Michael Brown

Michael Brown of UBS Securities questioned Brookfield Asset Management's exposure to AI-driven disruption, specifically breaking down software exposure across private credit and private equity funds, and sought high-level views on AI's impact on the private asset ecosystem and LP allocations.

Answer

Conor Teskey, Chief Executive Officer of Brookfield Asset Management, emphasized that AI is a strong net positive for the business, validating its focus on digital infrastructure and power demand. He stated that Brookfield's firm-wide software exposure is minimal, with less than 1% in private equity and no software exposure in its credit business, which focuses on real asset lending and asset-backed finance.

Michael Brown asked about Brookfield Asset Management's exposure to AI-driven disruption, particularly concerning software within private credit and private equity funds, and sought high-level views on how AI disruption might impact the private asset ecosystem and LP allocations.

Answer

Conor Teskey, CEO, stated that AI is a strong net positive for Brookfield, validating its focus on digital infrastructure and increased power demand. He emphasized that Brookfield's exposure to AI disruption is minimal, with less than 1% software exposure in its private equity portfolio and no software exposure in its real asset or asset-backed credit businesses. He noted that the firm's focus on long-term contracted real assets and disciplined credit positioning places it favorably to benefit from AI penetration.

Michael Brown of Wells Fargo asked for a breakdown of the Q4 insurance inflows between Brookfield partners and third-party SMAs, the target investment mix for that capital, and the fee differential. He also inquired about Oaktree's deployment strategy for its newly closed Opportunities Fund VII.

Answer

President Connor Teskey clarified that Q4 insurance inflows were almost entirely from Brookfield Wealth Solutions and that the firm is moving $2-5 billion of this capital annually from liquid assets into higher-fee private funds. CFO Hadley Peer Marshall addressed the Oaktree question, noting the fund is already nearly 50% deployed and continues to find attractive opportunities in the current environment, driven by higher base rates and maturity walls, across both special situations and distressed assets.

Michael Brown asked about the outlook for expense growth and margin expansion into 2025, as well as the firm's capital-raising expectations for the remainder of 2024 and into 2025.

Answer

President Connor Teskey projected that margins would continue to accelerate into Q4 and 2025, driven by revenue growth outpacing plateauing expenses and the full run-rate of fees from recent capital onboarding. He also noted the fundraising environment is the strongest it has been in two years, with high confidence in hitting 2024 targets and expecting continued positive momentum in 2025, led by flagship funds.

Michael Brown asked about the Private Capital Solutions opportunity, specifically expectations for the GP and LP mix in the secondary market for 2026 versus 2025, PJT's market share opportunity, and when primary fundraising might strengthen due to increased realizations. He also inquired about competition for talent in the restructuring business, referencing a partner spinning out.

Answer

Paul Taubman, Chairman and CEO of PJT Partners, discussed challenges in primary fundraising but highlighted opportunities in credit and real estate, where PJT benefits from discerning clients. He sees secular growth in secondaries due to their attractiveness (no J-Curve, high-quality assets), expecting more capital and competitive processes, and anticipates PJT gaining market share. Regarding talent, Mr. Taubman affirmed PJT's focus on having the best talent and culture, seeing significant white space opportunities, and remaining a highly attractive destination for professionals.

Michael Brown with UBS asked about the key factors shaping Stifel's financial advisor recruitment strategy for 2026, including approaches to high net worth advisors and the observed productivity expansion from recently onboarded experienced advisors, particularly those from B. Riley. He also inquired about the broadening of institutional investment banking activity beyond financials and where deal momentum is accelerating most.

Answer

Chairman and CEO, Ronald J. Kruszewski, confirmed a noticeable productivity increase from B. Riley advisors, attributing it to Stifel's robust platform and integrated lending and credit model. He also indicated strong recruiting momentum and a potential increase in allocation to recruiting efforts. Regarding institutional banking, Mr. Kruszewski highlighted continued strength in financial institutions, with accelerating momentum in healthcare, industrials, technology, and consumer sectors. CFO, James M. Marischen, further noted improving sponsor activity as a significant growth area.

Michael Brown asked about the factors shaping advisor recruitment in 2026, Stifel's approach to high net worth advisor recruitment, and the productivity expansion from experienced advisors, specifically those from B. Riley. He also inquired about the institutional side, strong investment banking results, the broadening of activity across the platform, and where deal momentum is accelerating most.

Answer

Ronald J. Kruszewski (Chairman and CEO, Stifel Financial) noted a productivity increase from B. Riley advisors due to Stifel's platform and integrated model. He highlighted strong recruiting, particularly of teams with a broad mix of business, and indicated a potential increase in recruiting allocation. For institutional business, Kruszewski observed continued strength in financials, increasing activity in healthcare, industrials, tech, and consumer sectors. James M. Marischen (CFO, Stifel Financial) added that sponsor activity is noticeably improving, and Kruszewski mentioned signs of the 'private equity unlock' contributing to a conducive environment.

Michael Brown from Wells Fargo Securities asked for more detail on the firm's shifted recruiting approach that has successfully attracted large teams. He also inquired about the outlook for bank M&A, considering regulatory approvals, market conditions, and the expected timing from deal announcement to closing.

Answer

CEO Ronald Kruszewski explained that Stifel is leveraging its strong margins and scale to offer more competitive transition packages while maintaining ROI discipline. On bank M&A, he stated that deal announcement-to-close timeframes are shortening and that a few key deals could spur broader industry consolidation. CFO James Marischen added that some deals have been approved in as little as four months, signaling positive regulatory receptivity.

Michael Brown inquired about the 2025 outlook for organic growth in wealth management, the catalysts needed to prompt advisor moves, and the rationale for the lower end of the compensation ratio guidance.

Answer

CEO Ron Kruszewski explained that recruiting has natural ebbs and flows tied to market performance and transition packages, but he is optimistic for a stronger recruiting year in 2025. CFO Jim Marischen added a specific forecast for first-half adviser additions. Regarding the compensation ratio, Kruszewski noted that growing Net Interest Income (NII) and higher productivity provide flexibility for leverage, though the firm must remain competitive. He affirmed his comfort with the 56% to 58% guidance range.

Michael Brown asked about BlackRock's differentiated offering in the competitive insurance channel, which represents 5% of AUM, and the demand outlook for this channel in 2026.

Answer

CFO Martin Small detailed BlackRock's position as the largest insurance general account manager with $700 billion in assets and HPS's contribution of $60 billion in credit assets. He outlined opportunities in private credit and high-grade solutions, aiming to migrate 10% of public fixed income to private high-grade, expand mandates, and pursue strategic partnerships, emphasizing BlackRock's full-service, customized capabilities.

Michael Brown asked about the risk of assets moving away from the U.S. and potential backlash against BlackRock as a U.S. firm due to growing geopolitical frictions.

Answer

Chairman and CEO Laurence Fink asserted that BlackRock's long-standing 'hyper-local' strategy mitigates this risk, emphasizing the firm's deep integration into local economies. While acknowledging a potential reallocation of capital from the U.S. to regions like Europe, he expressed long-term optimism driven by mega-trends like AI and infrastructure. Executive Martin Small reinforced that BlackRock's business mix is structured to benefit financially from the growth of non-U.S. capital markets.

Michael Brown sought clarification on the 2025 expense guidance, specifically the expected contribution from the HPS acquisition and the key factors influencing the operating margin outlook.

Answer

Martin Small, an executive, confirmed the mid-to-high single-digit core G&A expense growth guidance for 2025, which excludes HPS. He emphasized the firm's disciplined, rules-based budgeting approach, which drove significant operating leverage in 2024. Small noted that since market movements are the highest-margin item, a positive market environment in 2025 should allow the firm to continue investing for growth while delivering further margin expansion.

Michael Brown inquired whether HEI anticipates any key legislation movement in 2026 based on the Public Utilities Commission's upcoming wildfire fund report.

Answer

Scott Seu, HEI President and CEO, stated it was too soon to say, as he did not want to get ahead of the PUC or predict their recommendations regarding future legislative needs.

Michael Brown, on behalf of Nicholas Campanella, asked about the potential reaction from credit rating agencies if Senate Bill 897 is signed into law and how the legislation would impact the future implementation of a wildfire fund.

Answer

HEI President and CEO Scott W. Seu stated that while they don't want to speculate, they have received strong indications that the bill's signing would be a "credit positive" for the company. Executive Vice President and CFO Scott DeGhetto added that SB 897 requires the Public Utilities Commission (PUC) to study the viability of a wildfire fund and provide recommendations to the legislature before the 2026 session.

Michael Brown of Barclays inquired about the assumptions in the 2025 EPS guidance, specifically if a successful Florida City Gas (FCG) depreciation study outcome is included, how the company would offset a negative result, how the increased capital expenditures will be funded, and when to expect a full refresh of the long-term guidance.

Answer

EVP and CFO Beth Cooper confirmed that the full 2025 guidance range of $6.15 to $6.35 per share assumes a successful outcome on the FCG depreciation study. Regarding funding for increased CapEx, she explained that the company has reached its 50% equity target, has significant capacity on its revolver due to recent debt placements, and will align future equity with project timing. She also noted that while new 2026 capital guidance will come in February, a full refresh of the long-term plan through 2028 is not imminent as they are only in the second year of the current plan.

Michael Brown from Wells Fargo & Company inquired about the strength of evergreen fund flows in May and the maturity of institutional investor adoption of these funds, including any potential for fee pressure.

Answer

Co-CEO Erik Hirsch confirmed that May flows were very strong and that market volatility can be a positive catalyst for private market allocations. He characterized institutional interest in evergreen funds as being in the very early stages, stating that no fee pressure is evident as the products offer a cost-effective alternative to traditional fund structures.

Mike Brown from Wells Fargo requested clarification on the expected run rate for equity-based compensation expense and its potential impact on the company's share count going forward.

Answer

CFO Jeff Armbrister stated the expected annual run rate for equity-based compensation is approximately $30 million, with the current quarter reflecting the full impact. Co-CEO Erik Hirsch added that this expense is tied to aggressive, long-term stock performance targets for employees and executives, aligning incentives with shareholder value creation. He also noted shares are not yet vested due to service requirements.

Michael Brown asked for more details on the Northern Trust partnership, including how clients will use Cobalt and how the partnership is monetized. He also questioned the quarter-over-quarter decline in the specialized fund fee rate.

Answer

Co-Chief Executive Officer Erik Hirsch explained that the Northern Trust partnership integrates Hamilton Lane's Cobalt SaaS platform to provide institutional clients with data analytics, benchmarking, and forecasting for their private market portfolios. He highlighted the brand enhancement and revenue benefits, with a goal to expand the partnership. Regarding the fee rate, Hirsch stated the quarterly fluctuation was 'noise' from retro fee timing and advised focusing on the year-over-year trend, which remains positive and growing.

Michael Brown of Wells Fargo inquired about the pipeline for large institutional wins, given the recent high pace of activity, and asked what the appropriate cadence for new deals is going forward.

Answer

Executive Richard Steinmeier highlighted LPL's leadership position in the large bank market, a $1.5 trillion opportunity, and its expansion into the insurance BD space. While confirming the pipeline of potential partners remains deep, he stated that the company is currently focusing its resources on the critical Atria and Commonwealth integrations. Consequently, he advised not to expect other large announcements 'for the time being' to ensure a seamless experience for new and existing advisers.

Michael Brown asked about the constraints on growth in the institutional channel and the potential pace of onboarding new clients. He also requested a preview of the core G&A growth outlook for 2025.

Answer

CEO Rich Steinmeier explained that while the sales cycle for large institutions remains long and is the primary constraint, the firm has significantly increased its capacity for onboarding, now able to handle multiple large transitions per month. President and CFO Matthew Audette deferred specific 2025 G&A guidance to the year-end call but noted the focus will be on balancing growth investments with operating leverage, similar to the dynamic seen in 2024.

Michael Brown inquired about Carlyle's interest in inorganic growth in the life and annuity insurance space, how it might approach a large transaction, and its philosophy on capital-light versus capital-heavy business models.

Answer

CEO Harvey Schwartz indicated the firm is more 'front-footed' on M&A than in the past but any deal must be accretive. He praised the Fortitude partnership for providing valuable intelligence and capabilities. Schwartz emphasized a strong preference for a capital-light model, noting its benefits in volatile markets, but said the firm could solve for an acquisition if it made strategic and financial sense.

Michael Brown sought to clarify the 2025 targets, asking if the ~$40 billion fundraising goal includes potential inflows from Fortitude, and how management fee growth is expected to contribute to the overall 6% FRE growth guidance.

Answer

CFO John Redett confirmed that any inflows from Fortitude are not included in the base case guidance and would be additive. He reiterated that overall management fee growth will be driven by strong performance in Solutions and Credit, which will offset a more modest decline in Corporate Private Equity in 2025 before that segment returns to growth.

Michael Brown asked about Carlyle's long-term outlook, questioning if the ~$40 billion annual fundraising level is a sustainable target and whether the firm can achieve low double-digit annual FRE growth over a multi-year horizon.

Answer

CEO Harvey Schwartz indicated that for future FRE growth, investors should look to emerging, high-quality revenue streams like capital markets and the global wealth channel. Regarding fundraising, he explained that the $40 billion target was initially set to provide comfort during his transition and should not be seen as a rigid quarterly goal. He emphasized that the overall business momentum feels "extraordinary."

Michael Brown asked if potential fundraising elongations could impact the Q4 FRE margin target and whether the Peppertree acquisition is accretive to margins and included in that guidance.

Answer

CFO Jack Weingart clarified that the potential for fundraising slippage is already factored into the firm's guidance. He confirmed the Peppertree acquisition is expected to be accretive to margins, but its impact is not included in the current forecast to exit the year with a margin in the mid-40s, as it is not large enough to significantly alter the base projection.

Michael Brown requested more specific guidance on the expected quarter-over-quarter movement in management fees for Q1 2025, given the various moving parts in the fourth quarter of 2024.

Answer

CFO Jack Weingart stated that TPG expects 'moderate growth in the first quarter' for Fee-Related Revenue (FRR), with an acceleration expected in the second half of the year. This back-half acceleration will be driven by the activation of new flagship funds, including TPG Capital and Healthcare Partners, which are anticipated to hold a first close around mid-year.

Michael Brown asked about the long-term FRE margin potential beyond 2025, noting the guidance to approach the mid-40s and questioning what the ultimate goal for the platform is.

Answer

CEO Jon Winkelried stated that a 45% FRE margin is a milestone, not the final target. He anticipates further margin expansion in 2026 and 2027 as the platform continues to scale, with an eventual goal of reaching 50% and above, although he did not provide a specific timeline for achieving this.

Michael Brown asked for an expansion on the opportunity in the secondaries market and whether the large, planned exits by endowments represent a one-off situation or a broader LP trend.

Answer

CEO Michael Arougheti explained that the secondaries market is benefiting from a structural shift toward a balance of LP- and GP-led deals and expansion into new asset classes like real estate and credit. He confirmed that endowments seeking liquidity is a broad-based trend, driven by factors like reduced government funding and potential tax changes. He positioned Ares's large, long-standing secondaries business as a key partner for these institutions in the current liquidity-scarce environment.

Michael Brown asked about the health and competitive landscape of the European direct lending market and the interplay between private credit and the broadly syndicated loan market as banks become more active.

Answer

Co-President Blair Jacobson described the European market as healthy, with the portfolio performing well and investment activity picking up. CEO Michael Arougheti characterized banks as partners more than competitors, explaining that increased bank activity benefits Ares' CLO business and signals a healthier M&A market, which is a net positive for the platform.

Michael Brown asked for Ares's outlook on the interval fund structure, given peer activity, and whether its existing fund's distribution could be expanded. He also requested clarification on the Q4 FRPR guidance and the drivers of the compensation ratio for that revenue stream.

Answer

CEO Michael Arougheti highlighted that Ares already has a scaled, successful interval fund with a 5-year track record and will continue to expand its distribution, seeing no immediate need for partnerships like those announced by peers. CFO Jarrod Phillips explained the Q3 FRPR comp ratio was higher due to a specific fund structure with a charitable component, while the Q4 ratio is impacted by different tax structures on European funds. He reiterated the long-term comp ratio guide is in the mid-30s.

Michael Brown of Wells Fargo Securities asked about the risk from foreign LPs and endowments potentially reducing allocations to U.S. private markets and how insulated Apollo might be from this trend.

Answer

CEO Marc Rowan stated that while the period of 'hyper exceptionalism' for U.S. markets is over, he does not see a major impact on Apollo's business, as it offers diversification. President James Zelter added that while the bar for attracting non-U.S. capital is higher, Apollo's scale, performance, and breadth of strategies place it in a select group of managers that will continue to win its fair share of global allocations.

Michael Brown noted that the 'no new toys' era seems to be over and asked about Apollo's strategic M&A focus, particularly whether it would be on origination or other capabilities, and the implications for capital allocation.

Answer

CEO Marc Rowan confirmed that the 'no new toys' policy is over but specified that M&A will be small-scale and focused on acquiring origination capabilities that are immediately accretive. He used the Argo acquisition as a prototype for adding proven teams that can leverage Apollo's larger platform. He stated this activity is not large enough to materially impact broader capital allocation plans.

Michael Brown asked about the equity sleeve in a new CIT offering that utilizes the AAA platform, inquiring about the pipeline for similar opportunities and its potential to expand into wirehouse model portfolios.

Answer

CEO Marc Rowan described AAA as a hybrid equity product designed for low double-digit returns with lower volatility, which is increasingly being adopted within broader portfolio allocations. He noted that while it is too early to define a 'pipeline' for more CIT offerings, the firm is focused on executing well with the first one before expanding further.

Michael Brown asked about capital allocation, inquiring about plans for the firm's cash balance, the potential for increased share buybacks, and the focus areas for inorganic growth, particularly in private markets.

Answer

CFO Jen Dardis noted that of the $3.3 billion in cash and discretionary investments, about half is available for strategic uses like M&A or buybacks. She confirmed the pace of share repurchases has increased in 2024 and into April. CEO Robert Sharps added that the firm will remain opportunistic with buybacks. Regarding M&A, Sharps stated the framework is unchanged, focusing on acquiring new, compelling capabilities that are culturally aligned and financially sensible. He confirmed private market alternatives are a priority but noted some objectives could also be met through partnerships.

Michael Brown asked about the expense outlook for 2025, inquiring how the firm is thinking about expense growth and what the key areas of investment will be for the upcoming year.

Answer

CFO Jen Dardis stated that while formal 2025 guidance is not ready, the initial goal is to align expense growth with forecasted revenue growth. Given stronger revenue momentum entering 2025 compared to the prior year, she expects the opening expense guide to be slightly higher than last year's initial 3-5% range. Key investment areas remain consistent: building out the ETF franchise, expanding marketing reach, growing the alternatives platform, and investing in operational and technological efficiency.

Michael Brown asked about the non-traded BDC market, questioning what could offset lower dividends if the Fed cuts rates and whether investor flows would hold up in a lower absolute yield environment.

Answer

Co-CEO Marc Lipschultz explained that in a lower base rate environment, he would expect credit spreads to widen, providing a partial offset. He emphasized that Blue Owl's products offer a strong relative return and that the firm built its credit business in a zero-rate environment with strong flows. He also argued that if lower rates signal economic fear, investors should be even more attracted to their products' focus on principal preservation. CFO Alan Kirshenbaum reiterated that the business was built on a relative value proposition.

Michael Brown of Wells Fargo & Company asked for a breakdown of the $25 million sequential increase in credit fees, specifically the contribution from the Atalaya acquisition and other underlying drivers.

Answer

Chief Financial Officer Alan Kirshenbaum confirmed the analyst's estimate for Atalaya's contribution was directionally correct. He noted that management fees grew across all credit products, and Part 1 fees were effectively flat, with the Q3/Q4 level serving as a good run-rate baseline until the software lending BDC is listed.

Michael Brown of Wells Fargo inquired about the expected timeframe for the final close of the North America buyout and Infrastructure Fund V, and which other flagship funds would see inflows in 2025.

Answer

Executive Craig Larson noted a 'barbelled approach' to fundraising, with capital arriving at first or final closes. He stated that the Americas fund will have a couple more closes and the flagship Asia strategy will launch fundraising on its heels. No specific final close date for Infra V was given. Both Larson and Co-CEO Scott Nuttall emphasized that flagship funds represent a small portion (around 12-20%) of total capital raised, highlighting the firm's diversified fundraising platform.

Michael Brown asked for the reason behind the flat 0% Q4 return in traditional private equity and for an outlook on public-to-private opportunities.

Answer

Executive Craig Larson explained that the flat return mirrored the Russell 2000, a more representative index than the S&P 500 for KKR's portfolio. An executive, likely Co-CEO Scott Nuttall, added that beyond public-to-private deals, KKR sees significant global opportunities in corporate carve-outs and sponsor-to-sponsor activity, particularly in markets like Japan and Europe.

Michael Brown of Wells Fargo asked about the long-term opportunity for private assets in the retirement or defined contribution (DC) channel, the importance of being a first mover, and how the Capital Group partnership might provide an advantage.

Answer

Executive Craig Larson described the DC channel as a massive, long-term opportunity, likely to be accessed first through target date funds. He stated KKR is well-positioned due to its partnership with Capital Group, a major target date fund provider, and its ownership of Global Atlantic, whose annuity products are also relevant. However, he cautioned that this is a long-term initiative.

Michael Brown from Wells Fargo Securities inquired about the revenue growth needed to achieve year-over-year improvement in the compensation ratio and asked for details on the fixed cost component of compensation.

Answer

CFO Tim LaLonde explained that while the firm was on track to improve the comp ratio, recent market uncertainty makes it more challenging. He emphasized that revenue growth is the most significant driver for the ratio and that it was too early in the year to provide a specific revenue target needed for improvement.

Michael Brown of Keefe, Bruyette & Woods, Inc. inquired about the potential for further improvement in Evercore's compensation ratio in 2025, asking if the nearly 200 basis point improvement from 2024 could be considered a 'gradual' pace or if it could be even better in a strong revenue environment.

Answer

CFO Timothy LaLonde characterized the 190 basis point improvement in 2024 as 'meaningful' and consistent with prior commentary. While not providing specific guidance for 2025, he stated that the firm is 'striving hard to achieve meaningful improvement again this year' and will have better visibility as the year progresses.

Michael Brown from Wells Fargo requested an update on Evercore's European business, asking about the scale of the franchise, plans for future investment, and the expected progression of the M&A recovery in the region.

Answer

CEO John Weinberg reaffirmed that Europe is a crucial strategic investment and expressed pleasure with its progress. He highlighted recent senior hires in Paris and Spain and stated the firm is systematically recruiting high-quality talent. He described Europe as having 'real momentum' and being a 'bright spot' with significant upside potential, and confirmed that Evercore will continue its significant investment there.

Michael Brown of Wells Fargo asked about the health of the M&A backlog, the risk of deal drop-outs, the outlook for Q2 revenue, and the sustainability of the Q1 Asset Management fee rate.

Answer

CEO Peter Orszag confirmed the backlog is growing but is subject to tariff uncertainty, and he declined to give specific Q2 guidance. Evan Russo, CEO of Asset Management, addressed the fee rate, explaining the Q1 increase was due to a favorable business mix. He suggested using the 2024 average fee rate as a better full-year assumption for 2025, as the pipeline contains a mix of mandates that will cause quarterly fluctuations.

Michael Brown sought more clarity on the 2025 share count outlook and asked whether a slower-than-expected recovery in the IPO market could act as a catalyst for M&A.

Answer

CFO Mary Ann Betsch explained that without an increase in buybacks, the share count would likely see a similar increase to 2024 (excluding share price impact), but the plan to increase buybacks should have a mitigating effect. CEO Peter Orszag opined that a fully reopened IPO market is the final stage of the capital markets recovery. He anticipates this will happen in 2025, but agreed that to the extent it doesn't, it would likely be a "marginal benefit" for Lazard's M&A and secondaries businesses.

Michael Brown sought clarification on the 2025 share count outlook, asking if it could remain flat year-over-year. He also posed a high-level question about whether a slow IPO market recovery could act as a catalyst for M&A activity.

Answer

CFO Mary Ann Betsch explained that the share count trajectory depends on the pace of buybacks, which she expects to be higher in 2025 to help offset dilution from stock-based compensation. CEO Peter Orszag addressed the IPO market, stating that while he expects it to fully reopen in 2025, any continued sluggishness would likely be a 'marginal benefit' for Lazard's M&A and secondaries businesses as companies seek alternative exit strategies.

Michael Brown of Wells Fargo Securities asked about the results of the C-Corp conversion, focusing on its impact on investor interest, the shareholder base, and potential future index inclusion.

Answer

CEO Peter Orszag expressed that the firm was 'very pleased' with the conversion's outcome, citing increased daily trading liquidity and, more critically, access to a broader investor base previously restricted from owning the stock. He highlighted being oversubscribed at investor conferences and noted Capital Group as a significant new shareholder. Orszag views potential index inclusion as a future benefit but considers the conversion a success on its own merits.

Michael Brown asked for an outlook on Q2 revenue relative to Q1 given the increased volatility, and how the firm would balance margin protection with talent investment if the M&A recovery is slower than anticipated.

Answer

Chairman and CEO Kenneth Moelis indicated that Q2 is seeing deals pushed out and some cancellations, resulting in a backlog that is down from the end of Q1. He described the outlook as 'not disastrous, but...not as good as I was hoping.' On strategy, he stated the firm would 'look at all the above' but stressed a commitment to protecting its top talent and continuing to invest in key areas like private funds advisory, which he sees as crucial in a difficult M&A market.

Michael Brown asked about the competitive landscape for hiring and retaining talent and whether there is structural pressure on compensation costs. He also inquired about the outlook for the restructuring business and the expected interplay between traditional restructuring and liability management.

Answer

CEO Ken Moelis described the talent market as 'fairly stable' over the last 18 months, noting that talent remains available as lending disintermediation from large banks continues. Regarding restructuring, he expects activity to be dominated by liability management exercises rather than traditional Chapter 11 filings, because ample risk-oriented capital is available to help companies extend maturities. He sees this as a continuous cycle driven by the large volume of debt issued in recent years.

Michael Brown asked for specifics on the use of the $650 million in seed capital from MassMutual, the planned product structure, and the expense outlook for the year assuming flat markets.

Answer

CEO Andrew Schlossberg explained the capital will seed initial products leveraging complementary capabilities from both firms, with structures designed for wealth management platforms. CFO Allison Dukes projected the compensation-to-revenue ratio would be 43-44% and Alpha implementation costs would be $10-15 million per quarter, suggesting flat year-over-year expenses with flat revenue is a reasonable expectation given disciplined cost management.

Michael Brown asked how Blackstone expects private wealth flows to perform given the recent market volatility and which asset classes might remain in favor among retail investors.

Answer

President and COO Jonathan Gray reported that two weeks into the quarter, they had not seen a pullback in wealth channel sales. He anticipates a potential shift toward more cautious strategies like credit but believes the lower volatility and strong long-term performance of private assets, such as BREIT's 9.4% annualized net return, will continue to resonate with financial advisors and their clients.

Michael Brown asked for a comparison of the new multi-asset credit fund versus BCRED, how it would be marketed to avoid cannibalization, and if its structure allows for wider distribution.

Answer

Jonathan Gray, President & COO, responded cautiously, stating the new product will offer broad exposure to Blackstone's entire credit platform, including asset-backed and real estate finance, beyond just direct lending. He confirmed it will utilize a "different structure" designed to be "more accessible to investors" but did not provide further specifics on marketing or distribution channels.

Michael Brown asked for an explanation of the recent increase in operating expenses and inquired whether embedded FRE growth could drive margin expansion beyond historical levels in 2025.

Answer

CFO Michael Chae attributed the operating expense increase to servicer fees, placement fees for BXPE, and initiative-driven consulting spend. He projected a lower OpEx growth rate for Q4. Regarding 2025 margins, Chae stated that while it's early for specific guidance, the firm anticipates stability as a baseline with potential for upside and continued long-term operating leverage.

Michael Brown asked about the successful JAAA ETF and its related products, specifically inquiring about the progress in broadening its use among institutional clients and whether the firm is facing increased competitive pressures.

Answer

CEO Ali Dibadj characterized the institutional adoption as being in the "very, very early days," akin to spring training. He pointed to a significant 30-40% increase in the RFP pipeline and a record number of positive consultant ratings as encouraging leading indicators. On competition, he stated that while the environment is intense, they are not seeing significant fee pressure, which he attributes to successfully delivering a product that meets a clear client need.

Michael Brown asked if Janus Henderson is seeing increased fixed-income activity or RFPs due to flow pressures at a large competitor, and whether mandate decision timelines are accelerating.

Answer

Executive Ali Dibadj acknowledged that in such situations, institutional mandate decisions can accelerate to a timeline of several quarters, faster than the typical 12-24 months. He added that the intermediary channel moves even more quickly, and the firm aims to capture its fair share of these opportunities, especially through its ETF platforms.

Michael Brown from Wells Fargo & Company asked about the M&A outlook, specifically the potential knock-on effects of a new U.S. administration on mid-market and cross-border activity, and also requested guidance on non-compensation expenses.

Answer

CEO Scott Adelson explained that a more receptive M&A environment is broadly helpful, boosting 'animal instincts' for deal-making. He noted the firm's diversity across industries and geographies provides a portfolio effect against uncertainties like tariffs. CFO J. Alley addressed the expense question, stating she expects high single-digit growth for non-compensation expenses in Q4 year-over-year, noting Q3 benefited from some timing advantages.

Michael Brown inquired about the real estate market recovery, asking for specific timing on a pickup in fundraising, transaction fees, and realizations, and whether the recent rise in yields is a concern. He also asked a follow-up question about operating leverage, future investment spending levels, and the impact of platform scale.

Answer

CEO Jonathan Slager acknowledged that rising yields might slow the recovery's pace but expects transaction volumes to increase due to pent-up demand and a looming loan maturity wall. Vice Chairman Dean Allara added that a retail fundraising vehicle is expected to break escrow in Q4, with growing momentum on RIA and custodian platforms. Regarding operating leverage, Mr. Slager noted that the logistics team is already scaled for growth and will begin generating development fees without significant new hires. Mr. Allara highlighted that the distribution team's headcount has grown 50% over two years, with continued investment planned to support institutional and retail expansion.