Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Blackstone, the world's largest alternative asset manager, expects twenty twenty
Speaker 2: six to be its best year ever for IPOs. I
Speaker 2: spoke with the company's president and COO, John Gray on
Speaker 2: a wide range of topics, including concerns around private credit.
Speaker 1: When you have this much noise in the system and
Speaker 1: concern it will result in investors potentially looking for liquidity,
Speaker 1: So it's not unreasonable to expect this will take some
Speaker 1: time to work through. The chem will be do the
Speaker 1: products continue to show resiliency. And what's nice is because
Speaker 1: the yields are high, in the case of our BBC
Speaker 1: b cred more than a nine percent yield, you can
Speaker 1: absorb losses and you have a very lowly leveraged structure.
Speaker 1: So if you think about a bank that's typically call
Speaker 1: it twelve times levered, these vehicles for US less than
Speaker 1: one times levered. These vehicles can deliver a premium in
Speaker 1: performance as they have to liquid leverage loans. Investors will say, wow,
Speaker 1: these things are more resilient than I expected. They continue
Speaker 1: to deliver positive results and then this will ebb over time,
Speaker 1: but it may take a bit to work through well.
Speaker 2: What's a bit is that like quarters years? What does
Speaker 2: it look like?
Speaker 1: You know, it's hard to say. I would think it
Speaker 1: would be more quarters than years, but you'll have to
Speaker 1: see how the environment evolves. And obviously as base rates
Speaker 1: come down, that of course is a headwind as well
Speaker 1: from an absolute return standpoint, but not from a relative
Speaker 1: return standpoint.
Speaker 2: Even with the fears in private credit, it has been
Speaker 2: capital markets and M and A and activity that has
Speaker 2: been extremely robust. And John, I think that would surprise
Speaker 2: a lot of people coming into this year, considering we've
Speaker 2: had the fears over AI disruption, still on trade and
Speaker 2: now war on our hands. What are you seeing in
Speaker 2: your portfolio companies or are there any stresses around energy
Speaker 2: costs and inflation?
Speaker 1: What we've seen is remarkably strong. I mean, in Q one,
Speaker 1: our private equity portfolio had ten percent revenue growth, which
Speaker 1: was an acceleration from Q four and so yes, there
Speaker 1: are isolated companies, particularly in Europe, who are facing higher
Speaker 1: energy costs. Their natural gas has gone up quite a bit,
Speaker 1: which is very different than the United States. Some companies
Speaker 1: are still dealing with some terrif issues. There's slowness or
Speaker 1: more challenges. I would say in mid and lower end
Speaker 1: consumer businesses, but in aggregate the picture is pretty good.
Speaker 1: And the big driver goes back to what we talked
Speaker 1: about at the beginning, This huge AI infrastructure room five
Speaker 1: companies spending seven hundred billion dollars in capital just US alone.
Speaker 1: We think this year our data center business that we
Speaker 1: could lease across all our platforms six gigawatts. Six gigawatts,
Speaker 1: to put in context, is almost one hundred billion dollars
Speaker 1: of data centers. There'll be another couple hundred billion of
Speaker 1: chips put in by the hyperscalers. That's three hundred billion
Speaker 1: of aggregate spend. That's like the economy of Portugal or Finland.
Speaker 1: And so I think that tailwind to the overall economy globally,
Speaker 1: but particularly in the United States is powerful, which is
Speaker 1: one of the reasons why even as we have a
Speaker 1: shock like we're seeing with the war, we can continue
Speaker 1: to power through. Our expectation is we'll see a pretty
Speaker 1: healthy economy despite these headwinds.
Speaker 2: Those numbers boggle my puny, little human brain, so that
Speaker 2: you were laying them out. But as we see higher
Speaker 2: energy prices still the straight of hormous is closed. Gasoline
Speaker 2: prices go up. It's a market, and I know you're
Speaker 2: in private markets for a reason, but public markets are
Speaker 2: trading at all time highs. Do you think there is
Speaker 2: an element at which we are maybe a little bit
Speaker 2: too sanguine about wider risks and disruption from what's happening
Speaker 2: in the Middle East.
Speaker 1: Well, I think the market has begun to develop a
Speaker 1: perspective because this is now the fifth time since twenty
Speaker 1: twenty we're in the first quarter of the year. We've
Speaker 1: had a shock, right COVID, which was obviously very big.
Speaker 1: We had the Russia invasion of Ukraine which created an
Speaker 1: energy crisis. We had Silicon Valley Bank which shook the
Speaker 1: financial markets. We had Liberation Day which hit companies and markets,
Speaker 1: and now this And in each one of those previous experiences,
Speaker 1: the market traded off, people were highly concerned, and ultimately
Speaker 1: the returns the market were covered by the end of
Speaker 1: the year. And so I think the market has now
Speaker 1: been conditioned a little bit to say, hey, we should
Speaker 1: have a bit of patient that there will at some
Speaker 1: point here be a resolution and we'll go back to
Speaker 1: underlying fundamentals, which again is a pretty healthy global economy
Speaker 1: and inflation away from energy prices generally heading lower in
Speaker 1: terms of certainly rental housing costs, labor market cooling, and
Speaker 1: then these big productivity gains which should be beneficial for
Speaker 1: earnings growth and economic growth. So I'm not sure the
Speaker 1: market has it wrong. If the conflict escalates, and things
Speaker 1: could obviously change, but based on past history and the
Speaker 1: underlying strength of the US economy in particular, I think
Speaker 1: it's reasonable for the market to stay optimistic.
Speaker 2: Related to this, John, is the year of the IPO.
Speaker 2: I know you said it to start the year. There
Speaker 2: are some question marks because of everything we're discussing, but
Speaker 2: given the resiliency, the fact that lift off, yes gets delayed,
Speaker 2: but it's back on the docket. Jersey Mike's also going
Speaker 2: to becoming public too. At this point, Can anything stop
Speaker 2: the Year of the IPO or is this a train
Speaker 2: that's just going to keep running?
Speaker 1: Well, I would say I still think, as you noted,
Speaker 1: this is the year of the IPO. That prediction was
Speaker 1: not looking so good thirty days ago. But I think
Speaker 1: because of this strength in AI and three of the
Speaker 1: biggest tech companies in the world are likely over the
Speaker 1: next twelve eighteen months to go public. We're fortunately in
Speaker 1: our wealth vehicle investors in all three We have a
Speaker 1: number of companies. I can't comment on specifics that are
Speaker 1: on the docket that we think the market will receive well,
Speaker 1: but what I'd say is there's really a bifurcation. There
Speaker 1: are companies that are in sort of the path of
Speaker 1: AI direct beneficiaries. The market wants more exposure to those companies.
Speaker 1: There are companies that are sort of AI unaffected, like
Speaker 1: our medline business which we took public at the end
Speaker 1: of last year, and medical supplies. There's a lot of
Speaker 1: enthusiasm for that. The one area where I would say
Speaker 1: it's much tougher is in those white collar sort of
Speaker 1: job services areas. That's professional services, information services, software there,
Speaker 1: because the market has concerns about what the business model
Speaker 1: will look like over time, that's going to be tough
Speaker 1: for But the rest of that market's big enough that
Speaker 1: I think he can support a fair number of IPOs.
Speaker 1: We right now have nine of them filed globally in
Speaker 1: the US, Europe, and Asia. So we do think this
Speaker 1: should be our busiest year ever for IPOs at Blackstone.
Speaker 2: My interview with Blackstone President and COO John Gray, and
Speaker 2: I got to say I mean, he was measured in
Speaker 2: both the IPO response and in just the idea of
Speaker 2: how they're navigating all of the software stuff. He was like, look,
Speaker 2: there is still more pain to come out there. We
Speaker 2: talked about Tom of Bravo's Medalia. He mentioned that they
Speaker 2: lost more than five billion dollars on the deal too,
Speaker 2: so he said, yeah, things look good, but not Tolebravo
Speaker 2: lost more than five billion dollar correct, not to be
Speaker 2: very clear. Not because they bought Medalia for like six
Speaker 2: and a half and now it looks like they're ready
Speaker 2: to pass the keys.