Good day, ladies and gentlemen, and welcome to The Blackstone Fourth Quarter and Full Year 2016 Investor Call. My name is Mark and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Weston Tucker, Head of Investor Relations. Please proceed, sir.

Great. Thanks, Mark. And good morning and welcome to Blackstone's fourth quarter 2016 conference call. I'm joined today by Steve Schwarzman, Chairman and CEO; Tony James, President and Chief Operating Officer; Michael Chae, our Chief Financial Officer; and Joan Solotar, Head of Multi-Asset Investing as well as External Relations. Earlier this morning, we issued a press release and slide presentation of our results, which are available on our website. We expect to file our 10-K report later next month. I'd like 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 do not undertake any duty to update these statements. For a discussion of some of the risks that could affect the firm's results, please see the Risk Factors section of our 10-K. We will also refer to non-GAAP measures on this call and you'll find reconciliations in the press release on the Shareholders page of our website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. So a quick recap of our results. We reported GAAP net income of $770 million for the fourth quarter and $2.2 billion for the full year, up 95% and 38%, respectively, from the prior year comparable periods. Economic Net Income or ENI per unit was $0.68 for the fourth quarter and $2 for the full year both of which were up materially from the prior year periods due to greater appreciation across the funds. Distributable earnings per unit were $0.55 for the quarter and $1.78 for the full year. We declared a distribution of $0.47 per common unit to be paid to holders of record as of February 6 and that brings us to $1.52 paid out with respect to 2016. With that, I'll now turn the call over to Steve.

Good morning and thank you for joining our call. Blackstone closed 2016 with strong fourth quarter results, as Weston just mentioned, and powerful momentum heading into 2017. Fourth quarter revenues and Economic Net Income rose by 79% and 86%, respectively. For the full year, revenue reached $5.1 billion, while ENI rose to $2.4 billion, both up 11%, as compared to only slight earnings growth for the broader market. We generated full year cash earnings of $2.2 billion and continue to pay very healthy distributions to our unitholders. In fact, over the past three years, Blackstone has actually distributed over $8 billion in value to our unitholders, which is more than any other public firm in our industry, no one close. And we remain one of the highest yielding equity securities of any large company in the world. We've delivered these good results during what was a really unprecedented period for markets and active managers in particular. Last year, January marked the worst start to a year for equities in history. Then came the Brexit referendum and its subsequent violent fallout across many asset classes and then, of course, the unexpected U.S. presidential election. The fact that the S&P ended up 9.5% on the year with positive momentum and surging investment confidence, in fact the highest confidence level in 15 years, is really extraordinary. Needless to say, many active managers didn't participate in this 9.5% gain. Looking beyond markets, investors, businesses, governments and individuals around the world are trying to assess the scope and potential impacts of new U.S. policy in many areas, including tax reform, a variety of new trade initiatives, immigration issues, deregulation and debottlenecking across the board, healthcare changes, energy policy, infrastructure proposals and a more pro-growth posture towards our financial institutions. I've spent a great deal of…

Thanks, Steve, and good morning, everyone. Our fourth quarter results represented a strong finish to the year with positive trends in revenue, Economic Net Income, distributable earnings and AUM. We achieved positive sequential growth in every one of these metrics each quarter of 2016, with all reaching their best level of the year in the fourth quarter. And that momentum has clearly continued into 2017. Total ENI nearly doubled in the quarter to $812 million, our best performance in seven quarters, as performance fees and investment income surged in every business. ENI for the full year rose 11% to $2.4 billion, as Steve said. Fee-earning AUM rose 13% to a record $277 billion. Total AUM rose 9% to $367 billion, with every business up sequentially and year-over-year. We saw $17 billion of gross inflows in the quarter and $70 billion for the year, our second best year ever, despite not having our private equity or real estate flagship funds in the market in 2016. That brings us to nearly $220 billion of gross inflows for the past three years, entirely organic, which is more than the total size of any of our peers. Fee-related earnings for the full year rose 7% to exceed $1 billion, despite the spin of our Advisory business as well as the six month fee holiday for our $19 billion BCP VII fund. FRE margin expanded nearly 350 basis points to 40%, a firm record for an annual period, driven by several factors: the spin-off of the lower margin Advisory business, the strong incremental margins on our added AUM, and active management of our cost structure as reflected in our historically low fee comp ratio. In addition, we received a benefit to FRE in the fourth quarter from favorable FX effects in our treasury with the…

Your first question comes from Glenn Schorr from Evercore. Please proceed, sir.

Hi. Thanks very much. First, non-fund question. I'm curious for Steve. You chair the Strategic and Policy Forum for the new administration. I'm just curious on how that differs from your current role and how you chair the firm and where it takes you, how demanding on your time and what type of things you are advising on?

Well, actually, my wife has asked me the same question because you just pack more stuff in and you sleep less. And it's very interesting type of position to have because you touch a lot of people in the administration. And the whole administration is in a startup phase. And, as you know, most of the cabinet heads aren't even confirmed yet. So there is a startup element of it in terms of my role which is I'm not a member in the administration. I am chairing a committee. I'm like a full-time person of Blackstone that's getting sort of sucked into a lot of interesting things that are happening, because, as I said in my remarks, a lot of people around the world are sort of observing all these changes that seem to come out every day and are looking for some type of interpretation of what that means or might mean. And so that's created, I think, a short-term bubble for me to do a lot of stuff. But I don't think that that will continue at the same level for a sustained period of time once they stand up all the cabinet heads. We will have regular meetings with the President and supposed to be every month. And so that's a very interesting thing in a rapidly changing environment. But my full-time job is at Blackstone and I'm shoehorning all this other stuff in. And one other thing. I mean you have to recognize Blackstone is a really terrific place. And I'm just like one person. I happened to lead off this call but that's a little illusory. And at every place at the firm, led by Tony, it's really an extraordinary place. And I'm still reading every memo. I'm doing all that stuff. And eventually I'll go back to a more normal life.

I appreciate that. I can't wait to see what basketball player you compare the President to. Okay. So I heard the fee related earning guidance, but I'm curious on outlook for fundraising. You mentioned the second best fundraising ever despite having the flagship private equity and real estate funds not in the market. Could we just talk a little bit more on the outlook for fundraising? I know Strategic Partners just closed a new Asia-focused real estate fund, but I guess just looking for a little more color on how big and which – any of the flagship funds coming to market?

Glenn, it's Tony. I think it's a mistake to focus too much on the flagship funds. We have such a diverse pallet of funds right now, all of which are pretty big actually. Plus we have a lot of new initiatives in the pipeline. I think without any new initiatives it would be slightly less than in 2016, but still a very good year for fundraising. But it doesn't take too many of the new initiatives we're looking at to push this up to be a comparable year.

And of the core funds, how do we think about how often they open for new rounds? Like is that -

Generally speaking, if it was a drawdown fund, it's every three years to four years. But, increasingly, we've got funds that are open all the time taking in money every month.

So when you talk about – Glenn, it's Michael – core as in terms of Core+ real estate, that is basically always taking in money, as Tony said. Core private equity operates a little bit more like a classic drawdown fund in terms of episodic fundraising.

The last cleanup one is on core real estate. I think you mentioned in the past that $100 billion potential market. Your growth has been great. Is anything there we – anything there you've seen that would dissuade us from thinking the size of the market isn't as you described in the past?

I think Steve's goals are the same.

All right. Thanks very much.

Thanks, Tony.

Tony just spoke for me.

If we could just – I just want to remind everybody. We've got a pretty full queue. So if we could just on the first round limit it to one question and one follow-on just to make sure we get through everybody, that would be great.

Your next question comes from Craig Siegenthaler from Credit Suisse. Please proceed. Craig Siegenthaler - Credit Suisse Securities (USA) LLC Thanks. Good morning. The infrastructure segment could represent a very large profit opportunity for Blackstone and it's a logical extension of some of the teams and products you're managing now. I'm just wondering, are there any plans to raise funds in the infrastructure space and what are you working on there now?

Well, Craig, as you point out, it's a logical target and it's something we've been looking at for a while. And I'm not going to give you any idea of timing. But yes, there are plans to add funds in that space. Craig Siegenthaler - Credit Suisse Securities (USA) LLC Got it. And then just as my follow-up on retail, can you kind of circle back and remind us what you're doing across retail, how the liquid alt product is doing, any new products you've launched there because that's actually a big space you guys can tackle? That would be helpful.

Sure, Craig I'll take that. So, basically, the distribution systems that we're targeting have investable assets collectively of over $10 trillion. So I would say we're very early in penetrating those. Retail high net worth assets today are about 17% of the total and it's a mix of the liquid perpetual products as well as the drawdown. So if you were to segment it through the major wire houses, we really focus on QPs, qualified purchasers, who could really buy anything although we have daily liquidity product on those platforms as well. We're entering the independent broker-dealer channel which is just as large in assets, but there it's really more accredited investors, and going down to dollar one you'd have a mix that would be less drawdown and more perpetual offerings, if you will. And then we also have family office, et cetera, which is more of an institutional type sale. So I would say the mix partly depends on which funds Blackstone on the drawdown side happens to be offering in that year. But I think you'll see a growing number in the more liquid perpetual fund space as we're entering these new systems and developing more products. And then just finally, I think one of the most interesting things that we do is also weave together different funds that we already have to create bespoke solutions for these different channels. And I think you'll see more of that coming over the next 12 months. Craig Siegenthaler - Credit Suisse Securities (USA) LLC Thank you, Joan.

One thing I'd say, this is Steve, at the risk of prolonging this answer is that in life you have to have a dream. And one of the dreams is our desire and the market's need to have more access at retail to alternative asset products. As I said in my prepared remarks, if you look at those returns, those are really stunning. And at the moment, a lot of people are not allowed to put those into retirement vehicles and other types. One of the interesting issues when you have a new government is whether they want to continue that type of prohibition or not because what it's doing is denying people sort of a better retirement. And if there is a change in that area, that becomes a huge opportunity for the firm. We already have lots of white space that Joan was talking about. So we're not defective in terms of things to do every day to increase sort of penetration, but there is ability for something to get changed that could be really, really impactful. And we'll see what happens with that. Craig Siegenthaler - Credit Suisse Securities (USA) LLC Thank you, Steve.

Operator, next question, please?

Your next question comes from Devin Ryan from JMP Securities. Please proceed.

Thanks. Good morning, everyone. Maybe just one starting here on taxes. One of your peers had mentioned a 20% corporate tax rate and the 33% personal tax rate as a level that would meet the economics to them essentially a wash for converting to a C corp. And I'm just curious if you guys are looking at I'm sure examining what's happening in D.C. Are you thinking about levels where at least from an economic perspective it would seem to be a wash and just how you're kind of more broadly thinking about that topic right now given all the changes occurring?

Devin, it's Michael. Look, I'd say obviously no proposal has been put on the table around taxes. We're studying it and I think have a good positioning to understand how it will unfold. And we're going to be watch what happens. We'll be open-minded. We're not religious about a structure where you want to basically pursue a structure and have a structure that's in the best interest and maximizes value for our shareholders. So we go into this as students of what will happen and we'll see.

Got it. Okay. That's helpful. I figured I'd ask. And then with respect to the CLO business, five new CLOs in the quarter, some nice growth there, just curious what's driving that and just the outlook that just seemed a little bit elevated to me?

Well, actually, for GSO, as I mentioned, they've been the leader for almost half a decade. And that volume of I think nine issuances throughout the year and it picked up in the fourth quarter, I think, just reinforces their leadership position both in U.S. and Europe. And so we certainly see – we've had a long-term success record like 20 years almost our team in the CLO area. The returns have been terrific. The performance has been terrific. And it's actually we think been a good market opportunity for the economics of those vehicles. So I think it's really a reinforcement of momentum in that business for us has continued for a long time.

Great. Okay. Thanks, guys.

Thanks, Devin.

Your next question comes from Michael Cyprys from Morgan Stanley. Please proceed.

Hi. Good morning. Thanks for taking the question. Just curious if you could talk a little bit about where you're underwriting new investments today across your business, just in terms of return expectations, exit multiples, exit cap rates, and just how that's evolved over the past few months as the market has gotten a little bit more optimistic on growth and rising rates?

Okay. Well, we don't try to take current short-term markets overweight those in our exit multiples. So we tend to look in all of our businesses what's a normalized kind of exit multiple for a cap rate environment and financing environment for when we exit because we're in the illiquid business. So we make an investment now. We're having to guess what the conditions will be five years from now. And obviously there's always reversion to the mean. So, frankly, it doesn't change much with a quarter's good markets. And in terms of our basic returns, as I said before, they haven't changed much either. We have capital that we invest with the cycle. We won't sort of lower our returns because interest rates are down typically. We make it less active if there's not much to do and make more active when there is a lot to do, but we try to keep our returns pretty stable and deliver to our LPs results consistent with what we've delivered to them in the past across all the funds.

Okay. If I could just ask a little follow-up there just on that point, in terms of exit multiples or exit cap rates. Are you baking in any sort of expansion of cap rates or multiples on the back-end upon exit? How are you thinking about that as you're underwriting today?

Well, so with respect to cap rates in real estate, we've always baked in and continue to higher cap rates. And in this world with respect to multiples, we're baking in lower multiples on the private equity side as we have been.

Got it. So no change there. Okay. Super. Thank you.

Your next question comes from Alex Blostein from Goldman Sachs. Please proceed.

Hey, everybody. Good morning. Question around back to the tax situation, so lots of questions around interest expense deductibility. Wondering if you guys could either as you think about the change here, how would you I guess peg the probability of this making its way into the final sort of proposal. And I guess a broader – I understand there's a lot of moving pieces, but how do you guys think about that impact in the IRRs and the private equity and real estate businesses for you, if that were to happen?

I think – and Tony did a really good job with this on our earlier media call – that these proposals really can't be unbundled because the way they are being looked at in the Congress is an integrated approach whether it's order adjustable tax and lack of ability to deduct interest, but you get 100% write-off immediately on capital assets and you also get a much lower tax rate. So if you bake all these things together, net-net, it's a neutral to positive for the way we look at what we've heard would be considered. On the other hand, this is such a monumental set of changes from a tax perspective. And the way we look at the system this would be the biggest tax reform in certainly 75 years, maybe 100 years. So it all fits together and it's meant to fit together, not to just have take one piece out and say, well, this is unfavorable. You have to look at it all which is the way the people are putting the law together, are looking at it. On the other hand, you have to get a law passed and this is not the easiest lift with all these new concepts. And my guess is that you'll get it out of the House because it's got enormous momentum in the house, but then it has to go through the Senate, which is not nearly as up-to-date on what's going to be coming at them and then you have to go to confidence and make it work. So, it's a lot on the table, a lot that has to happen. But if the package, as people describe it, even though it hasn't been introduced, so it's basically backstage whispering, it gets through, then the stuff all really balances out for a firm like ours and may be a net positive depending upon where the corporate tax rate finishes.

Yeah. I might just add a couple of color, things for you to think about. For the typical private equity deal, often we get an asset step up, which gives us a higher tax basis, which we depreciate, which allows us actually to have a tax shelter anyway away from the interest for a while, number one. Number two, debt is still cheaper than equity. We're looking at equity returns pre-tax sort of 20%-ish growth. Debt is a lot cheaper than that, so there's still be ability to use your debt to capture that arbitrage. And number three, if some of the things going on are enacted into law, you could argue that other things being equal, interest rate should come down. It should come down because corporations will issue less debt. And yeah, there'll still be the demand on the part of investors for yield securities. And you could also argue that corporate debt will now be taxable at a much lower rate. So, it will be more appealing as an investment class. So, there's a lot of things playing through here that are hard to predict. But, as Steve said, as the way we look at the package of things that are being put on the table, collectively this is probably net beneficial for our portfolio to some degree.

Got it. Thanks for that answer. Quick follow-up for Michael around core+ real estate. I think you mentioned that some of that money becomes eligible for carry in Q4 of 2017. Can you guess – I guess just remind us based on the – I think you said $14 billion in total AUM in that product now, kind of how the stack works over the next couple years? How much becomes eligible for carry? And I think the carry feels almost like recurring because I think it's based on like the absolute yield level on the portfolio.

Yeah. Alex, the basic thing to keep in mind is that that carry feature begins on the third anniversary of when the capital was taken in from the investor. So, in the fourth quarter this year, that's when that first group of investors from what will then have been three years ago sort of eligible for that. And so what we'll follow is sort of a rolling thing where as the money has been raised over the last few years it will become eligible for that feature and it will smooth out over time. But it's – as we've talked about in the past, that's a very powerful feature of that fund for us.

Yeah. But I want to note. It is very much recurring. A, we don't have to sell the asset. It's done on a marked basis, so it's not as lumpy as the other kinds of DE you think about as just based on the mark. And B, since it's investor by investor and since we're taking investors in each quarter, you'll be getting this every quarter. And as the business matures and as it accumulates, it will become smoother and smoother and smoother. And so you'll expect – we view this as very much recurring income and it will be reflected in our recurring income.

Yep. Make sense. Thanks very much.

Your next question comes from William Katz from Citigroup. Please proceed.

Thanks for taking the question. This is Jack Keeler filling in for Bill. Just a quick question on Hedge Fund Solutions. Obviously you've seen strong growth and better returns than peers in the space but many – whether it's funds of funds or hedge funds themselves, there seems to be pressure as well as outflows. Can you just kind of comment on why you think that you're more resilient than they've been and how that might project going forward both for you and the industry at large?

Yeah. Okay, Jack. Well, first of all, we're using our scale to actually lower the fees that we pay to the underlying managers as much as we possibly can. I think we've been actually one of the leaders in that. Our goal of ideally what I'd love to do is have our volume discount because we're so much larger than anyone else in terms of allocating the hedge funds, sufficient to offset all of our fees. And maybe we'll get there. We're getting pretty close actually. I think that this is an asset class which there has been a lot of press about, Michael talked about. You've really got to break it down into different strategies. We're seeing no diminution whatsoever in investor appetite. As Michael said, we're still raising the same amount of money we have in the last few years. And so it's an asset class that will underperform in bull markets because it's hedged. And what investors get is they get less volatility. Less volatility means, of course, protection on the downside, but it also means you don't fully participate on the upside. So you'd expect this product to lag the kind of bull market certainly we've had in the last few months. But a lot of investors look at this market today and say they are pretty fully valued and how do they play equities through the cycle with less risk, how they protect against the downside that may be embedded with sort of the market prices where they are, this looks pretty good to them.

And if I could just add in terms of BAAM specific positioning, if you are looking to have a hedge fund piece in your portfolio, their performance relative to peers is really quite strong. And as investors have looked to reduce the number of managers not just in hedge funds, but frankly in a lot of asset classes, we continue to be a beneficiary of that. And so they've continued to gain quite a lot of market share.

Okay. Thanks for taking my question.

Thanks, Jack.

Your next question comes from Mike Carrier from Bank of America. Please proceed.

All right. Thanks a lot. Michael, maybe first question, just on the DE outlook. You guys have said in the past that over time you kind of expect a range of maybe $1 to $3 on the distribution side or the DE side. It seems like you gave some guidance on 1Q in things that have closed. FRE looks like it's set to continue to have some momentum, even ex the FX benefit this quarter. And then, I guess, when you think about the net accrued or the seasoned capital, given the outlook there, particularly if the capital markets are favorable, just wanted to get a sense of where are we maybe in this range, that $1 to $3 if the trends continue in your favor?

Thanks, Mike. A lot in that question. I can't quite talk you through our whole model as part of this answer. But, look, I think, first of all, the $1 to $3 range that you mentioned, we should put a fine point on that. The low-end of that range is basically anchored on sort of what's the FRE, right, which is under contract typically for a long, long time. And it's not really, I would say, a real world low end of what we think our DE will be in the absence of some period of time which is really, really unusual. So let me just anchor on that. That $1 is meant to be a really positive thing about one component of our DE that really is a great foundation for everything else that comes from it from realizations. I think in terms of how to think about the trajectory and outlook, I talked about how – if you look at the last few years of DE, what was obviously notable about 2016 was while we had pretty good growth realizations, actually even closer in line with 2015, the conversion, particularly in the corporate private equity area, because of the BCP V issue I mentioned, was lower. And I talked about why we think just mathematically in terms of the structure of funds, this is a year where we'll come out of that and that's a good thing. And then in terms of that realization pipeline, we feel good about it, but we'll see what the year brings. So there's good momentum. There's a lot of things you can look at about focusing on our sort of invested capital base and how it's seasoning. Our invested capital base on our drawdown funds has basically tripled in the last six years. And that's obviously – those are the seeds for and the crops for future harvest. Another thing to think about is we're sort of – even though some of these older funds like BCP V and perhaps VI have been the gift that keeps on giving and there is still more to go, there are – for example, the 2011 vintage funds, BCP VI, BREP VII, BEP I, which are really I think coming into their own as well, I think there is something like $33 billion of unrealized value in those funds. I think the average ownership period for that capital is like three years in terms of the unrealized amount. And you know how our business works. Three-year old investments on average are just coming into their own in terms of potential monetization events, IPOs which will set up subsequent years of harvest, et cetera. So, all those things come together and we feel very good about the outlook.

Yeah. That's helpful. And then just as a follow-up, you guys mentioned a lot on the policy changes, whether it's taxes, improving economic growth and what that means for the portfolio of companies. Just in terms of maybe fundraising opportunities with potential changes, like anything stick out? Tony, you've spent a ton of time on the retirement space, and what potentially could change or what the opportunity could be for you guys or for others in the industry?

Well, I think Steve hit on it in his comments. The really big, vast, vast untapped territory is the $27 trillion that's in 401(k)s that we don't sell – we, as an industry, don't sell anything into. So we – and I would say that severely penalizes 401(k) savers because they earn typically 2% to 3% on their money. There isn't a pension fund in America that hasn't earned more than 6% and their targets today are about 7% on average going forward. So you can see the cost, if you will, of forcing investors into short-term daily mark-to-market, daily liquidity, illiquid stuff (54:21). And if we could open up those pools of capital to our kind of investing, I can assure you that retiring Americans will be vastly better off, both short-term and long-term.

Okay. Thanks a lot.

Your next question comes from Brian Bedell from Deutsche Bank. Please proceed.

Great. Thanks very much. Maybe just to piggyback on that last question. It makes a ton of sense to be able to have longer-dated illiquid products and 401(k)s if restrictions were such that you wouldn't sell them. How do you think you would go about influencing that policy? I mean I guess do you think it's a chance that you can do that with the new administration?

Well, this has been a bit of crusade for me over the last 18 months. And we have a plan that all the details of which may not survive but one of the core premises of that is that people's retirement savings have to work harder for them. And the beauty of that is you're enhancing people's retirement security without taxing anyone higher, without creating new government welfare programs. And that capital, which is available, which is now available to be invested in the economy and things, longer-lived assets like infrastructure, will be good for economic growth as well. So we've obviously spent a lot – or I've spent a lot of time with both Republicans and Democrats on this. And I've got an awful lot of favorable reactions from both sides of the aisle. So I'm hopeful that we can make some progress on this with the new administration. And one of the things that Speaker Ryan has highlighted in his Better Way is that we need to come up with something, a plan, to help Americans' retirement security. As you might know, Speaker Ryan's A Better Way is a very detailed policy prescription, but on this issue he's highlighted the need without the policy. So we're hopeful that we can get in front of him and give him some thoughts that will help address the issue. And certainly investing better is the easiest, cheapest, most painless way to get that done.

Okay. That makes sense. And maybe just on the – while we're on the topic of the new administration, maybe, Steve and/or Tony, your view – you've been very patient in the energy arena with some of the changes that are beginning to happen with the new administration. How does this impact your view on energy deployment and I guess while we're at it, deployment outside the U.S. and maybe in the context of global trade?

Well, okay, it's obviously a more favorable environment in the U.S. for energy, exploration and transportation. That should pull costs down in the United States and encourage and barrier down and encourage development. So I think the way we that think this is playing out is you'll have more production although more production probably puts a lid on prices in the United States. So you probably saw it yesterday a spokesman from BP came out and said that we're never going to see $100 oil again because there's a lot more oil out in the world than we thought. And more of it's being produced both from technology advances, regulatory reform like in the United States but also big countries in the Middle East being able to produce and get on the global markets again. And their view is that over time demand tapers down, over a long time demand tapers down due to renewables and whatnot and changes in transportation technology. So that they think that's going to – that demand will mean that we don't have the kind of $100 oil that we had before. I'm not so sure about that myself. I know they're kind of – they've been saying that before. They're kind of a little bit out there on that and most industry observers wouldn't necessarily agree with them. But one thing that we do know is there's a lot of oil in unstable parts of the world and any geopolitical risk can cause a spike at any time. But I think the effects on energy of the new administration are net good for the U.S. energy industry.

And then on the deployment opportunities outside the U.S. with the viewpoint of new administration.

Well, we've been deploying capital outside the United States around the world. And I don't think we're looking at a terribly different picture there, frankly.

It depends what happens with all these changes and if the dollar gets a lot stronger and trade changes a bit to put pressure on individual companies outside the United States and also in individual countries, particularly have dollar borrowings. So there may be interesting valuation changes which can provide opportunities for our firm to buy businesses at different prices, which may end up going through an adjustment period, where if you're in at the right time that could be very interesting. So you have to look at the U.S. and then also non-U.S. as a function of some of these really big macro trends.

So you would choose to be a little more patient say in the near-term to intermediate-term to see how this shakes out?

Yeah. I don't have an answer for that today.

Okay. No worries. Thanks so much for all the color.

Thanks, Brian.

Your next question comes from the line of Gerry O'Hara. Please proceed.

Great. Thanks. Just a quick one on BCP VI as it sort of transitions into carry or above the preferred threshold. How should we think about the potential for catch-up management fees or performances fees I suppose going forward and the runway around that, I guess, for Michael?

Yeah. I mean it's – sort of this being back into cash carry it's sort of – think about as just stepping back into the shoes of sort of catch-up position we've been in for a while now. And so I think last quarter that stat we used being 64% through the catch-up. This quarter, we're something like 69%. We've talked about half of the LPs being in full carry, about half not. So that basic situation stays the same. There's not a structural change there.

Okay. Thank you. And can you just remind us the size of Europe V that's coming online I guess April 1, just trying to get a sense about kind of sizing base management fees with now that BCP VII is off holiday and Europe V, I guess, will be also coming off in 2017?

Yeah. Gerry, we've raised about US$7 billion for the fifth Europe fund and about US$5.5 billion or US$6 billion of that will be under fee holiday until April.

Okay. Great. Thanks for taking my questions.

Your next question comes from Chris Shutler from William Blair. Please proceed.

Hi, guys. Good afternoon. Just one quick one on the topic of new initiatives. You already talked about infrastructure which I know you're not putting a timeline on. But what other business segments should we expect to see some innovation from in the near-term? And is it fair to think the things that you're considering are more FRE-centric? Thanks.

Oh boy, I'd have to inventory that. But I would say let's define it by, A, investment category; B, target markets; C, structure. In target market, we see – that you'll see more from retail investors and some of the new segments that Joan talked about. And many of those will have more permanent capital structures. Some of them are always open but some of them will also be things where we actually don't really redeem. There are other ways investors can get exit – a BDC, for example, is a good example of that where people put in and then ultimately it's floated as a public entity and that keeps as AUM definitely. With respect to new categories, one of the other areas we're looking at is more growth-oriented investing, earlier stage stuff. I think we have some interesting ideas on that. We're not ready to come public with those yet but that's an area that we've been also studying for a couple years now and playing around. And then, just even businesses like our Strategic Products investment which started off with one private equity secondaries business, now has real estate secondaries, there's infrastructure secondaries. It's got a primaries business. It will be looking at emerging managers and some other things. So, in every one of our business, you'll see that kind of innovation and new categories growing, although from your sort of financial model of the firm's standpoint, it will be a while before they get big enough where you're talking about, $7 billion to $10 billion, to where you want to – you need to start changing your models.

Okay. Thanks, Tony.

I would now like to turn over to Weston Tucker for closing remarks.

Okay. Great. Thanks, everyone, for your time today. And I look forward to following up after the call.

Ladies and gentlemen, that conclude today's conference. Thank you for your participation. You may now disconnect. Have a great day.