Blackstone(US:BX)2024-07-18 17:44Financial Data and Key Metrics Changes - The company reported GAAP net income of $948 million for Q2 2024, with distributable earnings of $1.3 billion or $0.96 per common share, and declared a dividend of $0.82 [6][31] - Total AUM increased by 7% year-over-year to $1.1 trillion, with inflows of $39 billion in the quarter and $151 billion over the last 12 months [31] - Fee-related earnings (FRE) were $1.3 billion in Q2, up 3% year-over-year, marking the 11th consecutive quarter of FRE over $1 billion [33] Business Line Data and Key Metrics Changes - The credit and insurance business had a busy quarter with $21 billion invested or committed, including global direct lending and infrastructure [20] - In private equity, new commitments included acquisitions in Japan, the UK, and India, with a total deployment of $34 billion in Q2, up 73% year-over-year [20][31] - Real estate saw nearly $15 billion deployed in the first half of the year, approximately 2.5 times the same period last year, with a focus on logistics, rental housing, and data centers [21][22] Market Data and Key Metrics Changes - The company noted a significant decline in new construction starts, down 40% to 70% year-over-year across various asset classes, which is expected to positively impact long-term values [16][22] - The office sector remains under pressure, with vacancy rates in the mid-20s, while logistics and rental housing maintain lower vacancy rates of 5% to 6% [22][72] Company Strategy and Development Direction - The company is positioning itself as a leading financial investor in AI infrastructure, with expectations of $1 trillion in capital expenditures in the U.S. over the next five years for data centers [12][14] - Blackstone plans to launch several new products in the private wealth channel and expand its infrastructure platform globally [18][24] - The firm aims to leverage its scale and expertise in credit and insurance to capitalize on the growing demand for private credit strategies [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a favorable environment for investment, anticipating a significant realization cycle as interest rates decline [7][38] - The firm expects a material step-up in FRE in Q4 2024, driven by the exit of fee holidays for several flagship funds and scheduled crystallization events [39][40] - Management highlighted the importance of long-term trends in digitalization, life sciences, and energy transition as key drivers of future value [58] Other Important Information - The company has a robust ongoing dialogue with major data center customers and is actively providing capital to AI-related companies [13][14] - The firm has raised over $8 billion for its latest opportunistic European fund and $5 billion for its latest real estate debt fund, indicating strong momentum in private wealth [23][47] Q&A Session Summary Question: Insights on investment activity and future deployment - Management noted positive signs in investment activity, with $19 billion committed at the end of the quarter and increased transaction activity across equity strategies [42][44] Question: Outlook for real estate fundraising - Management acknowledged investor caution in real estate but indicated improved sentiment and potential for significant capital inflows as performance differentiates [46][48] Question: Update on bank partnerships and asset-backed finance - Management highlighted a growing interest in asset-backed finance, with significant opportunities in the market and ongoing partnerships with banks [51][53] Question: Impact of the upcoming U.S. election on deployment - Management emphasized that economic factors, particularly inflation, will be more critical than the election outcome in determining market performance [56][58] Question: FRE margin outlook for 2025 - Management expects stability in FRE margins in the near term, with potential for operating leverage and growth as funds exit fee holidays [60][62] Question: Update on the secondary business and fundraising confidence - Management expressed confidence in the secondary business due to structural inefficiencies and strong historical returns, anticipating larger fundraising for the next vintage [66][68]