M&A and IPO Outlook
Q: Will M&A and IPO activity increase, or will companies stay private longer?
A: Jonathan Gray believes the environment is improving for both M&A and IPO activity as debt costs come down and equity markets strengthen. He expects a much better IPO market in 2025, which would be positive for realizations and DPI. Gray notes that private companies are being drawn into the market as public valuations rise.

Impact of Lower Rates on Credit Business
Q: How will lower base rates and tighter spreads affect the credit business?
A: Jonathan Gray states that even as base rates and spreads decline, Blackstone can still produce a durable premium over liquid fixed income. Products like BCRED have delivered 700 basis points over base rates since inception. Relative returns remain attractive, supporting continued migration towards private credit.

Fee-Related Earnings (FRE) Growth Outlook
Q: What is the outlook for FRE growth amid back book headwinds?
A: Michael Chae expresses optimism for 2025 FRE growth, citing multiple building blocks such as base management fees, activation of flagship vehicles, expansion of perpetual strategies, and momentum in credit and insurance. He acknowledges challenges but emphasizes a strong path forward without relying on quarter-to-quarter net flow algorithms.

Secondaries Performance Lag
Q: Why does secondaries performance continue to lag below hurdle rates?
A: Jonathan Gray maintains confidence in the secondaries business, highlighting that since inception, flagship private equity secondaries funds have achieved high-teens net returns. Recent underperformance is attributed to lower immediate gains from buying new deals at discounts and the lagging performance of mature underlying funds. Michael Chae adds that investment performance has been outstanding overall.

Investing Pipeline and Sector Favorability
Q: Is the November election delaying investments, and which sectors are favorable?
A: Jonathan Gray hasn't observed a slowdown due to the election and notes that both real estate and private equity are expected to see increased activity. Real estate may experience a larger percentage pickup due to rebounding from a low base, with conditions like falling interest rates and improving investor sentiment contributing to the positive outlook.

Real Estate Investment Outlook
Q: Will Blackstone be a net buyer or seller in real estate, and which assets are favored?
A: Stephen Schwarzman indicates that Blackstone has been a net buyer and expects to continue investing, especially as debt becomes more available at lower costs. The firm favors sectors like logistics, rental housing, data centers, and sees opportunities in select office and retail spaces. Sentiment is improving, and they anticipate increased realizations in 2025.

Asset-Backed Opportunity and Bank Partnerships
Q: How big is the asset-backed opportunity, and has Blackstone secured enough partnerships?
A: Jonathan Gray explains that the asset-backed market is approximately $25 trillion, much larger than the $5 trillion leveraged finance market, with private players holding only 1-2% penetration. He is optimistic about significant growth potential. While Blackstone prefers a do-it-yourself approach, they are open to partnerships in specific areas and continue to build origination capabilities.

AI and Data Center Investments
Q: How will deployment opportunities in AI and data centers affect fundraising?
A: Jonathan Gray states that having large-scale pools of capital is a competitive advantage in investing in data centers, which have been a lead driver in their infrastructure business, delivering 16% net returns since inception. While it's too early to say if deployment will accelerate fundraising, he feels they have momentum in the U.S., Europe, and Asia, and expects faster deployment and higher returns.

Operating Expenses and Margin Outlook
Q: What drove the increase in operating expenses, and how will margins look next year?
A: Michael Chae attributes the operating expense growth to third-party servicer fees from the Signature Debt Portfolio acquisition, placement fees primarily related to BXPE, and consulting spend. Adjusting for these items, underlying growth is in the low double digits. He expects a lower rate of growth in Q4 and feels good about margin stability and potential expansion in 2025.

Funds Coming Off Fee Holiday and Fundraising Impact
Q: How much AUM came off fee holiday, and what does this mean for future fundraising?
A: Michael Chae notes that new private equity and infrastructure funds came off fee holiday in Q3, with foregone fees around $40 million. Jonathan Gray mentions that institutional investors are feeling better, and as DPI picks up, they expect a better fundraising environment in 2025, with funds like private equity Asia, Life Sciences, and opportunistic credit in the pipeline.

Wealth Management and Competition
Q: How is rising competition impacting Blackstone's wealth management platform?
A: Stephen Schwarzman emphasizes their first-mover advantage with $250 billion in AUM and strong relationships with financial advisors. He believes the firm's scale and performance create goodwill, and as base rates come down, the attractiveness of their products increases. Jonathan Gray adds that fewer groups can compete in this space due to shelf space limitations, and their brand and reach are significant advantages.

Insurance Platform Growth
Q: Can you comment on growth opportunities in the insurance platform?
A: Jonathan Gray reports that Blackstone's overall insurance business grew to $221 billion, up 24% year-over-year. Dialogues with insurance companies are exceptionally strong, both in strategic partnerships and separately managed accounts (SMAs). He expresses high optimism for continued growth in this area, emphasizing the value of 185 basis points of excess return for A-rated paper to insurance clients.