Private Credit Deployment
Q: Any challenges deploying capital next year?
A: Management doesn't see challenges in deploying capital next year. Despite large fundraises, private credit fundraising is down sequentially over the last 3 years. Dollars raised and deployed are becoming more concentrated among larger managers. They believe the private credit market is undercapitalized relative to the opportunity.

FRE Margin Outlook
Q: Will FRE margins expand in 2025?
A: They expect FRE margins to expand within the range of 0 to 150 basis points as laid out at Investor Day. As they deploy capital, margins will expand, and excluding distribution fees, margins would have scaled over 100 basis points.

Credit Spread Compression
Q: Is middle market seeing spread compression?
A: Yes, due to a healthy economic backdrop and lower defaults, not just competition or supply. The default rate is significantly below historical averages, leading to a general narrowing of credit spreads. There's a durable credit spread between private credit and traded markets that moves around 150 to 400 basis points.

Part 1 Fees Outlook
Q: Will Part 1 fees grow despite rate changes?
A: Yes, they expect Part 1 fees to grow as the increase in absolute dollars will outpace any rate-related impact. A 100 basis point decline in interest rates could reduce FRE by about $9 million per year, but other components like upfront fees and credit spreads mitigate this effect.

Asset-Backed Finance Origination
Q: Do you need more partnerships to grow origination?
A: No, their current team and capabilities are sufficient. They have over 70 investment professionals covering 30 asset classes, and the team can continue to grow at the current pace.

Fundraising Outlook
Q: What's driving fund inflows now and next year?
A: They expect continued fundraising across multiple products and strategies, including special opportunities, climate infrastructure, secondaries, and real estate, with about 35 funds in the market next year. Fundraising will be platform-wide rather than dominated by a single large fund.

Distribution Costs Impact
Q: Are increasing distribution costs widespread and impacting margins?
A: Distribution costs are uniform across the industry. While they temporarily impact margins, they lead to scale benefits and quick absorption as management fees turn on. They view it as a significant tailwind rather than a headwind.

Private Wealth Channel Growth
Q: Elaborate on new infra strategy and strong October flows?
A: October saw record inflows of $1.2 billion, led by ASIF and the new core infrastructure fund (ESIF), which offers a 500–700 basis point tax-advantaged premium. They continue to expand products and are now on 60 distribution platforms, up 50% year-over-year.

Real Estate Market Activity
Q: Where do you see improvement in real estate transactions?
A: They're seeing increased activity in industrial and multifamily sectors in the U.S. and Europe. Focusing on industrial, residential, student housing, and single-family, they've completed large hotel transactions in the U.K. and their first U.S. retail deal in years.

Secondary Returns
Q: What's causing negative returns in secondaries?
A: Negative returns are due to lag effects; it's more relevant to look at inception-to-date returns, which are performing as expected. Quarter-over-quarter returns can be misleading in secondaries.

Interval Fund Outlook
Q: What's your outlook for your interval fund structure?
A: Their diversified credit fund is already scaled with a 5-year track record and over $6 billion AUM, offering liquid and illiquid credit exposure. They can expand distribution but will consider partnerships only if they enhance distribution or client experience.

FRPR Comp Ratio
Q: How should we think about the comp ratio for FRPR?
A: The comp ratio varies due to different fund structures. They typically guide to mid-30s, but variations occur due to factors like fund structures and tax differences, such as European funds and charitable tie-ins.