? Well, they're producing higher returns. So, for our insurance clients on the investment-grade side, year to date, they've earned 170 basis point premium over comparably rated securities. It's not a surprise. Our insurance business is growing at 20% a year. When you're able to deliver that premium, it becomes even more important, by the way, as base rates come down. So, on the non-investment-grade side, similar dynamic. We've produced in our non-traded BDC 300 basis points of premium return. And that is the reason why this is happening. And by the way, as a side note, it's also deleveraging the system. Our non-traded BDC is probably one-tenth as leveraged as you would see in a financial institution. And you also get better duration matching. You don't have daily deposits and so forth. So, it's helpful for the financial system. Obviously, banks are hugely important and play a valuable role, but we've added something that is helping consumers and businesses and investors. Now, your question is, what's happened to credit quality? And I'd say, in general, credit quality looks pretty darn good. You know, if you look across, again, our non-traded BDC, the average loan to value we made was 40% at origination, so a fraction of what it was back in the 2006, 2007 days. EBITDA this year at the companies in the portfolio is up 9%. And of course, we've got a Fed now that's cutting rates, which is helpful for the borrowers. Now, will there be isolated credit incidents? Sure. Right. Could there be disruption given what's going on? Yeah. But the question is, will we have higher losses, higher defaults than and therefore lower returns than the leveraged loan and high-yield market? We don't believe that at all. And so, ultimately, this is gonna be about delivering enduring premiums and returns without taking on incremental risk. That's what we've done in both investment-grade and non-investment-grade. That's why I think it'll continue. To your point on the stress test, you know, if they show up and say, "Hey, you're doing non-investment-grade lending and using BCRED as an example, $80 billion balance sheet, $50 billion of equity. They compare that to the financial institutions, they rate who would have $5 billion of equity. It seems a little different to me. Right. And so, I think whenever you have this kind of innovation and change in a market, it's obvious, you know, people are gonna wanna ask questions. You also are creating some disruption to existing business models. But in my mind, this is a structural change that will continue, and you will continue to see more capital allocated. Yes, you are trading away some liquidity, and so you're not gonna see this for the full fixed-income market. There are plenty of things that will continue to be done by banks. But private credit is not some sort of short-term blip. It's not adding enormous risk to the system. It is a fundamentally sound change in the system that's helping the overall financial market. It's helping borrowers. It's helping investors. Yeah. That all makes a lot of sense. Why don't we spend a couple minutes on another kind of mega trend out there, which is the wealth market? Enormously powerful from a growth perspective for you and many of your peers. But I do think Blackstone is still by far and away the leader. I think you have roughly 50% market share of the industry fee pool in this market. So, let's spend a couple of minutes there. First, I'd love to get your perspective on the roadmap for additional product innovation. So, you guys were early with BREIT and BCRED. You obviously have a product in private equity. You have one in infra. What does the makeup of this product set look like over the next couple of years? What else are you working on that'll be rolling out in the next one to two years? Again, the why, why have we had so much success? Why have we gotten to $290 billion in the wealth space? It's because we started a long time ago, 23 years ago, in drawdown funds, 15 years ago in building a dedicated team, almost a decade ago with creating semi-liquids with BREIT, and bringing the fees down and the quality of investing way up, and it's all performance-driven. Again, you're asking investors to make a trade. You have to deliver a premium performance. You have to give them something different in terms of diversification, access to things they couldn't otherwise have. We've been very successful at that in both good times and bad. That gives me a lot of confidence. The keys to me and the market to us are that what we introduce, delivers those returns. And we're not just creating product because that's what can sell, but we can have an enduring advantage. We have, we have generally done things that are broad-based and scale because we know certain markets can go in and out of favor pricing-wise. We've made decisions over time where we've chosen, in the case of private equity and infrastructure, to sell only to qualified purchasers because the 40 Act limitations we thought would've made it harder to deliver, in those asset classes the kind of returns and scale we wanted. To your question, I think you'll see us find ways to put some of these products together, simpler solutions. You'll see us do some things in collaboration. We announced our alliance with Vanguard and Wellington. I think you'll see some of that introduced in the new year. We've done a multi-asset credit product. There are a couple of other things I think I'm gonna hold off on the announcement, just like what the theme of this year's holiday video will be. We're gonna. I was gonna try for that later, but you already shut me down on this one, so. Yeah. What I would say is there is a lot of Enthusiasm, but again, just like with our institutions, just like with our insurance clients, we've got a deliver performance. And so, when you look at individual investors, they're probably about 1% allocated to private assets versus a third for institutions. That still feels like it has a long way to run. And I think our positioning in the market, given the strength of the brand and the strength of the performance and then the breadth of the product offerings, that feels like a really, really good combination. And, you know, in Q3, we saw a doubling of inflows over last year's levels. In a better market environment, given the breadth of what we're doing, it feels pretty good to us. Yeah. Let's talk a little bit more, what's going on on the ground, I guess today. Obviously, lots of focus on credit, like we talked about earlier. It's really the first time that, you know, the growth in this private credit part of the market with wealth, gets tested, like we are seeing now with a lot of headlines and the barrage of headlines on the, you know, this part of the market for the last couple of months now. Obviously, BCRED had a, you know, filing out this morning. Redemption picked up, you know, not quite to 5%, but close, but also gross sales slowed down as of December 1st. So, what are you hearing on the ground from financial advisors, the wirehouse, the gatekeepers in terms of this being either a short-term reaction to the news flow, or something more substantive? There's obviously been an enormous amount of noise out there around private credit, much of which we would push back with the facts. But I would point out a little differently, Alex. We've been through a couple of these tests before. In fact, we've gone north of the 5% in 2022, went north of it in 2023 after Silicon Valley Bank. We saw a pretty meaningful spike after Labor Day. Whenever you get a lot of negative headlines, particularly among the individual investors, you can see a shift in sentiment. What matters ultimately, again, is performance. In October, we produced 70 basis points of performance. We feel really good about the underlying both credit quality. We talked about the growth in the EBITDA in terms of the companies here, the low loan to value. To me, that's ultimately what is determinative here. And so, you know, as I said, you could be in an environment where you'll have a couple you know, several companies with defaults. The question on those things are, have you marked those appropriately? Do you know how to handle it? Are you senior secured? We feel really great about what we've been doing. And by the way, on the flow side, despite relentlessly negative press, in the fourth quarter, we had $3.3 billion of gross inflows, and we still had implied $1.2 billion of net inflows. I think, again, what matters is performance. I think, interestingly, you know, we went through BREIT, which was a different sort of environment, obviously a much harsher downturn in the underlying asset class. We significantly outperformed, and my confidence in that product is extraordinarily high. And so, again, if we show that we can outperform the leveraged loan market, the high-yield market, and enduring premium in returns, then I think financial investors will continue to subscribe to these products. That's, to me, the key focus. Great. That's all that makes sense. Okay. Let's talk about another important area for Blackstone, which is obviously the real estate business. We talked a little bit about that before we got on stage, but clearly feels like the sentiment from some of your peers and then marketplace broadly around real estate is starting to improve. It's something you talked about as well in the past. So, give us your expectations around sort of growth in your real estate franchise for the next 12-18 months. Well, it's been a difficult three and a half years, no question about it. COVID hurt the office market. You had this huge step function increase in cost of capital. So, Cap rates went up a bunch. Values came under pressure. And investors, you know, not surprisingly, don't feel great 'cause they haven't had a great experience during this period of time. But when you look under the hood, the pillars of a recovery are coming closer, right? So, you've seen values fall. This is definitely not your bubble asset class, that's for sure. And yet, underlying demand for housing will continue, logistics for going to a resort hotel. So, it's an asset class that has fallen out of favor but has long-term strong demand profile. Supply is down almost two-thirds, new starts in terms of logistics and rental housing, which takes time to play out but is very beneficial. Cost of capital, base rates down, spreads down. Borrowing costs are probably down about 40% from their wides of a couple of years ago, and you're beginning to see transaction activity pick up. It can take some time, but it certainly feels like we're getting closer, and so I think, for us, we focus on these, the picture that's coming, and we're trying to invest ahead of it, so not a surprise. We've been privatizing a bunch of REITs. We announced a commercial real estate REIT in Hawaii, Alexander & Baldwin this week for $2.3 billion. This reflects our view of real estate and what we do believe will be a coming recovery. Great. Okay. Let's pivot from kind of the themes to maybe some of the financial KPIs for the business, really starting with fundraising. Again, I think over $225 billion over the last 12 months of inflows across the franchise. As you look out into 2026, what are your early expectations for fundraising? I think it should be a very good year. You know, we talked about wealth, a lot of momentum there, given the introduction of new products and the success of existing products. I feel very good about that. When I think about our insurance business, again, more and more insurers are beginning to recognize to be competitive. They need this additional yield. Our open architecture model, not competing with them, is a very helpful space to be and to be able to do it broadly. I think that should continue to grow. Again, I mentioned 20% growth in the last quarter. And then our institutional business, where people have always said is a mature business, you know, it's grown 60% the last five years. I think over the last 12 months, it's about half of our flows in. It's a, you know, a number of those things are drawdown, so you send the money back. You don't get that perpetual compounding thing, but the strength of our franchise in energy transition, in Asia, private equity, in secondaries, in credit, in so many areas, in real estate, you know, in life sciences, we have so many areas where we've delivered for clients that it feels to me we will continue to have another good year. We have a good fundraising cycle ahead of us, so I would say right now, with this kind of market backdrop, it feels pretty good. Yeah. Well, speaking of market backdrop, you know, the outlook for realization and broadly capital markets activity has definitely been a bright spot in these conversations for the last two days. So, you've been also pretty bullish on that for a couple of quarters. I think one of the points you made is that Blackstone's IPO pipeline is the highest it's been since 2021. Talk to us a little bit more about your expectations for realizations over the next 12 months and maybe help us frame that in some sort of a historical context because it does feel like there's a lot of pent-up demand on the exit side. Well, you know, we saw M&A and IPO activity basically crater during that sharp increase in rates, and it's still running today, you know, well down versus historical levels as a % of the market cap of the stock market, and so, to us, it feels natural now as you get cost of capital coming down, spreads coming down, a strong equity market that you begin to see an IPO market that's emerging. Yes, we did three in the quarter. In the third quarter, we have a large one in the market today. We've got an active pipeline for next year. M&A activity in the U.S., I think quarter to date, up almost double, and I wouldn't underestimate the power of the regulatory environment changing. And so, I think the ability to have confidence that you can buy or sell a business really matters. I still think we're operating, you know, well below historic levels. This year, you had Labor Day, the government shut down. I think if you have smoother sailing next year with lower cost of capital and some confidence, I think you'll see a meaningful pickup. So, I would be in the camp that we've sort of moved from sort of taxi to takeoff as it relates to transaction activity, the IPO market. That feels pretty good to us, and obviously, that's good for our business. It should be good for our shareholders. Great. With a couple of minutes left on the clock, I'd love to wrap up with a couple of thoughts on evolution of the business, given the fact that you guys celebrated your 40th year anniversary this year. You've been there, I believe, for 33 years of those 40. Couple that with real performance of the stock, and it's not just you, but the whole space obviously struggled a bit this year, coming off a phenomenal two-year run, and I think that's important to acknowledge. But how do you think the company's evolving if you see further points in the cycle where there's a bigger disconnect between the value and what your forward looks like? How are you thinking about capital management in that context? Or any other thoughts around that would be helpful? Well, I feel great about the underlying business. We did have this 40th anniversary. We brought all our partners together around the world. When we talked about all the potential markets, all the potential growth, we feel really good. We still think alternatives, even though they've grown a lot and it seems big, it's a $13 trillion industry. When you think about public equities and corporate fixed income, asset-backed fixed income, infrastructure, residential, commercial, real estate, I don't know, it's a $300-plus trillion market out there for us potentially to invest capital into. The total business is equal to the market cap of, I don't know, four stocks in the United States today. I think there's still a lot of room to go here. And to me, the key continues to be delivering for the customers, making sure we get right these technological changes. We're able to intervene in businesses. We've got a really rigorous discipline process that we attract and retain amazing people, that we have an entrepreneurial spirit. I mean, Steve Schwarzman has really sort of pushed that into the firm, this idea. We're constantly thinking about what we can do better. We are not a place, despite our size scale, that is sitting around saying, "Hey, we're there." You know, I, I described recently at our CEO conference, our boardroom meetings, you would think we're a failing company. I mean, the conversation is a relentless focus on, "We miss this market. This competitor's done this." This, I, I feel for us, we have this vast expanse in front of us. The key thing is we've got to maintain the quality of our people, our integration, and process. And being able to be a full-service capital solutions provider in the private markets, we can give you super low-cost investment-grade debt. We can give you more junior debt. We can give you pref equity. We can do control. We can co-invest as a minority. We can do stakes, secondary, everything across the platform. That is really powerful and do it increasingly on a global basis. And of course, do it without a balance sheet. All the capital we're managing is third-party capital. We don't owe it back to anybody. It's not an obligation. If rates and spreads tighten, our business is to deliver returns. And so, the way I feel about the business is we are in exactly the same business we've always been. Our plan is to continue to be in that business and to be excellent in it. And things come up and down and cycles and this and that, but if we continue to deliver premium returns in these different areas, our relationships and the strength of our brand, which is really, really powerful and allows us to grow without capital, if we have that, then we can expand a ton in our original institutional business and in a very profound way with insurers and individual investors. So, my optimism about the future is extremely high. And then back to your earlier question, it's nice to be coming to a part of the cycle where things are starting to turn up. So, the long-term, we feel great about, and obviously, the short-term pickup in deal activity, that's also very good. Great. Well, we talked about a lot of themes over the course of the day today. I was hoping you could hit on one more theme, which is your holiday video. So, if you're willing to share anything with us today, that would be of great interest to the crowd. You know, it's, I could tell you, but I'd have to kill you. It's basically what it is, Alex. It's so funny. We're so crazed about it because we don't want it to get out. We don't even tell, you know, our colleagues, partners. They just get their role, like, "Show up. Wear this ridiculous outfit at this time, and we're gonna film you," and I will say, you know, the broader point for us is we wanna be great at what we do. We demand a lot of our people, but we want it to be a human-scale place. We wanna make fun of ourselves, which is what the holiday video is. We wanna have a really integrated culture. It's why every Monday we do our internal Blackstone TV where we connect with people. It's why I do these sort of ridiculous running videos. It's all in an effort to humanize what we do for all our constituents out there, and obviously we've got a lot more, both shareholders, investors. We have 300,000 investors these days. You're reaching a broader audience, and I couldn't be more proud of the quality of the people, what they do, how they give back. We've had a very difficult year because of what happened. We had this horrible shooting, but the pride I have in our people is immense, and so my optimism going forward is very high, but I would say the video will be cringe-worthy, so please don't hold that against me. On that note, thank you so much. Okay. It's great to see you. Thank you all.

Speaker 2: All right. Good afternoon, everybody. Thank you for joining us. We'll get started with our next session. Hopefully everybody's well-fed. Next up, it's my pleasure to introduce John Gray, President and COO of Blackstone. With more than $1.2 trillion in assets under management, Blackstone is the world's largest and most diversified alternative asset manager, distinguished by its expertise across effectively all major sub-verticals within private markets. The firm also has had an enormous amount of success, growing in the wealth channel, as that market continues to expand as well. So, lots to talk about, hopefully lots of good cyclical things to talk about as well, looking out into 2026. So, John, thank you for being here. Always fun to have the conversation with you. All right. all right Good afternoon, everybody. good afternoon everybody Thank you for joining us. thank you for joining us We'll get started with our next session. we'll get started with our next session Hopefully everybody's well-fed. hopefully everybody's well-fed Next up, it's my pleasure to introduce John Gray, President and COO of Blackstone. next up it's my pleasure to introduce john gray president and coo of blackstone With more than $1.2 trillion in assets under management, Blackstone is the world's largest and most diversified alternative asset manager, distinguished by its expertise across effectively all major sub-verticals within private markets. with more than $1.2 trillion in assets under management blackstone is the world's largest and most diversified alternative asset manager distinguished by its expertise across effectively all major sub-verticals within private markets The firm also has had an enormous amount of success, growing in the wealth channel, as that market continues to expand as well. the firm also has had an enormous amount of success growing in the wealth channel as that market continues to expand as well So, lots to talk about, hopefully lots of good cyclical things to talk about as well, looking out into 2026. so lots to talk about hopefully lots of good cyclical things to talk about as well looking out into 2026 So, John, thank you for being here. so john thank you for being here Always fun to have the conversation with you. always fun to have the conversation with you

Speaker 1: Alex, I'm happy to be back. Alex, I'm happy to be back. alex i'm happy to be back

Speaker 2: It's great. Look, why don't we start with a bit of question on the macro side first with economic outlook. Given Blackstone's breadth of investment capabilities, you always have very unique perspectives in terms of what's going on on the ground, real-time, with respect to corporate health. So, talk to us a little bit about that and what 2026 looks like for the corporate world. It's great. it's great Look, why don't we start with a bit of question on the macro side first with economic outlook. look why don't we start with a bit of question on the macro side first with economic outlook Given Blackstone's breadth of investment capabilities, you always have very unique perspectives in terms of what's going on on the ground, real-time, with respect to corporate health. given blackstone's breadth of investment capabilities you always have very unique perspectives in terms of what's going on on the ground real-time with respect to corporate health So, talk to us a little bit about that and what 2026 looks like for the corporate world. so talk to us a little bit about that and what 2026 looks like for the corporate world

Speaker 1: You know, I think we're a little more optimistic than most people are. The U.S. economy has been incredibly resilient. We had Labor Day, we had a government shutdown, we've had pretty high absolute level of short rates, and yet in Q3, our private equity companies saw 9% revenue growth. I'm sure we're gonna get into private credit. Default rates among non-investment-grade borrowers have been low, profit margins have been increasing, and globally, it's a pretty good picture too. I would say, you know, the things powering it obviously are this AI CapEx cycle. That is clearly the biggest engine of growth, and it's been a great thing, obviously, for our business, I think for the alternative space overall. I'd say the weakness is in Europe and then also, around some of the consumer businesses we have, particularly middle and lower income. You know, I think we're a little more optimistic than most people are. you know i think we're a little more optimistic than most people are The U.S. economy has been incredibly resilient. the u.s economy has been incredibly resilient We had Labor Day, we had a government shutdown, we've had pretty high absolute level of short rates, and yet in Q3, our private equity companies saw 9% revenue growth. we had labor day we had a government shutdown we've had pretty high absolute level of short rates and yet in q3 our private equity companies saw 9% revenue growth I'm sure we're gonna get into private credit. i'm sure we're gonna get into private credit Default rates among non-investment-grade borrowers have been low, profit margins have been increasing, and globally, it's a pretty good picture too. default rates among non-investment-grade borrowers have been low profit margins have been increasing and globally it's a pretty good picture too I would say, you know, the things powering it obviously are this AI CapEx cycle. i would say you know the things powering it obviously are this ai capex cycle That is clearly the biggest engine of growth, and it's been a great thing, obviously, for our business, I think for the alternative space overall. that is clearly the biggest engine of growth and it's been a great thing obviously for our business i think for the alternative space overall I'd say the weakness is in Europe and then also, around some of the consumer businesses we have, particularly middle and lower income. i'd say the weakness is in europe and then also around some of the consumer businesses we have particularly middle and lower income So, water parks, theme parks, hotels. If you looked in the November Smith Travel data for hotels, revenue in luxury was up 6-7%. It was down the same in economy. So, water parks, theme parks, hotels. so water parks theme parks hotels If you looked in the November Smith Travel data for hotels, revenue in luxury was up 6-7%. if you looked in the november smith travel data for hotels revenue in luxury was up 6-7% It was down the same in economy. it was down the same in economy You're definitely seeing a bit of this K-shaped economy, but overall, I'd say it's a pretty good picture when I look at it net from our company's vantage point. I'd say the other encouraging thing is the inflation data, to us, has continued to look better than what you read about, and I—we often find that our 270 companies and the 13,000 pieces of real estate give us better insight, so rental housing, inflation is running well below the 4% that's in the CPI data today. In the labor market, what I would say we see is basically the difficulty of hiring has gone way down. 93% of our CEOs three years ago would've said it's hard to hire. Today, it's 30%. Hourly wages have gone from 4.1% a year ago to 3% at our U.S. companies. You're definitely seeing a bit of this K-shaped economy, but overall, I'd say it's a pretty good picture when I look at it net from our company's vantage point. you're definitely seeing a bit of this k-shaped economy but overall i'd say it's a pretty good picture when i look at it net from our company's vantage point I'd say the other encouraging thing is the inflation data, to us, has continued to look better than what you read about, and I—we often find that our 270 companies and the 13,000 pieces of real estate give us better insight, so rental housing, inflation is running well below the 4% that's in the CPI data today. i'd say the other encouraging thing is the inflation data to us has continued to look better than what you read about and i—we often find that our 270 companies and the 13,000 pieces of real estate give us better insight so rental housing inflation is running well below the 4% that's in the cpi data today In the labor market, what I would say we see is basically the difficulty of hiring has gone way down. 93% of our CEOs three years ago would've said it's hard to hire. in the labor market what i would say we see is basically the difficulty of hiring has gone way down 93% of our ceos three years ago would've said it's hard to hire Today, it's 30%. today it's 30% Hourly wages have gone from 4.1% a year ago to 3% at our U.S. companies. hourly wages have gone from 4.1% a year ago to 3% at our u.s companies So, there's a bit of stickiness in goods inflation, but I think the Fed will actually get data here over time that will allow them to cut rates, so if you've got a resilient economy, cost of capital coming down, obviously we have spreads that have tightened a bunch in investment-grade and high-yield, that's helpful, and then we're on the cusp of this massive both investment boom followed by what I think will be a very significant productivity boom from the technology, and I think it's hard to get really negative in aggregate when you overlay that with the other set of facts, so that makes us all more inclined, which is why you see us active investing. So, there's a bit of stickiness in goods inflation, but I think the Fed will actually get data here over time that will allow them to cut rates, so if you've got a resilient economy, cost of capital coming down, obviously we have spreads that have tightened a bunch in investment-grade and high-yield, that's helpful, and then we're on the cusp of this massive both investment boom followed by what I think will be a very significant productivity boom from the technology, and I think it's hard to get really negative in aggregate when you overlay that with the other set of facts, so that makes us all more inclined, which is why you see us active investing. so there's a bit of stickiness in goods inflation but i think the fed will actually get data here over time that will allow them to cut rates so if you've got a resilient economy cost of capital coming down obviously we have spreads that have tightened a bunch in investment-grade and high-yield that's helpful and then we're on the cusp of this massive both investment boom followed by what i think will be a very significant productivity boom from the technology and i think it's hard to get really negative in aggregate when you overlay that with the other set of facts so that makes us all more inclined which is why you see us active investing

Speaker 2: Great. Let's translate that into the investment activity, which has really accelerated for you guys over the last couple of quarters. I think about $140 billion of capital deployed over the last 12 months, and again, the pace of that deployment has really accelerated. I guess looking out into 2026, can we talk a little bit about key themes and investment areas where you're finding the most attractive, risk-adjusted returns, and also by the same token, talk a little bit about areas you're trying to avoid? Great. great Let's translate that into the investment activity, which has really accelerated for you guys over the last couple of quarters. let's translate that into the investment activity which has really accelerated for you guys over the last couple of quarters I think about $140 billion of capital deployed over the last 12 months, and again, the pace of that deployment has really accelerated. i think about $140 billion of capital deployed over the last 12 months and again the pace of that deployment has really accelerated I guess looking out into 2026, can we talk a little bit about key themes and investment areas where you're finding the most attractive, risk-adjusted returns, and also by the same token, talk a little bit about areas you're trying to avoid? i guess looking out into 2026 can we talk a little bit about key themes and investment areas where you're finding the most attractive risk-adjusted returns and also by the same token talk a little bit about areas you're trying to avoid

Speaker 1: Yeah. I mean, if you subscribe to our worldview that bringing superintelligence at scale at very low cost is gonna be transformative, you try to figure out how can I invest in that and take the least amount of risk. And I think we've become the leading investor in the infrastructure around this. Massive investments on data centers, but long-term lease data centers where you don't put a shovel in the ground until you have a 15-plus-year lease with a very large market cap company. Huge investments in energy and power. So that's generation, transmission, utilities, electrical equipment, everything we're gonna be doing, the data centers, the robots, the autonomous vehicles, it's gonna plug into the wall. So, making huge bets. And in our business, what's great is we can express it in infrastructure, in energy transition, in real estate, on the equity side, on the debt side. Yeah. yeah I mean, if you subscribe to our worldview that bringing superintelligence at scale at very low cost is gonna be transformative, you try to figure out how can I invest in that and take the least amount of risk. i mean if you subscribe to our worldview that bringing superintelligence at scale at very low cost is gonna be transformative you try to figure out how can i invest in that and take the least amount of risk And I think we've become the leading investor in the infrastructure around this. and i think we've become the leading investor in the infrastructure around this Massive investments on data centers, but long-term lease data centers where you don't put a shovel in the ground until you have a 15-plus-year lease with a very large market cap company. massive investments on data centers but long-term lease data centers where you don't put a shovel in the ground until you have a 15-plus-year lease with a very large market cap company Huge investments in energy and power. huge investments in energy and power So that's generation, transmission, utilities, electrical equipment, everything we're gonna be doing, the data centers, the robots, the autonomous vehicles, it's gonna plug into the wall. so that's generation transmission utilities electrical equipment everything we're gonna be doing the data centers the robots the autonomous vehicles it's gonna plug into the wall So, making huge bets. so making huge bets And in our business, what's great is we can express it in infrastructure, in energy transition, in real estate, on the equity side, on the debt side. and in our business what's great is we can express it in infrastructure in energy transition in real estate on the equity side on the debt side So, I would say that infrastructure around what's happening continues to be a huge theme for us. I would say, coming to alternatives, we really like the secondary space. We're the largest player in that. There's a lot of push, obviously, for DPI. Alternatives continue to grow. Being able to provide liquidity there at scale is a real advantage. We like that area. I would say, some of these big corporate solutions deals we're doing on the private credit side. We've done with Rogers and EQT in the midstream space and Sempra Energy, where you're helping them in very capital-intensive businesses do things that are capital-efficient for them and lower their cost of capital, and that at our scale on the credit side is an area that is. There's a relatively small number of competitors to do that. So, I would say that infrastructure around what's happening continues to be a huge theme for us. so i would say that infrastructure around what's happening continues to be a huge theme for us I would say, coming to alternatives, we really like the secondary space. i would say coming to alternatives we really like the secondary space We're the largest player in that. we're the largest player in that There's a lot of push, obviously, for DPI. there's a lot of push obviously for dpi Alternatives continue to grow. alternatives continue to grow Being able to provide liquidity there at scale is a real advantage. being able to provide liquidity there at scale is a real advantage We like that area. we like that area I would say, some of these big corporate solutions deals we're doing on the private credit side. i would say some of these big corporate solutions deals we're doing on the private credit side We've done with Rogers and EQT in the midstream space and Sempra Energy, where you're helping them in very capital-intensive businesses do things that are capital-efficient for them and lower their cost of capital, and that at our scale on the credit side is an area that is. we've done with rogers and eqt in the midstream space and sempra energy where you're helping them in very capital-intensive businesses do things that are capital-efficient for them and lower their cost of capital and that at our scale on the credit side is an area that is There's a relatively small number of competitors to do that. there's a relatively small number of competitors to do that I would say commercial real estate, which I'm sure we'll hit on, has had a tough three-and-a-half-year run, but you can sort of see the pillars of this recovery starting to come in place, and we're definitely getting closer to that, and then geographically, I would point out in Asia, two places we love, India, which has been hugely successful for us, both in real estate and private equity. That is an economy that I think will continue to be the fastest growing of the big 20 economies out there, where the physical capital markets, legal infrastructure continues to improve, and then Japan, where the growth won't be as high, but there's a real openness to foreign capital coming in, and that is unlocking all sorts of assets. We bought a $3 billion luxury real estate complex from a railroad Company this year. I would say commercial real estate, which I'm sure we'll hit on, has had a tough three-and-a-half-year run, but you can sort of see the pillars of this recovery starting to come in place, and we're definitely getting closer to that, and then geographically, I would point out in Asia, two places we love, India, which has been hugely successful for us, both in real estate and private equity. i would say commercial real estate which i'm sure we'll hit on has had a tough three-and-a-half-year run but you can sort of see the pillars of this recovery starting to come in place and we're definitely getting closer to that and then geographically i would point out in asia two places we love india which has been hugely successful for us both in real estate and private equity That is an economy that I think will continue to be the fastest growing of the big 20 economies out there, where the physical capital markets, legal infrastructure continues to improve, and then Japan, where the growth won't be as high, but there's a real openness to foreign capital coming in, and that is unlocking all sorts of assets. that is an economy that i think will continue to be the fastest growing of the big 20 economies out there where the physical capital markets legal infrastructure continues to improve and then japan where the growth won't be as high but there's a real openness to foreign capital coming in and that is unlocking all sorts of assets We bought a $3 billion luxury real estate complex from a railroad Company this year. we bought a $3 billion luxury real estate complex from a railroad company this year We did a couple of privatizations, and that is a market we also like, so one of the great things about our business is having global scale and being able to play in different markets, different parts of the capital structure. What I don't love, I would say, emerging markets generally away from India and maybe the Middle East, that has been a tough place. We haven't done a lot of it, but we just haven't, over time, achieved real return premiums for the risk, and perhaps, and definitely much more importantly, businesses at risk of disruption from AI. Everybody's talking about bubbles in AI, and yes, there'll be plenty of losers in AI, but in the race, what's happening to legacy businesses? We did a couple of privatizations, and that is a market we also like, so one of the great things about our business is having global scale and being able to play in different markets, different parts of the capital structure. we did a couple of privatizations and that is a market we also like so one of the great things about our business is having global scale and being able to play in different markets different parts of the capital structure What I don't love, I would say, emerging markets generally away from India and maybe the Middle East, that has been a tough place. what i don't love i would say emerging markets generally away from india and maybe the middle east that has been a tough place We haven't done a lot of it, but we just haven't, over time, achieved real return premiums for the risk, and perhaps, and definitely much more importantly, businesses at risk of disruption from AI. we haven't done a lot of it but we just haven't over time achieved real return premiums for the risk and perhaps and definitely much more importantly businesses at risk of disruption from ai Everybody's talking about bubbles in AI, and yes, there'll be plenty of losers in AI, but in the race, what's happening to legacy businesses? everybody's talking about bubbles in ai and yes there'll be plenty of losers in ai but in the race what's happening to legacy businesses

Speaker 2: Yeah. Yeah. yeah

Speaker 1: If autonomous vehicles continue to gain share, which I suspect, well, what does that mean for an auto insurance company? What does that mean for a company who's focused on collisions? And yes, it may take 15 or 20 years, but what begins to happen to multiples? We saw that in the media business. Or we've seen that in other industries. So, I would say disruption around, you know, horizontal enterprise software companies, IT services businesses, and then lots of rules-based businesses, legal, accounting, transaction processing. I think you've got be very mindful. And if I was giving one piece of advice as investors, this is the main thing to focus on. If autonomous vehicles continue to gain share, which I suspect, well, what does that mean for an auto insurance company? if autonomous vehicles continue to gain share which i suspect well what does that mean for an auto insurance company What does that mean for a company who's focused on collisions? what does that mean for a company who's focused on collisions And yes, it may take 15 or 20 years, but what begins to happen to multiples? and yes it may take 15 or 20 years but what begins to happen to multiples We saw that in the media business. we saw that in the media business Or we've seen that in other industries. or we've seen that in other industries So, I would say disruption around, you know, horizontal enterprise software companies, IT services businesses, and then lots of rules-based businesses, legal, accounting, transaction processing. so i would say disruption around you know horizontal enterprise software companies it services businesses and then lots of rules-based businesses legal accounting transaction processing I think you've got be very mindful. i think you've got be very mindful And if I was giving one piece of advice as investors, this is the main thing to focus on. and if i was giving one piece of advice as investors this is the main thing to focus on

Speaker 2: Yeah. No, lots, lots to unpack there. Thank you for that. Why don't we double-click, only leave that first theme and probably the biggest theme, which is around AI. Blackstone was very early in identifying the secular opportunity. We've talked about it, feels like for years, but it's finally kind a here. Talk to us, I guess, maybe a little bit more about how you envision this market evolving from an investment perspective, where it feels like other people are onto this as well and the opportunity set is still there, but there's a lot more capital, obviously, chasing that around right now. So what are the parts of the market where you still feel comfortable deploying capital? What do you see in terms of performance of these assets relative to your expectations? And then within AI, what are the risks? Yeah. yeah No, lots, lots to unpack there. no lots lots to unpack there Thank you for that. thank you for that Why don't we double-click, only leave that first theme and probably the biggest theme, which is around AI. why don't we double-click only leave that first theme and probably the biggest theme which is around ai Blackstone was very early in identifying the secular opportunity. blackstone was very early in identifying the secular opportunity We've talked about it, feels like for years, but it's finally kind a here. we've talked about it feels like for years but it's finally kind a here Talk to us, I guess, maybe a little bit more about how you envision this market evolving from an investment perspective, where it feels like other people are onto this as well and the opportunity set is still there, but there's a lot more capital, obviously, chasing that around right now. talk to us i guess maybe a little bit more about how you envision this market evolving from an investment perspective where it feels like other people are onto this as well and the opportunity set is still there but there's a lot more capital obviously chasing that around right now So what are the parts of the market where you still feel comfortable deploying capital? so what are the parts of the market where you still feel comfortable deploying capital What do you see in terms of performance of these assets relative to your expectations? what do you see in terms of performance of these assets relative to your expectations And then within AI, what are the risks? and then within ai what are the risks

Speaker 1: Yeah. So, this has been the best-performing area for our firm. There's no question, you know, we bought QTS in 2021 for $10 billion, and its lease capacity's up 12-fold. And we did that in our infrastructure business. We did that in BREIT and our institutional real estate core plus funds. That turned out to be a really good decision. We bought the biggest data center player in Asia. I would say, surprisingly, despite the capital that's moved there, because of the constraints of power, it's still an attractive place to deploy capital. And as I said, you're not really investing the capital at scale until you have a long-term lease. So, these are not condos in Miami. This is a much safer underlying activity. And so, I continue to believe that's a really good way to invest in this. Yeah. yeah So, this has been the best-performing area for our firm. so this has been the best-performing area for our firm There's no question, you know, we bought QTS in 2021 for $10 billion, and its lease capacity's up 12-fold. there's no question you know we bought qts in 2021 for $10 billion and its lease capacity's up 12-fold And we did that in our infrastructure business. and we did that in our infrastructure business We did that in BREIT and our institutional real estate core plus funds. we did that in breit and our institutional real estate core plus funds That turned out to be a really good decision. that turned out to be a really good decision We bought the biggest data center player in Asia. we bought the biggest data center player in asia I would say, surprisingly, despite the capital that's moved there, because of the constraints of power, it's still an attractive place to deploy capital. i would say surprisingly despite the capital that's moved there because of the constraints of power it's still an attractive place to deploy capital And as I said, you're not really investing the capital at scale until you have a long-term lease. and as i said you're not really investing the capital at scale until you have a long-term lease So, these are not condos in Miami. so these are not condos in miami This is a much safer underlying activity. this is a much safer underlying activity And so, I continue to believe that's a really good way to invest in this. and so i continue to believe that's a really good way to invest in this I do believe, and by the way, again, both on the equity side and the debt side, we talked about the energy. I just, if there was one theme you could believe in, it is power. I do believe, and by the way, again, both on the equity side and the debt side, we talked about the energy. i do believe and by the way again both on the equity side and the debt side we talked about the energy I just, if there was one theme you could believe in, it is power. i just if there was one theme you could believe in it is power

Speaker 2: Yeah. Yeah. yeah

Speaker 1: I just, I can't come up with a scenario where we're not using significantly more power five years from today, 10, 15 years. It feels like we're going to a world where there's a lot of need for electricity. I'd say, as you move up into more of the direct business, we are investing, but obviously we recognize the risk. It's with different pools of capital. We've invested in a couple of large language models, companies. We have begun to invest in a few of the application software companies, companies like OpenEvidence in the medical field or Norm Ai in the legal field. And some of these companies have the opportunity, if they're able to execute, to grow to be very big and very profitable, but we recognize not everyone's gonna win. I just, I can't come up with a scenario where we're not using significantly more power five years from today, 10, 15 years. i just i can't come up with a scenario where we're not using significantly more power five years from today 10 15 years It feels like we're going to a world where there's a lot of need for electricity. it feels like we're going to a world where there's a lot of need for electricity I'd say, as you move up into more of the direct business, we are investing, but obviously we recognize the risk. i'd say as you move up into more of the direct business we are investing but obviously we recognize the risk It's with different pools of capital. it's with different pools of capital We've invested in a couple of large language models, companies. we've invested in a couple of large language models companies We have begun to invest in a few of the application software companies, companies like OpenEvidence in the medical field or Norm Ai in the legal field. we have begun to invest in a few of the application software companies companies like openevidence in the medical field or norm ai in the legal field And some of these companies have the opportunity, if they're able to execute, to grow to be very big and very profitable, but we recognize not everyone's gonna win. and some of these companies have the opportunity if they're able to execute to grow to be very big and very profitable but we recognize not everyone's gonna win What we're trying to do is figuring out how to play this, recognizing what's coming, and again, not taking too much risk. On the traditional sort of private equity side, we're also looking at businesses where we think we can potentially transform them. What we're trying to do is figuring out how to play this, recognizing what's coming, and again, not taking too much risk. what we're trying to do is figuring out how to play this recognizing what's coming and again not taking too much risk On the traditional sort of private equity side, we're also looking at businesses where we think we can potentially transform them. on the traditional sort of private equity side we're also looking at businesses where we think we can potentially transform them Have sort of an AI or DIE strategy where you could buy a healthcare claims processing business or an accounting firm and bring this technology to bear and make them much better in serving their customers and much more productive. So, every investment memo, in the first two pages of the memo, there's at least one paragraph about the AI risk for that business. We've gone through all our portfolios, yellow, red, green, where do we have the most risk? We just see this. Look, it's taking time. That it's a little bit like basic science where they've invented some unbelievable therapies, but getting 'em to the hospital, the clinic is hard. But it's going to happen. And when it does, it's gonna radically change, like we saw with yellow pages and taxi cabs. And I think usage is gonna continue to go up. Have sort of an AI or DIE strategy where you could buy a healthcare claims processing business or an accounting firm and bring this technology to bear and make them much better in serving their customers and much more productive. have sort of an ai or die strategy where you could buy a healthcare claims processing business or an accounting firm and bring this technology to bear and make them much better in serving their customers and much more productive So, every investment memo, in the first two pages of the memo, there's at least one paragraph about the AI risk for that business. so every investment memo in the first two pages of the memo there's at least one paragraph about the ai risk for that business We've gone through all our portfolios, yellow, red, green, where do we have the most risk? we've gone through all our portfolios yellow red green where do we have the most risk We just see this. we just see this Look, it's taking time. look it's taking time That it's a little bit like basic science where they've invented some unbelievable therapies, but getting 'em to the hospital, the clinic is hard. that it's a little bit like basic science where they've invented some unbelievable therapies but getting 'em to the hospital the clinic is hard But it's going to happen. but it's going to happen And when it does, it's gonna radically change, like we saw with yellow pages and taxi cabs. and when it does it's gonna radically change like we saw with yellow pages and taxi cabs And I think usage is gonna continue to go up. and i think usage is gonna continue to go up So, I think for us as a firm, it's a great opportunity because the needs in capital around the chips and data center and power are so enormous, and we're really uniquely set up to go after that. And then in some of our growthier strategies, we can also make some very interesting investments on things that have a lot of upside. And at the same time, we've gotta look at our legacy portfolios and try to limit the risk and push to get those companies to transform. So, I think for us as a firm, it's a great opportunity because the needs in capital around the chips and data center and power are so enormous, and we're really uniquely set up to go after that. so i think for us as a firm it's a great opportunity because the needs in capital around the chips and data center and power are so enormous and we're really uniquely set up to go after that And then in some of our growthier strategies, we can also make some very interesting investments on things that have a lot of upside. and then in some of our growthier strategies we can also make some very interesting investments on things that have a lot of upside And at the same time, we've gotta look at our legacy portfolios and try to limit the risk and push to get those companies to transform. and at the same time we've gotta look at our legacy portfolios and try to limit the risk and push to get those companies to transform

Speaker 2: Great. Well, it'll be fascinating to watch for sure, so all right. Another hot topic, credit, not surprisingly, and it feels like the news flow around that has died down a little bit, but it's clearly still very much top of mind for investors. When we sort of take ourselves out of the day-to-day news flow related to this topic, talk to us maybe a little bit of what you guys are seeing as far as credit trends across the portfolio, not just in direct lending, but maybe in your private credit holistically. That's part one, and then part two, the development with Bank of England. You and I think some of the others are effectively volunteering to participate in this stress test, which might be. Great. great Well, it'll be fascinating to watch for sure, so all right. well it'll be fascinating to watch for sure so all right Another hot topic, credit, not surprisingly, and it feels like the news flow around that has died down a little bit, but it's clearly still very much top of mind for investors. another hot topic credit not surprisingly and it feels like the news flow around that has died down a little bit but it's clearly still very much top of mind for investors When we sort of take ourselves out of the day-to-day news flow related to this topic, talk to us maybe a little bit of what you guys are seeing as far as credit trends across the portfolio, not just in direct lending, but maybe in your private credit holistically. when we sort of take ourselves out of the day-to-day news flow related to this topic talk to us maybe a little bit of what you guys are seeing as far as credit trends across the portfolio not just in direct lending but maybe in your private credit holistically That's part one, and then part two, the development with Bank of England. that's part one and then part two the development with bank of england You and I think some of the others are effectively volunteering to participate in this stress test, which might be. you and i think some of the others are effectively volunteering to participate in this stress test which might be

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Quite helpful to the ecosystem. Quite helpful to the ecosystem. quite helpful to the ecosystem

Speaker 1: Yeah. Yeah. yeah

Speaker 2: What do you think it's gonna look like? What do you think it's gonna look like? what do you think it's gonna look like

Speaker 1: Well, I would step back and try to focus on what's happening and why is it happening here? What we've really seen is an innovation that's been taking place now, really in an accelerating way over the last five, seven years, but started earlier than that. We've been at direct lending now for two decades. You know, we have a private credit business that doesn't use balance sheet. That between corporate and real estate credit is $500 billion and is growing very rapidly, and we have competitors who are obviously growing as well. They may be using a different approach in how they do things. Why is it happening? It's happening because what you're basically doing is bringing investors directly up to borrowers. It's not that much different than what Amazon did to revolutionize the delivery of goods to consumers. Well, I would step back and try to focus on what's happening and why is it happening here? well i would step back and try to focus on what's happening and why is it happening here What we've really seen is an innovation that's been taking place now, really in an accelerating way over the last five, seven years, but started earlier than that. what we've really seen is an innovation that's been taking place now really in an accelerating way over the last five seven years but started earlier than that We've been at direct lending now for two decades. we've been at direct lending now for two decades You know, we have a private credit business that doesn't use balance sheet. you know we have a private credit business that doesn't use balance sheet That between corporate and real estate credit is $500 billion and is growing very rapidly, and we have competitors who are obviously growing as well. that between corporate and real estate credit is $500 billion and is growing very rapidly and we have competitors who are obviously growing as well They may be using a different approach in how they do things. they may be using a different approach in how they do things Why is it happening? why is it happening It's happening because what you're basically doing is bringing investors directly up to borrowers. it's happening because what you're basically doing is bringing investors directly up to borrowers It's not that much different than what Amazon did to revolutionize the delivery of goods to consumers. it's not that much different than what amazon did to revolutionize the delivery of goods to consumers And obviously, we still have a large brick-and-mortar retail world, but we have other players now who do this online at scale. And why are borrowers embracing this, both on the investment-grade and non-investment-grade side? It's because we're able to do things with speed and flexibility that at times you can't do in the public markets. Why are investors embracing it? Well, they're producing higher returns. So, for our insurance clients on the investment-grade side, year to date, they've earned 170 basis point premium over comparably rated securities. It's not a surprise. Our insurance business is growing at 20% a year. When you're able to deliver that premium, it becomes even more important, by the way, as base rates come down. So, on the non-investment-grade side, similar dynamic. We've produced in our non-traded BDC 300 basis points of premium return. And that is the reason why this is happening. And obviously, we still have a large brick-and-mortar retail world, but we have other players now who do this online at scale. and obviously we still have a large brick-and-mortar retail world but we have other players now who do this online at scale And why are borrowers embracing this, both on the investment-grade and non-investment-grade side? and why are borrowers embracing this both on the investment-grade and non-investment-grade side It's because we're able to do things with speed and flexibility that at times you can't do in the public markets. it's because we're able to do things with speed and flexibility that at times you can't do in the public markets Why are investors embracing it? why are investors embracing it Well, they're producing higher returns. well they're producing higher returns So, for our insurance clients on the investment-grade side, year to date, they've earned 170 basis point premium over comparably rated securities. so for our insurance clients on the investment-grade side year to date they've earned 170 basis point premium over comparably rated securities It's not a surprise. it's not a surprise Our insurance business is growing at 20% a year. our insurance business is growing at 20% a year When you're able to deliver that premium, it becomes even more important, by the way, as base rates come down. when you're able to deliver that premium it becomes even more important by the way as base rates come down So, on the non-investment-grade side, similar dynamic. so on the non-investment-grade side similar dynamic We've produced in our non-traded BDC 300 basis points of premium return. we've produced in our non-traded bdc 300 basis points of premium return And that is the reason why this is happening. and that is the reason why this is happening And by the way, as a side note, it's also deleveraging the system. Our non-traded BDC is probably one-tenth as leveraged as you would see in a financial institution. And you also get better duration matching. You don't have daily deposits and so forth. So, it's helpful for the financial system. Obviously, banks are hugely important and play a valuable role, but we've added something that is helping consumers and businesses and investors. Now, your question is, what's happened to credit quality? And I'd say, in general, credit quality looks pretty darn good. You know, if you look across, again, our non-traded BDC, the average loan to value we made was 40% at origination, so a fraction of what it was back in the 2006, 2007 days. EBITDA this year at the companies in the portfolio is up 9%. And by the way, as a side note, it's also deleveraging the system. and by the way as a side note it's also deleveraging the system Our non-traded BDC is probably one-tenth as leveraged as you would see in a financial institution. our non-traded bdc is probably one-tenth as leveraged as you would see in a financial institution And you also get better duration matching. and you also get better duration matching You don't have daily deposits and so forth. you don't have daily deposits and so forth So, it's helpful for the financial system. so it's helpful for the financial system Obviously, banks are hugely important and play a valuable role, but we've added something that is helping consumers and businesses and investors. obviously banks are hugely important and play a valuable role but we've added something that is helping consumers and businesses and investors Now, your question is, what's happened to credit quality? now your question is what's happened to credit quality And I'd say, in general, credit quality looks pretty darn good. and i'd say in general credit quality looks pretty darn good You know, if you look across, again, our non-traded BDC, the average loan to value we made was 40% at origination, so a fraction of what it was back in the 2006, 2007 days. you know if you look across again our non-traded bdc the average loan to value we made was 40% at origination so a fraction of what it was back in the 2006 2007 days EBITDA this year at the companies in the portfolio is up 9%. ebitda this year at the companies in the portfolio is up 9% And of course, we've got a Fed now that's cutting rates, which is helpful for the borrowers. Now, will there be isolated credit incidents? Sure. And of course, we've got a Fed now that's cutting rates, which is helpful for the borrowers. and of course we've got a fed now that's cutting rates which is helpful for the borrowers Now, will there be isolated credit incidents? now will there be isolated credit incidents Sure. sure

Speaker 2: Right. Right. right

Speaker 1: Could there be disruption given what's going on? Yeah. But the question is, will we have higher losses, higher defaults than and therefore lower returns than the leveraged loan and high-yield market? We don't believe that at all. And so, ultimately, this is gonna be about delivering enduring premiums and returns without taking on incremental risk. That's what we've done in both investment-grade and non-investment-grade. That's why I think it'll continue. To your point on the stress test, you know, if they show up and say, "Hey, you're doing non-investment-grade lending and using BCRED as an example, $80 billion balance sheet, $50 billion of equity. Could there be disruption given what's going on? could there be disruption given what's going on Yeah. yeah But the question is, will we have higher losses, higher defaults than and therefore lower returns than the leveraged loan and high-yield market? but the question is will we have higher losses higher defaults than and therefore lower returns than the leveraged loan and high-yield market We don't believe that at all. we don't believe that at all And so, ultimately, this is gonna be about delivering enduring premiums and returns without taking on incremental risk. and so ultimately this is gonna be about delivering enduring premiums and returns without taking on incremental risk That's what we've done in both investment-grade and non-investment-grade. that's what we've done in both investment-grade and non-investment-grade That's why I think it'll continue. that's why i think it'll continue To your point on the stress test, you know, if they show up and say, "Hey, you're doing non-investment-grade lending and using BCRED as an example, $80 billion balance sheet, $50 billion of equity. to your point on the stress test you know if they show up and say "hey you're doing non-investment-grade lending and using bcred as an example $80 billion balance sheet $50 billion of equity They compare that to the financial institutions, they rate who would have $5 billion of equity. It seems a little different to me. They compare that to the financial institutions, they rate who would have $5 billion of equity. they compare that to the financial institutions they rate who would have $5 billion of equity It seems a little different to me. it seems a little different to me

Speaker 2: Right. Right. right

Speaker 1: And so, I think whenever you have this kind of innovation and change in a market, it's obvious, you know, people are gonna wanna ask questions. You also are creating some disruption to existing business models. But in my mind, this is a structural change that will continue, and you will continue to see more capital allocated. Yes, you are trading away some liquidity, and so you're not gonna see this for the full fixed-income market. There are plenty of things that will continue to be done by banks. But private credit is not some sort of short-term blip. It's not adding enormous risk to the system. It is a fundamentally sound change in the system that's helping the overall financial market. It's helping borrowers. It's helping investors. And so, I think whenever you have this kind of innovation and change in a market, it's obvious, you know, people are gonna wanna ask questions. and so i think whenever you have this kind of innovation and change in a market it's obvious you know people are gonna wanna ask questions You also are creating some disruption to existing business models. you also are creating some disruption to existing business models But in my mind, this is a structural change that will continue, and you will continue to see more capital allocated. but in my mind this is a structural change that will continue and you will continue to see more capital allocated Yes, you are trading away some liquidity, and so you're not gonna see this for the full fixed-income market. yes you are trading away some liquidity and so you're not gonna see this for the full fixed-income market There are plenty of things that will continue to be done by banks. there are plenty of things that will continue to be done by banks But private credit is not some sort of short-term blip. but private credit is not some sort of short-term blip It's not adding enormous risk to the system. it's not adding enormous risk to the system It is a fundamentally sound change in the system that's helping the overall financial market. it is a fundamentally sound change in the system that's helping the overall financial market It's helping borrowers. it's helping borrowers It's helping investors. it's helping investors

Speaker 2: Yeah. That all makes a lot of sense. Why don't we spend a couple minutes on another kind of mega trend out there, which is the wealth market? Enormously powerful from a growth perspective for you and many of your peers. But I do think Blackstone is still by far and away the leader. I think you have roughly 50% market share of the industry fee pool in this market. So, let's spend a couple of minutes there. First, I'd love to get your perspective on the roadmap for additional product innovation. So, you guys were early with BREIT and BCRED. You obviously have a product in private equity. You have one in infra. What does the makeup of this product set look like over the next couple of years? Yeah. yeah That all makes a lot of sense. that all makes a lot of sense Why don't we spend a couple minutes on another kind of mega trend out there, which is the wealth market? why don't we spend a couple minutes on another kind of mega trend out there which is the wealth market Enormously powerful from a growth perspective for you and many of your peers. enormously powerful from a growth perspective for you and many of your peers But I do think Blackstone is still by far and away the leader. but i do think blackstone is still by far and away the leader I think you have roughly 50% market share of the industry fee pool in this market. i think you have roughly 50% market share of the industry fee pool in this market So, let's spend a couple of minutes there. so let's spend a couple of minutes there First, I'd love to get your perspective on the roadmap for additional product innovation. first i'd love to get your perspective on the roadmap for additional product innovation So, you guys were early with BREIT and BCRED. so you guys were early with breit and bcred You obviously have a product in private equity. you obviously have a product in private equity You have one in infra. you have one in infra What does the makeup of this product set look like over the next couple of years? what does the makeup of this product set look like over the next couple of years What else are you working on that'll be rolling out in the next one to two years? What else are you working on that'll be rolling out in the next one to two years? what else are you working on that'll be rolling out in the next one to two years

Speaker 1: Again, the why, why have we had so much success? Why have we gotten to $290 billion in the wealth space? It's because we started a long time ago, 23 years ago, in drawdown funds, 15 years ago in building a dedicated team, almost a decade ago with creating semi-liquids with BREIT, and bringing the fees down and the quality of investing way up, and it's all performance-driven. Again, you're asking investors to make a trade. You have to deliver a premium performance. You have to give them something different in terms of diversification, access to things they couldn't otherwise have. We've been very successful at that in both good times and bad. That gives me a lot of confidence. The keys to me and the market to us are that what we introduce, delivers those returns. Again, the why, why have we had so much success? again the why why have we had so much success Why have we gotten to $290 billion in the wealth space? why have we gotten to $290 billion in the wealth space It's because we started a long time ago, 23 years ago, in drawdown funds, 15 years ago in building a dedicated team, almost a decade ago with creating semi-liquids with BREIT, and bringing the fees down and the quality of investing way up, and it's all performance-driven. it's because we started a long time ago 23 years ago in drawdown funds 15 years ago in building a dedicated team almost a decade ago with creating semi-liquids with breit and bringing the fees down and the quality of investing way up and it's all performance-driven Again, you're asking investors to make a trade. again you're asking investors to make a trade You have to deliver a premium performance. you have to deliver a premium performance You have to give them something different in terms of diversification, access to things they couldn't otherwise have. you have to give them something different in terms of diversification access to things they couldn't otherwise have We've been very successful at that in both good times and bad. we've been very successful at that in both good times and bad That gives me a lot of confidence. that gives me a lot of confidence The keys to me and the market to us are that what we introduce, delivers those returns. the keys to me and the market to us are that what we introduce delivers those returns And we're not just creating product because that's what can sell, but we can have an enduring advantage. We have, we have generally done things that are broad-based and scale because we know certain markets can go in and out of favor pricing-wise. We've made decisions over time where we've chosen, in the case of private equity and infrastructure, to sell only to qualified purchasers because the 40 Act limitations we thought would've made it harder to deliver, in those asset classes the kind of returns and scale we wanted. To your question, I think you'll see us find ways to put some of these products together, simpler solutions. You'll see us do some things in collaboration. We announced our alliance with Vanguard and Wellington. I think you'll see some of that introduced in the new year. We've done a multi-asset credit product. And we're not just creating product because that's what can sell, but we can have an enduring advantage. and we're not just creating product because that's what can sell but we can have an enduring advantage We have, we have generally done things that are broad-based and scale because we know certain markets can go in and out of favor pricing-wise. we have we have generally done things that are broad-based and scale because we know certain markets can go in and out of favor pricing-wise We've made decisions over time where we've chosen, in the case of private equity and infrastructure, to sell only to qualified purchasers because the 40 Act limitations we thought would've made it harder to deliver, in those asset classes the kind of returns and scale we wanted. we've made decisions over time where we've chosen in the case of private equity and infrastructure to sell only to qualified purchasers because the 40 act limitations we thought would've made it harder to deliver in those asset classes the kind of returns and scale we wanted To your question, I think you'll see us find ways to put some of these products together, simpler solutions. to your question i think you'll see us find ways to put some of these products together simpler solutions You'll see us do some things in collaboration. you'll see us do some things in collaboration We announced our alliance with Vanguard and Wellington. we announced our alliance with vanguard and wellington I think you'll see some of that introduced in the new year. i think you'll see some of that introduced in the new year We've done a multi-asset credit product. we've done a multi-asset credit product There are a couple of other things I think I'm gonna hold off on the announcement, just like what the theme of this year's holiday video will be. We're gonna. There are a couple of other things I think I'm gonna hold off on the announcement, just like what the theme of this year's holiday video will be. there are a couple of other things i think i'm gonna hold off on the announcement just like what the theme of this year's holiday video will be We're gonna. we're gonna

Speaker 2: I was gonna try for that later, but you already shut me down on this one, so. I was gonna try for that later, but you already shut me down on this one, so. i was gonna try for that later but you already shut me down on this one so

Speaker 1: Yeah. What I would say is there is a lot of Enthusiasm, but again, just like with our institutions, just like with our insurance clients, we've got a deliver performance. And so, when you look at individual investors, they're probably about 1% allocated to private assets versus a third for institutions. That still feels like it has a long way to run. And I think our positioning in the market, given the strength of the brand and the strength of the performance and then the breadth of the product offerings, that feels like a really, really good combination. And, you know, in Q3, we saw a doubling of inflows over last year's levels. In a better market environment, given the breadth of what we're doing, it feels pretty good to us. Yeah. yeah What I would say is there is a lot of Enthusiasm, but again, just like with our institutions, just like with our insurance clients, we've got a deliver performance. what i would say is there is a lot of enthusiasm but again just like with our institutions just like with our insurance clients we've got a deliver performance And so, when you look at individual investors, they're probably about 1% allocated to private assets versus a third for institutions. and so when you look at individual investors they're probably about 1% allocated to private assets versus a third for institutions That still feels like it has a long way to run. that still feels like it has a long way to run And I think our positioning in the market, given the strength of the brand and the strength of the performance and then the breadth of the product offerings, that feels like a really, really good combination. and i think our positioning in the market given the strength of the brand and the strength of the performance and then the breadth of the product offerings that feels like a really really good combination And, you know, in Q3, we saw a doubling of inflows over last year's levels. and you know in q3 we saw a doubling of inflows over last year's levels In a better market environment, given the breadth of what we're doing, it feels pretty good to us. in a better market environment given the breadth of what we're doing it feels pretty good to us

Speaker 2: Yeah. Let's talk a little bit more, what's going on on the ground, I guess today. Obviously, lots of focus on credit, like we talked about earlier. It's really the first time that, you know, the growth in this private credit part of the market with wealth, gets tested, like we are seeing now with a lot of headlines and the barrage of headlines on the, you know, this part of the market for the last couple of months now. Obviously, BCRED had a, you know, filing out this morning. Redemption picked up, you know, not quite to 5%, but close, but also gross sales slowed down as of December 1st. So, what are you hearing on the ground from financial advisors, the wirehouse, the gatekeepers in terms of this being either a short-term reaction to the news flow, or something more substantive? Yeah. yeah Let's talk a little bit more, what's going on on the ground, I guess today. let's talk a little bit more what's going on on the ground i guess today Obviously, lots of focus on credit, like we talked about earlier. obviously lots of focus on credit like we talked about earlier It's really the first time that, you know, the growth in this private credit part of the market with wealth, gets tested, like we are seeing now with a lot of headlines and the barrage of headlines on the, you know, this part of the market for the last couple of months now. it's really the first time that you know the growth in this private credit part of the market with wealth gets tested like we are seeing now with a lot of headlines and the barrage of headlines on the you know this part of the market for the last couple of months now Obviously, BCRED had a, you know, filing out this morning. obviously bcred had a you know filing out this morning Redemption picked up, you know, not quite to 5%, but close, but also gross sales slowed down as of December 1st. redemption picked up you know not quite to 5% but close but also gross sales slowed down as of december 1st So, what are you hearing on the ground from financial advisors, the wirehouse, the gatekeepers in terms of this being either a short-term reaction to the news flow, or something more substantive? so what are you hearing on the ground from financial advisors the wirehouse the gatekeepers in terms of this being either a short-term reaction to the news flow or something more substantive

Speaker 1: There's obviously been an enormous amount of noise out there around private credit, much of which we would push back with the facts. But I would point out a little differently, Alex. We've been through a couple of these tests before. In fact, we've gone north of the 5% in 2022, went north of it in 2023 after Silicon Valley Bank. We saw a pretty meaningful spike after Labor Day. Whenever you get a lot of negative headlines, particularly among the individual investors, you can see a shift in sentiment. What matters ultimately, again, is performance. There's obviously been an enormous amount of noise out there around private credit, much of which we would push back with the facts. there's obviously been an enormous amount of noise out there around private credit much of which we would push back with the facts But I would point out a little differently, Alex. but i would point out a little differently alex We've been through a couple of these tests before. we've been through a couple of these tests before In fact, we've gone north of the 5% in 2022, went north of it in 2023 after Silicon Valley Bank. in fact we've gone north of the 5% in 2022 went north of it in 2023 after silicon valley bank We saw a pretty meaningful spike after Labor Day. we saw a pretty meaningful spike after labor day Whenever you get a lot of negative headlines, particularly among the individual investors, you can see a shift in sentiment. whenever you get a lot of negative headlines particularly among the individual investors you can see a shift in sentiment What matters ultimately, again, is performance. what matters ultimately again is performance In October, we produced 70 basis points of performance. We feel really good about the underlying both credit quality. We talked about the growth in the EBITDA in terms of the companies here, the low loan to value. To me, that's ultimately what is determinative here. And so, you know, as I said, you could be in an environment where you'll have a couple you know, several companies with defaults. The question on those things are, have you marked those appropriately? Do you know how to handle it? Are you senior secured? We feel really great about what we've been doing. And by the way, on the flow side, despite relentlessly negative press, in the fourth quarter, we had $3.3 billion of gross inflows, and we still had implied $1.2 billion of net inflows. I think, again, what matters is performance. In October, we produced 70 basis points of performance. in october we produced 70 basis points of performance We feel really good about the underlying both credit quality. we feel really good about the underlying both credit quality We talked about the growth in the EBITDA in terms of the companies here, the low loan to value. we talked about the growth in the ebitda in terms of the companies here the low loan to value To me, that's ultimately what is determinative here. to me that's ultimately what is determinative here And so, you know, as I said, you could be in an environment where you'll have a couple you know, several companies with defaults. and so you know as i said you could be in an environment where you'll have a couple you know several companies with defaults The question on those things are, have you marked those appropriately? the question on those things are have you marked those appropriately Do you know how to handle it? do you know how to handle it Are you senior secured? are you senior secured We feel really great about what we've been doing. we feel really great about what we've been doing And by the way, on the flow side, despite relentlessly negative press, in the fourth quarter, we had $3.3 billion of gross inflows, and we still had implied $1.2 billion of net inflows. and by the way on the flow side despite relentlessly negative press in the fourth quarter we had $3.3 billion of gross inflows and we still had implied $1.2 billion of net inflows I think, again, what matters is performance. i think again what matters is performance I think, interestingly, you know, we went through BREIT, which was a different sort of environment, obviously a much harsher downturn in the underlying asset class. We significantly outperformed, and my confidence in that product is extraordinarily high. I think, interestingly, you know, we went through BREIT, which was a different sort of environment, obviously a much harsher downturn in the underlying asset class. i think interestingly you know we went through breit which was a different sort of environment obviously a much harsher downturn in the underlying asset class We significantly outperformed, and my confidence in that product is extraordinarily high. we significantly outperformed and my confidence in that product is extraordinarily high And so, again, if we show that we can outperform the leveraged loan market, the high-yield market, and enduring premium in returns, then I think financial investors will continue to subscribe to these products. That's, to me, the key focus. And so, again, if we show that we can outperform the leveraged loan market, the high-yield market, and enduring premium in returns, then I think financial investors will continue to subscribe to these products. and so again if we show that we can outperform the leveraged loan market the high-yield market and enduring premium in returns then i think financial investors will continue to subscribe to these products That's, to me, the key focus. that's to me the key focus

Speaker 2: Great. That's all that makes sense. Okay. Let's talk about another important area for Blackstone, which is obviously the real estate business. We talked a little bit about that before we got on stage, but clearly feels like the sentiment from some of your peers and then marketplace broadly around real estate is starting to improve. It's something you talked about as well in the past. So, give us your expectations around sort of growth in your real estate franchise for the next 12-18 months. Great. great That's all that makes sense. that's all that makes sense Okay. okay Let's talk about another important area for Blackstone, which is obviously the real estate business. let's talk about another important area for blackstone which is obviously the real estate business We talked a little bit about that before we got on stage, but clearly feels like the sentiment from some of your peers and then marketplace broadly around real estate is starting to improve. we talked a little bit about that before we got on stage but clearly feels like the sentiment from some of your peers and then marketplace broadly around real estate is starting to improve It's something you talked about as well in the past. it's something you talked about as well in the past So, give us your expectations around sort of growth in your real estate franchise for the next 12-18 months. so give us your expectations around sort of growth in your real estate franchise for the next 12-18 months

Speaker 1: Well, it's been a difficult three and a half years, no question about it. COVID hurt the office market. You had this huge step function increase in cost of capital. So, Cap rates went up a bunch. Values came under pressure. And investors, you know, not surprisingly, don't feel great 'cause they haven't had a great experience during this period of time. But when you look under the hood, the pillars of a recovery are coming closer, right? So, you've seen values fall. This is definitely not your bubble asset class, that's for sure. And yet, underlying demand for housing will continue, logistics for going to a resort hotel. So, it's an asset class that has fallen out of favor but has long-term strong demand profile. Well, it's been a difficult three and a half years, no question about it. well it's been a difficult three and a half years no question about it COVID hurt the office market. covid hurt the office market You had this huge step function increase in cost of capital. you had this huge step function increase in cost of capital So, Cap rates went up a bunch. so cap rates went up a bunch Values came under pressure. values came under pressure And investors, you know, not surprisingly, don't feel great 'cause they haven't had a great experience during this period of time. and investors you know not surprisingly don't feel great 'cause they haven't had a great experience during this period of time But when you look under the hood, the pillars of a recovery are coming closer, right? but when you look under the hood the pillars of a recovery are coming closer right So, you've seen values fall. so you've seen values fall This is definitely not your bubble asset class, that's for sure. this is definitely not your bubble asset class that's for sure And yet, underlying demand for housing will continue, logistics for going to a resort hotel. and yet underlying demand for housing will continue logistics for going to a resort hotel So, it's an asset class that has fallen out of favor but has long-term strong demand profile. so it's an asset class that has fallen out of favor but has long-term strong demand profile Supply is down almost two-thirds, new starts in terms of logistics and rental housing, which takes time to play out but is very beneficial. Cost of capital, base rates down, spreads down. Borrowing costs are probably down about 40% from their wides of a couple of years ago, and you're beginning to see transaction activity pick up. Supply is down almost two-thirds, new starts in terms of logistics and rental housing, which takes time to play out but is very beneficial. supply is down almost two-thirds new starts in terms of logistics and rental housing which takes time to play out but is very beneficial Cost of capital, base rates down, spreads down. cost of capital base rates down spreads down Borrowing costs are probably down about 40% from their wides of a couple of years ago, and you're beginning to see transaction activity pick up. borrowing costs are probably down about 40% from their wides of a couple of years ago and you're beginning to see transaction activity pick up It can take some time, but it certainly feels like we're getting closer, and so I think, for us, we focus on these, the picture that's coming, and we're trying to invest ahead of it, so not a surprise. We've been privatizing a bunch of REITs. We announced a commercial real estate REIT in Hawaii, Alexander & Baldwin this week for $2.3 billion. This reflects our view of real estate and what we do believe will be a coming recovery. It can take some time, but it certainly feels like we're getting closer, and so I think, for us, we focus on these, the picture that's coming, and we're trying to invest ahead of it, so not a surprise. it can take some time but it certainly feels like we're getting closer and so i think for us we focus on these the picture that's coming and we're trying to invest ahead of it so not a surprise We've been privatizing a bunch of REITs. we've been privatizing a bunch of reits We announced a commercial real estate REIT in Hawaii, Alexander & Baldwin this week for $2.3 billion. we announced a commercial real estate reit in hawaii alexander & baldwin this week for $2.3 billion This reflects our view of real estate and what we do believe will be a coming recovery. this reflects our view of real estate and what we do believe will be a coming recovery

Speaker 2: Great. Okay. Let's pivot from kind of the themes to maybe some of the financial KPIs for the business, really starting with fundraising. Again, I think over $225 billion over the last 12 months of inflows across the franchise. As you look out into 2026, what are your early expectations for fundraising? Great. great Okay. okay Let's pivot from kind of the themes to maybe some of the financial KPIs for the business, really starting with fundraising. let's pivot from kind of the themes to maybe some of the financial kpis for the business really starting with fundraising Again, I think over $225 billion over the last 12 months of inflows across the franchise. again i think over $225 billion over the last 12 months of inflows across the franchise As you look out into 2026, what are your early expectations for fundraising? as you look out into 2026 what are your early expectations for fundraising

Speaker 1: I think it should be a very good year. You know, we talked about wealth, a lot of momentum there, given the introduction of new products and the success of existing products. I feel very good about that. When I think about our insurance business, again, more and more insurers are beginning to recognize to be competitive. They need this additional yield. Our open architecture model, not competing with them, is a very helpful space to be and to be able to do it broadly. I think that should continue to grow. Again, I mentioned 20% growth in the last quarter. And then our institutional business, where people have always said is a mature business, you know, it's grown 60% the last five years. I think over the last 12 months, it's about half of our flows in. I think it should be a very good year. i think it should be a very good year You know, we talked about wealth, a lot of momentum there, given the introduction of new products and the success of existing products. you know we talked about wealth a lot of momentum there given the introduction of new products and the success of existing products I feel very good about that. i feel very good about that When I think about our insurance business, again, more and more insurers are beginning to recognize to be competitive. when i think about our insurance business again more and more insurers are beginning to recognize to be competitive They need this additional yield. they need this additional yield Our open architecture model, not competing with them, is a very helpful space to be and to be able to do it broadly. our open architecture model not competing with them is a very helpful space to be and to be able to do it broadly I think that should continue to grow. i think that should continue to grow Again, I mentioned 20% growth in the last quarter. again i mentioned 20% growth in the last quarter And then our institutional business, where people have always said is a mature business, you know, it's grown 60% the last five years. and then our institutional business where people have always said is a mature business you know it's grown 60% the last five years I think over the last 12 months, it's about half of our flows in. i think over the last 12 months it's about half of our flows in It's a, you know, a number of those things are drawdown, so you send the money back. You don't get that perpetual compounding thing, but the strength of our franchise in energy transition, in Asia, private equity, in secondaries, in credit, in so many areas, in real estate, you know, in life sciences, we have so many areas where we've delivered for clients that it feels to me we will continue to have another good year. We have a good fundraising cycle ahead of us, so I would say right now, with this kind of market backdrop, it feels pretty good. It's a, you know, a number of those things are drawdown, so you send the money back. it's a you know a number of those things are drawdown so you send the money back You don't get that perpetual compounding thing, but the strength of our franchise in energy transition, in Asia, private equity, in secondaries, in credit, in so many areas, in real estate, you know, in life sciences, we have so many areas where we've delivered for clients that it feels to me we will continue to have another good year. you don't get that perpetual compounding thing but the strength of our franchise in energy transition in asia private equity in secondaries in credit in so many areas in real estate you know in life sciences we have so many areas where we've delivered for clients that it feels to me we will continue to have another good year We have a good fundraising cycle ahead of us, so I would say right now, with this kind of market backdrop, it feels pretty good. we have a good fundraising cycle ahead of us so i would say right now with this kind of market backdrop it feels pretty good

Speaker 2: Yeah. Well, speaking of market backdrop, you know, the outlook for realization and broadly capital markets activity has definitely been a bright spot in these conversations for the last two days. So, you've been also pretty bullish on that for a couple of quarters. I think one of the points you made is that Blackstone's IPO pipeline is the highest it's been since 2021. Talk to us a little bit more about your expectations for realizations over the next 12 months and maybe help us frame that in some sort of a historical context because it does feel like there's a lot of pent-up demand on the exit side. Yeah. yeah Well, speaking of market backdrop, you know, the outlook for realization and broadly capital markets activity has definitely been a bright spot in these conversations for the last two days. well speaking of market backdrop you know the outlook for realization and broadly capital markets activity has definitely been a bright spot in these conversations for the last two days So, you've been also pretty bullish on that for a couple of quarters. so you've been also pretty bullish on that for a couple of quarters I think one of the points you made is that Blackstone's IPO pipeline is the highest it's been since 2021. i think one of the points you made is that blackstone's ipo pipeline is the highest it's been since 2021 Talk to us a little bit more about your expectations for realizations over the next 12 months and maybe help us frame that in some sort of a historical context because it does feel like there's a lot of pent-up demand on the exit side. talk to us a little bit more about your expectations for realizations over the next 12 months and maybe help us frame that in some sort of a historical context because it does feel like there's a lot of pent-up demand on the exit side

Speaker 1: Well, you know, we saw M&A and IPO activity basically crater during that sharp increase in rates, and it's still running today, you know, well down versus historical levels as a % of the market cap of the stock market, and so, to us, it feels natural now as you get cost of capital coming down, spreads coming down, a strong equity market that you begin to see an IPO market that's emerging. Yes, we did three in the quarter. In the third quarter, we have a large one in the market today. We've got an active pipeline for next year. M&A activity in the U.S., I think quarter to date, up almost double, and I wouldn't underestimate the power of the regulatory environment changing. Well, you know, we saw M&A and IPO activity basically crater during that sharp increase in rates, and it's still running today, you know, well down versus historical levels as a % of the market cap of the stock market, and so, to us, it feels natural now as you get cost of capital coming down, spreads coming down, a strong equity market that you begin to see an IPO market that's emerging. well you know we saw m&a and ipo activity basically crater during that sharp increase in rates and it's still running today you know well down versus historical levels as a % of the market cap of the stock market and so to us it feels natural now as you get cost of capital coming down spreads coming down a strong equity market that you begin to see an ipo market that's emerging Yes, we did three in the quarter. yes we did three in the quarter In the third quarter, we have a large one in the market today. in the third quarter we have a large one in the market today We've got an active pipeline for next year. we've got an active pipeline for next year M&A activity in the U.S., I think quarter to date, up almost double, and I wouldn't underestimate the power of the regulatory environment changing. m&a activity in the u.s i think quarter to date up almost double and i wouldn't underestimate the power of the regulatory environment changing And so, I think the ability to have confidence that you can buy or sell a business really matters. I still think we're operating, you know, well below historic levels. This year, you had Labor Day, the government shut down. I think if you have smoother sailing next year with lower cost of capital and some confidence, I think you'll see a meaningful pickup. So, I would be in the camp that we've sort of moved from sort of taxi to takeoff as it relates to transaction activity, the IPO market. That feels pretty good to us, and obviously, that's good for our business. It should be good for our shareholders. And so, I think the ability to have confidence that you can buy or sell a business really matters. and so i think the ability to have confidence that you can buy or sell a business really matters I still think we're operating, you know, well below historic levels. i still think we're operating you know well below historic levels This year, you had Labor Day, the government shut down. this year you had labor day the government shut down I think if you have smoother sailing next year with lower cost of capital and some confidence, I think you'll see a meaningful pickup. i think if you have smoother sailing next year with lower cost of capital and some confidence i think you'll see a meaningful pickup So, I would be in the camp that we've sort of moved from sort of taxi to takeoff as it relates to transaction activity, the IPO market. so i would be in the camp that we've sort of moved from sort of taxi to takeoff as it relates to transaction activity the ipo market That feels pretty good to us, and obviously, that's good for our business. that feels pretty good to us and obviously that's good for our business It should be good for our shareholders. it should be good for our shareholders

Speaker 2: Great. With a couple of minutes left on the clock, I'd love to wrap up with a couple of thoughts on evolution of the business, given the fact that you guys celebrated your 40th year anniversary this year. You've been there, I believe, for 33 years of those 40. Couple that with real performance of the stock, and it's not just you, but the whole space obviously struggled a bit this year, coming off a phenomenal two-year run, and I think that's important to acknowledge. But how do you think the company's evolving if you see further points in the cycle where there's a bigger disconnect between the value and what your forward looks like? How are you thinking about capital management in that context? Or any other thoughts around that would be helpful? Great. great With a couple of minutes left on the clock, I'd love to wrap up with a couple of thoughts on evolution of the business, given the fact that you guys celebrated your 40th year anniversary this year. with a couple of minutes left on the clock i'd love to wrap up with a couple of thoughts on evolution of the business given the fact that you guys celebrated your 40th year anniversary this year You've been there, I believe, for 33 years of those 40. you've been there i believe for 33 years of those 40 Couple that with real performance of the stock, and it's not just you, but the whole space obviously struggled a bit this year, coming off a phenomenal two-year run, and I think that's important to acknowledge. couple that with real performance of the stock and it's not just you but the whole space obviously struggled a bit this year coming off a phenomenal two-year run and i think that's important to acknowledge But how do you think the company's evolving if you see further points in the cycle where there's a bigger disconnect between the value and what your forward looks like? but how do you think the company's evolving if you see further points in the cycle where there's a bigger disconnect between the value and what your forward looks like How are you thinking about capital management in that context? how are you thinking about capital management in that context Or any other thoughts around that would be helpful? or any other thoughts around that would be helpful

Speaker 1: Well, I feel great about the underlying business. We did have this 40th anniversary. We brought all our partners together around the world. When we talked about all the potential markets, all the potential growth, we feel really good. We still think alternatives, even though they've grown a lot and it seems big, it's a $13 trillion industry. When you think about public equities and corporate fixed income, asset-backed fixed income, infrastructure, residential, commercial, real estate, I don't know, it's a $300-plus trillion market out there for us potentially to invest capital into. The total business is equal to the market cap of, I don't know, four stocks in the United States today. I think there's still a lot of room to go here. And to me, the key continues to be delivering for the customers, making sure we get right these technological changes. Well, I feel great about the underlying business. well i feel great about the underlying business We did have this 40th anniversary. we did have this 40th anniversary We brought all our partners together around the world. we brought all our partners together around the world When we talked about all the potential markets, all the potential growth, we feel really good. when we talked about all the potential markets all the potential growth we feel really good We still think alternatives, even though they've grown a lot and it seems big, it's a $13 trillion industry. we still think alternatives even though they've grown a lot and it seems big it's a $13 trillion industry When you think about public equities and corporate fixed income, asset-backed fixed income, infrastructure, residential, commercial, real estate, I don't know, it's a $300-plus trillion market out there for us potentially to invest capital into. when you think about public equities and corporate fixed income asset-backed fixed income infrastructure residential commercial real estate i don't know it's a $300-plus trillion market out there for us potentially to invest capital into The total business is equal to the market cap of, I don't know, four stocks in the United States today. the total business is equal to the market cap of i don't know four stocks in the united states today I think there's still a lot of room to go here. i think there's still a lot of room to go here And to me, the key continues to be delivering for the customers, making sure we get right these technological changes. and to me the key continues to be delivering for the customers making sure we get right these technological changes We're able to intervene in businesses. We've got a really rigorous discipline process that we attract and retain amazing people, that we have an entrepreneurial spirit. I mean, Steve Schwarzman has really sort of pushed that into the firm, this idea. We're constantly thinking about what we can do better. We are not a place, despite our size scale, that is sitting around saying, "Hey, we're there." You know, I, I described recently at our CEO conference, our boardroom meetings, you would think we're a failing company. I mean, the conversation is a relentless focus on, "We miss this market. This competitor's done this." This, I, I feel for us, we have this vast expanse in front of us. The key thing is we've got to maintain the quality of our people, our integration, and process. We're able to intervene in businesses. we're able to intervene in businesses We've got a really rigorous discipline process that we attract and retain amazing people, that we have an entrepreneurial spirit. we've got a really rigorous discipline process that we attract and retain amazing people that we have an entrepreneurial spirit I mean, Steve Schwarzman has really sort of pushed that into the firm, this idea. i mean steve schwarzman has really sort of pushed that into the firm this idea We're constantly thinking about what we can do better. we're constantly thinking about what we can do better We are not a place, despite our size scale, that is sitting around saying, "Hey, we're there." You know, I, I described recently at our CEO conference, our boardroom meetings, you would think we're a failing company. we are not a place despite our size scale that is sitting around saying "hey we're there." you know i i described recently at our ceo conference our boardroom meetings you would think we're a failing company I mean, the conversation is a relentless focus on, "We miss this market. i mean the conversation is a relentless focus on "we miss this market This competitor's done this." This, I, I feel for us, we have this vast expanse in front of us. this competitor's done this." this i i feel for us we have this vast expanse in front of us The key thing is we've got to maintain the quality of our people, our integration, and process. the key thing is we've got to maintain the quality of our people our integration and process And being able to be a full-service capital solutions provider in the private markets, we can give you super low-cost investment-grade debt. We can give you more junior debt. We can give you pref equity. We can do control. We can co-invest as a minority. We can do stakes, secondary, everything across the platform. That is really powerful and do it increasingly on a global basis. And of course, do it without a balance sheet. All the capital we're managing is third-party capital. We don't owe it back to anybody. It's not an obligation. If rates and spreads tighten, our business is to deliver returns. And so, the way I feel about the business is we are in exactly the same business we've always been. Our plan is to continue to be in that business and to be excellent in it. And being able to be a full-service capital solutions provider in the private markets, we can give you super low-cost investment-grade debt. and being able to be a full-service capital solutions provider in the private markets we can give you super low-cost investment-grade debt We can give you more junior debt. we can give you more junior debt We can give you pref equity. we can give you pref equity We can do control. we can do control We can co-invest as a minority. we can co-invest as a minority We can do stakes, secondary, everything across the platform. we can do stakes secondary everything across the platform That is really powerful and do it increasingly on a global basis. that is really powerful and do it increasingly on a global basis And of course, do it without a balance sheet. and of course do it without a balance sheet All the capital we're managing is third-party capital. all the capital we're managing is third-party capital We don't owe it back to anybody. we don't owe it back to anybody It's not an obligation. it's not an obligation If rates and spreads tighten, our business is to deliver returns. if rates and spreads tighten our business is to deliver returns And so, the way I feel about the business is we are in exactly the same business we've always been. and so the way i feel about the business is we are in exactly the same business we've always been Our plan is to continue to be in that business and to be excellent in it. our plan is to continue to be in that business and to be excellent in it And things come up and down and cycles and this and that, but if we continue to deliver premium returns in these different areas, our relationships and the strength of our brand, which is really, really powerful and allows us to grow without capital, if we have that, then we can expand a ton in our original institutional business and in a very profound way with insurers and individual investors. So, my optimism about the future is extremely high. And then back to your earlier question, it's nice to be coming to a part of the cycle where things are starting to turn up. So, the long-term, we feel great about, and obviously, the short-term pickup in deal activity, that's also very good. And things come up and down and cycles and this and that, but if we continue to deliver premium returns in these different areas, our relationships and the strength of our brand, which is really, really powerful and allows us to grow without capital, if we have that, then we can expand a ton in our original institutional business and in a very profound way with insurers and individual investors. and things come up and down and cycles and this and that but if we continue to deliver premium returns in these different areas our relationships and the strength of our brand which is really really powerful and allows us to grow without capital if we have that then we can expand a ton in our original institutional business and in a very profound way with insurers and individual investors So, my optimism about the future is extremely high. so my optimism about the future is extremely high And then back to your earlier question, it's nice to be coming to a part of the cycle where things are starting to turn up. and then back to your earlier question it's nice to be coming to a part of the cycle where things are starting to turn up So, the long-term, we feel great about, and obviously, the short-term pickup in deal activity, that's also very good. so the long-term we feel great about and obviously the short-term pickup in deal activity that's also very good

Speaker 2: Great. Well, we talked about a lot of themes over the course of the day today. I was hoping you could hit on one more theme, which is your holiday video. So, if you're willing to share anything with us today, that would be of great interest to the crowd. Great. great Well, we talked about a lot of themes over the course of the day today. well we talked about a lot of themes over the course of the day today I was hoping you could hit on one more theme, which is your holiday video. i was hoping you could hit on one more theme which is your holiday video So, if you're willing to share anything with us today, that would be of great interest to the crowd. so if you're willing to share anything with us today that would be of great interest to the crowd

Speaker 1: You know, it's, I could tell you, but I'd have to kill you. It's basically what it is, Alex. It's so funny. We're so crazed about it because we don't want it to get out. We don't even tell, you know, our colleagues, partners. They just get their role, like, "Show up. Wear this ridiculous outfit at this time, and we're gonna film you," and I will say, you know, the broader point for us is we wanna be great at what we do. We demand a lot of our people, but we want it to be a human-scale place. We wanna make fun of ourselves, which is what the holiday video is. We wanna have a really integrated culture. It's why every Monday we do our internal Blackstone TV where we connect with people. It's why I do these sort of ridiculous running videos. You know, it's, I could tell you, but I'd have to kill you. you know it's i could tell you but i'd have to kill you It's basically what it is, Alex. it's basically what it is alex It's so funny. it's so funny We're so crazed about it because we don't want it to get out. we're so crazed about it because we don't want it to get out We don't even tell, you know, our colleagues, partners. we don't even tell you know our colleagues partners They just get their role, like, "Show up. they just get their role like "show up Wear this ridiculous outfit at this time, and we're gonna film you," and I will say, you know, the broader point for us is we wanna be great at what we do. wear this ridiculous outfit at this time and we're gonna film you," and i will say you know the broader point for us is we wanna be great at what we do We demand a lot of our people, but we want it to be a human-scale place. we demand a lot of our people but we want it to be a human-scale place We wanna make fun of ourselves, which is what the holiday video is. we wanna make fun of ourselves which is what the holiday video is We wanna have a really integrated culture. we wanna have a really integrated culture It's why every Monday we do our internal Blackstone TV where we connect with people. it's why every monday we do our internal blackstone tv where we connect with people It's why I do these sort of ridiculous running videos. it's why i do these sort of ridiculous running videos It's all in an effort to humanize what we do for all our constituents out there, and obviously we've got a lot more, both shareholders, investors. We have 300,000 investors these days. You're reaching a broader audience, and I couldn't be more proud of the quality of the people, what they do, how they give back. We've had a very difficult year because of what happened. We had this horrible shooting, but the pride I have in our people is immense, and so my optimism going forward is very high, but I would say the video will be cringe-worthy, so please don't hold that against me. It's all in an effort to humanize what we do for all our constituents out there, and obviously we've got a lot more, both shareholders, investors. it's all in an effort to humanize what we do for all our constituents out there and obviously we've got a lot more both shareholders investors We have 300,000 investors these days. we have 300,000 investors these days You're reaching a broader audience, and I couldn't be more proud of the quality of the people, what they do, how they give back. you're reaching a broader audience and i couldn't be more proud of the quality of the people what they do how they give back We've had a very difficult year because of what happened. we've had a very difficult year because of what happened We had this horrible shooting, but the pride I have in our people is immense, and so my optimism going forward is very high, but I would say the video will be cringe-worthy, so please don't hold that against me. we had this horrible shooting but the pride i have in our people is immense and so my optimism going forward is very high but i would say the video will be cringe-worthy so please don't hold that against me

Speaker 2: On that note, thank you so much. On that note, thank you so much. on that note thank you so much

Speaker 1: Okay. Okay. okay

Speaker 2: It's great to see you. It's great to see you. it's great to see you

Speaker 1: Thank you all. Thank you all. thank you all