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Speaker 1: Bloomberg Audio Studios, podcasts, radio News.

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Speaker 2: John, thank you so much for joining this morning.

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Speaker 1: Great to be here.

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Speaker 3: So a surge in profits, deals abound, exits were robust.

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Speaker 2: Is this the starting gun fired off?

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Speaker 1: It does feel a bit of that, Danny. It's great

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Speaker 1: to be here to be talking about it. We had

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Speaker 1: a heck of a quarter.

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Speaker 4: What we saw here was we delivered for our customers.

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Speaker 4: That's the most important thing in terms of returns. We

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Speaker 4: really leaned into digital and energy infrastructure. We also saw

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Speaker 4: big inflows as well, fifty plus billion dollars and all

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Speaker 4: of that produced big earnings. Distributable earnings up fifty percent.

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Speaker 4: But you've really hit on the key here. We've got

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Speaker 4: a couple of things going on, a cyclical uplift in

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Speaker 4: deal activity, and that's very helpful for our business and

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Speaker 4: our investors. And then we also have some of these

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Speaker 4: big markets that continue to grow in wealth, insurance, very

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Speaker 4: attractive investment areas and places like India and life sciences.

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Speaker 1: So a lot of good things are starting to happen.

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Speaker 2: Across the board.

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Speaker 3: It does look like deal activity is up, not just

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Speaker 3: at Blackstone, but you see it within the investment banks,

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Speaker 3: within some of your peers John the way that this

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Speaker 3: is going, could we get.

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Speaker 2: Back to record levels of deal activity.

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Speaker 4: Well, if you look over time, you always see new highs,

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Speaker 4: but it takes time. After the downturn certainly happened after

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Speaker 4: the financial crisis. I think it'll happen after this inflation

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Speaker 4: and rate rise period.

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Speaker 1: It will not happen overnight.

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Speaker 4: We're still at low absolute levels of M and A

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Speaker 4: and IPO activity relative to historic levels as a percentage

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Speaker 4: of market cap, but there were very encouraging signs in

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Speaker 4: the third quarter. IPOs were up one hundred percent. M

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Speaker 4: and A activity was up sixty.

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Speaker 1: Four percent in the US.

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Speaker 4: We did three IPOs globally in the quarter, which is

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Speaker 4: the first time in four years that that's occurred. We

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Speaker 4: announced an eighteen billion dollar deal this week with whole logic.

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Speaker 1: It does feel like things are coming together.

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Speaker 4: And what's helping is the cost of capitals coming down,

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Speaker 4: the FEDS lowing rates, the long end has come down,

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Speaker 4: spreads of Titan high yield spreads are down almost in

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Speaker 4: half from their highs a couple of years ago, and

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Speaker 4: we've got record highs in.

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Speaker 1: The stock market.

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Speaker 4: That is a very good combination for more deal activity

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Speaker 4: and so if we get a little bit of calm

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Speaker 4: hair in the overall environment, with this kind of backdrop,

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Speaker 4: I would expect next year will be an even better

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Speaker 4: year for M and A and IPOs.

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Speaker 3: Even so, there are still concerns. There's uncertainty around trade policy. Terrorists,

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Speaker 3: to be honest, are really just starting to bite. You

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Speaker 3: see that in some of the public company earnings, and

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Speaker 3: sticky inflation is.

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Speaker 2: Still with us. John, Are those not still concerns?

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Speaker 1: Well, I would tick through some of these.

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Speaker 4: Certainly on the tariffs, we've been an advocate of letting

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Speaker 4: this tariff diplomacy play out. Obviously, around Liberation Day there

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Speaker 4: was a lot of concern but ultimately we saw progress

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Speaker 4: and deals being made by the administration. I would expect

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Speaker 4: that will continue to happen. There will be noise as

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Speaker 4: the negotiations go back and forth, but I do believe

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Speaker 4: this will settle and I don't think six twelve months

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Speaker 4: from now this will be on the front page. The

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Speaker 4: other thing I'd say around inflation is that our data

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Speaker 4: is pretty encouraging in certain areas. Rental housing the biggest

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Speaker 4: component in CPI. Our data says it's running about half

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Speaker 4: of the three point six percent what the Bureau of

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Speaker 4: Labor Statistics produces, and that should be helpful for the FED. Also,

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Speaker 4: we've seen a cooling in the labor markets. If you

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Speaker 4: look at hourly wages at our portfolio companies, they're down

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Speaker 4: around three percent from north of four percent a year ago.

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Speaker 4: So I think that should allow the FED to continue

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Speaker 4: to lower rate. That's a positive. So I think some

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Speaker 4: settlement of the tariffs, continued, good data on CPI and

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Speaker 4: rates coming down should be helpful. And overall that environment

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Speaker 4: does feel pretty good. Obviously, there can be risks along

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Speaker 4: the way. We're in the midst of a government shutdown

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Speaker 4: that can slow things like IPOs in the short term,

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Speaker 4: but when we look out over the horizon, it feels

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Speaker 4: pretty good for deals.

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Speaker 3: So you're an optimist and there is clear robustness there, John,

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Speaker 3: But you and your private capital counterparts, the shares of

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Speaker 3: your companies have really been punished this year. Virtually all

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Speaker 3: have underperformed the wider market. What do you think is

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Speaker 3: behind those fears and is any of it warranted?

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Speaker 4: Well, it's hard to look at stocks day to day.

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Speaker 4: We focus on the long term for our shareholders. I

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Speaker 4: think our total return is something like three and a

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Speaker 4: half times over the last five years double the stock market.

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Speaker 4: So shareholders have been rewarded for investing with Blackstone, where you,

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Speaker 4: of course are very aligned with them as the largest

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Speaker 4: shareholders of the company. I think in markets when people

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Speaker 4: are nervous about what's happening, there have been a lot

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Speaker 4: of these stories around private credit, which I'm happy to

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Speaker 4: talk about that may have created concern. Maybe people have

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Speaker 4: been focused on the government shutdown and the IPO market slowing,

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Speaker 4: or the tariffs causing that. We tend to take this

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Speaker 4: longer term approach, and when we do that, it looks

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Speaker 4: like a.

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Speaker 1: Very bright environment.

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Speaker 4: So I think with us, what we found is we

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Speaker 4: just keep executing, keep delivering good returns for our customers.

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Speaker 4: That enables us to raise money to expand our business,

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Speaker 4: and I think shareholders will see that this business can

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Speaker 4: continue to grow and deliver.

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Speaker 3: Let's get into the private credit of it all, John,

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Speaker 3: because it feels like not a day comes by that

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Speaker 3: someone admittedly not in private credit, comes on this show

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Speaker 3: or others and say private credit is a trouble child,

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Speaker 3: and bankruptcy with some prime auto lenders are exemplary of that.

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Speaker 2: Why do you push back against that idea.

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Speaker 4: Well, we would say that if you look at the

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Speaker 4: three big troubled credits that have been out there the

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Speaker 4: last couple of weeks, this is not a private credit story.

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Speaker 4: These credits were bank led, they were bank originated, they

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Speaker 4: were bank syndicated, So we can't really understand why there's

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Speaker 4: a referendum on private credit. I would also point out

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Speaker 4: that these were non institutional borrowers. If you look at

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Speaker 4: what we do in our one hundred and fifty billion

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Speaker 4: dollar direct lending business, we lend ninety eight percent to

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Speaker 4: private equity sponsors to public companies. These were individuals. And

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Speaker 4: also it appears, based on the reporting that there was

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Speaker 4: fraud involved in these three situations.

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Speaker 1: That's something that's not so common.

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Speaker 4: So I don't think it says really anything about private credit.

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Speaker 4: And I also, because of the idiosyncratic nature of the fact,

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Speaker 4: I don't think it says a lot about the overall

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Speaker 4: health of credit in the system.

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Speaker 3: But John, couldn't you make the argument that these were

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Speaker 3: firms that were tapping the credit markets over a span

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Speaker 3: of years, and you had very reputable people coming in

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Speaker 3: and lending to them. Does it not say something that

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Speaker 3: very fact that despite this continued concern of financial impropriety,

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Speaker 3: that people continued to lend to them and didn't spot

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Speaker 3: some of the warning signs.

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Speaker 4: Well, clearly in these situations there should have been more

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Speaker 4: concerned registered. When you go through a period of very

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Speaker 4: low default there can be at times people relaxing standards,

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Speaker 4: and maybe that was the case in these situations. Although

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Speaker 4: in defense of the folks who lend here fraud, not

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Speaker 4: disclosing liabilities, double pledging collateral, those are hard things to catch,

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Speaker 4: and so that to me is a little more understandable.

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Speaker 1: And I do think you have to look at this

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Speaker 1: in this scheme.

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Speaker 4: Of overall credit, look at what's happening in the banking system.

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Speaker 4: Their defaults continue to be very low, they'll realize loss

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Speaker 4: is very low. It's a similar story in private credit.

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Speaker 4: So in aggregate, the system to us feels very healthy.

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Speaker 4: There will be these one off situations and certainly as

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Speaker 4: you get deeper into a cycle, could you see defaults

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Speaker 4: go up or losses go up off of these very

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Speaker 4: low base today? Yes, But overall, again I think the

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Speaker 4: system feels pretty good to us.

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Speaker 2: What about returns?

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Speaker 3: It had been a lot of is the golden age

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Speaker 3: of private credit, But Johna's rates start to come in.

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Speaker 3: Just performance wise, is it still the golden era?

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Speaker 4: Well, I still think it's a very good time for

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Speaker 4: private credit. I would acknowledge that as base rates come

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Speaker 4: down and as spreads tightened, some of the very high

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Speaker 4: returns that were achieved being a senior lender in private credit,

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Speaker 4: that's harder to do achieving mid teams returns. But the

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Speaker 4: premium relative to liquid credit what you get in leverage

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Speaker 4: loans in high yield, that's enduring because you have this

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Speaker 4: farm to table model. You're bringing investors right up to

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Speaker 4: borrowers and knocking out a bunch of origination and securitization costs.

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Speaker 4: And so I think the key thing is not necessarily

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Speaker 4: the absolute return, but can you deliver a premium return

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Speaker 4: over liquid markets? And that I continue to have very

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Speaker 4: high confidence, and that's why I think we'll continue to

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Speaker 4: see flows into private credit, not just non investment grade

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Speaker 4: but investment grade. What we're seeing with insurance clients, the

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Speaker 4: momentum in that area is pretty remarkable because insurance clients recognize,

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Speaker 4: particularly as base rates and spreads come down, that getting

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Speaker 4: that extra return from private credit without taking on any

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Speaker 4: additional risk.

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Speaker 1: That makes a ton of sense.

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Speaker 2: There are those that.

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Speaker 3: Are suffering, be it in credit or private equity. It's

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Speaker 3: a real bifurcation of the industry. KKR somewhat famously told

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Speaker 3: Bloomberg a few weeks ago that there are more McDonald's,

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Speaker 3: or rather there are more private equity funds in the

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Speaker 3: US than McDonald's. It seems like that's slowly changing.

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Speaker 2: John.

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Speaker 3: You hear stories of Brookfield and oak Tree coming together,

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Speaker 3: as speaking with a manager yesterday who said every day

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Speaker 3: he has a new inbound from a GP looking to

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Speaker 3: sell itself. With that increasing fragmentation, has Blackstone considered acquiring

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Speaker 3: new managers.

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Speaker 1: Not really.

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Speaker 4: We're an organically focused business. We're celebrating our fortieth anniversary.

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Speaker 4: Over that period of time since Pete and Steve founded

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Speaker 4: the firm, there have been a small number of acquisitions,

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Speaker 4: relatively small in the scheme of the firm.

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Speaker 1: We would look for.

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Speaker 4: Those type of acquisitions that give us some intellectual capital

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Speaker 4: and capabilities we have, but in general we find we

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Speaker 4: don't want to buy aum from another firm because we

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Speaker 4: can raise capital for us. What we really want is

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Speaker 4: great talent to move into a space. We did this

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Speaker 4: more recently, maybe seven years ago in life sciences. We

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Speaker 4: did it ten or so years ago in the secondary's business,

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Speaker 4: so it would be very tactical where we're getting a capability.

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Speaker 1: We don't have.

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Speaker 4: But in general, we found we can continue to grow

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Speaker 4: this business organically. The rates of growth have been quite

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Speaker 4: strong over time, and it's because investors have so much

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Speaker 4: confidence in us. So I think of us as an

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Speaker 4: organic business building firm.

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Speaker 1: And I think that's the path we'll continue on.

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Speaker 4: The exception is if we found something very special that

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Speaker 4: we could add to the firm. My expectation though, is

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Speaker 4: that would be pretty small relative to the overall firm.

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Speaker 3: Let's talk about some of the talent and changes to

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Speaker 3: how people do work. Whenberg recently learned that open AI

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Speaker 3: hired a lot of bankers and has been working on

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Speaker 3: a program of Generator of AI specifically to do financial

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Speaker 3: grunt work, how long do you think before something like

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Speaker 3: that could take hold at Blackstone, where AI does the

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Speaker 3: work of associates.

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Speaker 4: Well, I would say it's a little bit of a

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Speaker 4: harder task in aggregate, but there are elements of what

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Speaker 4: our people do where.

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Speaker 1: We can continue to improve.

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Speaker 4: Their productivity and have them do things they frankly don't

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Speaker 4: enjoy doing. We've seen huge evolutions in the thirty three

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Speaker 4: years I've been into this business. I remember having to

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Speaker 4: walk around the halls to get the orders, call people

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Speaker 4: on the phone, look in the yellow pages, go down,

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Speaker 4: pick things up. Long before in uber eats world, long

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Speaker 4: before we were connected.

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Speaker 1: I think we're going to continue to see an evolution.

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Speaker 4: I think you will be able to interface with an

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Speaker 4: AI agent to say, hey, I'm looking in this industry,

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Speaker 4: you know, can you give me the relevant comparables, the

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Speaker 4: risk factors. That's already starting to happen, by the way,

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Speaker 4: in areas like engineering and claud code we're using those technology.

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Speaker 4: Are video teams starting to use this techno, Our legal

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Speaker 4: teams are using AI to start doing things like marketing compliance.

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Speaker 4: We're definitely going to be able to help our analysts

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Speaker 4: and associates. So I think it'll continue to make them

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Speaker 4: productive and make the job even more enjoyable.

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Speaker 2: I think they're all.

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Speaker 3: Going to be happy to hear this, John, because you

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Speaker 3: notably did not say that it will replace them, So

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Speaker 3: I think that's a good event.

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Speaker 1: On Yes, well, thank you, Danny, great to see you.

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Speaker 2: Thank you so much, John, really appreciate your time this morning,