Welcome to Blackstone's First Quarter 2015 Investor Conference Call. And now I'd like to hand the call over to Joan Solotar, Senior Managing Director, External Relations & Strategy.

Great. Thanks, Katrina. Good morning, everyone. Welcome to Blackstone's first quarter 2015 conference call. Joined today by Steve Schwarzman, Chairman, CEO; Tony James, President and Chief Operating Officer; Laurence Tosi, CFO; and Weston Tucker, Head of IR. Earlier this morning, we issued our press release and slide presentation illustrating results which is available on our website, and we will file our 10-Q in a few weeks. I'd like to remind you that the call include, may include forward-looking statements, which by their nature are uncertain and outside of the firm's control. Actual results may differ materially. After discussion of some of the risks that could affect the firm's results, please check the Risk Factors section of the 10-K. We don't undertake any duty to update any forward-looking statements, and we will refer to non-GAAP measures and for reconciliations, please see the press release. I'd also like to remind you that nothing on the call constitutes an offer to sell or solicitation of an offer to purchase any interest in any Blackstone funds. The audio cast is copyrighted material and may not be duplicated, reproduced or rebroadcast without consent. So very quick recap of the results. We reported Economic Net Income, or ENI of $1.37 per unit for the first quarter, that's our best ever and nearly double the prior year quarter, driven primarily by a sharp increase in performance fees. Distributable Earnings were $1.2 billion, that's $1.05 per common unit, that's also a record and up over 2.5x to $0.40 that we recorded in the prior year. So we’ll be paying a distribution of $0.89 per common unit, that's to unitholders of record as of April 27, 2015. And that's our largest quarterly distribution to date. And with that I'll turn it over to Steve.

Good morning. And thank you for joining our call. The first quarter was remarkable for Blackstone and our shareholders in all respects. As Joan mentioned, it was our most profitable quarter ever both in terms of Economic Net Income and Distributable Earnings. This follows a record set a year in 2014. Realizations continue to accelerate reaching a record $13.5 billion in just one quarter. Driving a distribution of $2.66 per share over the past 12 months equating to a yield of approximately 6.5% on our current stock price. We raised an astonishing $30 billion of new capital in the first quarter alone, which is substantially more than any of our alternative competitors have ever raised even in a full year, driving our AUM well past the $300 billion mark, and all signs point to 2015 being a very big year for us and our shareholders. You may ask and many of you have, how have we been able to build a company like Blackstone? And is this success is sustainable? Blackstone really has a very simple business model. We delivered roughly a 1,000 basis points above the stock market on average to our Limited Partners in our funds. When we do that over time and time again for 30 year period we create enormous excess returns for our investors. As a result, our limited partners have given us very large amounts of money over time to invest. And these amounts are accelerating. Our performance over 30 years is what sustains our success as a business. We designed the firm from the beginning with the idea that we would only expand it to new asset classes if there was a remarkable opportunity to take advantage of, a major paradigm shift in the markets. In addition, we would only enter this new…

Thank you, Steve. I think that sets a pretty high bar. At least I know if I get fired I have 10,000 people looking for my job. I can feel better. In the first quarter, Blackstone set record for assets, inflows, revenues earnings and distribution. Both for the quarter and the last 12 months again. First quarter ENI doubled to $1.6 billion, or $1.37 per unit on $2.5 billion in revenues. Distributable Earnings nearly tripled to a record $1.24 billion or $1.05 a unit as public and private market demand for Blackstone managed assets and companies remain strong and drove record realizations of $49 billion. As a result, realized performance fees and investment income were over $1 billion for the quarter and over $4 billion over the last year. By investing in assets in which we can intervene and actively manage, we've been able to generate above market returns across cycles. The central driver of our business is the growth in the companies we own and operate, or the hedge fund managers we invest with or the credits we buy. Those drivers are not short-term market cycle dependent. And when they grow and increase in value they compound. Our private equity companies are on average growing revenues 6% and EBITDA 9% which is 2x the revenue and 4x the EBITDA growth of the S&P. Similarly, our real estate portfolio fundamentals measured by occupancy, rate and earnings continue to strengthen and perform at the upper range of relevant market measures. Additionally, both private equity and real estate public holdings totaling $31 billion were up over 15% in the first quarter alone. That above market appreciation contributed to total returns for private equity and real estate which were both up over 20% over the last 12 months, nearly double the total return…

[Operator Instructions]

And just to remind if you can first round just ask one question because we have a long queue and then you can just come right back in. Thanks.

Your first question comes from the line of Michael Carrier representing BofA Merrill Lynch. Please proceed.

Thanks, guys. And may be the first question is just on the level of deployment activity and the opportunities you are seeing. I think the real estate has been very clear and evident in terms of what you guys are focused on. I guess just on the private equity side and then on the credit side. It sounds like you are doing more, you are up in credit. I just want to get a sense of given the environment where do you see some opportunities to still hit some of those returns and maybe in private equity shift more to the core product for lower returns but still attractive opportunities.

Hi, Mike. It's Tony. How are you doing? Well, private equity, we are seeing a lot of active deployment. And generally speaking values are high so if you live on buying public companies there is a lot of leverage, I think that's not a good place to be. But some of the things we are emphasizing are, first of all, we have a lot of or we are building a lot of assets where particularly in the power and energy area where we gets essentially by building our own assets, we are building assets with high teens, cash on cash return. We are getting in at book value and we exit them when they are flowing assets we can sell at much lower return - much lower cap rate and capital gain. We are also varying to a lot of consolidation. We get -- we buy a very good managed team, small company and then can roll up the industry in the roll up acquisition even if we pay a fairly full multiple but the platform company is small in the context of all other things we can roll up and by the time we exit our embedded cost in there is 5x or 6x EBITDA. I should note that the average EBITDA level in our private equity portfolio is only 4.5x today. These are not leveraged driven high price things. We are also buying growth companies that need capital to grow, and I think we are getting some pretty good values on that. Those prices haven't been run up as much as many other company by the availability of debt and low interest rates. And then finally we are doing a lot in especially finance area where the asset quality is high, but the financial crisis wiped out a lot of competitors. And frankly they went out of business not because they lost money on the asset side because they couldn't roll their liabilities. Well given capital to grow the customer need is still there, it has been a great place for us. So we are finding a lot of interest things to do. Putting a lot of money out and returns are as high as they've ever been. So that's private equity. Credit, lot of focus on energy obviously and they are very active, engaged a lot of energy stuff. You also mentioned Europe; the managing platform in Europe which is a new effort for us is going great guns. And so some of the back up in the credit market is there for a while, gave us some good mezz opportunities, so I think we are chugging along in that business as well.

Your next question comes from the line of Michael Kim representing Sandler O'Neill. Please proceed.

Hey, guys, good morning. Just coming back to sort of the realization ratio of about 70% on an LTM basis that LT that you mentioned which I think was up pretty meaningfully versus closer to 50% in 2014. So I know there is a lot of moving parts and assumptions beneath the surface but just wondering if you could may be talk a little bit about the sustainability of that ratio particularly as you mentioned a receivable sort of continues to grow.

So, Michael, the three year average on that conversion to use that word is 40 and you are correct in the last 12 months it is closer to 70%. I think it has been particularly active over the last couple of quarters in particular. So I don't know that it will stay at the 70% rate and I am not sure it needs to. It actually needs to be 45% to 50% to eclipse the distributable earnings in the last 12 months over the next 12 months. So the number may come down but the earnings may grow.

Your next question comes from the line of Dan Fannon representing Jefferies. Please proceed

Hi, thanks. $30 billion of AUM that came in this quarter and wondering how much of that came from the retail channel? And if you kind of expand upon the relationships that are happening beyond what was established with Fidelity within that set, I guess over year ago and then also just a mix of generically between kind of existing and new customers. You talked a lot about the re-up that's happening from some of your larger clients, I just wondering if you could give us some ballpark numbers as to the percentage of repeat customers within that, big AUM number.

So, Dan, maybe LT would take, LT, I will take the retail piece and maybe Tony will take the overall piece. So retail continues to both surprise us as well as to be a significant contributor. So it was about $2.5 billion, $2.6 billion in the first quarter came from different retail systems, one. Two, there is a couple of trends in there that are very positive which was in the systems that we have been in for long period of time. We are seeing individual financial advisors distribute Blackstone funds to a greater set of their clients. We are seeing a greater set of financial advisors invest so you got better penetration both within each advisor and then across it. And if you look at the list over the last six months, there are four, five distribution channels that we had not even tapped until that period. So it is a very strong story in all regards in the year is off to an important head start with that. With respect to my comments on the larger funds and I don't know Tony add this, was we are seeing some of our biggest clients and part of this is the fact that the demand exceeds the capacity are making more concentrated debts in our larger funds and we see that as our two flagship funds come through in real estate and private equity. And I think it is very encouraging sign. I would point out though that set of largest investors is some are the same and bigger than they were in the previous ones and some are new and they are quite significant. So we are seeing both the trends towards concentrated investment in Blackstone and the trend where very large scale investors are starting to coming. Our most recent funds are now down to about 60% to 65% North America, five years ago that was 85%, which means also we are seeing some really nice global growth.

Okay. So on the re-ups, I don't have exact number, Dan, but it is extremely high. It is -- and we are also getting a lot of cross fund investors. So increasingly investors take more and more of our products which is reflecting some of the same trends that LT was saying. So but there are very, very few investors in capital who are not re-upping today.

Less successor funds by 85% re-up rate and the cross fund investments are 65% to 70%.

The next question comes from the line of Patrick Davitt representing Autonomous. Please proceed.

They’ll get it at some point. Good morning, guys. Could you give a bit an update of where the ENI catch up is relative to the distributable earnings catch up on BCP V?

So the overall catch up on blended basis, Patrick, is 85%, on ENI basis you are close to 100% and on a DE basis you are about [60%] [ph]. So that gets the blended basis of 84%. So the way to look at that is going forward as we have appreciation the ENI, the firm will accrue 20% of the appreciation at BCP V but as distributions are down we will still be in the 80:20 catch up for the foreseeable future.

Your next question comes from the line of Brian Bedell representing Deutsche Bank. Please proceed.

Great. Good morning, guys. Maybe if you could talk a little bit about, a little bit more in detail about real estate for GE deal. Do you see other types of assets out there and then how does that influence your view on fund raising even after the big BC or BREP8 fund? And then maybe just comment on the continued success in core plus to $5 billion and where you think that can go in the intermediate term and just on the IRRs your underwriting goes for BREP8 and a core plus? Thanks.

Okay. So in real estate, we still a lot of activity. There is a lot of-- particularly in Europe we are extremely active. We are still seeing a lot of activity in Asia. And so those are undiminished. The US is, the GE was great but as Steve mentioned it overshadowed as multi billion our tech private of a REIT that we announced the same day that got no press at all because of the GE deal. We bought, which got $1.5 billion to buy the Sears Tower and that's going to be fantastic deal I think. So there is a plenty of big chunky stuff to do in the US as well. We don't think we are at a real estate peak. We think we are somewhere in mid cycle and there is good values to be add on the buy side and there is reasonable market to sell on the sale side. It's kind of right in balance and it is a great time. In terms of driving more fund raising though, our rate from core plus which I'll come to, these are episodic funds where you go out and raise them and it takes awhile to deploy them. So we are not going to raising that global fund for a while. Our Asian fund is ways to go. Our European fund got invested very quickly and we actually when did re-up or a top up and we come in through that very quickly. So we will be out in the market again fairly soon with the European Real Estate Fund. In terms of core plus, it is going great. We have recently closed some transactions. We've got sort of -- it is money we all take down till we have places to put it. And we have a backlog of interested investors. And we are working on a bunch of deals. Where do I think that can go? Well, Steve set that number already I think for us so.

I said when we started this business in 10 years; we had the $100 billion of AUM. One year into it, we are at five something, that's amazing for like just starting up. And I think now it is pretty bold type of an expectation but I think we are on track because the way business is grow it typically starts slower and more you do, the more investors you get, the more they give you and starting out in the five to six range year one gives me a good sense that we got a realistic shot of achieving what I think we can do. In life when you start businesses, you have to have an aspirational dream that everybody understands that's realistic, achievable but pushes and I think that's where we are with core plus. We are very happy as are the people investing with us because lovely notes and emails from them.

It has been remarkable. And maybe just the IRRs that you are targeting for BREP8 versus core plus?

Well BREP8 IRR are as same as our BREP fund, we shift for in the 20s and core plus was in the low teens.

Your next question comes from the line of Michael Cyprys representing Morgan Stanley. Please proceed

Hey, good morning, guys. Could you talk a little bit about the opportunity that you see within credit? It looks like you raised over $6 billion or so capital in the quarter, curious if you could just elaborate a little bit on a which product those went to and also could you share your latest views on how you see the direct lending opportunity opening in the US and Europe and how Blackstone is executing against that?

It's LT, I'll start it off Michael and so the inflows with respect to the quarter that you saw in credit were largely in-- they were really across the whole platform. We did have quite few in the CLO space, the BDC is continue to grow and then there were some separate account inflows as well. I think that so the story there is really balanced. And that's what has been taking hold for them for some time. They do have some new products that they are working on now which Tony referenced and you will see more that in the second quarter. But if you look at where they are year-over-year and their growth not only in the fee for earnings asset but also their inflows they are really well positioned to see good opportunities.

Yes. And I might just add a couple of things on that. Direct lending in Europe is off to a great start. And we have VDCs here, there are other parts of the world where we could do that and we are thinking about that. The SM as discussed supplement account that as LT mentioned for our primary focus on the energy opportunity and they have had a very successful energy sleeve so to speak to jump on the opportunities that have been creative. And then with GE cap, we are going through the reorganization is doing I think there will be some very interesting opportunities for its cohort for GSO and so we are getting geared up to kind of focus on that. And see what we can make up of it.

Your next question comes from the line of Bill Katz representing Citi. Please proceed

Okay, thanks very much. I guess multi part question, some unrelated. Keeping also sense of what's left on BCP V in terms of catch up, Steve, I will be curious what the response is to the new private equity fund that's in the market place that you mentioned it could be a second quarter event. And then stepping back, I know it is very fluid and early but what's your sense of the opportunity that may, may not come out of the proposal by the Department of Labor for maybe Blackstone in the sector at large.

Blackstone on what? Sorry.

For both Blackstone and sector in terms of alternatives into the retail channel given what it seems to be exclusion ill -liquid sets into the channel, so curious your thoughts.

We get reverse, may be I will answer the BCP V question and turn it over to Steve for the --

I mean LT is already answered it. We are 85% through the catch up so that's where we are on that.

I just kind of wanting that it is important to distinguish that there is unrealized and realized and the 85% are blend and on the unrealized basis pretty much through the catch up 98.5% and then with respect to the realization part they are only about 60% quite a moment ago.

Okay. On BCP VII, we have restrictions on what we can say. This were up, is it marketing and so we can't tell you how we are doing exactly but there is really terrific receptivity to private equity area and that area have been really excellent historically. And there is actually a very good response to Joe Bradda who is running that business which is terrific because one of the things that is important as firm goes forward is that you have a new generation of management and I get all kinds of like unsolicited positive things to actually show goes a business somebody, usually followed by some large amount of money which I guess is the best way to express your love and appreciation of someone in the finance business. So I think that all seems to be going well in that area.

Yes, I'll just add, we have a hard cap of $17.5 billion on that. As you know we've had a pattern of getting our hard cash so we are optimistic about this one. On the fiduciary duty clause which I think what you are referring to, I don't think that's going to affect us much. I think it will -- you can argue it will help us because -- in various ways because I think our performance and the return we gave will make us sort of easy choice and other choices a bit more difficult. But I don't, I haven't really studied the details of that so much. I think some of the things like some of those private client products with huge loads and things like that will be challenged. We will see how that all plays out.

I think longer term in the interest of the regulatory apparatus to provide access to retirement products are alterative asset in liquid products. Given the safety of products historically and the nature of our performance to deny people access to these products to somehow be protecting them. So that they can earn lower returns. So they don't have as much money to retire with. Strikes me as a very odd policy outcome and I would suspect at some point that will change because it is illogical for it not to change large part because most people don't have adequate money to retire. So I am hopeful that there will be change in that area though I can't predict when that will happen. But it so illogical to take the position that we are in now. The change should come at some point and when it does it sort of the leading brand name in our business with the kind of performance across the board that could be very, very good thing for the firm.

Your next question comes from the line of Devin Ryan representing JMP. Please proceed.

Hey, thanks, good morning. Question for me on the leverage lending market and volumes are down year-to-date. You are not sure how much of that is demand versus supply. But just curious if you are seeing any change in the timeline to organize financing and bring deals together in private equity just given some larger banks have been little less active in that market. And then if it is that if you are is that create opportunities for you just given your probably better cost of funding. I am just curious what you are seeing in that market right now.

There is definitely resistance to leverage over 6x EBITDA and that has increased I suppose. There are lenders you can go that are not subject to that but they are obviously they are narrower group. So in general we drive on capital structures to that sort of leverage level. Frankly, we don't like to be much above that leverage level anyway. So it is not much of an impediment. There aren't many businesses to justify more leverage than that on them. So I would say it is not so much more time. I think the banks in general are short, don't have enough opportunities to put attractive earning asset on the books. This is why you have them for example asking negative interest rates and asking giving back deposits and asking depositors to pay the bank and all these kind of strange stuff. So the appetite is there and I don't think the timing or the structuring of the deal or anything is really that impacted of it. But you are not going to see a -- you are going to see a big deals that require leverage of more than 6x will be slower and will be harder.

Even absolute leverage which I thought was part embedded in your question is lower just because with higher prices, private equity investors are typically more cautious which creates sort of fewer deals for the industry not necessarily for us in certain specialty cases. But for the industry which is just less business for the bank to prosecute.

Our last question comes from the line of Patrick Davitt representing Autonomous. Please proceed.

Hi, guys. Thanks for the follow up. I have a bar question, you had a pretty good relationship historically with the Chinese government and we are increasingly seeing some cracks in the data we are getting from there. I guess the question is broadly how concerned are you in terms of the direction of that economy and more specifically to Blackstone exposures that you already have in the current portfolio?

Okay. We don't have a lot of exposure as investors but the impact of China is that it is slowing, is just there for off and on for like two weeks and they talk about the new normal with great pride actually and what it means we are slowing down. Except publicly that their target is seven, they are very specific. They said around seven. So the reason they probably said around seven there is a good expectation it would be lower than seven. So they didn't want to hang themselves on seven. And they reported seven just in the first quarter. So what's happening is their export model is being challenged by their own prosperity. It is sort of an odd thing that when Xi Jinping took over he basically said I want to make my people more affluent, the average person more affluent. And to the extent that he achieved that having cheap labor to drive export, collapses on itself if you will. So they know they have to pivot their economy and move to a different, more mature model with more consumption in services and things of that type which is what they are in process of doing. That will be a complicated thing because China doesn't provide the way you might suspect in a sort of old age protection and medical protection that some of the developed world countries of course provide. So people have very high savings there like 40% plus. So they got to drag those savings out and put them into the economy which means they are now going to be putting in enhanced governmental safety net, so that's being designed. Actually that one of our old friends, finance minister Lou Jiwei in-charge of CIC. So they are building that at the same…

I would now like to turn the call back to Ms. Joan Solotar for any closing remarks.

Great. Thanks, everyone. And we are available for any follow up question.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.