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Speaker 1: John, I want to talk about the talent story, because

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Speaker 1: of course we know it's harder to get into Blackstone

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Speaker 1: than it is to get into a Harvard for example.

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Speaker 1: How are you thinking about adding staff this year?

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Speaker 2: Well, talent is the most important thing here at Blackstone.

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Speaker 3: You know, what we create is based on the incredibly

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Speaker 3: talented people who work at this firm.

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Speaker 4: We love bringing in super.

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Speaker 3: Talented, driven people of all sorts of backgrounds from all

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Speaker 3: over the world. It's one of the things that makes

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Speaker 3: me most proud about this company. It's really in the

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Speaker 3: dna of this firm, driven by Steve Schwarzman, a real

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Speaker 3: focus on great people, meritocracy. I'd say in terms of

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Speaker 3: hiring for the year ahead, I think we will continue

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Speaker 3: to grow our headcount. I think the pace of growth

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Speaker 3: will be a function of the pace of deal activity,

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Speaker 3: the pace of fundraising. If those things accelerate, you'll probably

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Speaker 3: see more hiring as you get through the back half

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Speaker 3: of the year. So there will be spots for people

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Speaker 3: who want to come at work at this firm.

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Speaker 2: It is a very selected place and it's also a

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Speaker 2: fun place. As you know, Shanali. We were proud of

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Speaker 2: our holiday video.

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Speaker 3: We had something like eight million people who watched it,

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Speaker 3: which is a little crazy, but it speaks to the

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Speaker 3: brand and people's desire to connect with Blackstone, and there's

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Speaker 3: big desire to work here as well.

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Speaker 1: John. Let's just take a big look at Blackstone for

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Speaker 1: a moment here as you report your full yeer results

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Speaker 1: for last year. Because it wasn't too long ago when

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Speaker 1: Blackstone surpassed Morgan Stanley in market value. It begs the question,

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Speaker 1: as investors moved to private assets, are you gunning to

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Speaker 1: go after JP Morgan too?

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Speaker 2: Now?

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Speaker 4: Well, good morning, Shanali. I guess I just start with the.

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Speaker 2: Quarter which we're particularly proud about.

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Speaker 3: We had really the best quarter since middle of twenty

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Speaker 3: twenty two when it relates to distributt earnings, when it

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Speaker 3: relates to investment activity and fundraising. And what's happening in

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Speaker 3: our business is we're benefiting from this regime shift as

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Speaker 3: we move from this rising cost of capital environment which

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Speaker 3: we saw under the FED for the last couple of years,

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Speaker 3: into an environment here whereas inflation comes down, the Fed's easing,

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Speaker 3: and that leads to a virtuous cycle for our business.

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Speaker 3: Equity markets open up, debt, cost to capital comes down,

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Speaker 3: IPOs occur m and a activity picks up, and that's

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Speaker 3: very positive for our business in terms of a reacceleration.

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Speaker 3: But what we're really proud about, and it speaks to

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Speaker 3: our firm, is during this challenging two year period, we've

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Speaker 3: shown real resilience and that is important to our investors.

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Speaker 4: And our stock but also our limited partners.

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Speaker 3: And so when I think about the business longer term,

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Speaker 3: we're very excited about alternatives as a sector. Investors across

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Speaker 3: the landscape are coming to alternatives, and we, as the

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Speaker 3: leader in the space, are uniquely positioned.

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Speaker 2: So, yeah, we have a lot of optimism about.

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Speaker 3: The future and in terms of how big the company

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Speaker 3: can get to all a function of us delivering for

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Speaker 3: our customers.

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Speaker 1: Well, let's talk about what made the company bigger in

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Speaker 1: the last quarter. A lot of your inflows really came

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Speaker 1: in the credit space. But at the same time, John,

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Speaker 1: there are a lot of investors out there who are

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Speaker 1: worried that perhaps private credit is approaching bubble territory. The

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Speaker 1: question becomes, are there enough opportunities out there to prudently

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Speaker 1: put the money to work.

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Speaker 3: Well, when you talk about things like a bubble and credit,

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Speaker 3: what I like to look at is how much risk

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Speaker 3: is there. And if you look at the loans we're

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Speaker 3: originating in direct lending to private equity sponsors, on average

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Speaker 3: today they're about forty percent loan to value. That's almost

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Speaker 3: half what they were back in the six seven period

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Speaker 3: when we had an actual bubble. Rates and credit across

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Speaker 3: our non investment grade borrowers are less than thirty basis points.

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Speaker 4: So we still see a very healthy market out there.

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Speaker 3: What we do expect is that transaction activity will pick

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Speaker 3: up and that folks like us in the private credit

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Speaker 3: space are in a really great position to deliver for borrowers.

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Speaker 3: If you think about what we do, we make loans

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Speaker 3: to companies and hold them either on behalf of our

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Speaker 3: pension fund clients, it could be for individual investors in

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Speaker 3: the form of BDCs, or an investment grade for our

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Speaker 3: insurance companies, and we can deliver certainty to borrowers and

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Speaker 3: that is taking more share. And so I think what

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Speaker 3: we're seeing as a structural shift towards private credit. It

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Speaker 3: doesn't mean that we're seeing access is build up in

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Speaker 3: the system, as I said, because the fundamentals in terms

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Speaker 3: of loan to value credit quality still remain strong.

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Speaker 1: How do you feel about the opportunity here for M

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Speaker 1: and A to move forward. You mentioned deals coming back,

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Speaker 1: but the reality is we've only seen it in drips

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Speaker 1: and drabs. How fast do you see yourself putting hundreds

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Speaker 1: of billions of dry powder to work?

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Speaker 3: Well, we do have two hundred billion of dry powders.

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Speaker 3: So M and A activity picking up is helpful for

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Speaker 3: our business. I think looking back over time, it's helpful

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Speaker 3: to have a little perspective. If you went back to

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Speaker 3: the early nineties, M and A activity declined fifty sixty percent.

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Speaker 3: It was down similarly in eight oh nine and again

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Speaker 3: the last two years, but invariably, because private equity sponsors

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Speaker 3: want to sell, companies want to sell non core divisions,

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Speaker 3: families want liquidity, institutions want to sell things, Invariably things

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Speaker 3: start to happen again. And I think now, given this

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Speaker 3: shift in rates, we'll begin to see more of that.

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Speaker 3: So our expectation is we'll see a pickup. And if

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Speaker 3: you looked in our fourth quarter, you see some early

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Speaker 3: signs of that. Our lending area saw more than a

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Speaker 3: double in terms of new loans we were making. If

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Speaker 3: you looked in our private equity area, we've been working

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Speaker 3: on some of these transactions a long time, but in

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Speaker 3: the last six weeks of the year, we announced six

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Speaker 3: deals across the US and Europe, many in sectors we

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Speaker 3: like digital marketplaces, enterprise software, energy, transition.

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Speaker 4: And in real estate.

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Speaker 3: We also saw a pickup and activity privatizations a big

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Speaker 3: distress loan portfolio, so we are seeing a pickup. It

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Speaker 3: does often take a bit of time, but things are

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Speaker 3: starting to loosen, so it does feel like for M

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Speaker 3: and A a bit of an inflection point.

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Speaker 1: John, it was very notable to see take privates happen

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Speaker 1: across the private equity industry, going from public markets shrinking

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Speaker 1: at again going into private hands. Do you see a

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Speaker 1: lot more spin offs and take privates coming to Blackstone

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Speaker 1: in the following year.

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Speaker 2: Well, I think we'll continue to see that activity.

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Speaker 3: There are companies out there who don't feel like they're

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Speaker 3: getting value appropriately. There are some SPACs from a different

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Speaker 3: era that may not be trading particularly well. There may

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Speaker 3: be real estate companies trading at a discount to their

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Speaker 3: underlying asset value. There could be infrastructure companies that could

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Speaker 3: be great long term holds in the private market.

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Speaker 4: So I think we'll see some of that, but.

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Speaker 3: I also think we'll see plenty of private activity. If

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Speaker 3: you think about the trillions of dollars of assets held

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Speaker 3: by families and particularly private equity sponsors, there's going to

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Speaker 3: be a desire to move towards liquidity and that will

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Speaker 3: create a lot of opportunity across various areas.

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Speaker 4: At Blackstone, well.

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Speaker 1: A big question about exits as well. Realize performance fees

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Speaker 1: had been pressured for you guys across the industry, do

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Speaker 1: you think the IPO market is opening enough for exits

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Speaker 1: for Blackstone portfolio companies?

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Speaker 3: You know you would expect at some point it's going

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Speaker 3: to reopen. It's been a tough couple of years for

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Speaker 3: IPOs and a bit like M and A, there's syclicality

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Speaker 3: to this, and I do think we'll start to see

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Speaker 3: a better IPO more market, particularly as cost of capital

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Speaker 3: here is coming down. Exit sometimes takes some time. It's

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Speaker 3: like a conveyor belt. You have to identify the companies

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Speaker 3: you want to look to sell, consider an IPO, maybe

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Speaker 3: a private sale. Those processes take time, but a more

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Speaker 3: conducive market is helpful for that activity. As you look forward,

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Speaker 3: As you look towards the back half of twenty four

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Speaker 3: so yeah, we have some optimism that equity markets and

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Speaker 3: receptivity to new companies should improve.

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Speaker 1: John, real estate, you mentioned it a couple times. The

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Speaker 1: big open question in the market is how much more

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Speaker 1: do real estate values have to fall?

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Speaker 3: So I think real estate values are bottoming here. It's

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Speaker 3: not a view in terms of recovery, but there are

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Speaker 3: some positive signs. I would note we still will see

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Speaker 3: troubled assets that were financed in a different period of time.

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Speaker 3: They're going to emerge over the next couple of years,

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Speaker 3: particularly in the office sect. There are some areas like

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Speaker 3: multifamily housing where there's a lot of supply and the

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Speaker 3: fundamentals will be challenged as you look forward the next

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Speaker 3: twelve months or so. But going back to this cost

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Speaker 3: of capital, we've seen the ten year move from five

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Speaker 3: percent to four point one five percent.

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Speaker 4: We've seen spreads come down.

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Speaker 2: That's very helpful for real estate and new supply.

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Speaker 3: New construction starts in real estate, particularly in our biggest sector,

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Speaker 3: logistics have fallen by something like seventy five percent from

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Speaker 3: the peak. That starts to create really the foundation for

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Speaker 3: a recovery. Now, the way we think about this is

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Speaker 3: things go down the bottom, you bounce along here. Some

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Speaker 3: sectors don't do as well, some start to recover faster.

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Speaker 4: The key for US, with sixty.

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Speaker 3: Five billion of dry powder and real estate is to

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Speaker 3: take advantage of this time. Going back again in time

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Speaker 3: two thousand and nine, that summer fall, we started deploying

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Speaker 3: capital before the all clear sign If you look at

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Speaker 3: what we've done in ill estate the last sixty days,

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Speaker 3: the signature transaction.

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Speaker 4: Their mortgage loan portfolio.

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Speaker 3: We announced a big joint venture with Digital Realty, which

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Speaker 3: we also did with our infrastructure group, and then recently

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Speaker 3: a residential privatization of a company in the US and

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Speaker 3: Canada Tricon. That reflects our view, which is we want

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Speaker 3: to invest into this period of time, move on to offense.

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Speaker 3: Before everybody's calm about real estate. Why people are still nervous.

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Speaker 3: At some point that recovery will come. It will be

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Speaker 3: very clear to everybody generally. Then it's too late.

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Speaker 1: What about the cost of housing here, owning homes, rentals

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Speaker 1: in America in an election year where even if inflation

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Speaker 1: is cooling, you're still looking at Americans face housing costs

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Speaker 1: that many are calling now an affordability crisis. Do you

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Speaker 1: have any jitters about the sector given the politicization of it.

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Speaker 2: Well, I would say at its core, the problem we have.

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Speaker 4: In housing in America is supply.

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Speaker 2: If you look at the day we are building.

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Speaker 3: In twenty twenty three, we built basically the same number

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Speaker 3: of homes as we did in nineteen sixty when the

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Speaker 3: population of the US was about half and we really

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Speaker 3: haven't gotten new supply restarted in a meaningful way since

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Speaker 3: the financial crisis, and that has created a real and balance,

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Speaker 3: and so I do think there should be more emphasis

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Speaker 3: on how we can make it more affordable, particularly on

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Speaker 3: zoning property taxes in some places, creating tax incentive to

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Speaker 3: create more supply. This company I mentioned that we've committed

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Speaker 3: to acquire is building a billion dollars of homes here

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Speaker 3: in the US right now, another couple billion dollars in Canada,

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Speaker 3: where they have an even more acute housing shortage. I

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Speaker 3: do think it's a sector where more capital has to come.

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Speaker 3: There has to be more building, and I think rates

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Speaker 3: coming down will help that, but in the near term

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Speaker 3: I think we'll see less housing construction. The other beneficial

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Speaker 3: thing we talked about is because of the supply spurt

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Speaker 3: in multi family housing, renters will face a better environment

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Speaker 3: over the next twelve months.

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Speaker 1: So even with Blackstone playing a role here in the

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Speaker 1: supply question, do you still worry though, that firms like

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Speaker 1: Blackstone will get dragged further into the debate on ownership

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Speaker 1: in America?

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Speaker 3: Well, it's a question obviously that comes out a lot.

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Speaker 4: I think numbers help provide perspective.

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Speaker 3: There are one hundred and five million single family homes

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Speaker 3: in the United States institutional investors own I think less

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Speaker 3: than half of one percent of all of those homes.

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Speaker 3: Their buying is down close to ninety percent over the

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Speaker 3: last five years, and so the core of this problem

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Speaker 3: is not about institutional investors, it's supply demand. I'd also

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Speaker 3: point out when an institutional investor buys a home and

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Speaker 3: rents it out, the tenant there tends to have lower

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Speaker 3: income and therefore has access to a better school district

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Speaker 3: community than somebody who's buying. You know, I would say

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Speaker 3: on average, it's about fifty percent less today to rent

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Speaker 3: than to buy, and that creates opportunities. So I don't

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Speaker 3: think it's one size fits all here, and I do

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Speaker 3: think creating affordability is very helpful for families.

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Speaker 1: You talked a little bit about real estate and performance

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Speaker 1: and the bottoming out of the market. Be Read had

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Speaker 1: faced its worst performance last year since inception. Is there

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Speaker 1: more pain to come there or do you think that

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Speaker 1: performance there has bottomed dot as well.

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Speaker 4: So when we look at.

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Speaker 3: Bee Reach, we're incredibly proud of what it's done. Last

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Speaker 3: year we did have very modestly negative performance. It has

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Speaker 3: delivered eleven percent net since inception, that is double the

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Speaker 3: public market over that seven year period of time. We've done,

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Speaker 3: I think a really terrific job positioning in the best

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Speaker 3: sectors places like logistics, in housing data centers where rental

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Speaker 3: growth continues to be strong, and so that gives us

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Speaker 3: a lot of confidence. We've also focused in the much

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Speaker 3: faster growing sunbelt of the United States. I don't want

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Speaker 3: to go into projections, but what I would say is

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Speaker 3: it feels like twenty twenty four should be a better

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Speaker 3: year than twenty twenty three. And then I would also

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Speaker 3: point out on the redemption side, which had gotten a

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Speaker 3: lot of focus in the press.

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Speaker 2: Those redemptions are now down about eighty.

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Speaker 3: Percent from where they were a year ago, and if

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Speaker 3: the current trends continue, we expect we'll no longer be

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Speaker 3: pro rating investors here in the first quarter, So that's

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Speaker 3: another positive sign for b Reed.

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Speaker 1: Let's talk about the macro. You hinted a couple times

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Speaker 1: here about the idea of shelter costs cooling and cooling

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Speaker 1: even more throughout the year. What does that mean for

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Speaker 1: the direction of inflation and do you think it'll allow

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Speaker 1: the Fed to cut rates early this year?

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Speaker 4: Think the Fed has a lot of air cover on inflation.

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Speaker 3: When we look at our portfolio, we see input costs

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Speaker 3: for goods and materials basically flat year on year. When

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Speaker 3: we survey our CEOs, hiring has gotten a lot easier.

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Speaker 3: They're describing a lot less wage pressure. We talked about

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Speaker 3: rental housing, and so we think the data the Fed

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Speaker 3: will get will be pretty good. If you look at

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Speaker 3: CPIX shelter it's actually now below two percent. I think

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Speaker 3: the challenge is the FED is looking at what happened

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Speaker 3: in the nineteen seventies and they're very reluctant to reignite inflation.

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Speaker 2: And so my gut is they will cut rates.

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Speaker 3: The question is will they do it as quickly and

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Speaker 3: as deeply as the market wants. That's hard to say,

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Speaker 3: but I think the direction of travel is pretty clear,

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Speaker 3: because there's good news on the inflation front.

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Speaker 1: Another question mark around the cost of financing here is

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Speaker 1: the US fiscal life. You have the former Treasury Secretary

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Speaker 1: Robert Rubin speaking to Bloomberg this week saying that the

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Speaker 1: US is in a terrible place with its deficit. Do

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Speaker 1: you agree with that remark and do you think that

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Speaker 1: there are longer term ramifications, particularly with how we finance

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Speaker 1: this country and all the companies in it.

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Speaker 3: Well, the US today has a very valuable position in

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Speaker 3: the world, given the scale of the economy, the desire

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Speaker 3: of capital around the world to come here, the growth

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Speaker 3: of the economy, our population is still increasing.

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Speaker 4: We have a lot of competitive advantages.

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Speaker 3: But you point to something that is a structural challenge,

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Speaker 3: which is we're running very large deficits, and that is

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Speaker 3: something I think as a country we're going to have

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Speaker 3: to tackle. It's hard to say when that becomes a

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Speaker 3: real issue when marketplace participants lose confidence. Right now, there

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Speaker 3: continues to be a lot of confidence in the United States,

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Speaker 3: But I do think longer addressing those structural issues will

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Speaker 3: help ensure growth and stability for a long time.

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Speaker 4: So I do think it's something we're going to have

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Speaker 4: to face.

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Speaker 1: Before I let you go here, John, I want to

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Speaker 1: talk about the talent story, because of course we know

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Speaker 1: it's harder to get into Blackstone than it is to

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Speaker 1: get into a Harvard for example. How are you thinking

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Speaker 1: about adding staff this year?

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Speaker 3: Well, talent is the most important thing here at Blackstone.

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Speaker 3: You know, what we create is based on the incredibly

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Speaker 3: talented people who work at this firm. We love bringing

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Speaker 3: in super talented, driven people of all sorts of backgrounds

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Speaker 3: from all over the world. It's one of the things

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Speaker 3: that makes me most proud about this company. It's really

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Speaker 3: in the DNA of this firm, driven by Steve Schwarzman,

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Speaker 3: a real focus on great people, meritocracy. I'd say, in

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Speaker 3: terms of hiring for the year ahead, I think we

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Speaker 3: will continue to grow our headcount.

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Speaker 4: I think the pace of.

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Speaker 3: Growth will be a function of the pain of deal activity,

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Speaker 3: the pace of fundraising. If those things accelerate, you'll probably

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Speaker 3: see more hiring as you get through the back half

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Speaker 3: of the year, So there will be more spots for

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Speaker 3: people who want to come at work at this firm.

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Speaker 3: It is a very selected place and it's also a

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Speaker 3: fun place.

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Speaker 2: As you know, Sheanali. We were proud of our holiday video.

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Speaker 3: We had something like eight million people who watched it,

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Speaker 3: which is a little crazy, but it speaks to the

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Speaker 3: brand and people's desire to connect with Blackstone, and there's

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Speaker 3: big desire to work here as well.