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00:00Tell us a little bit more about where are we in this whole private markets discussion.
00:04Are we just early innings?
00:06Where are we?
00:08Thank you, Yvonne and David, for having me.
00:09It's a pleasure to be here.
00:11I think we definitely are in the early innings for private markets, particularly here in
00:16Asia.
00:16As I take a step back and look at our business, we've grown tremendously over the last couple
00:20of years.
00:21Our team size has basically doubled over the last two years, and we've been expanding
00:26our footprint.
00:27We now work with over 40 private banks and wealth managers across the region.
00:32We've been expanding our team.
00:34So outside of Hong Kong and Singapore, where we've had team on the ground for many years,
00:37we're also expanding in Japan, Australia, China, as well as Korea, which we just entered last
00:43year.
00:43Japan actually has our largest team on the ground, and we see an immense opportunity there.
00:48And overall, we think there's a massive opportunity ahead that we're scaling for, right?
00:52So as I look at the outlook and sort of the prospects for private markets in the region,
00:56you know, I think obviously there's a massive opportunity.
00:59And I think that's driven by a few factors.
01:02I think, one, there's been significant wealth creation in Asia.
01:05As we look at this, you know, we think there's $80 trillion of wealth sitting within private
01:10wealth globally.
01:11Roughly a third of that sits in Asia, and we expect that to continue to grow.
01:15And also, we think investors here and families here are going to be looking to preserve and
01:20to grow their wealth.
01:21At the same time, adoption of private market products is incredibly low.
01:25If you think about it, institutions are roughly 30% allocated or more to private market products.
01:30Meanwhile, individual investors are approximately 3% allocated to private market products.
01:36And I think in Asia, in many markets, it's much, much lower than that.
01:39So obviously, there's huge room for growth.
01:41I think the current market backdrop actually highlights the case for private market products,
01:46right?
01:46You have more volatility in the market.
01:48The public markets are more concentrated.
01:51And overall, if you look at 60-40 portfolios, they don't have, you know, the same diversification
01:56benefits as they've had in the past, right?
01:58If you look back to 2022, over 70% of the time, you know, stocks and bonds have been correlated.
02:03So overall, if you look at private market products and where they fit in investor portfolios,
02:07I think the benefits are actually quite significant, right?
02:10They have outperformed public benchmarks over time.
02:13They improve diversification.
02:15They reduce volatility for investors.
02:17And if you're looking to build financial security and build wealth for the long term, we think
02:21private market products would be a very, very important third leg to investor portfolios.
02:26You know, and we are seeing significant interest among Asian investors across a number of different
02:32markets, you know, for private market strategy.
02:34So, yes, we are in the very, very early innings.
02:37I mean, keeping up with demand the way you describe it, almost from a low base, but the
02:41delta is so quick and this refreshed recognition of what private markets offer.
02:46I mean, it's a good problem to have, right?
02:48Yes.
02:48You mentioned Japan.
02:49Japan specifically, why?
02:52What's with that market?
02:54And why do you think there's such a long runway there?
02:56Well, Japan is very, very exciting for us.
02:59It's already the second largest market for us for private wealth outside the United States.
03:04And we think it has an opportunity to grow much, much bigger, right?
03:08If you look at the overall context of the market, why is it so compelling?
03:12I think, you know, first of all, there's a policy initiative.
03:16There's an initiative, you know, for the country to move households from savings to investment.
03:21If you think about it, there's $15 trillion worth, roughly, of financial assets held by
03:26households in Japan.
03:27Roughly half of that sits in low-yielding cash and deposits.
03:31And at the same time, you know, Japan is positioning itself to become a leading asset management
03:36center across Asia.
03:37So, you've seen, essentially, an enablement of more high-quality products, investment products
03:43to be available to Japanese investors.
03:45So, I think, overall, there's a huge opportunity for us.
03:48And Japanese investors are just starting to get to know private market products, right?
03:53And so, again, we've been building a team on the ground.
03:56We're working with leading financial institutions on the ground.
03:59And just last year, we actually were the first alts manager to launch a major ad campaign
04:04in Japan.
04:05We think it's really important to build our brand in the market.
04:09We actually are the first to bring, you know, four flagship strategies into the market across
04:14private equity, private credit, real estate, and infrastructure.
04:18And we think it's important to sort of build on the long history that we've had with Japan.
04:22Actually, a lot of people don't know that, you know, Japan is quite fundamental to Blackstone.
04:27Actually, one of the very first investors in one of our first funds was a Japanese investor,
04:34Niko.
04:34So, our founder and chairman, Steve Schwarzman, likes to say that without Japan, you know,
04:39there would be no Blackstone.
04:40So, that's an important history for us to build upon.
04:43And we also want an opportunity to engage and interact, you know, with Japanese investors,
04:48help them understand how we invest, who we are.
04:51And so, we think there's a long road ahead.
04:53What are sort of the strategies that you're looking at for 2026 now?
04:56Is it still private equity or private credit?
04:59I mean, it certainly has gotten a lot of spotlight.
05:00But what do you think are some of the strategies that are going to work the most this year?
05:03Yeah, well, there's a number of strategies that we think, you know, are well positioned for
05:062026.
05:07I think, first of all, for private equity, we think it's a very interesting opportunity.
05:12Overall, the economic environment looks resilient and rates are coming down.
05:17And we see deal activity picking up, which will be great for private equity, right?
05:20So, again, we've been very active in deployment.
05:24And, you know, we're seeing more and more monetizations, IPOs, realization events, right?
05:30And so, we think it's a great time and the outlook for private equity is strong.
05:34And we're focused around a few big themes out there.
05:37You know, AI is the main thing, but energy as well, life sciences.
05:43So, there's a number of themes that we think are quite important within private equity.
05:46And we're seeing quite a bit of interest from investors in our private equity strategies
05:51across Asia.
05:52We think private credit.
05:54Last year, we had an incredible fundraising year in Asia for private credit.
05:57We continue to see this as a durable asset class.
06:00It delivers excess premium versus liquid credit with not taking on an additional amount of risk.
06:07So, we continue to see this as a compelling asset class.
06:09And we think, you know, it's a really interesting opportunity, you know, for real estate ahead.
06:15You know, we've been very active in deploying in real estate over the last 12 to 24 months.
06:20And if you look at real estate values on a relative basis, you know, real estate values are up about 6% to 7% up from the trough.
06:28Meanwhile, if you look at the S&P 500, it's at all-time highs.
06:31It's up 100%.
06:32You know, bonds are near all-time highs.
06:35So, again, we think on a relative basis with rates coming down that actually that's a very good time to be thinking about real estate as an asset class.
06:43And we hope to see more activity here.
06:45What are you seeing as far as, I guess, deal size, ticket size is concerned?
06:49I mean, because of players like yourself, I mean, companies now can frankly afford not to go public.
06:56I mean, they have access to debt and equity in larger and larger portions to stay private as long as they want to, I guess.
07:03But I wonder what that's doing to valuations and ticket sizes.
07:06Well, in general, for us, we are focused on larger-scale transactions.
07:11And I think you're right.
07:12You know, companies are staying private for longer, right?
07:15The private markets are much bigger.
07:17And I think, again, it's a much larger pool of opportunities.
07:21If you think about it, you know, the public markets today have fewer, you know, public, you know, have fewer companies than it has in the past, right?
07:27There's roughly half the number of public companies today versus 30 years ago.
07:31Meanwhile, if you look across scaled businesses and real estate assets, roughly 90%, you know, of these assets are private, right?
07:39And so, investing in private markets enables investors to access a much larger pool of opportunities as well as access, you know, a manager like ourselves, our deal origination capabilities, our value creation capabilities.
07:53And that's why we've been able to deliver outperformance over time across cycles.
07:57What do you think are still some of the risks that maybe investors don't know about, particularly private credit, right?
08:02It's still quite opaque in terms of transparency and the like.
08:05If there are any risks, what do you think they are?
08:07Well, overall, as we look at private credit, you know, we don't see the same picture that, you know, some of the media headlines that we're seeing, right?
08:16I think as we look at the overall environment for private credit, it still looks quite compelling.
08:20It's a durable asset class.
08:22We see, you know, a resilient economy.
08:25Market defaults are down.
08:26And as we look at our own portfolio, you know, we think portfolio quality is quite robust.
08:31And we're seeing EBITDA growth in our portfolio.
08:34So, again, I think the idea for private credit is it brings investors right up to the borrower, right?
08:41And so, we cut out the middlemen in the middle.
08:44It provides borrowers with better speed, more certainty, more flexibility, which is great for borrowers.
08:50And it allows investors to keep more of the return.
08:53And, again, they're getting that excess return without taking on a lot more risk, right?
08:58And so, again, we think there's actually a lot of room to grow still in private credit.
09:02We think it's actually an important asset class, particularly for investors that are looking for yield and income.
09:08And so, again, you know, we're positive on the outlook for private credit.
09:13You know, the, I don't know if I could still call it the dawn of AI, because it feels like we've been talking about this for more than we actually have.
09:21But how has that changed sort of just deal origination for you guys as far as real estate, for example, keeps coming up, data centers.
09:28And you've got to wonder whether the headline is leaning what's happening on the ground, or is it the other way?
09:33Are we in a bubble?
09:34What are you witnessing exactly as far as literally on the ground stuff is concerned?
09:38Well, what I would say is, you know, for us as a firm, we look at AI as an incredibly important theme.
09:44It's transformational.
09:45It's revolutionary.
09:46We call it the main thing.
09:48And we really are focused on the picks and shovels of AI.
09:51So, we're looking along the whole value chain, and we're seeing where can we participate where there's interesting value.
09:56And I think, you know, first of all, for data centers, if you look at the amount of data creation that there's been in the last couple of years and the amount going forward, you know, together, you know, with AI, with, you know, things like chat GPT, with autonomous vehicles, the amount of data creation and compute needed, there's going to be a significant need, you know, for data centers.
10:16And we are the largest owner of data centers in the world, and we have a very large pipeline ahead.
10:22And so, we think that is a very important opportunity.
10:24And obviously, to power these data centers, we think there's an incredible opportunity in energy, right?
10:30And so, again, we're very focused on various areas along the value chain that essentially benefits from the large opportunity ahead of us for AI.
10:39But we think it will impact, you know, all of us in how we work and in all of our businesses.
10:45And if you look across our businesses, everyone is focused on making AI investments and seeing how to take advantage of this opportunity.
10:50I hear that you're also expanding your team as well.
10:53In terms of headcount, are you looking to add more this year?
10:56I think definitely.
10:58Again, as I mentioned, we've roughly doubled our team size over the last two years.
11:02We're certainly continuing to grow our business.
11:05You know, we want to expand in Japan.
11:07We've added people on the ground in Australia.
11:09We're putting people on the ground in Korea.
11:11So, we are looking to continue to scale up our team to meet the opportunity.
11:15Is there a number in mind that you have for Japan?
11:18Well, again, I think there's a significant growth path we have ahead of us.
11:22So, we're going to continue to invest in our growth.
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