Blackstone Inc. (BX) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Record Deployment and Commitments: Blackstone deployed $34 billion in Q2, up 73% year-over-year, with an additional $19 billion committed to pending deals, indicating strong investment activity across the firm.
• Real Estate Market Recovery: Indications of real estate values bottoming out, with six consecutive months of flat or increasing values for the first time in over two years, signaling a positive outlook for Blackstone's real estate investments.
• Private Wealth Momentum: Raised $7.5 billion in the private wealth channel in Q2, with perpetual vehicles raising over $6 billion, showcasing accelerating momentum and investor confidence in Blackstone's offerings.
• Infrastructure and Credit Business Growth: Infrastructure platform exceeded $100 billion, with exceptional performance in infrastructure investments. Credit and insurance business thrived, with significant growth in AUM and strong demand for investment-grade and non-investment-grade strategies.

Pessimistic Highlights

• Office Real Estate Pressure: The office sector remains under substantial pressure with high vacancy rates, indicating challenges in this segment of Blackstone's portfolio.
• Real Estate Fundraising Caution: Institutional investors exhibit caution towards open-ended real estate funds, reflecting a more muted outlook for real estate fundraising in the near term.

Company Outlook

• Positive Market Dynamics: With inflation receding and interest rates expected to be cut, Blackstone anticipates a favorable environment for asset values and a significant realization cycle over time.
• Strategic Investments in AI and Data Centers: Blackstone is positioning itself as a major investor in AI infrastructure, expecting explosive trends in data centers and AI to lead to unprecedented investment opportunities.
• Growth in Private Wealth and Perpetual Products: Plans to launch new products in the private wealth channel and expand the global infrastructure platform, indicating a focus on innovation and meeting investor demand.

Q & A Highlights

• Q: Can you provide perspective on equity business deployment and commitments for the second half? (Craig Siegenthaler, Bank of America)

  A: Deployment activity is picking up, with $19 billion committed at the end of the quarter indicating positive forward indicators. Transaction activity is expected to remain solid, driven by favorable market conditions. (Jon Gray)

• Q: What's the outlook for real estate fundraising over the next 12 to 18 months? (Alex Blostein, Goldman Sachs)

  A: While investor sentiment on real estate has been negative, Blackstone has seen interest in opportunistic European funds and real estate debt funds. Open-ended funds may see muted inflows in the near term, but differentiation in performance is expected to attract significant capital over time. (Jon Gray)

• Q: Could you update on bank partnerships and asset-backed finance opportunities? (Glenn Schorr, Evercore ISI)

  A: There's a big market opportunity in asset-backed finance, with increasing interest from insurance companies. Blackstone is seeing a pickup in volumes and expects significant growth in financing AI infrastructure. (Jon Gray)

• Q: How do you view the impact of the U.S. election on Blackstone's activities? (Crispin Love, Piper Stanler)

  A: Investors are more focused on the economy and inflation rather than the election. Post-election policies could differ significantly, but Blackstone focuses on delivering great returns regardless of the political environment. (Jon Gray)

• Q: Can you discuss the FRE margin outlook and the impact of fee holidays and new funds? (Brian Bedell, Deutsche Bank)

  A: Near-term FRE margins are expected to be stable, with operating leverage over the long term. Fee holidays and sensitivity to fee-related performance revenues are key variables in the near term. (Michael Chae)