Blackstone Inc.

Good day and welcome everyone to the Blackstone first quarter 2022 investor call hosted by Weston Tucker, head of shareholder relations. My name is Kristof and I'm the event manager for today. During the presentation, your lines will remain on listen only. If you'd like to ask a question, press star one on your device. But if you require operator assistance at any time, please press star zero and the coordinator will be happy to assist you. I would like to advise all parties that this conference is being recorded, and with that, I'll hand it over to Weston. Please proceed.

Great. Thank you, and good morning, and welcome to Blackstone's first quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO, John Gray, President and Chief Operating Officer, and Michael Che, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-key report in a few weeks. I'd like to remind you that today's call may include forward-looking statements which are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update these statements, and for a discussion of some of the risks that could affect results, please see the risk factor section of our 10-K. We'll also refer to certain non-GAAP measures, and you'll find reconciliations in the press release on the shareholders' page of our website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported gap net income for the quarter of $2.5 billion, distributable earnings or $1.9 billion, or $1.55 per common share, and we declared a dividend of $1.32 per share to be paid to holders of record as of May 2nd. With that, I'll turn the call over to Steve.

Thanks a lot, Weston, and good morning, and thank you for joining our call. Blackstone reported an exceptional start to the year, with the first quarter representing one of the two best in our 36-year history. This was despite increasing interest rates and ever-higher inflation driving major declines in equity and debt markets. Distributable earnings, as Weston mentioned, in the first quarter rose 63% this year over last year. to $1.9 billion, while fee-related earnings increased 55% to $1.1 billion. Inflows, capital deployed, and realizations all set new records for the firm for any 12-month period. Most importantly, our investment performance was outstanding, dramatically outperforming public indices. Another example of why alternative assets continue to grow rapidly in a risk-off world. These results are highly atypical in money management. But greater than a single quarter, they represent further proof of concept, Blackstone's position in the financial sector, which I believe we are uniquely placed So what differentiates us? There are certain attributes that characterize a great financial firm, including strong investment performance over long periods of time, significant growth in assets while maintaining that performance, the ability to continuously innovate, a trusted brand, loyalty from customers, who themselves are healthy and growing, wide geographic and product reach, a distinctive high performance culture, the ability to attract and keep great talent, and the capacity to identify and act upon paradigm shifts before others. It is rare even for a great firm to possess several of these pillars of success at blackstone i believe we've demonstrated we have all of them as the largest alternative manager in the world we've built leading businesses across all of the major asset classes with uniformly outstanding returns our flagship strategies have significantly outperformed the comparable public indices, including 16 to 17% net returns annually, corporate private equity, and global opportunistic real estate for three decades, beating the indices by approximately 5 to 9% per year. As we've grown larger, have not sacrificed returns. Quite the opposite, in fact. In the first quarter, while nearly every major asset class outside commodities declined, our funds delivered strong performance. This is best highlighted on the one hand by our real estate business, our largest business, where superior sector and asset selection led to our flagship strategies appreciating eight to ten percent just in the quarter compared to a four percent decline in the reit index the other hand sorry on the other hand liquid markets our hedge fund solutions delivered a positive composite return in the quarter compared to a five to nine percent decline in the major global equity indices Strong performance over decades has given us the confidence and ability to innovate. While most companies struggle to build a great business outside of their original success, innovation itself is a core competency at our firm. Today, we have approximately 60 strategies, and we're constantly developing more, increasingly in the form of perpetual capital vehicles. As we deliver for our clients across more and more strategies, it deepens our relationships with them and creates a powerful network effect, leading to a greater share of wallet. That's why our inflows reached $50 billion in the first quarter alone and $289 billion for the last 12 months. Over the past three years, our limited partners, have entrusted us with $500 billion of inflows, which is greater than the total AUM any other alternative firm. Above all else, people and reputation are the absolute necessities for finance success. At Blackstone, these are our most important assets and the foundation of everything we've been able to achieve We have more talented people at the firm today than ever before, operating at the highest level of excellence. And we are reinvesting significantly in our capabilities and people in order to expand our leadership position in every area and further widen our competitive moat. As the gold standard in financial services, Blackstone is a magnet to the industry's best talent. as evidenced by 35,000 unique applications for fewer than only 200 positions in our most recent analyst recruiting class. And we've also been named consistently as one of the best places to work in finance. Taken together, these pillars of success are why Blackstone has continued to post strong results and why we have extraordinary forward momentum despite the current backdrop of rising rates and higher inflation. While no investment manager can be totally immune from these headwinds, we believe the unique balance of our firm and positioning of our portfolio will enable us to mitigate the adverse consequences of these factors. As we've highlighted previously, In our $200 billion corporate credit business, virtually all of our investments are in floating rate debt, which provides a better return for our customers as interest rates move higher. In our nearly $300 billion real estate business, approximately 80% of the equity portfolio in sectors where rents in the U.S. are growing significantly in excess of the rate of inflation. Owning hard assets has historically provided a strong hedge for inflation, which favors our $27 billion infrastructure business as well. For our $125 billion corporate private equity platform, our operating companies grew a remarkable 20%, 22% year over year in the first quarter, partially benefiting from reopening tailwinds. While we're seeing the impact of inflation on some of our companies, which we expect to continue, we believe investing in companies with strong revenue growth is the best protection to generate outperformance in the future. And in our $83 billion hedge fund solutions platform, we expect volatile liquid markets to advantage our downside protected strategies, which we saw in the first quarter. Overall, the transformation of our firm continues, which we first outlined at our investor day in 2018, with our AUM rapidly shifting towards perpetual strategies and our earnings towards more recurring FRE. Over this three and a half year period, Perpetual AUM is up over five times. An annual FRE has more than tripled. This transformation makes us more resilient to market cycles and provides additional opportunities to create value for our limited partners. In closing, I've never been more pleased with the positioning of our firm. or more optimistic about its prospects. Now, we'll turn it over to our television star, John Gray.