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Speaker 1: Another stock we're watching is Blackstone. The shares of the

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Speaker 1: world's biggest alternative asset manager are lower after missing estimates

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Speaker 1: for inflows and assets. Blackstone did, though, collect more fees

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Speaker 1: from big retail funds and credit strategies during the quarter

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Speaker 1: and earlier today, I spoke with Blackstone President and COO

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Speaker 1: John Gray about the results.

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Speaker 2: What we tend to focus on is how we delivered

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Speaker 2: over time, and in this quarter, we felt really good

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Speaker 2: about the way we started the year. We delivered for

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Speaker 2: our clients, which is the most important thing, strong performance.

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Speaker 2: Also in terms of our financial results, we felt very good.

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Speaker 2: What I'd say is exciting is a couple of positive trends.

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Speaker 3: Ones.

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Speaker 2: The market has reopened the capital markets, we're seeing a

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Speaker 2: lot more transaction activity. Equity markets are stronger, debt markets.

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Speaker 3: You see that in your reporting.

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Speaker 2: And then we're also seeing a reacceleration in our private

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Speaker 2: wealth area, individual investors coming to our products please with

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Speaker 2: our performance, improve market sentiment. And our private credit area

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Speaker 2: has really incredible momentum. We crossed over four hundred billion

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Speaker 2: dollars in terms of private credit or credit overall, real

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Speaker 2: estate and corporate over two hundred billion dollars most of

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Speaker 2: that in credit for our insurance clients today, and it's

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Speaker 2: just another area where people are embracing the Blackstone model.

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Speaker 2: So it's hard to measure things moment to moment in

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Speaker 2: the stock market, but we're very pleased with where we

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Speaker 2: sit today.

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Speaker 1: I'm glad you brought up private credit here because their

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Speaker 1: credit business brought in more money than any other business.

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Speaker 1: How does that momentum keep going into the year. Can

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Speaker 1: you keep it up?

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Speaker 3: Yes, we feel really good about it.

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Speaker 2: I mean one of the drivers, of course is performance.

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Speaker 2: If you looked at non investment grade private credit last

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Speaker 2: twelve months, it's delivered seventeen percent appreciation, So you've got

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Speaker 2: a lot.

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Speaker 3: Of happy clients in that area.

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Speaker 2: You also have a secular shift going on, not only

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Speaker 2: non investment grade but an investment grade private credit. You've

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Speaker 2: got insurance companies who are looking to expand what they've

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Speaker 2: done historically. They've done mortgages historically, but now working with

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Speaker 2: folks like us on things like single family mortgages or

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Speaker 2: residential I'd say, also infrastructure lending that could be digital,

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Speaker 2: green energy, a whole range.

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Speaker 3: Of activities, asset back.

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Speaker 2: Finance, fund finance, and so there's a broadening of how

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Speaker 2: we serve these insurance clients. There's a broadening of how

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Speaker 2: we're serving pension funds and individual investors. And I think

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Speaker 2: you know, if you look back over time, if you

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Speaker 2: think about sixty forty for investors, sixty equity forty fixed income,

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Speaker 2: a large portion of that sixty has moved to the

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Speaker 2: private area to alternatives over the last thirty years, and

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Speaker 2: yet in the fixed income bucket most of that has

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Speaker 2: stayed liquid. And I think we're in the early days

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Speaker 2: of an expansion in terms of alternatives in fixed income

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Speaker 2: in a range of areas, and that gives us a

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Speaker 2: lot of enthusiasm.

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Speaker 3: That's private credit.

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Speaker 1: On the private equity side, you still see realizations not

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Speaker 1: meeting the mark here. Do you think that the markets

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Speaker 1: will pick up drastically this year or is it going

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Speaker 1: to be a long time coming before we see deal

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Speaker 1: exits at a more significant scale.

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Speaker 3: Well, if you.

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Speaker 2: Think about where we are in the cycle, you know,

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Speaker 2: after two years of pretty slow m and a activity

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Speaker 2: transaction activity, it's picking up, as I noted before, and

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Speaker 2: what you tend to do in this part of the

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Speaker 2: cycle is focus on deployment of You've seen a big

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Speaker 2: pickup from us in deployment the last couple of quarters.

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Speaker 2: I think that'll continue because we think there are attractive

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Speaker 2: opportunities out there.

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Speaker 3: Across a range of sectors.

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Speaker 2: And then as you think about realizations, you know, getting

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Speaker 2: companies ready to say to sell, doing IPOs, those sort

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Speaker 2: of things take a bit of time, and what you

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Speaker 2: want to do is do it.

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Speaker 3: In a deliberate fashion.

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Speaker 2: Our model means we're not for sellers of assets, so

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Speaker 2: I think you will steadily.

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Speaker 3: See a pickup, but it'll take time.

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Speaker 2: It'll be probably more towards the end of the year

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Speaker 2: and into twenty twenty five. Our investors are focused us

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Speaker 2: on maximizing returns and we think that's the right way

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Speaker 2: to do it, to be deliberate in terms of realizations.

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Speaker 2: But a recovery in capital markets dead inequity is an

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Speaker 2: important early sign as we move towards that realization cycle.

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Speaker 1: Looking forward, can you have significant m and A with

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Speaker 1: the interest rate cycle staying this high given that the

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Speaker 1: expectations have changed so much for the number of rate

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Speaker 1: cuts this year.

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Speaker 3: Well, Interestingly, we have seen changes here.

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Speaker 2: Although short rates are not coming down, we've seen a

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Speaker 2: little bit of a tick.

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Speaker 3: Up in long rates.

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Speaker 2: Cost of capital has actually come down pretty materially from

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Speaker 2: say the October highs. High yield spreads have tightened one

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Speaker 2: hundred basis points, commercial mortgage backed security spreads probably one hundred.

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Speaker 3: And twenty five basis points.

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Speaker 2: And not only has the cost of that debt capital

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Speaker 2: come down, the availability has gone up materially, and so

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Speaker 2: I think that's an important first step. I think that's

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Speaker 2: why you're seeing a pickup in transaction activity.

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Speaker 3: You are right that as the FED cuts rates.

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Speaker 2: It will be easier for people to do transactions, and

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Speaker 2: you'll see more of a pickup. But even with rates

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Speaker 2: at this more elevated level, I think you'll see more

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Speaker 2: transaction activity given that reduction in cost of capital.

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Speaker 1: Do you think at least one rate cut this year

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Speaker 1: is achievable or is even that looking more unlikely?

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Speaker 3: You know, I think it is achievable.

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Speaker 2: I think the FED has had some real success on inflation.

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Speaker 2: You know, we had inflation north of nine now it's

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Speaker 2: three and a half percent. The pace of disinflation has slowed,

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Speaker 2: but the path is still downward. When we look at

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Speaker 2: our large portfolio twelve thousand real estate assets, two hundred

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Speaker 2: and thirty companies, what we see is input costs the

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Speaker 2: manufacturing businesses are pretty flat. We see we see hotel

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Speaker 2: room rates that have in some cases turned modestly negative.

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Speaker 2: Apartment rents are pretty flat. And when we look at

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Speaker 2: wages a year ago at our companies, they were growing

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Speaker 2: five percent, now four percent.

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Speaker 3: So I think the FED will.

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Speaker 2: Get some data that's positive, give them some room, but

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Speaker 2: I do think they'll be patient and deliberate, So in

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Speaker 2: expectation of fewer cuts, a little more delayed makes sense.

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Speaker 2: But ultimately, I think for investors what matters is rates

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Speaker 2: will at some point be coming down, and that's a positive.

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Speaker 3: And as investors, particularly us.

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Speaker 2: With nearly two hundred billion dollars of capital, we want

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Speaker 2: to try to find ways to deploy things before the

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Speaker 2: all clear sign, something we've begun to do, particularly in

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Speaker 2: real

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Speaker 3: Estate at scale,