Real Estate Market Outlook
Q: What are the fundamentals driving your confidence in real estate deployment?
A: Jonathan Gray highlighted positive signs in real estate, particularly in apartments and logistics, where vacancy rates are low at 5%-6%. He noted that supply has decreased significantly, with multifamily starts down 50% and warehouse starts down 75% from their peaks. Improved capital costs and increased bidder activity are creating favorable conditions for deployment.

Asset-Backed Finance Opportunity
Q: How do you view the opportunity in asset-backed finance and bank partnerships?
A: Gray described asset-backed finance as a significant opportunity in a $5 trillion market with low penetration. He mentioned strong client interest in higher returns from investment-grade private credit and noted that Blackstone is expanding platforms and partnerships in areas like fund finance, transportation, digital assets, and green energy.

Fee-Related Earnings Margin Outlook
Q: Should we expect an increase in FRE margins in 2025?
A: Michael Chae stated that margins are expected to remain stable in the near term, with operating leverage anticipated over the long term. He mentioned that factors like fee holidays and sensitivity to fee-related performance revenues affect margins but affirmed confidence in margin improvement over time.

Wealth Management Competition
Q: How do you see competition evolving in the wealth management channel?
A: Gray acknowledged increasing competition but emphasized Blackstone's first-mover advantage and strong brand. He highlighted their focus on financial advisors, innovation, and a 300-plus person global team serving individual investors, which positions them well despite new entrants.

Secondary Business Returns
Q: Can you discuss the returns and fundraising prospects in the secondary business?
A: Gray expressed confidence in raising a larger flagship fund, citing long-term returns of 14% across the business and recent funds delivering 21%-24% net. He emphasized the growing need for liquidity in the alternatives market and Blackstone's advantage as the largest player.

Investment Activity in Equity Businesses
Q: Do you expect further progress in equity deployments and commitments?
A: Gray noted very positive signs with $19 billion committed at the quarter's end, indicating strong forward activity. He mentioned increased deal volume across equity strategies, including private equity and real estate, and expects positive trends in investing.

Impact of U.S. Elections
Q: How might the upcoming U.S. election affect Blackstone's activities?
A: Gray stated that investors are more focused on economic factors like inflation. He mentioned that post-election policies could impact areas such as antitrust, energy, and tariffs, but emphasized that Blackstone has successfully operated in varying political environments by focusing on long-term trends.

Redemption Queues in Core Plus Real Estate
Q: What's the update on redemption queues in BPP, and expectations for inflows?
A: Gray reported that redemptions remain single-digit across the BP product line. He anticipates that inflows may be muted in the near term due to investor caution but expects sentiments to improve as real estate performance picks up, potentially reversing redemption trends.

BREIT Redemption Limits Impact
Q: How did tightening redemption limits at SREIT affect the wealth market?
A: Gray observed a short-term impact in May, with investor nervousness affecting BREIT. However, after assuring investors about liquidity management, BREIT redemptions dropped 50% from May to June and continued to decrease. The focus remains on delivering strong performance to maintain confidence.

Gross to Net Flow Gap in AUM
Q: How should we interpret the gross to net flow gap in AUM this quarter?
A: Chae explained that the gap results from assets moving between strategies and funds, particularly within open-ended funds. He noted that while this dynamic has increased over time, it is not expected to cause dramatic changes going forward.

European Semi-Liquid Products
Q: Why do European semi-liquid products lag U.S. products?
A: Gray attributed the lag to regulatory challenges and differing rules across European countries. He expressed commitment to working with regulators to make the environment more user-friendly and sees long-term opportunities despite current hurdles.