Blackstone's Jon Gray on Earnings, M&A, Private Credit

Great to be here.

It does feel a bit of that. Danny, it's great to be here to be talking about it. We had a heck of a quarter. What we saw here was we delivered for our customers. That's the most important thing in terms of returns. We really leaned into digital and energy infrastructure. We also saw big inflows as well, 50 plus billion dollars and all of that produced big earnings, distributable earnings up 50%. But you've really hit on the key here. We've got a couple things going on. A cyclical uplift in deal activity and that's very helpful for our business and our investors. And then we also have some of these big markets that continue to grow in wealth, insurance, very attractive investment areas in places like India and life sciences. So a lot of good things are starting to happen across the board.

Well, if you look over time, you always see new highs, but it takes time after the downturn. Certainly happened after the financial crisis. I think it'll happen after this inflation and rate rise period. It will not happen overnight. We're still at low absolute levels of M&A and IPO activity relative to historic levels as a percentage of market cap, but there were very encouraging signs in the third quarter. IPOs were up 100%. M&A activity was up 64% in the US. We did three IPOs globally in the quarter, which is the first time in four years that that's occurred. We announced an $18 billion deal this week with Whole Logic. It does feel like things are coming together. And what's helping is the cost of capital's coming down. The Fed's lowering rates. The long end has come down. Spreads have tightened. High yield spreads are down almost in half from their highs a couple years ago and we've got record highs in the stock market. That is a very good combination for more deal activity. And so if we get a little bit of calm here in the overall environment with this kind of backdrop, I would expect next year will be an even better year for M&A and IPOs.

Well, I would tick through some of these. Certainly on the tariffs, we've been an advocate of letting this tariff diplomacy play out. Obviously around Liberation Day, there was a lot of concern, but ultimately we saw progress and deals being made by the administration. I would expect that will continue to happen. There will be noise as the negotiations go back and forth, but I do believe this will settle and I don't think 6, 12 months from now this will be on the front page. The other thing I'd say around inflation is that our data is pretty encouraging in certain areas. Rental housing, the biggest component in CPI, our data says it's running about half of the 3.6% the what the Bureau of Labor Statistics produces. And that should be helpful for the Fed. Also, we've seen a cooling in the labor markets. If you look at hourly wages at our portfolio companies, they're down around 3% from north of 4% a year ago. So, I think that should allow the Fed to continue to lower rates. That's a positive. So, I think some settlement of the tariffs, continued good data on CPI and rates coming down should be helpful. And overall, that environment does feel pretty good. Obviously, there can be risks along the way. We're in the midst of a government shutdown that can slow things like IPOs in the short term, but when we look out over the horizon, it feels pretty good for deals.

Well, it's hard to look at stocks day-to-day. We focus on the long term for our shareholders. I think our total return is something like three and a half times over the last five years. Double the stock market. So shareholders have been rewarded for investing with Blackstone. We of course are very aligned with them as the largest shareholders of the company. I think in markets when people are nervous about what's happening there have been a lot of these stories around private credit which I'm happy to talk about that may have created concern maybe people have been focused on the government shutdown and the IPO market slowing or the tariffs causing that. We tend to take this longer term approach and when we do that it looks like a very bright environment. So I think with us what we found is we just keep executing, keep delivering good returns for our customers that enables us to raise money to expand our business and I think shareholders will see that this business can continue to grow and deliver.