Blackstone Inc.

Good day and welcome to the Blackstone first quarter 2023 investor call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. If you require operator assistance at any time, please press star zero. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I'd like to turn the conference over to Weston Tucker Head of Shareholder Relations, please go ahead.

Great, thanks, Katie, 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-Q 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. For 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 GAAP net income for the quarter of $211 million. Distributable earnings were $1.2 billion, or $0.97 per common share, and we declared a dividend of $0.82 per share, which will be paid to holders of record as of May 1st. With that, I'll turn the call over to Steve.

Thanks, Weston, and good morning, and thank you for joining our call. First quarter of 2023, represented a turbulent period for markets, frightening financial conditions, and growing concerns of a recession. While the S&P 500 posted gains, they were concentrated in just a handful of large tech companies. Meanwhile, the median stock in the U.S. was flat for the quarter, and is down 35% from recent peak levels. Capital markets activity remains muted IPOs and MNA activity count 50 to 60% year over year. In bad inflation, the Fed has increased the Fed funds rate by 475 basis points just in one year, representing the largest increase since 1980. While there is not widespread distress in the real economy, this tightening campaign has led to significant challenges for investors. along with unintended consequences, which we saw with UK pensions last summer, more recently in the US and European banking systems. These challenges once again highlighted the exceptional strength and stability of Black Sound. Our clients and counterparties have learned there is inherent safety in dealing with us. We don't operate the risk profile of financial firms that have fallen into trouble, almost always due to the combination of a highly leveraged balance sheet and a mismatch of assets and liabilities. At Blackstone, we have neither. We are an asset-light manager of third-party capital distributed across hundreds of segregated investment vehicles. our firm has minimal net debt and no insurance liabilities. We don't take deposits. I'll say that one again. We don't take deposits. The vast majority of AUM is under long-term contracts or in perpetual strategies. In our funds, we seek to align the time horizon of our investments with the duration of the capital, which positions us to not be for sellers in difficult markets. This is true of our semi-liquid vehicles as well, such as B-REIT, which invest in longer-term assets. We designed this vehicle at its formation in 2017 with predetermined limits for potential repurchases in order to be prepared for adverse market conditions, creating a level of safety so that it can continue to deliver strong outperformance over the long term, as it has done historically. The safety of Blackstone's approach extends to the way we invest. One of our core values is to avoid losing our customers' money. Of course, we also seek to significantly outperform benchmarks over time, as everyone knows we have. nearly 90 drawdown funds in our market history, comprising approximately $500 billion of aggregate commitments, which almost all, 98% of them, generated gains for investors, despite adverse investment environments during their lives at some point, most of these funds. We have an extremely rigorous process for evaluating risk, with an investment committee framework designed to minimize the prospect of losses and ensure consistency of judgment. And our global scale and reach give us deep insights into what's happening in the real economy, which inform how we position the firm and our portfolio ahead of changing conditions. To paraphrase a quote often attributed to hockey great Wayne Gretzky, you have to skate to where the puck is going, not to where it is. At Blackstone, we follow the same approach. In real estate, an area of heightened external focus by the media and investors recently, our equity business has experienced realized losses in only 1% over 30 years, a truly remarkable result. This includes during the global financial crisis, a period which saw most of our competitors collapse or exit the market. In contrast, we bought the right assets and put in place the right capital structures, more than doubling investor capital in that vintage of funds. We emerged from the crisis stronger and believe that this cycle will have a similar outcome. Today, investor sentiment toward real estate has been quite negative again, largely due to the pressures, as John explained on TV today, in the U.S. office market. Vacancies in offices have reached all-time high levels, and owners of many of these assets may be unable to extend financing in a more constrained capital environment. At Blackstone, we have minimal exposure. traditional U.S. office, having reduced our holdings from over 60% of the real estate equity portfolio at the time of our IPO in 2007 to less than 2% today. We instead emphasize sectors that are doing very well, including logistics, which now comprises 40% of the portfolio up from zero in 2007. Our real estate team has done a remarkable job of portfolio construction. In fact, I would call it some of Blackstone's finest work. Our positioning is the reason that B-REIT, for example, continues to generate strong growth in cash flows, up an estimated 9% year over year in the first quarter. despite market headwinds. We expect our investors to have a highly differentiated experience as a result, as they have throughout our history. In credit, higher interest rates and much higher available yields have led to significantly more investor capital being allocated to this area. John will expand on this opportunity for Blackstep. there's an increased focus on the potential for higher market defaults in an economic turndown. Blackstone's credit business, as with real estate, we've delivered excess returns over long periods of time while protecting the downside. For example, we have the largest manager of leveraged loans in the world, and our historic annual default rate in the U.S. is less than 1%. This record and our standard of care should provide comfort to investors who are new to this asset class. Private credit disperses risk outside the government backstop banking sector, with capital typically raised in discrete long-term funds rather than a funding model that is reliant on deposits which demand instant liquidity. This approach to credit extension makes the system safer and also supports the economy in challenging times. Our limited partners recognize Blackstone as a safe institution for which to allocate their capital, even as the world becomes more complex, in fact, especially so. We have learned that the best time to put money to work is in a risk-off world, when sentiment becomes negative. Recent stress in the banking system has led to heightened levels of negativity, along with diminished availability of credit, which should provide additional opportunity for us, given the firm's scale, available capital in both credit and equity areas. Overall, our LPs have entrusted us with an unprecedented $194 billion of dry powder ahead of what we believe could be a historic opportunity for deployment. One final note from me. Earlier this week, S&P Dow Jones updated the eligibility rules for their flagship indices to once again include companies with multiple share classes. This important development follows a consultation period in which they engaged a broad universe of market constituents. Blackstone is by far the largest company by market cap not included in the S&P 500 today. We are hopeful that this development paves the way for our inclusion, which would be very positive for our shareholders. And with that, I'll turn it over to John.