Outlook for Deployments in 2024
Q: What's the outlook for deployments in 2024 versus last year's $74 billion?
A: Management expects deal activity to pick up in 2024 due to favorable market conditions, including the Fed moving from tightening to lowering rates, tighter spreads, and increased M&A volume. While putting precise numbers is difficult, they are optimistic about increased deployments compared to the previous year.

Real Estate Carry and Realizations Timing
Q: When will real estate carry return to normalized levels?
A: Management anticipates that real estate realizations may remain subdued in the first half of 2024 but expects them to pick up over time. This year is viewed as transitional, with better prospects as they look ahead, particularly into 2025. They advise keeping expectations lower for the immediate term but express confidence in the ultimate outcome.

Private Equity Realizations Outlook
Q: What's the outlook for private equity realizations amid market recovery concerns?
A: Management feels positive about private equity realizations, highlighting that they were up year-on-year in 2023. Strong performance in sectors like digital migration, energy transition, and life sciences contributes to their optimism. They believe their portfolio positioning supports continued strength in realizations.

Direct Lending Opportunities
Q: How is the outlook for direct lending given market competition?
A: While acknowledging increased competition as banks re-enter the market, management sees continued opportunity in direct lending. Their scale allows them to write large checks, providing certainty to borrowers. Credit quality remains strong, with average loan-to-value at 40% and defaults nearly nonexistent. They anticipate more deal flow to match the growing capital supply.

Fee-Related Revenue Growth and Margins
Q: Can you sustain double-digit fee-related revenue growth and margin expansion in 2024?
A: Management feels confident about the embedded ramp in management fees, expecting growth to accelerate later in the year and into 2025 due to fund activations. On margins, they anticipate stability, emphasizing disciplined cost management and structural operating leverage in their model.

Insurance Inflows and Growth Outlook
Q: Do recent strong insurance inflows alter the 2024 outlook?
A: The strong inflows in the quarter are not seen as a pull-forward from 2025. Management expects baseline inflows from their four major insurance clients to meet or exceed prior ranges. They also see significant opportunities with other insurance clients, bolstering momentum in their insurance and credit business.

Core Real Estate Investor Appetite
Q: What's the outlook for institutional and retail appetite for core real estate?
A: Management believes it will take time for investor confidence to return to core real estate, requiring multiple quarters of strong performance. They anticipate cautious investor behavior due to recent modest losses and expect a gradual recovery as values stabilize and begin to grow.

Commercial Real Estate Lending Platform
Q: How are you broadening your commercial real estate lending platform?
A: Management sees opportunity in commercial mortgage real estate lending due to poor market sentiment and reduced capital from banks. With approximately $70 billion in the space, they are leveraging various capital sources to grow. They find attractive returns relative to risk and plan to lean into this area as spreads remain wide and loan-to-values have fallen.

Management Fees and Fee Holidays
Q: Are there more headwinds from fee holidays affecting management fees?
A: Management anticipates some marginal pressure due to 3- to 4-month fee holidays on new funds activating throughout the year. However, they expect an embedded upward ramp in management fees, with growth accelerating later in the year despite these temporary headwinds.

Impact of U.S. Election on Activity
Q: Will the upcoming U.S. election create an activity air pocket?
A: Management does not expect the election to deter transaction activity significantly. They believe deal flow will be more influenced by the Federal Reserve's actions on interest rates and inflation rather than electoral outcomes. They plan to maintain a long-term investment approach irrespective of the election.

BXP and Retail Distribution
Q: What's the addressable market and scaling potential for BXP?
A: Management sees significant growth potential for BXP, targeting individual investors who currently allocate only 1% of their $80 trillion in wealth to alternatives, compared to 29-30% for institutional clients. They aim to deliver strong performance to attract more investors and believe the product can grow to scale as confidence builds.

FRE Margin Stability Mechanics
Q: How can FRE margins remain stable when revenues decline?
A: Management attributes margin stability to disciplined cost management and an ability to adjust compensation in line with business performance. They highlight structural operating leverage and control over their cost structure, which enables them to maintain margins even amid revenue fluctuations.

Fee Rates in Real Estate and Credit
Q: Are current fee rates in real estate and credit businesses sustainable?
A: Management notes that average management fee rates across the firm have remained remarkably stable over multiple years. They acknowledge minor fluctuations due to factors like insurance inflows and specific transactions but view current rates as a solid baseline going forward.

Performance Fees at BREIT and BPP
Q: What's the outlook for performance fees at BREIT and BPP in 2024?
A: Management expects a better year compared to 2023, seeing a bottoming in property values but not a rapid V-shaped recovery. They believe it's a good time for deployment, with falling interest rates and reduced new supply aiding the sector, but precise value movements are hard to predict.

Apartment Sector Outlook
Q: What are your views on the apartment sector as we head into 2024?
A: Management sees single-family rentals as stronger in the near term due to housing shortages. In the multifamily space, they note a surge in new supply leading to flat or modestly negative rent growth, which may take 12 months or longer to work through. They may invest into weakness in multifamily, given their long-term constructive view despite near-term headwinds.