"This is why Blackstone took in $94 billion of new capital in the last 12 months despite capping, which means limiting the size of all of our major funds. In other words, the demand for our products significantly exceeded the money that we could accept. And in that sense, we could have raised much more than $94 billion.
This $94 billion is a record for Blackstone or any other alternative asset manager and is actually more than the combined fundraising of the other public alternative managers for any year in history. Our fundraising success is unprecedented for our industry and has propelled Blackstone to a record $333 billion in AUM, up 19% year-over-year."
Spin-off:Robert Lee - KBW
"Okay, great. And then a question on financial advisory, I know in the presentation you talked about that being on track for the second half, but just kind of curious, the spin of the advisory business, when do you think we may be able to expect kind of more details on it, so that we can kind of start thinking about value for BX shareholders that will be unlocked by that spin and putting some value on it?
Steve Schwarzman - Chairman and Chief Executive Officer
Okay. So Rob we filed a Form 10, which you can go through and it’ll show what the – basically the carved out financials for PJTR, so that gives you the detail. I think right now we are expecting that the spin will happen some time this fall, which we are expecting to do. With respect to the earnings to-date and this is in the press release, but let me reemphasize this that business will from time to time be lumpy with respect to its returns. And we think by the end of the third quarter, it will be up year-over-year. So there is a bit of a comparability issue. In fact, if I just took the results through today as we sit here, the 16 of July, they are actually up year-over-year. So they have some scale deals closed just after the end of the quarter.
With respect to the distribution itself and valuation, I think there is already some reports out there on valuation, I am not going to speculate on that piece. The impact on Blackstone is it’s about 3% on ENI and about 5% on DE, both of which are numbers that we frankly would grow through in 6 months to 9 months with respect to the regular activities in Blackstone. So it would be a good one-time distribution to the shareholders because as I said we expect to happen this fall. And we think with respect impact on Blackstone, it will not be material over time. And the timing, to be a little bit more specific about timing, somewhere near the end of the third quarter or beginning of the fourth, right in there."
Kinda interesting:"Eric Berg - RBC
Thanks very much. It’s a broader, non-numerical question. It’s more on the – on sort of the business plan at Blackstone. One of the things that occurred to me, I am deeply involved with following the retirement savings business and given your success as both agents and principles, let’s talk about as agents for others, given the fact that you have been – that you have so far outperformed the stock markets and credit market indices and given this retirement crisis that we continue to have in this country, can we be found to sort of – obviously, you are contributing to the solution by working for your pension fund clients, but what about defining contribution, 401(k) and related areas? I would – let’s get the management’s view on how – either in coming – in the next year or in coming years your investment success and prowess could be put to work in helping solve ordinary people’s income needs in retirement or is that not realistic?
Tony James - President and Chief Operating Officer
Well, first of all, let me say that you are my new favorite person and we are going to get you on the road, have you spend some time in Washington and everywhere else in the world. We completely agree. Let’s just start with that and frankly have been spending some considerable time on this. I have the view that the hidden crisis in America that no one is talking about is what’s going to happen with all of these 20, 30, 40-year-olds who no longer have corporate pension funds of defined benefit, so they have got 401(k)s and they are making little contributions in there, which is earning very, very little. When they retire at 65 and they don’t have enough to live on and it’s an entire generation, maybe two generations of people, we are going to go, oh my God, what happened? And if they can’t invest money at higher returns than 4% to 5%, which is all the public markets are going to give you, we are going to be in trouble as a country. So, I think that Blackstone has an obligation to save the country by delivering superior returns consistently with reduced, I would say reduced, lower risk in public markets to retail investors.
Now, there is a lot of institutional barriers to do that, but retail investors need these products just as value – or worse than institutional product, because they have few – less options today. And the reason that institutions have moved over the years from 5% of their assets into alternatives to the average pension being 20 and the average endowment being over 50, the more sophisticated the institutional investor, the higher the percentage of the assets they have in alternatives is because that’s the only way they have been able to go far and will be able to get returns. But there are lot of institutional barriers for retail investors, not starting with Department of Labor and a lot of other things which just now prohibit it, because they require daily liquidity, daily mark-to-market. Some of our products don’t let them do that, sells to that. We are creating products that can accommodate that, but it’s a small subset of what we do and a lot of the returns we make come from the fact that we can free ourselves from the tyranny of daily liquidity and take advantage of these substantially enhanced returns that come when you can do that without taking more risk. So, as a society, we will need to work on this. And I promise you, eventually people will recognize this has to happen and we are there to serve when it does.
Steve Schwarzman - Chairman and Chief Executive Officer
Okay. We will talk to you more about it. Yes, I would say – this is Steve, that Tony has given a terrific answer on it. This is basically a political issue and it’s a misunderstanding of risk and somebody thinks that they are protecting the public from firms and asset classes like – that we are in, where we have been doing this for 30 years and have averaged about double the stock market. And some of our asset classes have lost virtually nothing. And so any rationale look at this situation would come to the kind of conclusion that was implicit in your question and explicit in Tony’s answer. And this should really happen, but there are certain political beliefs that just don’t want to encounter reality. They have the theory that things actually are different than they are. And so as we go through political cycles, there maybe changes in this but there is an economic reality that the performance is there and people need this stuff. They need the returns. They have solved that problem institutionally.
When we started in the business, alternatives were somewhere around 2% of institutional portfolios. They are now somewhere around 17% to 20%. Some institutions are at 40% and the publics at 2%. And they are being held back unfairly and in terms of their own retirement and well-being. And I am optimistic that this will ultimately be addressed and it would be a terrific legacy, frankly, for an administration to do something like that for people. Because if you don’t have a good retirement at – given the age people live to now, I mean that could be 30% of your life and people need to be supported. So, you hit a hot button with us whether you can tell by Tony’s answer or my answer. And if we can unlock that, the scale of the firm, we get to really remarkable thing. I mean, there are people who have $4 trillion plus managing public money with returns that are a fraction of ours. Well, we can’t deploy that much money in our current mode, but just think about that. I mean, there is huge opportunity for us at some point in the cycle."
http://seekingalpha.com/article/3332545-the-blackstones-bx-ceo-steve-schwarzman-discusses-q2-2015-results-earnings-call-transcript 