Blackstone Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Cyprys - Morgan Stanley - Analyst : Hey, good morning. Thanks for taking the question. Maybe just on insurance, the platform continues to grow nicely there. So hoping you could maybe comment on the opportunity on both fronts on the strategic partnership side with the existing partners, how you're helping them grow? How are the conversations progressing for new potential relationships? And then on the regular way third-party side, I think you mentioned, 20 or so separate accounts, if you could help size that part of the business today and how you envision that continuing to grow from here? Thank you.

Question: Michael Cyprys - Morgan Stanley - Analyst : Great. Thank you.

Question: Michael Brown - Wells Fargo Securities - Analyst : Hi, good morning. Something -- if you could expand on the increase in the operating expenses this quarter, how much is driven by placement fees and where could that go? And then, if we think about the embedded FRE growth for 2025, how should we think about how that operating leverage should drive margin expansion next year? Could it be north of, call it 100 basis points? It's what you've kind of historically delivered over the years. Thank you.

Question: Glenn Schorr - Evercore Inc - Analyst : Hi, thanks. Big picture and Blackstone-specific question on the asset-backed world. So I wonder if you could size the asset-backed opportunity in your mind in terms of maybe put it in relative terms, to what we've seen in the direct lending market, just multiples bigger in the range of the same size or something like that. And then for you specifically, you talked about the different pieces of your juggernaut. I'm curious if you think relative to that backdrop, that we could be looking at in terms of share from the banks, do you think you've done enough to get your fair share in terms of bank partnerships and honing your third-party origination, piecing it together for that juggernaut? Thanks.

Question: Craig Siegenthaler - Bank of America - Analyst : Good morning, Steve, Jon, Michael. Hope everyone's doing well. We have a big picture question on the investing pipeline, and we heard a lot of positive commentary in the prepared remarks. But it looks like '25 will be a lot stronger overall, so they wanted your perspective on two key points. One, how much is the November election delaying investment decisions into next year? And two, is the backdrop broadly more favorable in real estate or private equity given the declining set-up in both discount rates and cap rates?

Question: Alexander Bolstein - Goldman Sachs Group Inc - Analyst : Hey, Jon. Good morning, everybody. Maybe piggybacking on that a little bit and zoning in on real estate a little more specifically. It's obviously very encouraging, conditions improving. Can you talk a little bit about your outlook over the next 12 to 18 months in terms of Blackstone being a net buyer or a net seller of real estate assets? And maybe a little bit on which asset classes in particular you expect to be more active in on both sides of that equation?

Question: Daniel Fannon - Jefferies - Analyst : Thanks. Good morning. Several funds came off the holiday in the third quarter. Can you repeat the size of that AUM? And then also just given the elevated levels of deployment that have been going on and seem to be continuing, can you talk about what that means for some of the larger funds or fundraising into 2025?

Question: Brian Bedell - Deutsche Bank - Analyst : Great. Thanks. Good morning. Thanks for taking my question. Maybe just move back to the AI and the data center theme. Just trying to connect the deployment opportunities, which are -- which obviously, you described is pretty massive in this space. Just connecting that, trying to connect that with the supply of investment capital from fundraising. So as you see that deployment come through, to what extent do you think the fundraising can keep up? Or to what extent will this team accelerate fundraising in say, over the next two years? Maybe just one example there would be the BREP. The BREP fund is 43% [committed] and your data centers are part of that. Could they be coming back to market given by the end of 2025 for the next vintage or is that too early? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 17, 2024 / 1:00PM, BX.N - Q3 2024 Blackstone Inc Earnings Call

Question: Brian Bedell - Deutsche Bank - Analyst : Great. Thank you very much.

Question: Brennan Hawken - UBS AG - Analyst : Great. Good morning. Thanks for taking my questions. So rates declining, you spoke to that helping out many of your businesses. But I was curious to hear how to think about the impact of lower base rates and tighter spreads on the credit business and maybe specifically, how should we think about the rate sensitivity of [FRPR] within credit?

Question: Benjamin Budish - Barclays - Analyst : Hi, good morning and thanks for taking the questions. I wanted to maybe ask another question on the FRE outlook for next year. Maybe thinking about the [comp] ratio in management fees versus realized performance revenues. I know in the past you've commented that you're not really looking to make a structural change like some of your peers have done. But when we look back on across the last like three, four, five years, it does look like overall -- the overall fee-related [comp] ratio has come down a little bit on the opposite on the performance side. And so just thinking through next year, I'm curious what your appetite is, particularly given if we do see a big pickup in performance revenues, it could be an opportune time given it would really smooth out the total [cost picture] for your employees? I appreciate any thoughts there. Thank you.

Question: Benjamin Budish - Barclays - Analyst : Got it. Thank you very much.

Question: Steven Chubak - Wolfe Research - Analyst : Good morning.

Question: Steven Chubak - Wolfe Research - Analyst : How are you? Wanted to ask a question on the FRE and net flow outlook. So certainly encouraging to see the improved fundraising deployment activity in the quarter. One metric which fell short of expectations was [FPM] growth. And that has reinforced at least some of the challenges of overcoming back book headwinds, which are running at about 10% of [FPM]. Just given the strong fundraising tailwinds you cited, was hoping you could speak to the FRE growth outlook just in the context of some of these back book pressures and how you're thinking about a sustainable organic net flow rate just as we refine some of our modeling assumptions for next year and beyond?

Question: Steven Chubak - Wolfe Research - Analyst : That's very helpful context. Thanks for taking my question.

Question: Kenneth Worthington - J.P. Morgan - Analyst : Hi, good morning. Thanks for taking the question. So lots of areas and elements in Blackstone are performing well and recovering. Secondaries continues to lag. We witnessed IRRs and [SP 9] and for three, [SP 8] all fell this quarter by a couple of percentage points. And returns in aggregate in secondaries for 2023 and '24 are well below your hurdle rates. So help us understand why performance here continues to lag. Is the path forward to better results just a function of time? And if that's the case, when do we see it? Or is there really like a different bigger issue here?

Question: Kenneth Worthington - J.P. Morgan - Analyst : Great. We'll stay tuned. Thank you so much.

Question: William Katz - TD Cowen - Analyst : Okay. Thank you very much for the update and taking my question this morning. Maybe a big picture one on wealth management. I see you have a tremendous first mover advantage and a great brand. How do you sort of see the platform evolving here just in terms of impact of rising competition and maybe what you're seeing in terms of investor demand as interest rate expectations shift? Thank you.

Question: Crispin Love - Piper Sandler - Analyst : Thanks. Good morning. Just a big-picture question here. So just from your seat, what are you seeing with regards to M&A and IPO activity in the IPO pipeline? And do you see a scenario where there are less IPOs companies staying private longer? And what could that mean for you? Are there both positive and negative implications there for Blackstone in this type of environment? Thank you.

Question: Crispin Love - Piper Sandler - Analyst : Thank you, Jon. Appreciate the color.