Good day and welcome to the Blackstone Second Quarter 2020 Investor Call. My name is Joanne, and I'm your event manager. During the presentation, your lines will remain on listen-only. [Operator Instructions] I'd like to advise all parties, this conference is being recorded. And I'd like to hand over to Weston Tucker, Head of Investor Relations. Please proceed.

Great. Thanks, Joanne, and good morning everyone, and welcome to Blackstone's second quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO; Jon Gray, President and Chief Operating Officer; and Michael Chae, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-Q report early 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 results, please see the Risk Factors section of our 10-K and most recent 10-Q. We'll 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 audiocast is copyrighted material of Blackstone and may not be duplicated without consent. So a quick recap of our results. We reported GAAP net income for the quarter of $1.4 billion. Distributable earnings were $548 million or $0.43 per common share, and we declared a dividend of $0.38 per share to be paid to holders of record as of August 3. With that, I'll turn the call over to Steve.

Thanks, Weston, and good morning and thank you for joining our call. The second quarter saw an extremely strong rebound in virtually every liquid asset class from their March lows, as governments around the world implemented unprecedented fiscal and monetary stimulus to counter the economic impact of the COVID-19 pandemic. In the United States, fiscal support is equal to approximately 15% of GDP and will likely exceed 20% with the expected passage of a fourth bill by the end of the summer as we estimated for you on our April earnings call. In addition, the federal reserve has increased its balance sheets thus far by $3 trillion, supporting new credit and liquidity facilities with potentially trillions more at their discretion if needy. The global economy has started to reopen, but as we discussed previously, the road to recovery will be uneven with divergent trends across regions and sectors. Asia is clearly further along as is Europe, both of which were impacted by COVID-19 first. In the U.S., the economy was surprisingly strong in terms of employment gains in May and June with 7.5 million jobs added and a reduction in the unemployment rate from 14.7% to 11.1%. We've learned that people are anxious to reestablish their lives on a personal level and in terms of their work. However, with persistent or accelerating infection levels in many states, we're seeing some reversals of reopening plans, which will likely reduce the pace of future employment gains while no one knows the exact course of the U.S. economy. It is likely to be slower than anticipated over the next several months as a result. However, once infection levels subside, a stronger economic recovery should occur. On a positive note, a large number of vaccine candidates are in development with several demonstrating strong efficacy…

Thank you, Steve, and good morning, everyone. The power of our business model delivered again in the second quarter. We’ve been consistently emphasizing the foundational elements of this strategy over the last several years, which include a number of pillars. First, if we produce strong performance, our investors will allocate more capital to us, for both existing and new strategies. Over the past few years since our Investor Day, we’ve reported nearly $250 billion of inflows and launched several new businesses in the areas we outlined. Our momentum remained quite positive even during the most abrupt market correction in modern history, with $48 billion of inflows in the first half of the year, including over $20 billion in the second quarter, all while our LPs are operating with few people physically in their offices, a testament to the significant trust they place in us. Specifically in the secondaries area, we finished fundraising both SP’s new real estate and infrastructure funds, bringing AUM on that platform to nearly $40 billion, up over fourfold since we acquired it in 2013. Both funds were meaningfully larger than prior vintages, including nearly doubling the infrastructure strategy to $308 billion. Several weeks ago, SP acquired $1 billion of infrastructure secondary interest, which we believe is the largest ever transaction in the sector and a classic example of the advantages of Blackstone’s scale. We also raised additional capital for our fourth real estate debt fund in the quarter and post quarter end, bringing it to $7 billion, significantly larger than the prior fund. And in our corporate credit segment, inflows were nearly $7 billion in the quarter across multiple areas, including liquid strategies, direct lending and our fourth mezzanine fund. LP demand for credit products in this environment, coupled with the Blackstone franchise, have been a…

Thanks, Jon, and good morning, everyone. I’ll first review the firm’s financial results, highlighted by the continued robust growth in fee-related earnings. I’ll then discuss the key drivers of investment performance and the outlook. Starting with results. Fee-earning AUM continued on its trajectory of strong double-digit growth, up 12% year-over-year to a record $436 billion, with positive growth in every segment. Total AUM, which includes the impact of market appreciation or depreciation, rose 3% to $564 billion with $94 billion of gross inflows over the last 12 months, despite $35 billion of realizations. Management fees increased 16% year-over-year to $977 million, also a record on higher AUM and the onset of full fees for several new funds. Fee-related earnings rose a remarkable 28% to $541 million or $0.45 per share, powered by the growth in management fees and expanding margins. For the last 12 months, FRE rose to a record $2 billion or $1.67 per share of 27% year-over-year. Distributable earnings were $548 million for the second quarter or $0.43 per common share, strong growth in FRE was offset by decline in net realizations as the market environment muted activity levels. That said, positive returns across the firm drove a 24% sequential increase in the net accrued performance revenue receivable on the balance sheet to $2.7 billion. And at the same time, invested performance revenue eligible AUM grew to a record $249 billion, up 10% year-over-year. These are both important indicators of realization potential over time. Turning to investment performance. Steve and Jon highlighted the strong rebound in our fund returns in the second quarter, including double-digit appreciation and corporate private equity, Tac Ops and credit and a record quarter for BAAM. I'll provide more context. While the impact of COVID has been broad-based across the economy, there has been…

Thank you. Your question-and-answer session will now begin. [Operator Instructions] Thank you. And our first question today comes from the line of Craig Siegenthaler from Credit Suisse. Please proceed.

Thanks. Good morning, everyone. Just given the strong returns in your hedge fund business and also attractive yields available in the private debt markets today, relative to really low yields we're seeing in the public fixed income markets. What are your thoughts on the future migration to both the hedge fund segment, and also private credit and out of traditional fixed income?

Well, Craig, I think that's a very important question. Everybody naturally has been focused on the impacts of the dislocation in the short term and what it's meant for the economy. I think the longer-term impact is that we are in an extremely low interest rate environment everywhere in the world. And if you were a large pool of capital or even an individual investors, you are willing to trade some liquidity in order to generate higher yields. So the idea that folks will make choices to allocate more to private credit potentially as well to hedge funds. We think that makes a lot of sense. We think there will be more of a move towards private assets overall. That's what we've been seeing prior to this recent step down in rates. We expect to continue to see that. And that's what really underlies our businesses, mega trend and movement towards alternatives in private credits no exception.

Thank you, Jon.

Thank you. And our next question comes from the line of Adam Beatty of UBS. Please proceed, Adam.

Good morning and thank you for taking the question. Just wanted to ask about the outlook for FRE margin? Looks like a healthy expansion in the quarter and particularly well controlled FRE comp expense. So just wanting to know if there were any particular drivers in the quarter that we should be aware of and how we should think about that going forward? Thank you.

Thank you, Adam. It's Michael. So it's a good question. And just stepping back, I think, as we've said on prior calls, first of all, just in terms of the numbers. It's best to look at margins and expense growth we think over multiple quarters and really the full year as we do have a degree of entry or move in our expenses. But with that said, obviously, over the first half as well, margin is up significantly. The two key drivers of that that I would highlight are first and primarily basically strong operating leverage is with simply put revenues growing well in excess of expenses. And particularly in our Real Estate segment, where you can see fee revenues are up over 40% and fee compensation is up 11%. So that really is the first headline. And then second, similar to other companies, we are seeing some margin benefit from lower discretionary expense such as T&E related to the current period in COVID, which is more of a temporary impact. But overall, we feel confident, as we said before, in our ability to drive operating leverage across the firm, I think this quarter has shown that and we're certainly pleased with the results.

Great. Thank you, Michael. I appreciate it.

Thank you, Adam. Our next question comes from the line of Chris Harris with Wells Fargo. Please proceed, Chris.

Thanks. Question on BREIT, guessing the fundraising there may have slowed down a bit in the quarter. But are you starting to see a fundraising recovery and related to that, how has the investor performance at BREIT holding up? It sounds like it's holding up quite well, but a little bit more color there would be appreciated.

Sure. So you're right in terms of what happened in BREIT this year. We started in the year with a lot of momentum on fundraising. When we had the crisis, we saw retail investors pull back like all investors, but I think retail a little more and we saw a sharp slowdown in fundraising activity. We begun to rebuild and we're starting to see more positive momentum. What really will drive BREIT over time gets to your point, which is really about performance? So yes, this year we're right now, I think sitting at negative 3% year-to-date, which is pretty strong relative to other real estate indices, but inception to-date, a 7% net IRR, which also has greatly outperformed. But looking forward, back to Steve's comment, 90% of that portfolio in logistics, rental housing and net lease assets positions it very well. So our confidence in BREIT is high. We think investors as they see the performance even in this challenged economic climate, we will start to return in a meaningful way. So BREIT, we think will continue to be a real engine for the firm over time.

Thank you, Craig. Our next question comes from the line of Glenn Schorr with Evercore ISI. Please proceed.

Hi, thanks very much. I wanted to see if you could get a quick comment about your insurance business and what you're seeing in the space? It looks like a lot of your largest peers have made periodic moves. Everybody has got a big platform. It's a huge wide open canvas. I heard your comments loud and clear on rates and the credit opportunity, but maybe you could just talk about your insurance franchise specifically that would be great.

Sure. So as background, we have $62 billion of assets from that sector today. We strengthened our relationship with our largest client fidelity and guarantee in connection with their merger with FNF. We have a terrific leader of our business in [indiscernible], and we're looking at a range of opportunities. There is an enormous amount of assets in this space and low interest rates make it a challenging investment environment. As a platform we think we have fairly unique origination capabilities in both corporate and real estate and other areas of credit. And we think that positions us quite well to serve a range of insurance clients. We're spending a lot of time here and I would just say stay tuned.

Okay, thanks.

Thank you. Our next question comes from the line of Michael Cyprys from Morgan Stanley. Please proceed.

Hey, good morning. Thanks for taking the question. I'd just be curious to hear your perspective on what, if any, or what sort of lessons learned do you take away from the past couple of months with this crisis and how that informs your decision making process, and maybe in what ways does it impact or alter your strategy in any way or approach to execution?

Well, I think, one thing it reminds us is sort of expect the unexpected. It's hard to anticipate a global pandemic that shuts down the economy, but you want to run your business in a very disciplined way as an investor. So make sure you have structures that allow you to hold assets, long-term capital commitments, debt structures that give you time. All of that is more important than ever. And we've seen over the last 20 years things happen. This is obviously the largest single event, but it was a strong reminder. And then the recovery here we've seen in markets quickly shows you again the importance of that staying power because assets can recover. I think the other important lesson in my mind is the transformation that's been happening in the global economy driven by technology, which we have been talking about here on these calls the last couple of years in terms of how we position the business, where we invest that continues to gain momentum and the crisis has clearly accelerated that. And so sort of betting against those trends has not been a good decision. We've been fortunate. Michael highlighted in this in his commentary around real estate and other areas of the firm that exposure to those areas, faster growing areas has made a difference. And we talk about, Steve talks about the importance of good neighborhoods, investing in good neighborhoods. This crisis reaffirmed that, that investing in the right sectors really has been the difference maker. I think that's reaffirmed overall. So big takeaway. You've got to have a real fortress in terms of how you run your business. That's certainly how we run Blackstone overall. And you've got to be mindful of the transformation that's taking place. Those were both key takeaways, I think from the COVID crisis.

I might just build on that Mike that from a internal and operational standpoint, we like other businesses have talked a lot about how relatively well it's worked sort of remotely, but the reason why it's worked so well remotely for us and quite seamlessly is because of 35 years of building culture in a very integrated firm and so forth. So we didn't miss a beat when we had to go remote. So that's been a critical thing and sort of we've benefited from that history as well as benefiting from 35 years of building relationships and trust and a brand and a franchise with our clients, which has allowed us to seamlessly continue to obviously raise capital and continue to win the trust of clients in this – even in this environment.

Yes, I – we're doing a pile on, Mike, on this thing, but it's an important question. And this is Steve. And one thing we've also learned through the crisis is the reemphasis on outstanding management because in a time where there are winners and losers and enormous dislocation, the managers who were tens, on a scale of ten, we'll find a way to be in the right place at the right time with the right emphasis, the right capital allocation. And it's hard to micromanage everybody's behavior from afar, if you will. And if the right people are in the right seats, you can get enormous like good outcomes and fragility in a way of certain business models. And it's not related to us in particular, but it’s more apparent than it was and the needs to manage change are much greater. And I think that's really been drilled into the organization, observationally. And also we've learned that different parts of our organization can uniquely help other parts of the business and that we even can combine certain functions, not just to do it more effectively, but to add enormous value by doing that. And so, I think, we've all found that these types of periods lead to different type of refocus, if you will and the potential for value adds in our different business. So what I would say is, as strong as Blackstone is that that we will be stronger coming out of this in terms of lessons we've learned and how we apply them for growth and performance in the future. Great question.

Thank you.

Thank you. Our next question comes from the line of Bill Katz with Citigroup. Please proceed. You’re live in the call, Bill.

Okay. Thank you very much for taking the questions. Good morning, everybody. Just a clarification on the bigger picture question. On the comp expense, is that a good run rate? I didn't quite hear what you said on that. And the bigger picture is just as you think about the private equity opportunity in retail, just given some of the department of labor rulings. How quickly do you think that that could potentially kick in? And how do you think about the economic opportunity associated with those volumes? Thank you.

Hi, Bill. It’s Michael. First on comp expense, I started by talking about don't look at one quarter, look at sort of overtime and really the balance of a year. So notwithstanding what the growth rates were in the first quarter, first half, I would also sort of point you to the LTM, for example, where else the LTM comp expense basically grew at something like 11% over the prior LTM period. So I think that's closer to sort of certainly a very near term expectation on that.

So on the 401(k) I'd say Bill, this is a very interesting opportunity for us and our industry going forward. There are obviously retirement savings challenges for Americans. And we think this decision by the DOL was a step in the right direction, for sure, because of the strong performance of alternatives. And the size it could be in the multiple hundred billion dollars for the industry in terms of additional assets. We, as the market leader, we think would get a healthy, reasonable share of that based on our performance, our track record and brand. But I want to qualify this by saying, we think it's a long journey because there are intermediaries, there's a system that's in place and we have to work with folks over time to get them to move in this direction. So we see it as a real opportunity, but something that will take time to emerge.

Thank you.

Thank you. Our next question comes from the line of Ken Worthington with JPMorgan. Please proceed.

Hi, good morning. I was hoping you could speak more about your outlook for dislocation based investment opportunities. So you mentioned the $11 billion put to work in public market opportunities brought about by COVID. What is the outlook for dislocated driven investment opportunities as we look at over the next 12 months and the potential to see accelerated deployment of your record dry powder? And maybe is your thoughts that the best of COVID-driven opportunities are in the past, or is the better opportunities still out there in the future?

So I bifurcate that answer. I think in the public markets, there was that brief window which proved to be attractive and we were fortunate to take advantage of it and move a significant amount of capital. And depending what happens on markets, that seems less likely, I think, to see that kind of dislocation again in the near term, particularly given the fiscal and monetary policies that have been put in place. In the private markets it takes more time. So a company that has limited capital will obviously utilize that capital to get through a difficult period of time. And at some point they may hit the proverbial wall. If you have real estate assets, a foreclosure process takes time. So I think as you think about more distressed opportunities in the private markets, those are ahead of us. In the public markets it's always hard to predict, but I think the serious levels of market decline doesn't – I would not predict that. So I think that we may see less of it, although there may be industries that come under more pressure, particularly if the virus persists. But I think the real opportunity still lies ahead of us in the private space.

Thank you.

Thank you. Our next question comes from the line of Alex Blostein from Goldman Sachs. Please proceed.

Hi, good morning, everyone. I was hoping to follow back – follow-up on some of the comments you guys made around real estate. And Michael thanks for incremental disclosure there with respect to exposures. But as you thinking about the current dry powder within real estate today how much of that do you expect to support sort of existing assets? How are you thinking about the path to recovery in real estate? And Jon to the last question I didn't hear you talk much about opportunities specifically within real estate and I imagine there could be some meaningful dislocations there as well. So maybe address that as well. Thanks.

Okay, so I would start in terms of protecting the portfolio. I would see that is generally a pretty small percentage of the dry powder we have. Given that we have, as Michael described, just 13% of our assets in hotel and retail and some of those are in better position, we don't have a large number of what we think of as deeply troubled assets. There are some additional assets in other sectors. But overall as a percentage of our holdings, it's relatively small, so we don't expect a lot of dry powder going in that direction. In terms of the path of recovery, what I'd say about real estate is we have this very wide dispersion in terms of performance, post-COVID. So we talked about logistics, and life science offices, garden apartments, all recovering, we're seeing places like China, where there's a faster recovery economically. And so we're seeing areas that have had strengths. Then we talked about hotel and retail, where you have significant headwinds. To give you a sense, collections for us in office, apartment and logistics are running 95% of typical levels. Retail, that number is more like 50% or 60%. So that gives you a sense of the challenges in the retail sector. Office, I would say is probably somewhere in the middle, we talked about our portfolio having more exposure to places like European office, continental European office, or Indian IT parks, life science office. And even in the U.S. more west coast sort of content technology oriented. We do have some exposures as Michael outlined in places like New York, and Washington D.C. and Chicago, but it's a very small percentage of our overall portfolio. I would expect in urban markets in the U.S. that this is going to be a challenging couple year period, because you've got people working remotely today, you have high unemployment, companies are going to be resistant to making long-term commitments, and that's going to put pressure in the near term. Over time we think people will return to office buildings. It's very hard to run businesses remotely. We think there will be less density. There's certainly going to be a lot less new construction, and we think there'll be a return. But turning to the investment opportunity, what that means is if you fundamentally believe this is more cyclical in nature, as we do in categories like office or in hotels, then you should have a good opportunity to deploy capital in retail enclosed malls, where we think the challenge is more secular, then we're going to be more hesitant in putting out capital.

Thank you. Our next question comes from the line of Rob Lee with KBW. Please proceed Rob.

Thank you. Good morning everyone. Hope everybody is doing well.

Hi, Rob. How are you doing?

Thank you. I guess my question is maybe a difficult one and a little more political, but maybe we have kind of in addition to all the pandemic difficulties out there, obviously it’s an election year, a lot of uncertainty and certain members of certainly one party or openly hospitals to the industry. So how do you incorporate that into your investment processes? And maybe that's more of a U.S.-centric thing, but how is that backdrop, playing into how you are thinking of capital deployment or willingness to deploy capital into certain types of strategies for our business?

Well, I guess I'd step back and say our business has been deploying capital now for 35 years. And we’ve done it in all different political environments. We’ve done it in all red, all blue, divided government, and we’ve managed to get through it and grow through all those different political cycles. I also think it’s really important to keep in mind that our clients, who are primarily pension funds, believe we provide a vital service to them. And we agree with them and that’s why they continue to allocate capital. And we’re really an important component in terms of providing retirement security to many Americans and many folks around the world. We believe, regardless of the political environment, we can continue to grow our business and serve our clients. I do think that given the fiscal shortfalls that exists, if the city state in federal level, higher taxes are – seem increasingly like a likelihood, and that’s something we’re thinking about as we deploy capital. But these things are always fluid. It’s hard to predict what’s going to come, but we feel good about our position and the importance of the role our firm place.

Thank you. Appreciate the color. Thanks.

Thanks. Our next question comes from Michael Carrier from Bank of America. Please proceed Michael.

Hi, good morning. Thanks for taking the question. You guys provided some good color on the real estate portfolio. And I may have missed it, but just was curious if you can provide some of the similar metrics on the private equity portfolio, whether it’s in terms of revenue or EBITDA trends and sector exposures, particularly just given that we’re seeing some nuances between the private universe, the public markets? Thanks.

So what I would say about the private equity portfolio is similar to real estate, as we’ve had this heavy orientation recently in faster-growing industries, which have held up quite well. And we believe about 70% of our portfolio is in what we call COVID resilient sectors. But big holdings like Refinitiv, investments like MagicLab, Blue Yonder, Vungle, what we’ve done in some of the faster-growing Asian markets, we feel quite good about those. Ultimate, Kronos, similarly, that’s been really important. And as a result, when you look at our overall private equity portfolio in the quarter, revenues were basically flat in the quarter and EBITDA was down fairly modestly, which was better than we certainly would have anticipated 90 days ago.

Got it, thanks.

Thank you, Michael. Our next question comes from the line of Jerry O’Hara with Jefferies. Please proceed. Jerry O’Hara: Great, thanks. Perhaps a slight pivot on an earlier question. But I think on the prior call, Jon, you may have mentioned that asset trades regular way. I think private equity could take up to a year setting experience from the GFC, so curious if anything would perhaps lead you to believe differently at this point? Or is there still sort of that 9 months to 12 months runway before activity picks up, beyond sort of the distressed situations cited earlier? And I guess on a related note, are there any particular follow through risks that you’re kind of watching for or see that could prolong that return to regular weight transactions? Thank you.

Yes. I think the – when you think about deployment and transaction activity, a backdrop of high uncertainty makes it harder to do control transactions, not necessarily on our side as the investor, but if you think about sellers. So given the resurgence of the virus in the United States, that, I think, has made some sellers a little more cautious. Now in those sectors that are not COVID impacted or have been positively impacted more life sciences, growth equity, technology-oriented deals, we’re still seeing reasonable transaction volumes. But in a lot of the sort of traditional economy, people are a little more cautious. I would expect that to continue as it relates to larger size control deals. We would be more than willing, and we’ve shown a willingness to deploy capital even into the most impacted areas. But there tends to be a little more resistance to that, as people want to sell into a little bit of a healthier market. And so I would say, I think certain sectors will remain active. It will take time. It’s hard to say exactly how long. But if you look at M&A volumes, I think they’re down since the crisis, about 50%, which is an indication of what’s happening and most of that is concentrated in those healthier sectors. So at some point here, businesses will transact. Opportunities will emerge. And the great thing about our model is we can be patient if necessary. And then when the opportunities emerge, we can move very, very quickly. And having that $156 billion of dry powder is very helpful.

Thank you, Jerry. Our next question comes from the line of Chris Kotowski from Oppenheimer. Please proceed.

Yes. Good morning. Thank you. I guess, kicking off on the political football question.

Hi Chris, it sounds like we lost your volume there. Can you still hear us? Joanne, why don’t we go back to the next question, and Chris can reprompt if he’s able to get a connection again.

Thank you. Our next question comes from the line of Chris Shutler from William Blair. Please proceed, thank you.

Hi guys, good morning. Curious to understand how your approach to valuing assets is changing in this environment, particularly in light of zero interest rates and the potential for those rates to remain very low for some time, as indicated by the 10-year. And we all understand the sensitivity of DCF models to the discount rate. So just curious to get your thoughts there.

Well, with respect to valuing our existing portfolios, first to value new investments. Look, our approach remains the same in terms of our process. It remained the same in the first quarter at a very challenging dynamic time in March, and it certainly remains the same now. And in terms of the rate environment, obviously, in the context of, say, a DCF that is generally expressed or impounded in discount rates and indirectly on a second order basis on exit multiple assumptions, which we look at based on historical levels, in a way that has the outcome of being quite conservative, which you’ve seen in terms of the values we have achieved upon exits versus where we carried assets on an unaffected basis, which generally has implied a meaningful discount. So we’ve been through a lot of different rate environments over 35 years. And every quarter, we value our assets. And as rates fluctuate, again, those are translated through into our discount rates. Our cost of debt is part of that, that's embedded in that and also in exit multiples.

And I would just say, in terms of new investments, we have not started expanding exit multiples based on the low rate environment, but it is an interesting question when you get to more stable infrastructure, real estate, resilient corporate businesses. As we've seen in the stock market, it is possible that there will be a re-rating hire for those businesses. And so we have not adopted that in our models, but it's obviously something we're looking at in terms of the market environment.

Great, thank you.

Thank you, Chris. Our next question comes from the line of Devin Ryan with JMP Securities. Please proceed.

Great. Thanks for taking the question. Just a follow-up on some of the realization commentary. And I guess the question really is that it sounds like some sales processes have started back up in certain areas and obviously, valuations in certain areas have recovered quite a bit. I'm curious how critical the ability to meet in person is to sell an asset, meaning, we really need a broader economic reopening for M&A to really come back here? M&A historically has been a business where people want to see and touch an asset or meet with management or employees in person. So I'm just trying to think about that? And on the other side, I'm assuming that the processes today are virtual, just given that dynamic. And so we've seen record equity capital raising over the past few months. Our debt capital ratio is incredibly active. So just trying to think about how much we're learning about what can be done virtually and maybe the benefits of that, either from the ability to sell assets through following offerings or IPOs or even M&A and kind of the virtual kind of evolution here?

Well, it's interesting. I do think as it relates to selling securities, this world has probably been a tool that is more advantageous. Doing an IPO roadshow, reaching a larger audience for liquid securities, I think it's a positive. But to your earlier comments, it is a headwind. Transactions have gotten done. We announced a number of deals this quarter oldly, some of the life science deals we announced, the studio deal we did on the West Coast in real estate but it's definitely harder. And I do think it weighs on the transaction environment. So as the virus 60, 90 days ago seemed to be receding, it felt like the deal activity was going to really pick up. There was a lot of pent-up demand to do transactions. Now that has made it hard, sort of, logistically to do deals and obviously has impacted businesses a bit. I do think back to Steve's earlier comments, as the virus goes and way once we have a vaccine, I do think you’ll see probably a step function increase in deal activity. And so this is a headwind to that deal activity today. But nevertheless, remarkably, we've done a number of transactions. Others have – people are finding a way to do business, but it's definitely a bit harder.

There's also a global dimension. That's probably as much as anything U.S.-centric comment. In Europe and Asia, there is more, I think, ability to convene and manage transaction processes. But the overall point stands, obviously.

Okay. Thank you.

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

Great. Thanks very much for taking the question. Most questions have been asked and answered. But maybe if I just come back to private equity in 401(k). I realize it's a very long-term endeavor. But I've been working with plan sponsors on this topic already. So maybe if you could just sort of comment on whether you think the 15% allocation from the DOL right now is one way to do it, but the potential for direct investments in private equity in 401(k)? And then whether you think it would be – it could be achieved in more core private equity products, like the series of BCP funds? Or would that be more facilitated through things like your secondary business or TAC ops?

I would say, I think it's unlikely that you're going to see direct investments. I think target date funds run by plan sponsors, is the most likely vehicle for accessing 401(k) money. And then I think within sectors, real estate is probably the easiest place to start. Because there is some real estate already in the 401(k) market, private real estate. So that seems like a logical area. I think our secondaries business because of the diversification there and liquidity is another area. And over time, hopefully, we'll move to traditional private equity. So as I said earlier, I think it's a journey. We tend to get focus on large market opportunities like this, and we work for a long time. So this stuff does not happen overnight, but we think our track record and what we can offer individual investors is compelling. And we're going to spend a fair amount of time trying to figure it out.

Good. And you've been working on with large plan sponsors or off of the moment?

I'm not going to comment on who we're talking to. But it's – as I said, it's an area of focus.

Fair enough. Thank you.

Thank you, Brian. And our final question comes from the line of Chris Kotowski from Oppenheimer Company. Please proceed.

I'm sorry. Thank you. I was having problems with my headset. There was a story in the FT yesterday that the Attorney General of Kentucky joined a lawsuit against you and KKR for excessive fees. I imagine you can't comment on that directly, but I guess it illustrates the point of the earlier question about how it's become such a political football. And I guess I wonder – I mean, private equity started out primarily serving public pension funds. And just given the [indiscernible] does it – is the riskiness of taking money from that source increased? And does it make it less attractive to you, especially since there are so many other places that want to give you money?

Yes. This suit, and I'm limited in what I can say, of course, but this was focused in the hedge fund area, just as background. The suit has already been dismissed once by the Kentucky Supreme Court. BAAM, our hedge fund area, actually beat the benchmark by threefold in this case and generated more than $150 million of gain for the pension fund. We think the claims here are completely without merit. And if the broader question is, do we think our pension fund clients appreciate what we do and our performance stands up and we're excellent fiduciaries? The answer to all of that is yes. And we do not see this as an underlying sort of trend in our business.

Okay. Thank you. That’s it for me.

Thanks, Chris.

Thank you. I'll now turn the call over to Weston Tucker for closing comments.

Great. Thanks, everyone, for joining us this morning, and please give me a call if you have any questions.

Thank you. That concludes your conference call for today. You may now disconnect. Thank you.