Blackstone Inc. · NYSE:BX
Blackstone — Investor Day (June 2014)
128 slides from Blackstone's investor day presentation, Jun 12, 2014
Slide 1: 2014 Blackstone Investor Day
2014 Blackstone Investor Day June 12, 2014 The Waldorf Astoria New York, NY
Slide 2: Table of Contents
2014 Blackstone Investor Day Table of Contents Please click on the section links below to navigate to the section Important Disclosures Agenda Introduction Welcome Remarks GSO Real Estate Private Equity Portfolio Operations Tactical Opportunities Strategic Partners Private Wealth BAAM Blackstone Fin
Slide 3: Important Disclosures
2014 Blackstone Investor Day Important Disclosures Not an offer. These materials are provided as an overview of The Blackstone Group L.P. and are for informational purposes only, and do not constitute an offer to sell, or a solicitation of an offer to buy, any security or instrument, or a solicitati
Slide 4: Important Disclosures, continued
2014 Blackstone Investor Day Important Disclosures, continued Forward-Looking Statements. These materials may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current v
Slide 5: Agenda – Thursday, June 12, 2014
2014 Blackstone Investor Day Agenda – Thursday, June 12, 2014 Time Function Location 7:00 am – 2:00 pm Conference Registration Starlight Roof – Foyer Distribution of Conference Materials (Park Avenue entrance elevators) 7:00 am – 8:00 am Welcome Buffet Breakfast Starlight Roof – North 8:00 am – 8:05
Slide 6: Agenda – Thursday, June 12, 2014
2014 Blackstone Investor Day Agenda – Thursday, June 12, 2014 Time Function Location 10:00 am – 10:25 am The Buy-Side View Starlight Roof – Center 25 mins Moderator: Steve Schwarzman, Chairman, CEO and Co-Founder Mario Giannini, CEO, Hamilton Lane 10:25 am – 10:40 am Tactical Opportunities Starlight
Slide 7: Introduction
Introduction
Slide 8: Blackstone: Leaving the pack behind
2014 Blackstone Investor Day Blackstone: Leaving the pack behind FAST LANE Blackstone 1
Slide 9: What you may not know about Blackstone
2014 Blackstone Investor Day What you may not know about Blackstone Our funds created $33 billion of value in the past year In the past year investors entrusted us with $52 billion in additional funds We invest for over half of all U.S. pensioners Innovation has driven $122 billion in AUM fr
Slide 10: The “Alternatives” have evolved
2014 Blackstone Investor Day The “Alternatives” have evolved # of Public Companies # of Institutions with >1mm Shares of BX 8 65 3 14 2007 Today IPO Today Average Daily Trading Volume Market Cap and Free Float ($ in millions) ($ in billions) $357 $100 $84 $40 $41 $6 $165 $38 $19 Mkt Cap Float Mkt Ca
Slide 11: Where would Blackstone rank today in the S&P 500?
2014 Blackstone Investor Day Where would Blackstone rank today in the S&P 500? ($ in millions) Market Avg. Daily Market Cap / LTM Trading Dividend Yield Cap Employees Employee Earnings Volume ’13A ’14E Blackstone $38,014 2,016 $18.9 $3,700 $165 4.3% 5.4% Median for Asset Managers in S&P 500 22,149 7
Slide 12: Blackstone’s earnings are not closely linked to the stock market
2014 Blackstone Investor Day Blackstone’s earnings are not closely linked to the stock market Blackstone Earnings vs. S&P 500 300% 200% R² = 0.22 100% BX ENI 0% -20% -15% -10% -5% 0% 5% 10% 15% 20% -100% -200% -300% S&P 500 Blackstone 5
Slide 13: The market values growth
2014 Blackstone Investor Day The market values growth BX Asset Managers Advisory Firms Biotech Software Earnings Growth(1) 31% 10% 15% 11% 9% Stock Volatility(2) 26% 24% 26% 39% 30% ’14E P/E(3) 10x 16x 23x 19x 23x $6.9bn $0.4bn ’98 ’00 ’02 ’04 ’06 ’08 ’10 ’12 1Q’14 LTM ______________________________
Slide 14: What’s it all worth?
2014 Blackstone Investor Day What’s it all worth? Hypothetical Fee-Earning AUM 60% below our historic rate ($ in billions) $610 If: $204 12% AUM growth 2x multiple on invested capital 7%–10% liquid fund returns Current 1 2 3 4 5 6 7 8 9 10 Years Hypothetical Distributable Earnings ($ per dilut
Slide 15: Welcome Remarks
Welcome Remarks
Slide 16: Welcome to Blackstone’s fourth Investor Day
2014 Blackstone Investor Day Welcome to Blackstone’s fourth Investor Day Private Equity Joe Baratta Credit Real Estate Dave Calhoun Jon Gray Bennett Goodman Hedge Fund Solutions Tactical Opportunities Tom Hill David Blitzer Private Wealth Secondaries Brendan Boyle Finance & Technology Verdun Perry L
Slide 17: Leading market positions across all our businesses
2014 Blackstone Investor Day Leading market positions across all our businesses People have been trying to imitate Blackstone for years… Blackstone 2
Slide 18: Not easy to replicate
2014 Blackstone Investor Day Not easy to replicate One of the best brands in all financial services Most extensive network of institutional LP relationships Deepest and broadest management team Scale to handle large, complex transactions that others can’t Better information; seamless shari
Slide 19: What makes Blackstone different?
2014 Blackstone Investor Day What makes Blackstone different? Small Firm Feel each person makes a difference Engaged Leaders Flat Organization shaping and guiding people daily An enduring no bureaucracy; move quickly culture that is unique and compelling Passion Camaraderie cohesive teams; common mi
Slide 20: How is the market valuing leadership?
2014 Blackstone Investor Day How is the market valuing leadership? For companies in The median P/E the S&P 500 with… multiple is… Earnings growth >30% 20x EBITDA margin >50% 24x Return on equity >40% 19x Dividend yield >5% 16x Blackstone surpasses all of …but BX these metrics… multiple is 10x ______
Slide 21: GSO
GSO
Slide 22: GSO’s Business Today
GSO’s Business Today
Slide 23: Global footprint with over 250 employees
2014 Blackstone Investor Day Global footprint with over 250 employees in New York, London, Dublin and Houston Total Assets Under Management GSO Capital Partners $66.0 billion Alternative Customized Investment Funds Credit Strategies – Long Only $35.2 billion $30.8 billion Closed End & Mezzanine Resc
Slide 24: Our Mission: Strong investment results across our strategies
2014 Blackstone Investor Day Our Mission: Strong investment results across our strategies ($ in billions) 2013 Results Inception to Date(1) Strategy AUM Net Returns Net Returns Index(2) Private Market Strategies Rescue Lending Flagship Funds $8.6 24.3% 17.6% 9.2% Mezzanine Flagship Funds 5.4 17.9% 1
Slide 25: GSO’s Evolution
GSO’s Evolution
Slide 26: Evolution of the GSO platform
2014 Blackstone Investor Day Evolution of the GSO platform ($ in billions) December 31, 2008 March 31, 2014 Total AUM: $22.4 $66.0 Alternatives 5.9 35.2 Customized Credit Strategies 16.5 30.8 % of AUM from products – 71% that didn’t exist in 2008(1) % of LPs invested in products – 34% that didn’t ex
Slide 27: Where have we grown?
2014 Blackstone Investor Day Where have we grown? ($ in billions) As of December 31, 2008 As of March 31, 2014 Hedge Fund Strategies Flagship funds $2.7 $4.5 Mezzanine Flagship funds 2.0 5.4 Rescue Lending Flagship funds – 8.6 Strategic SMAs(1) – 5.3 BDCs – 11.0 Other Credit Funds(2) 3.6 0.3 Customi
Slide 28: How have we achieved this growth?
2014 Blackstone Investor Day How have we achieved this growth? Raise new pools of capital based on key industry themes developed within GSO Leverage Industry and Blackstone Themes Examples: energy and residential housing Capitalize on Market Rescue Lending Funds Dislocations and Business Dev
Slide 29: Capitalizing on industry themes: Energy and Power
2014 Blackstone Investor Day Capitalizing on industry themes: Energy and Power GSO has invested over $15 billion in the Energy sector since 2005 Dedicated Energy team of 16 people with unique sector expertise and long-standing management relationships Energy fits extremely well within GSO’s in
Slide 30: Select GSO Energy and Power investments
2014 Blackstone Investor Day Select GSO Energy and Power investments Sub Sector / Theme Privately Originated Public Investments Upstream Midstream Pecos Service and Equipment Lake Road Power Generation Generating Calpeak ________________________________________________ All rights to the trademarks l
Slide 31: GSO’s Energy investments touch the major U.S. oil & gas plays
2014 Blackstone Investor Day GSO’s Energy investments touch the major U.S. oil & gas plays Bakken Utica Exploration & Production Midstream Power Services ________________________________________________ Note: Green shading represents key U.S. oil & gas production area. Blackstone 10
Slide 32: Capitalizing on industry themes: residential housing
2014 Blackstone Investor Day Capitalizing on industry themes: residential housing 2006–2007 2009 2013–2014 Bearish view GSO provides capital to mid cap Rescue financings for Morris Homes, KP1 homebuilders: Short positions Hedge fund positions in Beazer, iStar, Quinn Group • Beazer Homes •
Slide 33: Select GSO homebuilder and building products investments
2014 Blackstone Investor Day Select GSO homebuilder and building products investments Sub Sector / Theme Privately Originated Public Investments Homebuilders / Realtor Building Products REITs ________________________________________________ All rights to the trademarks listed herein belong to their
Slide 34: Market dislocation and regulatory changes
2014 Blackstone Investor Day Market dislocation and regulatory changes GSO’s views on market opportunity Significant structural and regulatory changes in financial markets create opportunity for GSO Global investment banking model moved to “Capital Lite” Volcker Rule / Dodd-Frank / OCC Leverag
Slide 35: What’s next?
2014 Blackstone Investor Day What’s next? GSO’s views: Credit markets remain frothy • Yields and spreads at record lows • Public market deals have more aggressive leverage, weaker covenants and lower credit quality • Sets up well for next distressed cycle Activity in Europe picking up significan
Slide 36: Why are we well positioned for the future?
2014 Blackstone Investor Day Why are we well positioned for the future? Investment Superior results generated across the platform Performance Believe we’re top quartile performer in all of our major strategies Unique Ubiquitous presence in below investment grade corporate credit Competitive
Slide 37: Real Estate
Real Estate
Slide 38: Blackstone Real Estate Overview
2014 Blackstone Investor Day Blackstone Real Estate Overview • $81 Billion AUM Blackstone • 17% Net Returns(1) Real Estate • Only 1% Realized Losses • $34 Billion of Capital Deployed Post-Crisis(2) • Same Simple Strategy – Buy it, Fix it, Sell it Keys to • Same Investment Process Success • Same Peop
Slide 39: BREP has consistently delivered solid performance since 1991
2014 Blackstone Investor Day BREP Performance Summary Blackstone Real Estate Partners (“BREP”) has consistently delivered solid performance since 1991 BREP Global Funds’ Performance Summary (US$ in thousands) Investment Invested 3/31/2014(1) Fund Period Capital Net IRR Pre-BREP ’91-'93 $ 140,714 33%
Slide 40: Investment success has translated into tremendous fundraising success
2014 Blackstone Investor Day Real Estate Assets Under Management Investment success has translated into tremendous fundraising success Fee-Earning Real Estate AUM Total Real Estate AUM ($ in billions) ($ in billions) $81 1Q’14 $53 1Q’14 +827% +1074% $6 $7 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 41: Assets have become far more diversified by product type and geography
2014 Blackstone Investor Day Evolution of Blackstone Real Estate Assets have become far more diversified by product type and geography AUM Pre-Crisis AUM Today (2007) (1Q ’14) BREP Global 53% BREP BREP Co-Invest $26B Global $81B 12% 85% BREDS 5% 11% 10% BREP Co-Invest BREP Europe BREDS Drawdown BREP
Slide 42: Growth driven by a highly integrated global investment platform
2014 Blackstone Investor Day Global Real Estate Platform Growth driven by a highly integrated global investment platform Europe 60 Professionals BREP BREDS 270+ Professionals globally Core+ North America 20 Partners average 13 years at Blackstone 156 Professionals BREP BREDS Core+ 1 Asia
Slide 43: Operating Platforms
2014 Blackstone Investor Day Operating Platforms Operating platforms provide a competitive edge in identifying market trends, deploying capital and/or creating asset value Office Hospitality Retail Industrial Residential/ Multifamily Madrid MF ________________________________________________ Note: T
Slide 44: Active capital deployment continues with geographic and product expansion
2014 Blackstone Investor Day Real Estate Invested Capital Active capital deployment continues with geographic and product expansion Real Estate Invested Capital ($ in millions) $10,250 $8,515 $6,600 $4,217 $973 2009 2010 2011 2012 2013 Blackstone 7
Slide 45: Key Questions for Blackstone Real Estate
Key Questions for Blackstone Real Estate
Slide 46: Where Are We in the Global Real Estate Cycle?
Where Are We in the Global Real Estate Cycle?
Slide 47: No major global market is yet experiencing an excess of cranes or capital
2014 Blackstone Investor Day Where Are We in the Global Real Estate Cycle? No major global market is yet experiencing an excess of cranes or capital Global Real Estate Cycle Distressed Phase Excess Phase Depressed Asset Values Peaking Asset Values No Financing Abundant Financing Limited Ne
Slide 48: Lack of new supply supports further appreciation
2014 Blackstone Investor Day U.S. Single Family Overview Lack of new supply supports further appreciation U.S. Single Family Housing Completions(1) Home Price Index(2) (Units in thousands) Invitation Homes Markets 110 1,654 100 Still down 27% 90 from ’06 80 569 70 60 50 _____________________________
Slide 49: What Is the Status of Realizations?
What Is the Status of Realizations?
Slide 50: Distributions to limited partners are on the rise and should accelerate
2014 Blackstone Investor Day What Is the Status of Realizations? Distributions to limited partners are on the rise and should accelerate Blackstone Real Estate Gross Distributions ($ in millions) $7,443 $3,708 $1,848 $2,055 +120% $681 $932 $30 $213 2008 2009 2010 2011 2012 2013 1Q’13 1Q’14 _________
Slide 51: 77% of BREP’s $21 billion of unrealized gains is concentrated in public holdings
2014 Blackstone Investor Day Realizations 77% of BREP’s $21 billion of unrealized gains is concentrated in public holdings and an office portfolio in liquidation BREP/Co-Invest Unrealized Gains Public Holdings and ($ in millions) Office Portfolio in Liquidation $21,161 Unrealized Gains 77% Unrealize
Slide 52: Net accrued carry continues to grow
2014 Blackstone Investor Day Real Estate Carried Interest Net accrued carry continues to grow despite over $660 million paid out since 2010 Net Accrued Carried Interest(1) ($ in millions) $2,424 1Q’14 Net Accrued Fund Carried Interest BREP VI $1,284 $1,446 BREP V 623 BREP VII 358 $918 BREP Europe II
Slide 53: Is Blackstone Real Estate Too Big to Keep Growing?
Is Blackstone Real Estate Too Big to Keep Growing?
Slide 54: Best-In-Class Real Estate Platform
2014 Blackstone Investor Day Best-In-Class Real Estate Platform Blackstone has the world’s preeminent global real estate platform with significant growth opportunities ahead Equity Debt $72 billion equity under management $9 billion equity under management Opportunistic Core+ High Yield 1st Mort
Slide 55: Blackstone Core+ Summary
2014 Blackstone Investor Day Blackstone Core+ Summary Core+ initiative leverages platform to bring scale, speed, certainty and market insights to the core plus space Blackstone Real Estate Core+ Investments Select Investments(1) $1.6bn Edens Various, U.S. Alban Gate London $- Nov ’13 1Q’14 _________
Slide 56: Blackstone Real Estate Key Takeaways
2014 Blackstone Investor Day Blackstone Real Estate Key Takeaways 17% 1% Performance Net IRR Realized Losses Drives Business BREP Global Funds BREP Global Funds • Raised Since ’07: $56 billion Fundraising • In Market: BREP Asia, Core+, BREIF & BXMT Robust Capital • Invested Since ’09: $34 billion De
Slide 57: Private Equity
Private Equity
Slide 58: Our Mission
2014 Blackstone Investor Day Our Mission We enable pension plans, endowments and governments to meet their future obligations • We invest on behalf of over half the retirees in the U.S.; 37 million people globally We invest in companies to grow them and in large projects that wouldn’t have gotte
Slide 59: Our Commitment
2014 Blackstone Investor Day Our Commitment We must have a specific intervention strategy to improve the target company The anticipated unlevered returns must readily beat the public markets We have to retain the best investors and operators in the industry Blackstone 2
Slide 60: What differentiates us?
2014 Blackstone Investor Day What differentiates us? Single global fund • One investment committee; one culture; one global deal team • Flexibility to allocate capital to best opportunities globally • Consistent decision making; consistent results Scale platform with global reach • Offices on 3
Slide 61: Consistently strong performance over years
2014 Blackstone Investor Day Consistently strong performance over 26 years Closed Funds Investing Funds 2.6x 2.8x 2.5x Total Gross MOIC 2.3x 1.7x 1.3x 1.5x 1.4x BCP I BCP II BCP III BCOM BCP IV BCP V BCP VI BEP (1987) (1993) (1997) (2000) (2002) (2006) (2011) (2011) Net IRRs 19% 32% 14% 6% 37% 7% 17
Slide 62: Strong recent momentum
2014 Blackstone Investor Day Strong recent momentum (performance from January 1, 2013) 17 portfolio companies IPO’d or sold(1) $14.8 billion of cash returned to BCP LPs(2) – average realization MOIC of 2.5x(3) $10.7 billion market capitalization created for companies taken public 28.3% cumul
Slide 63: Reason for caution in current market environment
2014 Blackstone Investor Day Reason for caution in current market environment Credit availability high; cost historically low Equity markets at all-time high LBO prices rising Options for sellers numerous • IPO market wide open • Corporate buyers active Discipline waning • Credit markets f
Slide 64: Credit availability high; cost historically low
2014 Blackstone Investor Day Credit availability high; cost historically low High Yield / Leverage Loan New Issuance(1) High Yield – Yield to Worst / Default Rate(2) ($ in billions) $1,746 13.0% $1,375 11.0% $1,113 $1,200 HY YTW 20-Yr Avg. $920 9.9% 1,316 $745 990 $732 9.0% Loan Index Yield 20-Yr Av
Slide 65: Stock markets at all-time high; options for sellers numerous
2014 Blackstone Investor Day Stock markets at all-time high; options for sellers numerous S&P 500 IPO Volume (U.S. / Europe) (January 1, 2004 – Present) ($ in billions) 2,000 $100 $93B $80 1,500 $60 $40 1,000 $20 500 $0 2004 2006 2008 2010 2012 2014 2009 2010 2011 2012 2013 Dividend Recap Volume (U.
Slide 66: LBO prices rising
2014 Blackstone Investor Day LBO prices rising EBITDA Multiples 10.2x 1.5x 4Q’13 9.9x 9.4x 9.1x 8.7x 8.7x 8.5x 8.4x 8.4x 7.5x 7.5x 6.9x 6.7x 6.7x 6.4x 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Though valuations are not at all-time highs, assets appear expensive in relatio
Slide 67: How we are navigating the environment
2014 Blackstone Investor Day How we are navigating the environment Adhere to our core discipline Ability to intervene to change performance of company – actions under our control • Not a passive recipient of the market return in an auction Unlevered returns drive value decision • Focus on yield,
Slide 68: How we are navigating the environment (Cont’d)
2014 Blackstone Investor Day How we are navigating the environment (Cont’d) Mismatch between Transformational requirements for capital Growth platforms operating intervention and its supply 23% 24% 29% BCP VI Invested / Committed BCP VI Invested / Committed BCP VI Invested / Committed 14.0%–18.8% 10
Slide 69: We are well positioned for the future
2014 Blackstone Investor Day We are well positioned for the future Excellent recent performance $14.8 billion returned in cash / $10.7 billion market capitalization created(1) BCP V “de-risked” with 1.2x cost in cash, publicly traded stock(1) BCP VI / BEP great performance so far – 17% / 49% n
Slide 70: What’s next?
2014 Blackstone Investor Day What’s next? Actively marketing next energy fund – substantially larger than first Global fund will be in the market at end of year Several initiatives underway to leverage strong Blackstone relationship with largest global LPs to grow AUM _________________________
Slide 71: Portfolio Operations
Portfolio Operations
Slide 72: Blackstone’s Portfolio Operations group drives value
2014 Blackstone Investor Day Blackstone’s Portfolio Operations group drives value Strong track record improving operations: Quarterly EBITDA Trends EBITDA YoY% Growth (Decline) 20% 15.2% 15% 10.9% 11.2% 9.4% 10% BX Portfolio 5.2% 5% 6.7% 0% 2.5% 2.5% S&P -5% -2.1% -10% -6.2% 1Q'13 2Q'13 3Q'13 4Q'1
Slide 73: Recent enhancements extend performance advantage
2014 Blackstone Investor Day Recent enhancements extend performance advantage Early appointment of Executive Advisors (Operators) to Board expand CEO reach Rigorous Leadership assessments early and often Early mobilization for key initiatives growth and productivity Example Gates Lev
Slide 74: Tactical Opportunities
Tactical Opportunities
Slide 75: Tac Opps created to pursue opportunistic investing
2014 Blackstone Investor Day Blackstone Tactical Opportunities (“Tac Opps”) was created to pursue opportunistic investing – a strategy in which we’re well placed to succeed Dramatic change in competitive environment • Bank exit due to regulatory restrictions (e.g., Volcker) • Hedge fund use of sid
Slide 76: Tac Opps invests across asset classes, capital structures and geographies
2014 Blackstone Investor Day Tac Opps invests across asset classes, capital structures and geographies and seeks to generate attractive risk-adjusted returns Nimble and swift in the face of changing market conditions Opportunistic Capture differences in relative risk / return across asset classe
Slide 77: Tac Opps pursues differentiated investments outside traditional buckets
2014 Blackstone Investor Day Tac Opps pursues differentiated investments outside of traditional alternative “buckets” Tac Opps Investments: Alternative Investment Landscape Typically do not fall neatly in Traditional any asset class (e.g., U.S. Real Assets NPLs: credit / real assets) U.S. U.K. Res
Slide 78: Two years in, investor reception positive and early results promising
2014 Blackstone Investor Day Two years into launching the business, investor reception has been positive, deal flow has been strong and early results highly promising Raised $5.6 billion in “first vintage” fund raise AUM Seeking to launch second fund later this year Invested / committed over $
Slide 79: Strategic Partners
Strategic Partners
Slide 80: Market-leading provider of liquidity solutions to owners of private equity interests
2014 Blackstone Investor Day Market-leading provider of liquidity solutions to owners of private equity partnership interests Acquires secondary interests in mature, high-quality private equity funds from investors Proven Strategy seeking liquidity on a fair, timely and confidential basis Experien
Slide 81: Over $14 billion raised since inception
2014 Blackstone Investor Day Over $14 billion raised since inception(1) Strategic Partners LBO-Centric Venture Capital Overage Real Estate SP I 2001 $0.8 billion 18% Net IRR SP II 2003 SP II RE $1.6 billion $300 million 31% Net IRR SP III 2005 SP III VC SP III RE $1.9 billion $210 million $315 milli
Slide 82: Secondary investing advantages relative to primary investing
2014 Blackstone Investor Day Properly executed secondary investing generally provides several advantages relative to primary investing Investment Characteristic Secondary Investment Primary Investment Assets Acquired Funded, identifiable assets at a more mature stage Blind pool Year of Acquisition o
Slide 83: Large addressable market, with strong industry fundamentals
2014 Blackstone Investor Day Large addressable market, with strong industry fundamentals 600 Global Capital Commitments to Available Global Secondary Private Equity Partnerships(1) 506 Private Equity Capital(2) 500 486 (US$ in billions) (US$ in billions) Primary Commitments 400 506 395 45 45 486 418
Slide 84: Seller motivations are dynamic and driven by a variety of factors
2014 Blackstone Investor Day Seller motivations are dynamic and driven by a variety of factors Market Issue Secondary Transaction Driver Active Portfolio Divestment of non-core GP relationships Management Strategic and opportunistic sales from limited partners Pressing liquidity needs Financia
Slide 85: Growth opportunities for Strategic Partners
2014 Blackstone Investor Day Growth opportunities for Strategic Partners Current Future Early Infra. / LBO / RE Co- Fund Secondaries Real Assets Primaries Secondaries Investments Admin. (<50% Funded) Secondaries Over 800 transactions Provides diversified Infrastructure and Real Ability to access Acc
Slide 86: Key ingredients for a successful secondary business
2014 Blackstone Investor Day Key ingredients for a successful secondary business Sourcing Broad, global sourcing capabilities, many repeat sellers Pricing A market leader in human and intellectual capital (+1,700 funds owned) Closing Most experienced secondary buyer in the world (+800 deals ex
Slide 87: Private Wealth
Private Wealth
Slide 88: Individual investors are under-allocated to Alternatives
2014 Blackstone Investor Day Relative to institutions, individual investors are under-allocated to Alternatives Allocation to Alternatives 26.0% 19.4% 2.0 – 3.0% U.S. Pensions (1) U.S. Endowments (2) Individual Investors(3) ________________________________________________ (1) 2013 Pensions and Inves
Slide 89: Larger wealth management firms are recommending increased allocations
2014 Blackstone Investor Day The larger wealth management firms are recommending increased allocations Top 5 Firms Total AUM = $5 trillion(1) Recommended Alternative Allocations = 5%–20%(1) Actual Alternative Allocations = 2%–3%(2) Every 1% in Additional Alternative Allocations = $50 billion
Slide 90: Capitalizing on the sizeable opportunity in Private Wealth
2014 Blackstone Investor Day Capitalizing on the sizeable opportunity in Private Wealth Alternatives continue to be an area of focus and growth for the larger wealth management firms because of their appeal to higher net worth investors • Net new assets Financial pressures have forced these firm
Slide 91: Blackstone U: An “Alternative” education
2014 Blackstone Investor Day Blackstone U: An “Alternative” education Blackstone U provides education on our businesses – what they are, how they work, why they might benefit high net worth clients Blackstone U gives advisors the chance to come to Blackstone to learn directly from investment hea
Slide 92: Sales, service, delivery
2014 Blackstone Investor Day Sales, service, delivery Three Main Channels Partner Firms: Accessing high-net-worth clients at large banks and wire-houses with existing funds and bespoke product Direct Investors: Direct relationships with select family office and ultra high-net-worth investors S
Slide 93: Product Diversity: drawdown, bespoke and evergreen funds
2014 Blackstone Investor Day Product Diversity: Episodic “drawdown” funds, “bespoke” investment products, and a suite of current and prospective “evergreen” funds Episodic Bespoke Evergreen Global and Regional Real Multi-strategy Hedge Fund Long / Short Equity Hedge Estate of Fund (SMA) FoF (R
Slide 94: Sales in the Private Wealth channel are growing steadily
2014 Blackstone Investor Day Sales in the Private Wealth channel are growing steadily Blackstone’s Retail Fundraising ($ in billions) $9.3 $7.8 $5.9 $2.5 $2.7 $0.6 2009 2010 2011 2012 2013 LTM 1Q’14 Blackstone 7
Slide 95: Private Wealth is a larger part of Blackstone’s investor profile
2014 Blackstone Investor Day The Private Wealth segment is becoming a larger part of Blackstone’s overall investor profile Private Wealth Management AUM at Blackstone 2010(1) Today Private Private Wealth Wealth 8% 12% $128bn in total AUM $272bn in total AUM __________________________________________
Slide 96: Blackstone Alternative Asset Management
Blackstone Alternative Asset Management
Slide 97: BAAM’s growth has outpaced the hedge fund industry
2014 Blackstone Investor Day BAAM’s growth has outpaced the hedge fund industry Cumulative Growth in AUM(1)(2) Percentage Change in AUM(1)(2)(3) (Jan-2009–Dec-2013) (Jan-2009–Dec-2013) 160% 120% BAAM 130% 80% 10 Largest HFs as of Jan-09 36% 40% 0% 10 Largest FoFs as of Jan-09 29% -40% Jan-09 J
Slide 98: BAAM has outperformed industry benchmarks
2014 Blackstone Investor Day BAAM has outperformed industry benchmarks(1) Annualized outperformance: Annualized reduced volatility: BAAM Composite (net) vs. industry benchmarks BAAM Composite (net) vs. industry benchmarks (Jan-2000–Dec-2013)(2) (Jan-2000–Dec-2013)(2) 3.2% 3.2% 3.0% -0.64% -1.23% 2.2
Slide 99: Manufacturing new capacity drives growth in BAAM’s traditional lines
2014 Blackstone Investor Day Manufacturing new capacity drives growth and revenue in BAAM’s traditional business lines BAAM Principal Solutions (“BPS”): traditional commingled and customized solutions Executed Deals Negotiated Structures/Transactions (Jan-2012 – Apr-2014(1)) (Apr-2014 Allocations(2)
Slide 100: BAAM has diversified its AUM and revenue across multiple business lines
2014 Blackstone Investor Day BAAM has diversified its AUM and revenue across multiple business lines 2013 2016 Forecast Next Generation Businesses 16% 33% AUM Breakdown 67% 1) Direct Investing 84% 2) Hedge Fund Ownership 17% 3) Liquid Alternatives 44% Revenue 56% Breakdown 83% BAAM Principal Next Ge
Slide 101: Direct investing and hedge fund ownership drive increased profitability
2014 Blackstone Investor Day Direct investing and hedge fund ownership drive increased profitability Direct Investing Hedge Fund Ownership $5.5bn AUM $5.8bn AUM Idea sourcing Direct economic participation Direct ownership Leveraged to industry growth Trading and hedging decisions Very lo
Slide 102: Liquid alternatives hold growth potential
2014 Blackstone Investor Day Liquid alternatives hold growth potential Liquid Alternatives AUM Growth: Alternative Mutual Funds(2) $2.0bn AUM ($ in billions) Differentiation by managing risks and creating capacity BAAM Mutual Fund performance since inception(1) $140 ? (’13 and beyond) 10% $120 8% $1
Slide 103: BAAM’s scale and investments have created barriers to entry
2014 Blackstone Investor Day BAAM’s scale and long term investments in key capabilities have created significant barriers to entry Human Capital Value Proposition 234 60%+ BAAM professionals Worldwide(1) Of historical inflows from existing clients(2) 100 50%–100% Investment professionals Of initial
Slide 104: BAAM is a high-growth business
2014 Blackstone Investor Day BAAM is a high-growth business BAAM has maintained strong financial performance across major metrics… Hedge Fund Solutions (“HFS”) Summary Financials ($ in millions) 2009 2013 CAGR AUM $28,799 $55,657 18% Revenue 313 649 20% Economic Income 170 377 22% …while making
Slide 105: Appendix: Industry Dynamics Should Support BAAM’s Continued Growth
Appendix: Industry Dynamics Should Support BAAM’s Continued Growth
Slide 106: A strong outlook for the hedge fund industry
2014 Blackstone Investor Day A strong outlook for the hedge fund industry should further strengthen BAAM’s growth trajectory AUM Growth (Hedge Fund Industry)(1) ($ in billions) $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2001 2003 2005 2007 2009 2011 2013 2014–2018 Projections(2) __________________
Slide 107: Hedge funds becoming a larger part of institutional portfolios
2014 Blackstone Investor Day Hedge funds becoming a larger part of institutional portfolios Pension Funds are increasing allocations to hedge funds Average Pension Fund Allocation to Hedge Funds(1) Nearly half of institutions, including 52% 6.8% of pension funds, reported increased 6.4% hedge fu
Slide 108: Blackstone Financials Update & Conclusion
Blackstone Financials Update & Conclusion
Slide 109: Momentum: A record twelve months
2014 Blackstone Investor Day Momentum: A record twelve months with strengthening forward indicators (Dollars in millions) Economic Fee Related Distributable Net Income Earnings Earnings 73% Increase 13% Increase 46% Increase $42 billion $3,700 Total Capital Returned over LTM $1,957 $783 $2,132 $691
Slide 110: Growth: Consistent, best-in-class growth
2014 Blackstone Investor Day Growth: Consistent, best-in-class growth over the last several years Fee-Earning AUM Total AUM (Dollars in billions) (Dollars in billions) $272 $204 $91 $95 2008 2009 2010 2011 2012 2013 1Q'14 2008 2009 2010 2011 2012 2013 1Q'14 Distributable Earnings Realizations (Dolla
Slide 111: Potential: Alternative Managers are gaining share
2014 Blackstone Investor Day Potential: Alternative Managers are gaining share as LPs continue an accelerating trend of allocating to higher returning private markets Over 150 Alternative Manager Allocation Drivers 8 Public Asset Managers(1) Public Alternative Asset Managers Superior long-term ret
Slide 112: Positioning: The leader in the fastest-growing segment
2014 Blackstone Investor Day Positioning: The leader in the fastest-growing asset management segment Since 2011, Alternatives are growing faster …and Blackstone is the fastest growing than Traditionals… in the Alternative space Total AUM Growth: 2011 – 1Q’14 Total AUM and Capital Raised: 2011 – 1Q’1
Slide 113: Innovation: Integrated investment platform
2014 Blackstone Investor Day Innovation: Integrated investment platform exposed to opportunities around the world and moves quickly to develop new strategies Total AUM Total Capital Invested (Dollars in billions) (Dollars in billions) 43% $272 $18 1Q’14 LTM Capital Invested outside of North America
Slide 114: Diversity: most diversified and balanced Fee Revenues
2014 Blackstone Investor Day Diversity: Blackstone has the most diversified and balanced Fee Revenues Carlyle KKR Fund of Funds Public Capital Global Markets 15% Markets Market Real 22% Strategies 28% 20% Advisory Assets 17% Private 12% Equity 46% 24% 53% Credit Corporate Private Private Equity Mark
Slide 115: Balance: Continuing to grow while maintaining diversity
2014 Blackstone Investor Day Balance: Continuing to grow at a rapid pace while maintaining diversity and growing the competitive advantage over peers Total AUM (Dollars in billions) $272 CAGR 187% Total AUM Growth Since 2008 23% $66 19% $58 $73 billion $95 Realizations since 2008 $81 26% $23 $24 $24
Slide 116: Value Realization: shift in the earnings mix
2014 Blackstone Investor Day Value Realization: Drives a shift in the earnings mix while “value creation” remains robust, which is an indicator of future earnings Economic Income (Dollars in millions) $3,783 $3,596 31% Economic Income CAGR since 2010 $1,785 $1,707 $2,041 $1,581 $1,585 35% $875 cash
Slide 117: Compounding Effect: Net Performance Fee growth
2014 Blackstone Investor Day Compounding Effect: Value creation and asset diversity drives Net Performance Fee growth, even throughout robust realization cycles Net Accrued and Realized Performance Fees (Dollars in millions) $3.11/unit $3.00/unit 71% $1,023 Net Accrued Performance Fees $1.99/unit pu
Slide 118: Uncorrelated: Annual seasonality and investment performance
2014 Blackstone Investor Day Uncorrelated: Annual seasonality and underlying investment performance drives financial performance rather than trends of the S&P 500 (Dollars in millions) 72 Realization Events 103 Realization Events 150 Realization Events 188 Realization Events 11% 12% 11% 10% 10% 10%
Slide 119: Core Strategy: business model optimized to outperform across cycles
2014 Blackstone Investor Day Core Strategy: a business model optimized to outperform for fund and equity investors across all cycles Organic Pure Asset Value Consistent Advantages Growth Manager Creation Earnings of Scale Superior growth Managing third Core expertise of Underlying Each business come
Slide 120: Unique: one of the fastest growing and most profitable asset managers
2014 Blackstone Investor Day Unique: Blackstone is one of the world’s fastest growing and most profitable asset managers Publicly Traded Asset Profitability Yield Scale Growth Managers 26 19 6 3 1 EBITDA(1) Margin > 30% Dividend Yield > 3% Net Income > $1B 3 Yr AUM CAGR > 20% (2) Blackstone: 54.6% 4
Slide 121: Appendix
Appendix
Slide 122: GAAP Statement of Operations
2014 Blackstone Investor Day GAAP Statement of Operations (Dollars in Thousands) 2008 2009 2010 2011 2012 2013 1Q'12 1Q'13 1Q'14 1Q'13 LTM 1Q'14 LTM Revenues Management and Advisory Fees, Net $ 1,476,357 $ 1,482,226 $ 1,584,748 $ 1,811,750 $ 2,030,693 $ 2,193,985 $ 471,676 $ 482,133 $ 573,160 $ 2,04
Slide 123: Total Segments
2014 Blackstone Investor Day Total Segments (Dollars in Thousands) 2008 2009 2010 2011 2012 2013 1Q'12 1Q'13 1Q'14 1Q'13 LTM 1Q'14 LTM Revenues Management and Advisory Fees, Net Base Management Fees $ 1,041,718 $ 999,829 $ 1,069,471 $ 1,281,185 $ 1,591,403 $ 1,740,807 $ 395,506 $ 408,747 $ 476,878 $
Slide 124: First Quarter 2014 Segments
2014 Blackstone Investor Day First Quarter 2014 Segments Private Real Hedge Fund Financial (Dollars in Thousands) Equity Estate Solutions Credit Avisory Total Revenues Management and Advisory Fees, Net Base Management Fees $ 98,584 $ 159,336 $ 113,384 $ 105,574 $ - $ 476,878 Advisory Fees - - - - 69
Slide 125: Reconciliation of GAAP to Non-GAAP Measures
2014 Blackstone Investor Day Reconciliation of GAAP to Non-GAAP Measures (Dollars in Thousands) 2008 2009 2010 2011 2012 2013 1Q'12 1Q'13 1Q'14 1Q'13 LTM 1Q'14 LTM Net Income (Loss) Attributable to The Blackstone Group L.P. $ (1,163,032) $ (715,291) $ (370,028) $ (168,303) $ 218,598 $ 1,171,202 $ 58
Slide 126: Reconciliation of GAAP to Non-GAAP Measures – Notes
2014 Blackstone Investor Day Reconciliation of GAAP to Non-GAAP Measures – Notes Note: See Appendix - Definitions. (1) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for Transaction-Related Charges which include principally equity-based compensation charges a
Slide 127: Earnings Composition – Net Realizations and Net Unrealized
2014 Blackstone Investor Day Earnings Composition – Calculation of Net Realizations and Net Unrealized (Dollars in Thousands) 2010 2011 2012 2013 1Q'13 1Q'14 1Q'14 LTM Realized Incentive Fees $ 116,700 $ 89,029 $ 301,464 $ 474,333 $ 24,727 $ 53,837 $ 503,443 Less: Realized Incentive Fee Compensation
Slide 128: Definitions
2014 Blackstone Investor Day Definitions Blackstone discloses the following financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America (“non-GAAP”) in this presentation: • B