Good day, ladies and gentlemen and welcome to the Blackstone Third Quarter 2015 Investor Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session [Operator Instructions]. I would now like to turn the conference over to your host for today, Miss. Joan Solotar, Senior Managing Director, Head of Multi-Asset Investing and External Relations. Please proceed.

Terrific, thank you, jasmine. Good morning, everyone. Thanks for joining us today for Blackstone's third quarter 2015 conference call. I'm joined by Steve Schwarzman, Chairman and CEO, Tony James, President and Chief Operating Officer, Michael Chae, Our newly appointed Chief Financial Officer and Weston Tucker, Head of IR. So, earlier this morning we issued the press release and a slide presentation illustrating our results and that's available on our website and we expect to file the 10-Q due in the next few weeks. Sufficed to remind you that today's call may include forward-looking statements, which are uncertain and outside of the firm's control and may differ from actual results materially. We don't undertake any duty to update the forward-looking statements and for a discussion of some of the risk that could affect the firm's results, please see the Risk Factors section that’s in our 10-K. We will refer to non-GAAP measures and you will find the reconciliations for those on the press release. And I would like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in any Blackstone funds. This audiocast is copyrighted material of Blackstone and may not be duplicated, reproduced or rebroadcast without our consent. So, just a very quick recap, we reported Economic Net Income or ENI per unit of negative $0.35 for the third quarter due to the unrealized marks on our public holdings in private equity real estate and credits. And for the year-to-date period, we reported positive ENI of the $1.45 per unit. Distributable earnings were $692 million in the quarter or $0.58 per common unit that's up 7% from the prior year, as realization activity was strong and we will be paying a distribution of $0.49 per common unit that to unit holders of record as of October 26, 2015 that brings us to $2.90 paid over the past 12 months, which if you want to calculate it equates to a pretty compelling yield of 9% on the current stock price, which makes it actually one of the highest yields of any large companies in the world. And with that I'm going to turn it over to Steve and we’ll take questions after Steve and Michael’s speak and I just want to remind you to please keep it to one question on the first round, because we have a lot folks on the call. Steve.

Good morning and thanks for joining the call and thanks Joan. The third quarter as you know was a turbulent period for global markets, with sharp declines and heightened volatility in basically every publically traded asset class. Volatility in the U.S. stock market for example, reached its highest level in four years. Markets have moved as though the world is heading into a recession with the very least that the world is facing and enhanced risk of slowing growth. From our prospective, we do not see a recession, but we are seeing slowing in certain regions and sectors with some excess coming out of markets. Here in the United States with the dollar up 10% to 25% versus many other currencies around the world, we've effectively experienced the fed rate hike without actually having with. With that said, we are seeing lots of positive sign as well. Restricted building in real estate around the world we would supply often below demand. Housing in the U.S. is strong and expected to get stronger. Office leasing is good; the auto and tech sectors are healthy and low oil price too should be good for the consumer. In the lodging space, which has been one of the hardest hit sectors this year in terms of public market evaluations, revenue trends actually remain quite strong. With the industry RevPAR estimated at around 6% year-over-year, which certainly is not reflective of recessions and I find it's very surprising in terms of a public markets evaluation. Overall, we see good growth in the U.S. perhaps slowing a bit from 2014 levels. While Europe appears to have bottomed is growing slightly faster than we anticipated. Emerging markets, India is in very good shape growing at over 7%, while China is definitely slowing, but still growing faster than…

Thank you, Steve. Good morning to everyone. With respect to our financial results, performance and outlook, I would like to cover a three key areas. First, digging into our ENI results a bit more and putting in context. Second, highlighting key performance strength in the business and finally discussing the outlook for distributable earnings and the cash generating power of the business. So, first on ENI. The driver of the negative ENI result for the quarter was the decline in our public holdings and the associated unrealized performance fee reversals. As you know, unrealized performance fees and unrealized investment income are two of the key components of ENI. These unrealized metrics are driven by the change in markets between two days, the first day and the last day to quarter and our snapshot based upon that beginning and endpoint. As Steven mentioned, in the brief period since quarter end, our publics in both corporate private equity and real estate have depreciated over 7% as of yesterday's close and the effect of that is the largely reverse of the ENI decline in the third quarter, in the first two weeks of the fourth quarter. Now this is not to minimize ENI as a metrics, especially over longer measurement periods, but the step back and put it in context over the shorter term, particularly during volatile periods. We also want to highlight the effect of the BCP V catch-up, which amplifies the ENI impact of the markdown in our public positions. The substantial portion of the overall decline in the firm’s economic income came from the impact of the catch-up and BCP V, which declined 7% in the quarter due entirely to its publics, which now comprise about 59% of that funds value. The fund overall has performed very well, particularly given…

[Operator Instructions]

And Just a reminder, if you could keep it to one question on the first round, we're happy to answer all your questions.

And our first question comes from the line of Craig Siegenthaler with Credit Suisse. Please proceed.

Thanks. Good morning, everyone. I know this question may sound a little premature but how do you think about the capacity constraints on the individual investor hedge fund products especially given their fast ramp this year?

Craig, its Tony. There is obviously some capacity limitations to our individual hedged fund products, but we’re a long away from testing those right now. We set up that product with fidelity and because of exclusivity arrangements we sort of mimicked it actually, so we've shown we can replicate it already, so if anyone of those products runs out in capacity we can sort of recreate a look alike and I think we can scale that business quite substantially overtime.

Thank you.

And our next question comes from the line of Bill Katz with Citigroup. Please proceed.

Okay, thanks so much. I Appreciate all the color, Michael as well. Thank you. So there has been I think some uncertainty about what is going on with some of the sovereign wealth funds. I think this industry has been quite a big beneficiary of a lot of growth coming out of the sovereign wealth funds. Can you frame your exposure to some of the sovereign wealth funds, what you might be seeing in terms of any kind of liquidation or redemption pressure and more broadly what you are seeing in the institutional channel for incremental demand?

I think the Sovereign wealth fund group is divided into sort of two categories, one are the ones that are mostly affected typically by the oil business and the all else group is continuing to enter some are first time investors in our asset class and some of those funds would be very, very substantial to new investors and the assets classes. So it's sort of businesses as usual with that group and the other group of the energy oriented economies had mixed approaches as we've not nearly dealt with redemptions and things of that type, because what's also going on in that group as well as the non oil people is that they are increasing their allocations to alternatives and then within alternatives they are increasing their allocations to their best performing managers and we’re sort of it. And so we don’t experience a lot of problem, the biggest issue is with the oil oriented Sovereign is that some of them are not increasing their aggregate money in their funds, which means that for us to grow with them, we either have yet to take share, which is happening, but even some of them interestingly are significantly increasing their share of alternatives, because of the performance characteristics. So we're not really feeling the affect of anything particularly major, and in fact we are growing in that asset group.

And on other point, as you know, two thirds of the capital we have is locked up for life of asset or life of fund and we've just raised the flagship product. So on that two-thirds, the average life remaining is like nine years.

The other thing, I would mentioned is that in terms of taking more share in both of these categories, oil and non-oil sovereigns that were in case in a number of discussions which is quite interesting where they want to very significantly increased their exposure and they are talking about not multibillion dollar commitments to as appose to just commitments on single fund. So, it's quite an interesting area and an important area and a growing area for us, just the opposite of what the underlying assumption was I think of your question.

And I'll put one more fact in there. The most sophisticated investors in the U.S. really looking endowment have about 50% of their assets in alternatives. Both pensions have 20 to 25 sovereigns is still way behind that have a long way to go.

Okay. Thanks very much.

And your next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed.

Good morning, everybody. Thanks for taking the question. As a follow-up to the distribution discussion and the outlook there, understanding that it is obviously pretty difficult to predict with a lot of precision on what realizations will look like. But if we take a step back and think through just a more stressed capital markets scenario whether or not it is more difficult to exit the equity markets or via M&A transactions, which businesses do you expect to contribute the most in that scenario to your realized investment income and incentive income businesses just to help us again gauge what potential downside could be? Because the offside case is clearly could be quite significant but I think the market is just more concerned on the downside problem.

This is Steve. And we'll have an open discussion with Mike and Tony on this one, because it's an interesting question. I think the real estate sector will power on in that environment. The only difficulty that sector would have would be access to capital that would slow it down at the moment that does not appear to be happening, the leverage sector, the price and availability in some kind of mix affected certainly on the junk side less on bank debt. Real estate will continue and all probability quite strong because their exits are not typically through public offerings, they are through sales of individual properties or groups properties. And the supply demand characteristic in real estate in many, many places around the world is very good. So, what you would need to really negatively impact that is just literally - recession, huge number of sort of non-performing loans, generally so that banks wouldn’t be financing, capital market is sort of locked up and turned off and then the time for anybody to do business. The number of times that that's an area, what happens is quite well, which usually around I thought just to not study but just sort of do it by fields like once every ten years something like that happened, relatively brief period of time. So, I think, we've got a very good situation there if you're asking us what would be part of the business that would be least successful.

Even then, if you don't get over building in real estate then you're going to have a lot of values and so to get over building you have to have an extended good part of the cycle before you come to that otherwise and absolutely people will need more space and rents go up and you get to leverage on the operating income. So, even in higher interest rent environments in that scenario without over building real estate holds its value.

And I would just chime in on that in real estate and agreeing with Steve and Tony that there has been a bifurcation recently between the public market performance where there has been a pullback and the private cap rate environment the real estate assets which has remained very strong and we're in the market with some assets, we continue to see strong interest apparently unaffected by the public market turmoil. And as Steve alluded to and particularly in the real estate business, we can sort of buy wholesale and sell retail, we can buy big enterprises, but then sale individual assets in smaller chunks to those private buyers.

The other thing is if we get economic softness, we should have low rates and at some point even if you can exit the private equity company in the IPO market or into the M&A margin, then you have the advantage of recast where we can - as long as our company’s continue to perform which they are with the EBITDA of 9% this year that’s a great performance, I mean none of us lose hyper there. Those companies delever quickly in that and with growing EBITDA you can yourself some nice dividend. So the credit markets are certainly half of the equity markets in this whole sustaining distribution question. And meanwhile its definite, on private equity in the phase is obviously quite choppy markets from last few weeks. We did successfully executed three IPOs in the last three weeks. So that [indiscernible] markets they are not closed, they are opened from time-to-time for good companies and so.

Yes and that’s because performance of those companies was really terrific and people like to buy terrific things and if that’s what you have on order what the heck works out.

Yes, got it. Thanks so much for taking the time answering the questions.

And our next question comes from the line of Michael Cyprys with Morgan Stanley. Please proceed.

Thanks, good morning. So you have a greater skew to public holdings than you did just a couple of years ago and it seems to make your ENI a little bit more correlated to public markets than in the past. So I guess just more strategically, how are you thinking about balancing your portfolio exits from here? Do you want to be more skewed toward strategic sales as opposed to IPOs, perhaps reduce some of the volatility in your ENI? Separately, how do you balance some of the strategic exits, potential challenges whether it could be a larger portfolio sale which could be maybe more challenging to do or even some of the antitrust concerns that have come up with some strategic sales recently?

Mike let me just hit the first couple, its Michael Chae and nice talking to you, I'll hit the first couple of parts of your question. First one in terms of public component of our portfolios, I did allude to BCP5 which obviously is a quite mature fund at 59% public, but for real estate overall their portfolio the public component that is in the low 20% and for private equity overall it's about third and that’s obviously concentrated in BCP V. So when you step back that’s still the balance around it. And I would say certainly so something you alluded to, we don’t manage our exists to ENI, we’re patient and we manage our exists as we have for 30-years against what the right moment and how to optimize the outcome of our limited partners.

And let me chime in a couple of things too, number of times, when we go public we actually don’t exit very much. So it's important to keep that in mind and a lot of times once the company is public we can actually exist either with subsequent equity sales or as a strategic sale of the whole company, sometimes we go public and then sell the company. So as Michael says all we’re trying to do is exist in the best way at the best time for our limited partners and drive underling investments, underling investment returns that are actually realized. The mark-to-market return quarter-to-quarter we don’t worry about.

And actually this isn’t so hard, all right? You do what the market will give you, if you have a hard equity market you take companies public and you make money that way, if those markets aren’t so good you don’t worry about it, because our businesses typically don’t need the capital, we’ve got like almost an infinite ability to find these companies. And then you just sell them if the sale market is good and if not you recap them and you make money that way. So we just sort of go with the flow if you will.

Great. Thanks very much.

And our next question comes from the line of Brian Bedell with Deutsche Bank. Please proceed.

Good morning, thanks for taking my question. Maybe just to flip it around to deployment, obviously with the markets pulling back late in the third quarter, how are you feeling about that going into the fourth quarter? I know we have had some rebound here of course but maybe if you want to comment on some of the specific sectors particularly energy, also overseas and in real estate in terms of putting some of the $85 billion of dry powder to work in the near to intermediate term?

Yes. Well energy is a major area of focus both in our credit markets and - in our credit business and in our equity business. So that jumps to mind when you sit back and the world say where is there distress, where is their value and that’s clearly while there are certainly risks and certainly issues, I think we feel pretty comfortable that the energy is not going to be down here forever and so that there is a opportunity create value and capture value with the companies that can get through this. And energy is a subset of broader commodity, there are other commodity areas I would say the same thing about. Real estate, we are putting a lot of money to work in Europe still, there is still a lot of ability to buy it below replacement cost there, those markets - the capital markets of real estate has not really recovered. Here obviously we are trying to arbitrage the difference between fairly robust values asset-by-asset, but public REIT stock that have been hit with the market drops overall. So that’s created some values we’re focused on that obviously with two big transactions we have announced recently. I think we are also doing a lot of looking around sort of new build, building new stuff particularly power asset around the world, lot of world needs electric power whether that be traditional power plants or whether that be renewable and the infrastructure that goes to move gas, to move oil, to move electricity and all of that stuff we can build that - our money goes in and cost goes in and book value and as long as the underlying economics of the projects are good, we know we are going to get our return on that and its decoupled from market movements. So we got $85 billion and it sounds like a lot, but we are also putting to work a lot, I think we've put to work - I think we mentioned about 16.5 we have put to work in the last year - I'm sorry year-to-date and we've got another 10 that’s committed and not even drawn down yet, so just this year with just what we've got on the plate that’s already like $25 billion. So I think we will able to make some really good investments in here.

Yes, if I could chime in, as Tony mentioned that 10.7 or close to $11 billion are currently committed but undrawn, much of increase I think it’s a good a metric for the opportunity side improving. I would say for real estate and a credit business for last couple of months, there has been a tangible I would say shift in the deployment environment and a good one in terms of the ability to be opportunistic and find more opportunities for sure. And I think in Private equity these things tend to take a little while to season a little bit longer, but I can tell you my partner Joe Baratta is happy feet when he sees markets pullbacks from the prospect of being an investor. Market pullbacks we thinking and volatility are ultimately good for creating good private equity deals, it takes time, but I would say even in private equity or as well in private equity there are number of situations where some months ago we felt like we are priced out of the situation, but that now they are coming back in line as actionable opportunities.

Great that’s a great color. Thanks so much.

And our next question comes from the line of Glenn Schorr with Evercore ISI. Please proceed.

Hi thanks. This is Kaimon Chung for Glenn Schorr. Just want to get an update on the progress of core plus real estate. Also just wondering how long before core private equity rolls out? Can you run that just with your existing infrastructure and any color on that would help. Thanks.

Well Core Plus real estate we are about $8.5 billion, there is a lot of investments and there is a lot of transactions. We try to kind of balance those two things, we try to take in money when we've got our sites on money to put to works, so I think that will continue and grow steadily and well. Core private equity we’re really doing - we don’t need much new infrastructure at all and we’re kind of in the process of assembling capital for that we have a couple of transactions we’re looking at, but nothing we’re about to announce.

And our next question comes from the line of Dan Fannon with Jefferies. Please proceed.

Thanks could you guys update us with regards of BCP5 as to where we sit in the catch up period I think there is a gap between ENI and DE and just I assume they went opposite direction this quarter, but can you give us where you are at that as of the end of the quarter?

Yes Dan, it's Michael. I think in previous call we've used this par once of you know what percent where through catch up and I think in last call we talked about 84% on a unrealized and realized basis. That same metric would be about 73% today, but I think it maybe the simplest way to think about it frankly is about half of our BCP5 LPs by value are whole carry, including all the BCP, ACLP and about half of the catch up mode. And overtime with hopefully more appreciation more will go from the catch up walking into fully carry bucket. So I tend to think about it that ways as appose to what kind a percent through the catch up.

Great thank you.

And our next question comes from a line of Mike Carrier with Bank of America. Please proceed.

Thanks, everyone. Just had a question on both credit and energy and I hear your comments on the portfolio company and in terms of the outlook versus people worried about a recession. But I guess in both areas just given that they were under pressure during the quarter, if you can give an update in energy what your current - I don't if you look at it from a private equity standpoint things that you have invested maybe prior to 2013 versus the capital that is raised to be deployed or the opportunity to take advantage of the pressures. And then anything on the credit side and when I think about the private equity business like the average leverage or the maturity of the debt that is in these companies like how stable are they versus maybe past cycles? And then same thing on the credit side how much dry powder do you have available to take advantage of certain industries that might come under pressure? I know it is a long question but just a couple of areas that I feel like we keep getting questions on.

Michael do you want to start on that?

Sure. Look I think was the respect to energy certainly first from an opportunity standpoint both are second energy fund which was activated within the year and our new opportunities which we call [ESOC] (Ph) in GSO. Both I think show a great discipline by not deploying capital in that first half of the year where it turned out there was a bit of the false dawn in the sector. So between the two event, they stand with a combined something like $7.5 billion to $8 billion of new dry powder, just facing to that opportunity sets. I think from a exposure standpoint we feel good about it, our private equity fund as we've talked about in past calls we think did a nice job divesting assets particularly ones directly impacted by oil prices and today the exposure to companies directly affected by oil prices we think is manageable, it’s about a fifth of the portfolio, they have done a excellent job putting in hedging. I think importantly the vast majority of our investments in BEP are not highly levered, they are investments with little or no leverage going in and so compared to some of the more infamous large deals in the sector if you will in the past few years, it's that distinct difference. So and I think on the…

And they are still marked above cost.

That’s right and on the credit side, we obviously have different kinds of investments and exposures in energy and GSO, energy investments or private drawdown funds and then liquid investments or hedged funds in our BDC and certainly energy credit in terms of the industry’s overall has took a beating in the third quarter and so from a mark-to-market perspective that's going to impact to some degree some more portfolios, but overall I noted just when we showed in our investing strategy earlier in the year. We feel good about that and we feel good about our overall portfolio.

One thing just to mention I guess is that our first energy fund is despite just the collapse of the oil business is so up approximately 25% to 26%, this is not what you would call a national tragedy and there are many people who have gotten severely damaged in this sectors and we've done quite well.

Yes, just to clarify the 26% is the IRR it's actually 2.5 times multiple of money for investors so as Steve says they are happy.

It's pretty amazing right and I was at a conference yesterday with lot of LT's and the people have put money out in the first six months of this year, and it’s hard not to do that but our people put out really and is great disciplined, wow I mean people got crushed, it really got destroyed and part of what you do with our businesses is you don’t do things where you think there is real risk and I think will be well rewarded deploying our money at the right time.

Obviously we had in the credit side some investments in companies that had a lot of leverage that are suffering, I mean I don’t want say we've did flawless on this we haven’t and we've also taken some - in private equity we had a bigger write ups than we have today, so we've written some of the write ups down a little bit we’re still ahead of the curve, but we could definitely give them back some value on a temporary basis, but I think that the strength of the company and our conviction that as I say that this is not - today's spot prices are not long-term energy prices and I think if I'm right about that we wanted some very nice return for our investors and we've been very careful also in investing companies that are unlevered as Michael said or have plenty of liquidity to ride through the next couple of years to prove ourselves right, we are not making speculative bets that require quick bounces in energy prices.

And our next question comes from the line of Luke Montgomery with Bernstein Research. Please proceed.

Hi, thank you. So I think there is a tendency to view the accrued carry balances as a key indicator of where distributions are headed. It has declined about 25% in the last two quarters I think clearly a key driver of that has been BCP V and the catch-up. My question is whether you think the focus on that metric is appropriate and how concerned you think we ought to be about the trajectory of the balance and accrued carry as we are thinking through what our distributions could step down over the intermediate term? I think finally maybe an answer to the question would be approximately how much better might the balance look today versus at the end of the third quarter?

So Luke, it's Michael. in terms of the receivables, as you know when we have in the 8-K the vast majority of the decline quarter-over-quarter was from BCP V and BREP VI to break that down for you little bit, about a third of that decline was just from realizations, and of the remainder to your later question about half of that decline has now been on a mark-to-market basis been made up by the rally in the public from the last two weeks. So, without maybe directly entering your question about what I think of the deep meaning of this metric, because I think it isn’t into metric, maybe what I just described could give you a sense of how you have to put it in context

Okay. Thank you.

And our next question comes from the line of Michael Kim with Sandler O'Neill. Please proceed.

Hey guys good morning. Maybe more of a conceptual question just given the more recent underperformance of the stock and the alternative asset managers more broadly. Just curious if you are thinking on the PTP structure has evolved at all? And that related to that, any sense that the chatter around potential tax changes for publicly traded partnerships has maybe started to pick up a bit more these days?

I think it's a political season and there used to be 19 candidates on the Republican side and I guess I watched what was it four or five of them on Democratic side, everybody has got a point of view and you have to distinguishes yourself in the crowd and there are the lot of different ways to do it. One of the ways is obviously to look at different kinds of businesses, asset classes, tax approaches and so forth, and we see the same stuff that you see and we also see sort of a very complex congressional array and some people don’t want to do anything under any circumstances and some people who will do almost thing to anybody at any time. And so I think, we're just sort of like a cautious interested observers and I don't know that there is any way you could sort of handicap what's going on, it's very difficult. So, we'll see what happens, runs the gamut from overall tax reform which can take a whole variety of different things and to targeted things against our industry which some people in favor of and this is only been going on now for eight years. And so I think we just take an active watching posture on it. America has become unbelievably complicated place with a variety of different positions that some of which haven’t existed in model life time certainly and this is I don’t figure out what it wants to do and hopefully it will really do good tax reform thing, it’s very, very simple and treats people without enormous preferences and has very low rates and this is my personal view not a Blackstone's view and that would be great for society, I don't even know of anything like that’s even vaguely possible, I think it's a right thing to do, but geez with different people in Congress appose to this that and so forth so to tell.

Okay, fair enough. Thanks for taking my question.

And our next question comes from the line of Kenn Hill with Barclays. Please proceed.

Hi, everyone. So you have recently raised a significant amount of capital through some of the flagship funds like BCP VII, and BREP VIII. Do you anticipate any sort of step down after such a robust period that - and how do you think about fund-raising going forward in general? Are there any key funds you think in particular that are going to drive some inflows over to 2016?

Our fund raising is episodic. So, yes I mean, it's lumpy, those are the big funds and they all came in from the beginning of the year and it's going to be hard to keep that space. However, Core Plus real estate, we talked about has huge potential and we're just beginning on that. In addition, we've got a tremendous potential with different kinds of retail products that we're just beginning on. So, I think those are two big areas where you can see a lot of assets. In real estate, we're coming to the end of a couple of funds that are chunky funds. So Europe at some point will be in the market, we've got - and we've got other real estate fund. So, yes it’s not going to fall of cliff by any means, but it's going to be hard to equal the pace the first half of this year.

There is also the third real estate mezzanine loan that is going in the market later this year and the secondary [Technical Difficulty].

And there is other perpetual hedge fund product like the long only et cetera that are on the platforms.

Yes, I would enroll chiming in here that GSO or some of their major drawdown funds will have fund raisers over the next year or two. So and then stepping back I would say if one could sort of the time one’s life and business perfectly obviously we feel great about the timing of our flagship fund raisers for real estate and private equity and are excited to have that capital in this environment.

Yes and just to go back to Michael’s earlier comment if you recall, lot of that money hasn’t even been turned on so to speak from a fee perspective, so we’ve raised a large private equity fund, but it's not even in its investment period yet, so it's not in our fee earning AUM.

Thanks for taking the question, I appreciate all the color there.

And our next question comes from the line of Devin Ryan with JMP Securities. Please proceed.

Yes, thanks. Good morning. Just want to come back to the question on potential tax changes on carry interest. I think we are clear on where you guys stand, I know that you also prepare for a number of scenarios. So just in that scenario where distributions experience higher taxes, does that change your view on capital allocation and maybe make buying back stock become more attractive as an alternative? And then along the same theme, the stock has bounced around a bit here. It has recovered from the low but is there a price or point where you say there is just really no better opportunity than buying back your own stock?

Its Michael, we’re not continuously planning in that regard and I'm not sure in that scenario those are contingencies we would consider strategically. So what you're hearing it's just not something we’re focused on at this point for those kind of plans.

Let me jump in on this, we’re a business because we pay out all of our earnings, we don’t generate a lot of capital. We see as far as we can see we've got double-digit growth ahead of us in AUM and that’s going to require given the way we structure our funds, so our LPs want to see we have a skin on the game, it's going to require us to keep putting money though and those underlying properties, those underlying investments have very high returns. So the combination of the returns on the underlying capital and that carries and the fees and all that that is generated for the firm means that return on our money if it's key to raising more capital is extremely high. And we’re going to - our view is we’re going to keep, we’re going to need to husband our capital to keep supporting that growth. So I don’t see near-term buyers, I really don’t I mean if anything as you’ve seen over last few years we’ve raised additional external capitals for the debt markets. So I think that tells you kind of where we are, we’re not running out of growth, we have to grow them, it might be a different discussion.

And just to put it simply really on the first part of your question, we said it I think before and we say it every time and it's true which is we manage and run our business the way we always have which is to generate the highest turns of long-term for our LPs period. So whatever regulatory changes may come or other exogenous factors that won’t change it.

Got it. Thank you.

And our next question comes from the line of Eric Berg with RBC. Please proceed.

Thank you and good afternoon. [Technical Difficulty].

Hey Eric can you either dial back in.

I’ll answer the question. So the question was basically the public’s were down, what does it imply for the private mark. Do you want to take that one? And what is it imply about the performance of the underling portfolio. And I would say generally the underling portfolios are outperforming what you would see in the market and as you know we’re very careful about choosing sectors and companies. So we saw positive performance in both private equity and real estate and so the privates actually were up.

And our final question comes from the line of Bill Katz with Citigroup. Please proceed.

Thank you very much. I just want to come back to this notion of capital allocation because I think it is a sticking point on the sector. I think one of the issues for this group overall is relevancy relative to traditional managers. Steve, you have often compared yourself to Blackrock and they have a higher multiple than you and half the growth rate you did this quarter on quarter. So if I look at your stock price when you went public, it was 31 and you add back the dividends, you have compounded growth of the stock by about 3.5% and yet fundamentals it is hard to argue that you have out executed everybody. So how do you help the shareholders get comfort that this is a good stock at this point in time? Because the age-old question is do you invest in Blackstone funds or Blackstone the stock and what I hear you saying now is there is no interest in buyback. But why not? I just don't understand why you can't possibly lower the payout ratio. You're not getting credit for the carry anyway and then buy back some stock and maybe a little bit more forceful statement of confidence relative to some of your peers who do buy back a lot of stock in the traditional space. Convoluted question but I am curious.

Well one of the advantage is that the long only managers have is they don’t have invest one-time in what they do and so they can do anything they want with their cash flow. And if they want to buy in some stock at higher price look not so smatter, at a low price its looks smatter they can do that. What happens with our business, sometimes we have unbelievable opportunities when market go down. And for us to raise money we must invest large amount of money, alongside our limited partners and as the world get worst, they want you to put up more and more money because they think perhaps it’s not such a wonderful idea and that is most wonderful time to be investing and we can do nothing that inhibits that. And by the way when times are terrible we can't sell stock to replenish, we can’t even sometime go to banks because banks freak out and regulators freak out. And so just when we need money to grow and make great investments, you would have us be out of money and frankly that’s like doesn't work. If we are trying to service our customers, have great products, we have not just look at the world does it as today. We have to plan on all the different types of contingency and one of those contingencies is always being liquid, don’t run out of money, have amazing products and grow your business and we are a great example of that. All right? And the fact that people don’t still sort of buy into what we are doing - I think somebody say on this call we had a 9% yield, I guess that’s the bad idea. Why would we want to do that? Right that’s like…

And Bill this is just to correct something being a little picky here, but the return is actually a little higher than you alluded to. So we return over $10 in cash you also have include the TJT spin out which shareholders got and when do the compound growth rate from the IPO is actually closer to 5% that has to well below how the firm has grown asset, how a firm has grown earnings and we're triple the sized that we were at the time of the IPO and as Steve said the earnings power is meaningfully greater than that the market is giving us credit before. So we agree with your frustration, but the structure of the firm is that we get tax on the full amount of earnings regardless of what have still distribute and so retaining capital is just not as efficient for those receiving the distribution.

Okay appreciate the…

Also one other the thing I would say my own people around the table are telling me to say nothing, but we went public at a time of sort of very high evaluation, because it’s really the top of the cycle that’s somewhere between two and three weeks after we went public, there was a the start of like the most massive credit crisis that we've had since the depression. And it drove our stock down to $3.55. If you had bought at 355 you wouldn't have the same mediocre return you were talking about. And so we can't control what the market was like the day we went public, but we sure have control the growth of our business and what we've paid out and all of those types of things and so I think the analysis has a bit of a false premise, which is that we won't public at an absolute market peak and you are measuring a us off of that. I wish the multiples were all the same because then there will be the performance that will drive it that much higher, but multiples change and they change for almost all financials and our performance against all financials is actually I think quite good, but something happened to the overall market place and we're sort of we're out there right at the top. So I think if you want to measure against the top then you can generate numbers that are somewhat like you were saying, if we went public in a more normalized environment it would have been much different.

I would like - if you still can get into our funds I would love to happen.

[Technical Difficulty] but thank you.

Thanks William.

Thanks and thanks everyone and we are here of course this afternoon to answer any other questions that you have. Thanks for joining.

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. So you all have a great day.