00:00Interesting one, because on one hand, you have like these high flyers, OpenAI, SpaceX, and then like subs with Jersey
00:06Mike's.
00:06How do you think about the actual composition of this thing and what's in it?
00:10Well, when we built our perpetual strategy, what we really wanted to do was mirror the way Blackstone built its
00:15private equity platform.
00:16And so if you look at our private equity platform, yes, we're probably most known for our large mature buyouts,
00:23Jersey Mike's, Medline, Copeland, these big important companies that serve an important part of the economy.
00:28But the platform is actually a lot broader than that, right?
00:31So we invest in buyouts.
00:33We have opportunistic investing.
00:34We have life sciences.
00:35We have secondaries.
00:37We have growth.
00:38And the reason we built our platform that way was to be able to allow us to deploy capital across
00:44different strategies,
00:45depending on where we're seeing the most attractive relative value across the market.
00:50And our thought was to have a perpetual strategy that can manage and benefit from that level of diversity.
00:56You're not majority shareholders in these AI companies or the rocket shipmaker, but you're not just any investor.
01:07You're Blackstone.
01:08So I was looking at your portfolio and wondering, are there any synergies here?
01:11Like Copeland, don't they do HVAC compressors?
01:13Of course.
01:14Could they be used in SpaceX rockets or in data centers?
01:19And do you get astronauts to eat Jersey Mike's?
01:22Like I know Danny DeVito like hangs out at your office all the time.
01:26So are there any synergies that you can arrange as a shareholder?
01:31Look, I think one of the things that we've done quite well across our portfolio is find ways for our
01:36portfolio companies to be able to work together.
01:39And one of the places you see that actually quite acutely is actually across the AI value chain.
01:45Like if you look at the data center's footprint that we have as a firm, and then you look at
01:49the number of the service opportunities and derivative plays that we've done around data centers,
01:53those businesses can actually benefit quite well.
01:56And when you look at like an open AI, an anthropic or a SpaceX, one of the benefits that we've
02:00had as an institution is really looking at our portfolio companies and understanding where they're going.
02:06So we have 270 portfolio companies.
02:08We're talking to our CTOs.
02:10We're talking to those engineering teams to figure out what they want to go build on.
02:13And one of the things that we were hearing quite strongly was this interest in building on top of the
02:18anthropic platform.
02:19That's what gave us so much conviction in terms of making an investment into the company.
02:23So will you talk to an anthropic and open AI and then think maybe we shouldn't do any more software
02:27deals?
02:28How are you thinking about that?
02:29What's your exposure to the portfolio?
02:30So when you look across the portfolio more broadly at Blackstone, we're a very balanced investor.
02:36We haven't kind of over-invested in any one sector.
02:38We've tried to keep our exposure limited across the board.
02:42And so when you think about software and what's happening in the market today, I think we have taken an
02:47approach of really trying to focus on mission-critical software companies,
02:51ones that have very high friction costs in terms of removing workflows,
02:57and frankly focusing on companies that have high, high renewal rates, important companies to their customers, proprietary data.
03:05When we focus on software companies that look like that, what we tend to find is that they're actually performing
03:11quite well, right?
03:12We're actually seeing good growth.
03:13We're seeing earnings going up.
03:14We're seeing margins going up.
03:15And so we think that portion of the software economy is actually going to handle pretty well relative to the
03:22AI pressure that's coming
03:23and importantly, actually be able to enable their workflows to do better.
03:27Did you have a take on the Citrini research piece?
03:31I mean, talking about friction, talking about software, right?
03:33But it was also, there was much more than that.
03:35White-collar job losses, destroying the consumer-led economy.
03:39What did you think?
03:40Well, it's interesting.
03:42I think when you look at the Citrini report, I think the first thing to look at is that first
03:45line.
03:46What they did was a scenario, not a prediction, right?
03:48What they were really looking at was in a world where this happens, what would this look like?
03:54I think it's less about what exactly is the world going to be.
03:58And I think, you know, there is certainly the risk of disruption across the investing landscape from AI.
04:05We've seen that over the past few weeks across software, financial services, insurance, brokerage, right?
04:09You've seen that work its way through.
04:11I think our approach has been to go look for portions of the economy that we think are going to
04:16be better insulated.
04:17So we do have a significant number of investments in the physical economy.
04:20You mentioned Jersey Mike's as being one of them.
04:22But there's a number of investments that we have that we think are going to be well insulated from that
04:27risk.
04:27But that's also where the open AI and the anthropics come from.
04:30What's your take on the circular nature of investments around open AI?
04:35We used to have this confusing graphic that we'd show about the 20 companies that are invested in open AI
04:39and which open AI is invested in at NVIDIA, et cetera.
04:43I mean, it seems to be there's a lot of hot takes around these companies.
04:47Well, what I would tell you is what you can't really refute is the underlying demand signals that we're seeing
04:55in the underlying companies.
04:56So the demand for the product continues to be very, very strong.
04:59The demand for the underlying infrastructure to enable these products continues to be very strong.
05:05And so we're big believers that this AI investment boom is going to continue.
05:09And that is going to fuel a very large AI productivity boom down the road.
05:14So we're not seeing signals of that demand side slowing down.
05:18And we're continuing to invest behind it.
05:20So there seems to be these two mass hysterias happening in parallel that sometimes overlap a little bit.
05:25One, it's like, is AI going to eat the world and everything looks different?
05:27And the other one is this fear about private credit.
05:29And I know you're an equity guy, but you did used to wear a credit hat.
05:33A lot of it is revolving around retail funds, around funds of the wealthy, like the one that you run.
05:38How do you think about the liquidity profile of the fund and whether it matches a more retail-oriented investor?
05:45Yeah. So I think you have to go back as to why investors are interested in the asset class to
05:50begin with, right?
05:51So if you actually look at capital formation across the alternative space over the last 23 years, 20, 30 years,
05:56it's been a tremendous amount of growth, right?
05:58And if you look at our capital base, our pension plans will be 20, 30 percent into alts.
06:04If you look at families and endowments, they could be 50, 60 percent for private investors, individual investors.
06:10Still 1 percent penetrated.
06:12So there's a lot of room to go.
06:13And the reason you've seen that growth is when you look at private equity in particular,
06:17it provides two real benefits to investor portfolios.
06:21The first is it's complementary and diversifying risk into a book.
06:25And then two, at least historically, it's provided enhanced returns.
06:28And to get that diversity benefit, to get those enhanced returns, has come at the expense of some liquidity, right?
06:34That's been the tradeoff that investors have made for a long time.
06:38But does everyone expect that that's the case?
06:40Is there enough education out there to tell people that these aren't exactly as liquid as other types of funds
06:47might be?
06:48So you're actually hitting on, I think, the exact right point, right?
06:51We are in the early stages of a big secular shift of private wealth capital coming into the alternative space.
06:57And we do believe that it is very important for managers to spend time educating the market on how these
07:04products work and what the risks are.
07:06And so we run these events called Blackstone University.
07:08We have them at Blackstone in New York.
07:10We actually run them regionally where we invite financial advisors and members of the wealth management community
07:15to actually understand the products at a deeper level and make sure that they are able to articulate the risks
07:21to their clients so that it's suitable for them.
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