COMPANY PROFILE - From $21.7B in AUM in 2002 to $102.B in 2007 at the IPO to $822B year end 2021. This company is amazing.

Blackstone is the world’s largest alternative asset manager. BX launched the first Private Equity Fund in 1987. Since that time, the industry and BX AUM has blossomed. They are among the smartest investors on the planet. They win when the economy is expanding because of their investments and they win in tumultuous times because they are one of a few aggressive buyers when asset prices are going on mega-sale. That’s the kind of investor all of us should want our assets managed by. The stock can be very volatile in tough times, but make no mistake, the stock is a raging table pounding buy when it gets thumped. They have over $135 billion of dry powder to put to work and they love doing it when everyone else is frozen. In the middle of the 2020 pandemic, they deployed about $62 billion into severely depressed priced assets that have no recovered well.

July 21 Earnings Summary: BX invests in “good neighborhoods” that tend to benefit in structurally higher inflationary periods. When the forward opportunities and macro markets change, so too will their investment focus. That’s what you want in an investment manager. With ownership in Blackstone funds and/or their BX stock, investors get access to their global think tank. Current focus is: areas with strong secular growth (profitable technology, software, life sciences innovation, travel & leisure), demand/supply imbalances (rental real estate, differentiated commercial real estate, energy transformation, climate change beneficiaries), real assets, global infrastructure (toll roads, cell towers, airports). They see every deal, they are the first call from companies that are considering going private, they are a private lender with massive and deep pockets. At almost $1 trillion in AUM, the model has massive network effects at scale making this a much more recurring revenue machine that warrants a much higher multiple. The real power of this model and this industry will be shown in tougher economic times when equities and bonds underperform with higher volatility. The best private equity firms are much more resilient and tend to really shine when asset appreciation gets harder. That drives more interest, more assets, more fee revenues, and more future monetizations when a new bull cycle begins. There is no firm with better intellectual capital and more dry powder to be opportunistic with lower asset prices than Blackstone.

• Blackstone earnings today: They are monsters. This brand is setting up to have a meaningful expansion in EPS over the next 3 years as a record $170B in dry powder gets put to work into distressed prices. That makes for better forward returns and great forward returns drives even more AUM growth. This positive feedback loop and incredible network effect is vastly mis-understood by most investors. Insiders own about half the float, they have a vested interest in seeing strong returns which drive AUM growth. And they get paid a 5-6% dividend to invest through the good and bad parts of every cycle. Total AUM is $940B in AUM +38% YOY, perpetual capital $355.9B +110% YOY, fee earning AUM $684B, $88BILLION in new inflows last 90 days, and the largest fund raising period in the companies history is going on now. BX raised $339.7B last 12 months. Deployed $47.8B in the quarter, $173.4B last 12 months. Performance across all products was vastly better than public market comps in a period that was worse than any other 1H of a year since 1970. This shows where they really add value. If its more difficult to make money over the next 3 years with higher inflation than people think, you think large assets seek their expertise more or less? I think this environment favors their offerings even more than in bull markets. Realizations will slow short term as its less favorable environment to sell but they did 29.3B in realizations last 90 days. Private credit - they see significant opportunity but are being very selective to which deals they participate in. Its a very good time to be a lender when banks slow their lending, they become the preferred lender & set the terms. They are price makers folks. Once people get a feeling of inflation slowing down, more deals get done. Distress in public markets is where they are focused on new deals because prices and” the need” offer more attractive currently. I know of few companies and industries better set up for stable and continuous growth in earnings in a very unique market/economic period that very few investors have experience navigating. Tougher markets will just drive more inflows to firms that have an information and capital advantage. Dealflow-investors will pause, mark downs will happen, and then more capital gets deployed driving better returns in the future. Cannot emphasize enough - the strength of BX Brand allows them to do things few other firms cannot do. They have a history of creating new funds to take advantage of whatever dislocations happen. They have wonderful relationships with the worlds top investors which trust them with more and more investment dollars when they create new funds. 1978-1982, CPI average 9%, rental apartments grew strongly and new supply fell through the floor. BX saw around corners 3 years ago and started building a massive exposure to inflation-protected assets, now the will reap the benefits as inflation stays higher for longer than people think. If you have the capability to make loans across all categories when banks slow lending, you become a very important partner to the worlds top investors, including large insurance companies. BX has a very powerful origination engine at a very important time when incremental yield is wanted and needed. The past - equity and bond returns were somewhat easy and robust. In todays environment - protection of capital resonates and showing you can massively outperform public market comps always drive even more capital inflows but always with a slight lag as performance comparisons get completed. Expect BX to create new products to address new market opportunities. RIA channel BX penetration is still low and will gain traction. The worlds smartest and best performing investors hold 30%+ in private assets, you do not have to be as smart as Yale but you can certainly clone their investment approach. HNW in retail is just beginning to allocate to private assets, real assets, infrastructure, real estate, hedge funds, and private equity. There is a long way to go here and BX is the leading brand for Advisors. BX is much closer to the beginning of this private wealth journey & growth of assets than the end.

Style Factor Highlights

From a factor scoring perspective versus the other 199 brands in the brands index and/or R3000, here’s where Blackstone scores well as of July 21, 2022:

• 99% high margins versus peers and margin expansion

• 97% attractive dividend yield across Russell 3000 stocks

• 88% in 3 year revenue growth versus the R3000 stocks

• 88% in FCF Growth across the Russell 3000 stocks

1/28/22 Update

WOW is all I can say about Blackstone and it’s business trends. They reported earnings yesterday and analysts aren’t even close in their projections. I don’t think people understand what’s happening in asset management these days and what secular trends are in play. BX will continue to benefit from a global interest in diversifying traditional fixed income (that market is unbelievably massive), flows into alternatives (retail and institutional), and an interest in top performing strategies across thematics and secular growth opportunities. BX offers them all and is just beginning to serve all the demand in retail, which itself is a massive channel for assets. By the end of 2022, BX will manage over $1 trillion in assets, almost half of that will be permanent capital that will continue to compound due to performance returns and higher fee revenues. The flywheel is like nothing I have ever seen. We continue to believe there are few other companies that are better suited to manage peoples money which is why BX is a top 3 position. I still think theres 30%+ upside from here and long-term, the company should offer significant and stable revenues, earnings and dividends and growth of the dividend. Remember, these are high beta stocks so when the stock market gets clocked, these stocks get clocked even more but do not mistake weakness in the stock with weakness in their business, they are an asset raising, fee generating machine! BTFD

Summary

This company is where the smartest and most connected people go to work. Blackstone is likely involved in every strong opportunity all over the world. They have a pristine reputation, are exceptional capital allocators and always seem to benefit during any calamities that happen. He who has all the cash, wins! Massive dry powder to put to work when the ROI looks attractive and sits at the forefront of every major important secular theme around the world: real estate, storage & warehouse space, logistics, private equity, venture, infrastructure, housing, etc. Holding Blackstone in portfolios allows clients to get access to the smartest capital allocators around the world and for much less minimum than going direct as a wealthy individual.

Massive trend: the global bond market is about $128 trillion in assets and the yields and total returns will continue to be much less than everyone is used to. The volatility across traditional bonds will be higher than normal as well so pensions and retail advisors are just beginning their pivot to the Alts category. At the institutional level, this is whats happening to the Alts allocation broadly: The trustees also voted to increase riskier alternative investments, raising private-equity holdings to 13% from 8% and adding a 5% allocation to private debt. Investments in BX stock is like giving BX experts money to go around the globe and take advantage of dislocations and growth areas plus get a dividend. I love thematic investors, they are much better than broad based investors because they have a high conviction bias which jives with our approach across the brands strategy. BX team looks for important, high growth secular tailwind areas like: Migration of everything online, sustainability, life sciences, global travel and leisure post-covid, rise of the emerging market middle class, particularly in India, growth of alternatives in investing across retail and institutional, enormous housing buildout thats coming given supply/demand imbalance (remember they are partly to blame being one of the largest, if not THE largest single family home owners in America after taking advantage of the housing crisis in 08/09). To reiterate, traditional fixed income will have less return/higher VOL than ever before so the biggest tailwind I see is the slow but steady migration of a portion of retail and institutional fixed income and into assets with “best of times fixed income” returns and volatility profiles. Private equity, venture, opportunistic real estate, infrastructure and thematic opportunities across alts-equity and bond- seem unbelievably well positioned and have massive dry powder to deploy on dislocations. Im a buyer on all the dips that will come because these are the smartest guys/gals in the room