Blackstone's Gray Says Deal Environment Hitting 'Escape Velocity'

First off, just on the quarter, we had record earnings per share for the quarter and for the year, and we've got a number of powerful engines. One is this deal environment hitting escape velocity. We did four IPOs in the second half of the year, led by Medline, which is a terrific business in Chicago, and the market reception was quite positive. It feels to us like that 2013-14 period, where after the hibernation following the GFC, we began to take a number of companies public, notably Hilton Hotels. And it looks like it should continue as long as markets stay where they are. I think we will see a lot of activity. That's obviously good for us and our investors.

I'd also point out for us that the decision we made to lean into AI infrastructure, becoming the biggest investor in data centers, becoming the biggest provider of private capital to utilities, the lead investor today in electrical equipment and related services, that's really delivered great results and there's a lot of momentum there as well. And then I just say finally that we continue to see this secular shift towards alternatives, insurance companies, individual investors, institutions. We had 71 billion of inflows in the quarter, 239 billion in the year. So a lot of good things are happening, but certainly the deal backdrop is quite favorable.

Well, you always can have things geopolitically. That's a risk that always exists. Certainly long rates, if you saw that backup, that could slow down the deal environment. But I'd say overall, the picture looks pretty good. We've got an economy with a fair amount of strength. Our private equity companies in the quarter had 9% revenue growth. That's obviously positive. We continue to see cost of capital coming down. Spreads are at very low levels. That's helpful for the deal environment as well. And then this AI world, this huge investment that's happening that we're helping to facilitate and then the huge productivity boom that's going to come, I believe after that is another positive. So there are always risks out there. You've got to be thoughtful in how you deploy capital. But the overall environment to us feels pretty good. I think this should be a strong year.

I'd say how you invest really matters. So a lot of what we've done here is, as I said, this infrastructure and it's based on long-term contracts with credit-worthy counterparties and that makes a huge difference. So if you're building a multibillion-dollar data center in the US or around the world and you have a 15-plus year contract with a company with a $3 trillion market cap, that feels pretty good. Similar dynamic if you're doing something around energy, be it an LNG or new power plant, you have a long-term contract. So I think there are ways to do this that are more downside protected. At the same time, we're trying to capture the upside selectively, you know, around some of the big LLMs, around some of the application software, but we're mindful of how much investing we're doing. We're also mindful of the risk, but there's also a fair amount of upside.

I do think what's interesting is everyone's focused on these bubble risks. I think the biggest risk is actually the disruption risk. What happens when industries change overnight, like what we saw to the Yellow Pages back in the 90s when the internet came along, or what happened to taxis when Uber and Lyft came to the taxi business 10 years ago. In the last two weeks, we saw JP Morgan say they're going to stop using proxy advisors and use AI instead. We heard Lemonade say that if you use your AI-powered self-driving Tesla during those miles, we're going to cut rates by 50%. What does that mean for insurance companies? What does that mean for collision repair companies? And so we're spending tons of time thinking about rules-based businesses, accounting, legal.