Good morning! Wow, good morning, everyone. We're all fitting in here, so if you can get close to your neighbor, right, as close as you want to your neighbor. It's fantastic to see everybody here this morning. Thank you all for your time and for joining us for the first ever and inaugural Blackstone Secured Lending Investor Day. I'm Jonathan Bock, and I'm honored to be your host for today. Now, let's take a look at our agenda. We're gonna bring it up here. It's an action-packed, dare I say, Oscar-worthy event. But just as important as the plot line, let me tell you about who's joined us in person and online today. In this room and online are the heads of private debt and CIOs of several of the world's largest institutional investors, the investment press, leading registered investment advisors, the sell-side analyst community, leading wirehouse brokers, and near and dear to my heart, the full cast and crew of Blackstone Secured Lending. Now, some of you folks have traveled from great distances, Los Angeles, London, Long Island, to be with us here, today. And, we're greatly thankful for that and want to... Let's just start with a simple question here. Okay, so get your phones out. We'll scan the QR code. Folks, if you could just scan this here. This allows you to, pull up some questions you'll get throughout the day. We'll have a little bit of the wisdom of the crowd, okay? And so it's all coming up. Don't worry, it'll also be on the next slide as you're all getting you know, getting plugged in here. All right, so let's ask this question: Why are you here today, right? Perhaps it's to learn more about BXSL, maybe better understand the dynamics of private credit, or you're just peeking over the fence, or option D, validated parking. Okay, guys, let's actually see. Let's pull it up and see what what we've got. You guys give your you know, why you're here today. We'll take a look, and we'll have some of these questions throughout. So we'll cue a little music. There we go. Very easy. All right. So let's pull up, let's pull up that answer here pretty soon, once it's coming up here. All right. All right, so we got some coming in. All right, so a lot of folks are learning more about BXSL. Of course, some folks are peeking over the fence or trying to understand the dynamics of both private credit and looking into BDC and its growth potential, and a very small select few who picked validated parking will be clearly very disappointed, okay? And so as I look back over my career in private credit, starting as a leading researcher, a published academic, and now as an operator, I'm reminded of what a typical BDC Investor Day looks like, right? And tell me if any of these, you know, you can empathize with. I've been to lots. It's you in a room, lots of people talking at you, all right? Often singing a familiar frame of creditworthy lines. You know, you recognize any here? Proprietary, best-in-class, highly selective. Many of these phrases correspond to private credit pitches, where as an industry, managers are trying to differentiate themselves to you, but often end up saying the exact same thing as everyone else. When everyone says the same thing, who do you believe? Put differently, who is the most credible? Today, you'll get the plot line up front, right? These five takeaways: It remains an attractive time to invest in private credit, dare I say, a golden moment. Private credit's a growing market supported by huge megatrends, and nothing about this is a bubble. Expect performance dispersion, where not all private credit will remain the same. Also, expect Blackstone to further differentiate itself from the field, given our scale and ability to act as a true value-added investment partner with private equity sponsors. Of course, expect the wind to remain at our backs as we continue to generate attractive returns, 14.4% last quarter, with substantial liquidity to take advantage of what the market will offer. These thoughts will be developed throughout the day. Yet in an industry first, you're not going to just hear it from us. You'll hear it from those with whom we partner, the banks, private equity sponsors, lenders, rating agencies, and most importantly, you'll hear from those for whom we serve, our shareholders. So many of you have heard the phrase, "the golden moment," and it certainly is an attractive time to invest. Today, the private credit market offers equity-like double-digit returns at senior secured lending levels of risk, and clearly attractive and a direct result of both an increase in base rates and spreads, which have profoundly shifted company cash flows from owners to creditors. Now, this is reflected in BXSL's performance, 14.5% LTM total return on a NAV plus dividends basis, a very strong dividend yield of 11.6%, an attractive total return since inception versus peers and other fixed income classes. Now, it's also embedded in BXSL's numbers, whether it's total return, senior security, dividend yield, non-accrual, EBITDA growth, all strong and grow along with this market opportunity. This market opportunity, it continues to grow and remains in its early stages. Looking at public syndicated markets of over $2.9 trillion, there's approximately $1.6 trillion of companies with debt tranches of $1 billion or larger, our specialty. And those were companies that just a few short years ago did not have access to the private credit solution. Now, more to hear on this from Brad Marshall. And while higher rates benefit floating rate lenders like BXSL, I've got no doubt that many of you in this audience and those of you that are online are asking this question: How much pressure are these higher-for-longer rates placing on borrowers? And we believe that it'll become apparent, particularly in this environment, that not all private credit is created equal, and that will lead to return dispersion amongst managers and strategies. It also offers the opportunity for Blackstone to further differentiate itself relative to other lenders, given our focus on lending to large companies in good investment neighborhoods. Now, the data bears this out. Private credit data from Lincoln shows that larger companies, $100 million or more, have grown over 7 times faster than smaller companies of $50 million or less, and default nearly 7 times less. And notice, BXSL's average portfolio EBITDA of $185 million puts us on the right side of this coming dispersion. Now, dispersion is also found in sector selection, where less cyclical sectors, whether it's healthcare, business services, technology, have showcased year-over-year growth of 5% and a quarterly default rate of 3%, compared to more cyclical sectors such as consumers and industrials, which exhibited only 2% growth year-over-year and a quarterly default rate of 8%. Importantly, 90% of BXSL's portfolio is in low default rate sectors. And it is this focus, the focus on large companies in good investment neighborhoods, that drives attractive performance. Non-accruals remain virtually zero compared to that of our peers, and 97% of our loans all have interest coverage at 1x or greater, compared to the market at 85%. Now, more to come on this from our CIO, Michael Zawadzki. But these results, they don't happen by accident, and I like to say in private credit, right? Private credit is an industry. It's not a hobby, right? It requires scale, specialized talent, managerial depth in order to drive attractive returns. Blackstone leads the marketplace as the world's largest alternative asset manager, and with over $297 billion in credit AUM, we're able to operate globally across liquid and illiquid private credit markets. With over 500 investment professionals, we can form opinions on over 3,100 companies, and we'll take those insights, and we'll put them back into our origination and our monitoring process. We leverage our sector expertise, whether it's our technologists or 100 senior advisors or 50 data scientists. This is extremely important in terms of how to differentiate your return for the future. Now, of course, our value creation team, led by Kristen Paladino, and you, you'll hear from her later, allows us to plug our portfolio companies into the Blackstone ecosystem, effectively allowing us to lower costs, improve revenue, and drive equity value for our sponsors as the lender. And so effectively, we're taking the scale and the power of this platform, and we're putting it to work for that of our investors. And in my opinion, that's very unique, especially in the BDC space, because, it's unique because many managers often have the intellectual capital and the financial capital to make a loan. This we know. Yet I believe only Blackstone is the manager that can make a loan better after it's made. And so today, the wind is at our backs. Blackstone Secured Lending generates the highest base dividend yield among peers with the highest amount of true first-lien, senior secured debt exposure, generating very attractive return per unit of risk. We generate this attractive risk-adjusted return by operating with an attractive expense structure in the BDC space, 32% lower than peers, which further drives total return 24% higher. For those that have a penchant for data, whether it relates to earnings quality or credit quality, fees or expenses like fees or cost of debt, Blackstone Secured Lending further differentiates among the peer set. Of course, a lot of things can look good on paper, right? Today isn't just about that. Today, you'll see this differentiation. You'll see it in our people, the world's absolute best, and I can't think of a better way to start than by playing a video that puts that differentiation front and center. Enjoy, and then please welcome Brad Marshall to the stage. The Value Creation Program is our way of adding value to the company after we make our investment, helping companies save money, helping the company cross-sell their products across the Blackstone ecosystem, and help them with things like cybersecurity, data science. Sometimes our companies need operational support from a manager like Blackstone that has immense world-class capabilities, and we want to be there to support those companies whenever they need us. This program is able to add value to entrepreneur-led organizations like Instructure, who are growing, and then also add value to large public organizations like Alnylam. Instructure is a logistics solutions company. We own and operate logistics assets. Blackstone has been transformational. In the case of Instructure, we have a 15-year relationship, and so when they need capital, we're their first call. That doesn't just stop with the first financing. That continues on in terms of add-on financings, providing operating support, helping them grow and meet their sustainability needs. Having someone like Blackstone understand the vision of what we're trying to create, the flexibility, the speed, the intellect to help us grow and realize our vision has been critical. Alnylam is a biotechnology company developing RNAi therapeutics, which is a whole new class of medicines that we've pioneered. We've been working really closely with Alnylam since our investment in 2020. We've completed over 25 different procurement programs with them. We've worked with them on their cybersecurity initiatives, and then we've also helped them in terms of negotiating with some of their key suppliers. To date, working with Alnylam, we've saved them over $8 million. The partnership has allowed us to focus on developing drugs and getting them to patients, and not worry about financing the business. That's invaluable for us. We're not just providing capital to these companies, but we're giving them access to our knowledge and our network. The combination not only makes Blackstone a great partner, but it helps us deliver for our investors. Please welcome to the stage, Brad Marshall. All right, so you always look better and sound better on a video, so let's just start there. So thank you for everyone being here. Thank you for everyone who is, you know, dialed in through the internet. So today, I'd like to talk about origination. We have a great panel, so I don't want to get in the way of the panel. So I'm just gonna give a few remarks on a little bit of what Jon was talking about, which is how we're trying to approach this market in a little bit of a different way. I won't go through the regular ways that we originate transactions, we find deals. We're gonna go through how we underwrite those deals a little bit later. But rather, I'd rather focus on things that we're trying to do, to Steve's comments last night, trying to innovate, trying to change the way that we find deals for our investors. But what I thought I'd start with is just talk about how the market has changed, because it's changed quite a bit, over the past 20 years. So when we started in 2005, most deals went to the public markets. In fact, if it went to the private markets, it's usually because it couldn't get done in the public markets. The deal was small, the deal was complicated, it was junior debt, perhaps. And that was kind of the nature of the private credit market, and over the past 20 years, it's evolved. It's evolved into different types of private credit products. It's evolved in terms of the size of companies that access the private markets, and it really started to change in 2020, the end of 2020, post-COVID, through 2021, which is a very much a bull M&A market. And that's kind of the... was the birth of these large-cap private transactions, which Jon mentioned a little bit earlier, in an area that we've been actually quite active. We'll talk a little bit about why later on, but it's a market that we think is quite differentiated from a risk standpoint. So when you think about why that has happened, the why is because there's been bank retrenchment in the private markets, in the financing markets. You've seen more capital flow into the asset class because of the return characteristics. At the end of the day, in our view, it's a better product, in many cases, for the private equity sponsor, and you'll hear from a few of our private equity sponsors later today. So quickly, what are we doing at Blackstone to originate transactions? How are we evolving our platform over time? Clearly, since 2005, things have changed. The amount of assets, the number of people, the amount of credit investments that we have made, and have that are inside our portfolios. I'm gonna go through a few of these very briefly before turning it over to our panel. So the first one is just on innovation, and Steve talked about this last night, this constant drive to innovate. If you're not innovating, then you're stuck behind. Clearly, within our credit business, if we were doing the same thing that we were doing in 2005, we probably wouldn't be doing our jobs very well. As I think about kind of these four categories, and again, we're doing all the things that most people do. We cover sponsors, as a primary source of, of deal flow. We cover corporates. But as I think about, you know, how we're expanding our coverage, we're doing that, by being local. So we have now 17 offices around the world, so we're closer to our clients, so we can know the lawyers, we can know the advisors, we can be closer to the private equity sponsors themselves in these geographies that we think are most active. We also cover advisors, and if you think about M&A advisors, both banks and independents, they are the tip of the spear. All deals start with sell-side advisors, so we have a very active presence in being in front of them. Blackstone, maybe by embarrassment, pays more fees to these M&A advisors than anyone in the world, and we try and monetize that on the credit side by being in front of them early on transactions. And cross-firm sourcing. So we actually have a program in place for the 4,000 employees that we have at Blackstone, that if they source a transaction for Blackstone Credit, even if they're in a different part of the firm, they actually get rewarded for doing so, and we're working on a deal right now that came from our CEO of private equity as a proprietary transaction. So expanding that coverage, using all parts of the firm and being in all parts of the market is really important. Thematic origination, we talked or Steve did last night, about data. Data is really important. We use that data to create thematic investment themes. So when we go out and try and originate deals, it has a purpose. We're not just trying to say, "Show us a deal," but we're trying to upgrade the funnel that we're reviewing that's going through our underwriting process. We have 50 data scientists, by the way, that is doing this for us. Value add, clearly, I feel passionate about our value add program, as that video suggested. But we are trying to take a playbook out of private equity, which is make the investment and then add value to that investment after we make the investment, whether it's using our sourcing capabilities, whether it's cross-selling the product across the firm, whether it's helping them with cybersecurity. We have the resources, and so if we can make the investment better for our partners, then it accrues to our benefit and obviously the benefit of our investors. And the last thing on this page in terms of innovation is we wanna face our clients and create solutions. We don't wanna pitch a product. We wanna create a solution for these clients. And it doesn't mean that it won't always be a product that... or a, a solution that fits, BXSL, but we wanna be able to be relevant to our partners, whether it's corporate or whether it's private equity backed. And that makes us, a more go-to financing source, so we see more deals because of it. Incumbency. Incumbency is not differentiated. If you've been doing this for more than five years, you have some level of incumbency. I think what's really different about our platform is being one of the largest liquid loan managers in the world and being one of the largest private managers in the world, our incumbency is unparalleled. We're invested in over 3,000 companies, and what we do for a living is, of course, we pick up the phone, answer, you know, calls from our private equity sponsors, but more actively, and especially this year, we're out trying to create those deals. We're calling the companies that are in our portfolio, whether it's on the public side or on the private side, and we're pitching these solutions. We're pitching, you know, transactions that the rest of our competitors don't necessarily see. We have JSSI as an example. We've done seven financings for this company, so over $1 billion. It started in the public markets. It was a hung deal. We committed to that deal. We took it private. We recapped it. A sponsor bought it, and then a second sponsor bought it, and then we just recapped it again this year. Our competitors have not seen this deal. No one has seen this deal. So it's those sort of transactions that we try and stay in front of to create. And this was the biggest, boldest part of Jon's slide nine, on what everyone pitches, but we try and create proprietary deals. This is really important to our, our platform. Expertise, hopefully, most people you invest with have some level of expertise, so this also is not differentiated. But we do try and pick themes, areas of the market that we think have long-term secular tailwinds, and we put more resources, more people, more data, more effort around those resources from a sourcing and underwriting standpoint. And so as I think about those three primary areas of expertise that we've built, I believe to be the largest in each one in the world across Blackstone, it's tech, it's life science and healthcare, and it's energy transition. Those teams are incredibly dynamic, deep, and of course, that helps us on the underwriting side, but it also helps us on the origination side because we can move quicker. We can move with a little bit more knowledge, familiarity, and we're known to be very thoughtful when it comes to these particular sectors. And then lastly, scale. And I think often people think about scale as a disadvantage. We would violently disagree with that, and it's really about how you use scale to your advantage. And we've been doing this a long time. We see the entire market, small deals, mid-sized deals, but where we've been most active most recently is in the large end of the market because there's not many people who can commit to a $4 billion transaction. Clearly, that's on the, on the larger end. But when you can go into a deal, speak for the whole thing, and then maybe have the, the sponsor bring other people into that deal afterwards or use that as an anchor to then go bring in other lenders, that's really powerful. That means you get a call on every large transaction, and of course, we're looking at the mid-size deals as well, and, and we're quite active in, in that market. It's actually where our value add program can be quite, valuable. But this is a big advantage for us. It also allows us to control deals, not participate in deals, but control these deals. Why that matters, and you'll hear this from a little bit later, but there are things in the documents, there's things that we are going to negotiate particular to our investment preference that are important to us because it may not appear obvious on the front end, in the spread or the OID or the leverage, but it's in the document, and the document will preserve your capital. It'll minimize losses, and that's what we care most about in credit, and we've, I think, done that fairly well over the past several years, well, dating back to 2005. So with that, I do have a poll, so if you can scan that QR code- ... And the question is this: when listening to BDC private credit managers discuss their value-added approach to origination, which I just did, what are some of the most common terms they use? We do proprietary transactions. We have deep sponsor relationships. We're large and can speak to the whole tranche. We have a great track record. So as you think about that answer, I'm gonna invite a panelist to the stage, and I look forward to catching up with you later in the day. Thank you. Please welcome to the stage Chris Sullivan, Roger Hoit, Brad Colman, Viral Patel, and Kristen Paladino. All right. Well, good morning. My name is Chris Sullivan, and I run our origination effort at Blackstone Credit, including our sponsor and advisor coverage. I joined the firm about two years ago from Barclays, where I ran the global sponsor coverage group there, and I'm just checking out the results. Interesting. I guess, I guess we've got some work to do on this panel. So as you guys have heard, and as we've consistently heard from you, the one thing credit managers do when they try to make themselves different is all say the same thing. So our objective with this panel is to get past the marketing spin a bit and get into the details of what we actually do on a day-to-day basis with our clients to make us different. To do that, I've got a terrific, terrific group of panelists here that I'll introduce quickly, and then we'll get into it. At the far end, who almost needs no introduction after the video, is Kristen Paladino. Kristen's been at the firm for almost five years, and she runs our Value Creation Program, which we'll talk a lot more about today. Next to Kristen is Viral Patel. Viral's been a partner at Blackstone for many years, been here almost 20 years, and he runs all of our technology investing in BXC. And in the middle, we've got Brad Colman, another one of our partners. Brad leads our healthcare investing, so across all things healthcare and life sciences. And then lastly, we saved the best for last, our guest, Roger Hoit, joins us from Moelis & Company, which is one of the top M&A advisory firms out there. Roger is a longtime investment banker who runs their private equity solutions group, so has long-standing relationships across the private equity landscape. So thank you all for being here. Roger, why don't we start with our guest? We'll, we'll let you, kick us off here to get the, get the conversation started, you know, and what you're seeing out there today in your business at Moelis, advising sponsors on buying companies, selling companies. Give the audience a sense for the tone out there. What's the appetite for new deals as we head into the new year? I'd be happy to. First of all, thank you, Chris, for having me. This is. It's an honor to be here today with you and your partners and investors, and this is, as you know, a really important strategic relationship for us and one where we've seen really material gains over the last couple of years, and I think that you've really benefited from your leadership and leadership coming from Brad and folks like Emily Yoder and whatnot. So first question is on appetite. The appetite on part of both buyers and sellers is literally voracious. Private equity is an incredible business, that it's incredible when the money is flowing consistently. So in 2023, private equity saw a real drop in deal volume, down 30%-40%, depending on how you measure that. Why would that be? It's actually a pretty simple explanation. Buyers and sellers have not come back into equilibrium, digesting the impact of the new normal in the credit markets, higher cost of capital across all asset classes, and importantly, high private equity portfolio valuation marks, which are complicating the decision as to how and when to monetize. Buyers, they've reset value expectations, despite what you may hear. They're down 20%-25%. It's actually fairly simple arithmetic, cost of debt, capital, and importantly, the inability to any longer target 14, 15, 16% IRRs, which is what we were seeing a couple of years ago. If some of us in this room can earn 14% in a senior secured bond fund, I don't know how you could do that for private equity. Sellers, their hopes are fading on only being down 10% or 15% in valuation, but that's still where the disconnect lies in terms of the difference between buyers and sellers. And again, as I mentioned, even if you've got an asset that you've got a 3 or 4 times gain in, if you're selling that asset below where you have it marked, it's a complicated decision for the GPs. Let me give you a couple stats on 2023, just to help to set the stage for 2024. During 2023, there were three times more add-on deals and new deals than there were monetization transactions. And importantly, for billion-dollar-plus monetizations, which are really the lifeblood of the large-cap private equity business, those deals were down over 50%. The PE IPO market, almost non-existent, and so the average age of investments in the private equity portfolios are increasing significantly. Well, well over 30% of assets have an average life of over five years, and so that's placing a lot of pressure. What does that mean? LPs need to get more capital back, and so they're coming back at the GPs who are running these businesses and trying to get them to restart the engine. And so, look, what does all that mean? It means enormous pent-up demand in the marketplace for transactions, and I think it's one of the reasons that, that at Moelis, we're very bullish about what we think is gonna happen in 2024. And just to give you a quick look inside our business, our backlogs and our pipelines are up materially. We're at record levels in terms of both, and they're roughly twice what pipelines were in the go-go days of 2021, which I think is a really- Wow ... interesting and significant statistic. Some of that is explained. Our firm's growing quickly. We're putting a lot of money and resource into growing our talent, particularly tech, healthcare, clean tech are big focus areas for us in terms of the growth, and that it does help to explain some of the the growth in our pipeline. But it's really more coming from the pent-up demand in the deal business, okay? And importantly, the financing market stability. We're nothing without a financing market, and, you know, the anchor that private credits provides for the market is really significant. So our recipe for 2024: we're going to see higher volumes across the board. We're going to see a much more diversified transaction mix. It's going to be trending towards a significant increase in credit. There's been an explosion in hybrid capital, and those hybrid capital solutions are fantastic, not just for monetization transactions, but also for balance sheet repair, where that's necessary. And then in the end, it's the sell- side business that will really benefit the most. We see really significant gains, probably more Q2, 3, and 4. Interesting. Thanks for those insights. We see a very similar backdrop in terms of what we saw in 2023 from a deal perspective, both volumes down, but also more add-ons, and we certainly share your optimism about 2024. So, hopefully, a lot of opportunities for deployment. Let's turn a little bit internal to Blackstone Credit, and I'm going to start with Brad Colman in the middle there, to talk about the industry focus that Brad Marshall was speaking about earlier. Brad, over the last couple of years, we've really refined our focus and deepened it around several sectors that have what we think are terrific long-term tailwinds, but also ones that require some unique and differentiated expertise. You lead our healthcare effort, which is one of those. Can you share your perspectives with how we've thought about expanding this sector focus strategy? Sure. Thanks, Chris. I think the sectors you see here on the, on the right side of the page, I mean, there's some similarities across, you know, across them, even though, of course, there are, there are nuances. They're all huge, right? They're very large, kind of investable universes of opportunities, and the capital need and the transaction volume, as Roger was referencing, is going to be tremendous there going forward, and so there are a lot of deals to do. But each one of them is complex, and, you know, they're the types of businesses within these subsectors that you really require some experience, some expertise, some real insight into. And if you think about the outlook for them, they're all a bit acyclical in the go forward. I mean, they really have sustained secular demand characteristics, each of technology, healthcare, and sustainable resources. So, it's no coincidence that those are the three that we're focused on. In terms of what we get out of being focused on those industries, I'll speak, of course, in more detail about healthcare, but if you think about it, and I see the statistics on this page don't include actually our liquid exposure, but in totality, because in our liquid business, we also are heavy investors in healthcare. We have about $31 billion of healthcare exposure, and that scale enables us to do a couple of different things. I mean, on just sort of building up our expertise, because we have so many assets, we can really invest in buying data, which is proprietary. We can do things like hire former executives, which will help us figure out where to go to originate deals, and then help us on the diligence side when we're trying to really underwrite them. And then having that portfolio, mining it for insights, monitoring it along the way, really gives us a very good sense of the direction of travel within various subsectors within healthcare. And I think it's pretty similar across our other verticals, and I'm sure Viral will say some of the same things, but that's how we think about it, and the scale sort of develops your expertise as it builds. Yep, makes sense. Viral, let's, let's pick up on Brad's comments. And in particular, when you look at the slide, technology and healthcare effectively sit in different boxes, if you will, than our sponsor coverage business. In reality, can you share some perspective, like on a day-to-day basis, how your team interacts with our sponsor coverage team and also with our private equity clients? Yeah, of course. Thanks, Chris. Look, you're right. I mean, on the slide shows technology and healthcare separate from sponsor coverage. The reality is it's a very integrated approach to both origination and underwriting. You know, we have dedicated teams in healthcare and in technology that cover each vertical, and the goal of that really is to develop a thesis-driven approach to help us figure out where we want to allocate capital and how we want to build our exposure in our portfolios. Right? That's, that's the core goal. And how we do that is we try to harness all of the data and all of the signal across the broader Blackstone network and try to pull that together in one place. So in technology, as an example, we've built these CIO panels that sit across cybersecurity, broader enterprise, enterprise software, fintech, proptech, and those are populated with CIOs from our portfolio companies, from our senior advisors, and they're moderated by investment professionals. And it's an opportunity for us to sit down with operating professionals to understand where is demand going, where are certain subsectors going, and starts building a view on areas that we want to be in, be in or not. We also track and monitor spend across all of our portfolio companies that we own on the private equity side. That's over 200 businesses where we're tracking by name. If a company is having increased spend, decreased spend, whether certain themes that are resonating within, like in cybersecurity, are increasing or decreasing, right? So it gives us more trends into where things are going. We also work closely with our product specialists, right? We have over 500 technologists on Blackstone payroll. We have experts in different areas of software that we can pair up with our investment teams, and that really helps drive our thoughts on the sector and where we want to invest. And to bring it back, Chris, to what you were saying, we take all of that information, and then we arm our coverage teams with that, right? The goal is for our coverage folks to know exactly where we want to invest, how we want to invest. And then when you're having a conversation with the sponsor, when you're having a conversation with the company, you can be much more targeted about what it is that you want to do and quickly say yes or no to a transaction. That's, that's really a big piece of it, right? So I was up in Boston a few weeks ago with one of our, coverage folks, meeting a number of our sponsors, because we like to also then take that information and then give that back, right? "So here's the insights Blackstone has on these sectors. Why don't we share that with, with, with you? ... Viral, do you mind if I just- Yeah, go for it! -for a second? I think, honestly, real sector expertise in credit, it's a, it's a real differentiator. If you think about the credit business, the credit business is incredibly, incredibly competitive business, and I've been around this for a long time. Just about all of that competition, I don't know if it's 95% or more, has been on terms, right? You can't win without the best rate, best tenor, the best, the best covenant package. And I think about the dialogue that we're having at this point between your teams, both in, in healthcare and in tech, and, and I'm glad you asked both of these guys to, to join because these are areas where we're having a lot of, dialogue back and forth. It's really differentiated, and I think it's not just allowing you guys to target deals earlier, but I really think it's allowing you to compete on a different plane. Mm-hmm. Because in addition to competing on terms, which you have to do, you can also compete on value add, and you can compete on relationships, and I think that's... That really is a, a differentiator. Brad, just thinking about the dialogue that you're having with our healthcare teams, your ability to, to create really significant relationships- Yeah ... with some of our lead bankers, like Rich Harding and Ryan Bell- Yep ... and Mark Kersey, and, you know, again, that's a total game changer in terms of your access to their content and frankly, to their deal flow. And Viral, you have the same thing with Jason Auerbach and his team as well, as I know, so. Yeah, great. Thank you, that's helpful, Roger. Let's shift the conversation a bit to something that, as you've seen already, we think is truly unique to Blackstone, which is our Value Creation Program. You guys saw it on the video, you heard it in Brad's earlier comments, but this is something that's truly unique to us, and it really changes our dialogue in a similar way to Roger was just saying, how that our expertise here changes our dialogue with bankers. The Value Creation Program changes our dialogue and our relationship with sponsors who own these companies. When we can do the things that Kristen is going to talk about, we go from being just a lender who competes on capital, to a value-added partner who can help them make their companies better and actually create equity value, and it's just a very different relationship. Kristen, you obviously run that program. Give us your perspective on how you and your team actually work with these companies on a day-to-day basis to help them improve. Yeah, absolutely. Thanks, Chris. So there are really three areas that we focus on when we're engaging with a company, and the first one is we're trying to reduce costs, and that's by leveraging the scale of Blackstone. The second is we're trying to increase top-line growth by cross-selling across all of Blackstone. And then the third is we're trying to leverage all the different resources that sit within our operating partners, our portfolio operations team, so things like cybersecurity, or ESG, or data science. But before we even meet with the management team, we're usually sitting down with our investment professionals because we want to understand, you know, what was the investment thesis that the sponsor originally had? And what are their priorities now that the deal has actually closed? One of the things that we've been hearing a lot since, you know, we've been in an era and a time of increasing inflation, increasing interest rates, that a lot of sponsors right now are really focused on trying to reduce costs. So when we are working with portfolio companies to try and reduce their spend or, or really to optimize their spend, we're not trying to cut out costs of organizations, we're trying to help them buy the same thing that they're purchasing for just a lower price. We take a very data-driven approach. So we'll sit with management, we'll go through their spend line item by line item, and then we'll also leverage a proprietary tool that we have in-house that was developed with our data science team and our procurement team. This tool leverages the data of over 10 years of procurement input and 6,000 different sourcing center events to put together a plan of action to execute on with the, with the management teams. The thing that it usually shows is the biggest opportunities by leveraging our sourcing center. So we have a team of people who are global, and their entire job is to put together online requests for proposals, or RFPs, or online e-auctions on behalf of companies at no costs. An e-auction is similar to if you were to think about a reverse eBay, where you're driving down costs that the vendors are bidding on to win that business. This tool is extremely flexible, so it can help very CapEx-heavy businesses, so businesses who are purchasing steel, or vehicles, or electrical components, but it can also be used for companies who are very asset light, so things like IT hardware and laptops, or audit services or consulting services. Interesting. As we're going into a more uncertain economy, it's no surprise that companies and sponsors are really focused on the cost side. Any recent examples you can share with us where we've had success? Yes. So we just had a BXSL company who finished up an online RFP recently, and this company, they operate companies who are in oral surgery practices across the country. They came to us, and they wanted to put together an RFP for consumables, for medical consumables. Since they use so many different consumables, and they're located across the entire country, this was an extremely complex process. So we had over 1,000 SKUs that we needed to go out to bid for, and as a result of putting this out to a competitive bid, we were able to save them between $1.5 million and $2 million. Wow ... by just really structuring their procurement process. Impressive. You put a multiple on that savings, and that's, that's real value. Yeah, absolutely. One question I'm guessing the audience may be asking themselves, which is, private equity firms, you know, often talk about their primary job being to improve the companies they own. Yes. Why do they engage with their lender, Blackstone, to help them do this? Yeah, I mean, I think that this is a really important point, Chris. Many of our sponsors have operating teams. Not all of them, different funds have different strategies, but many of them do. And the thing is, we are not trying to compete with them. We are not trying to replace them. What we are doing is we're trying to supplement their own initiatives that they have ongoing. We're trying to help make them more successful by bringing all the resources across this organization to bear, which also helps, by the way, de-risk our own investments. And so we like working with the operating partners that are sponsors. We've actually started to try and increase the connectivity. We just recently had an operating partner dinner in Europe, where seven of the largest sponsors had attended, and it's very helpful for these events that we can draw on the resources from Blackstone. Mm. So we had Greg Beutler there, who is the Head of Procurement for Portfolio Operations. We had Adam Dawson, who is one of our cybersecurity leads that sits in Europe. And, you know, Adam is a very busy person right now because cybersecurity is such a big focus for so many companies. Mm. It impacts most organizations. I'm sure many people in this audience have been in situations where they've gotten, unfortunately, a letter in the mail that says, "I regret to inform you that your data may have been breached in the latest recent ransomware attack." Or maybe I'm the only person, but I don't think so. And so, you know, because of that, we're really focused on preparing our companies and safeguarding them so they don't have to send out those letters. Mm. The way that we've done that is we've really focused on cybersecurity and identifying gaps in policy. So our cybersecurity team developed what we call the Cybersecurity Flash Assessment, and this assessment is not aligned to some sort of academic standard. What we did was we looked back at our historical breaches that took place in the Blackstone portfolio, because we wanted to understand, you know, what was the root cause? What was the specific control that failed, that led to the ransomware incident? And those are the controls that we're testing for so we can better prepare our companies so that they are more secure. Mm-hmm. And so, you know, one other thing that I think is really powerful about this program is, when we look at companies, and we do an assessment, and we look for these different gaps, say we have, we've identified a gap in email security or cybersecurity training. We are invested in a company called Mimecast, which is one of Viral's investments, that provides that exact service. We think the company has a really great product. We've done a ton of diligence on them, and we know the management team really well. So we can recommend Mimecast as a solution for a company who might have that gap. So it really is a win-win on both sides. Chris, I mean, that, just to touch on that, I mean, that is an extremely valuable tool for us when we're trying to develop relationships with sponsors, right? There aren't too many- Yeah ... lenders that can actually show up and add that kind of value post-closing. So I know when I'm on the road, when Brad's on the road meeting, meeting companies and sponsors, it's very often that a deal partner will actually raise this, right? And will say, "Hey, you saved me $2 million." I mean, to put a multiple on it, as you said earlier, you know, if these businesses are 10-15 times EBITDA on a $2 million cost savings, you know, that's $20-$30 million of equity value that we just created as a lender. Yeah. Really different. I was at a closing dinner Monday night, earlier this week, with a sponsor and a portfolio company we just closed on, and I couldn't believe how focused the management team and the lead partner of the sponsor were on Kristen and her teams being engaged with them already. It's really, really unique. All right, let's have a little fun and get the audience back engaged here with another question, this one on the topic of M&A valuations. So, despite market volatility, why haven't purchase price multiples come down in 2023? Buyers underrating higher growth and future multiple expansion, record private equity dry powder that needs to be deployed, higher leverage available to support valuation, or transaction activity skewed to the highest quality companies? Okay. I think I can think of one it's probably not. Otherwise, some good choices. See if you're paying attention. Okay. Interesting, everybody gravitated towards, I guess, what is it, D? A few. Okay, a few people think we're giving higher leverage out there. All right, we'll have to have a conversation with them. Interesting results. Why don't we let our panelists here, our experts, comment. Brad, why don't I start with you? What's your reaction, if we could pull them back up- Yeah ... and then sort of your perspective. My perspective, it's D. You know, I think that driven by a couple of things. I think private equity, in general, has been on a journey, you know, to go after growth assets, and so you see people looking for high quality, you know, growth assets. That's certainly the case within the healthcare sector. You know, the subsectors people are focused on are the really kind of growthy parts of the market. And I think the same is true across other sectors, and I think because of the sort of buyer-seller gap that's out there- Yeah ... sellers are bringing to market the really high-quality, crown jewel assets, and buyers are... Those are the things they'll talk themselves into paying for. Okay. Roger, you're our dean of valuation and M&A. What's your perspective? Don't believe everything you read, Chris. E, other? Yeah, E. Look, valuations are 100% down for like-for-like, same business two years ago compared to today. There's no question. So when you look at statistics like you just saw, and I've seen, I've seen all the same stuff, they're just, it's just a different mix. There's different components. There's a couple of interesting things going on. If you think about the number of growth deals, Brad, you referenced it. Mm-hmm. The first time ever that growth deals have outnumbered leveraged buyouts for- Mm ... you know, the PE business. Really significant statistic. Look at the S&P. The S&P's down 2.5, three turns on a EBITDA multiple basis versus where we were a couple of years ago, but we've seen a really significant shift in the direction of public to private transactions. And you guys have been involved in a lot. We've been involved in a lot as well. You think about a public to private, you're gonna have to pay 30, 40, 50% premium to that valuation to get that deal done. You're right back up to and above where you were from a valuation perspective, before the bit of the downturn. ... partnership deals have been really important, really significant uptick in 50/50 deals where we're able to leave capital structures in place. Again, you're not suffering the burden of higher interest costs if you're able to leave that capital structure in place, if the owner's done a good job of fixing those rates. And again, like that last one, Brad, you referenced it a little bit. Think about PE portfolio marks as you think about the transaction activity. It's difficult to show a loss on an investment versus the mark. Yep, interesting perspectives. Viral, what's your, what's your view? Yeah, I mean, similar. You know, I think it's the type of company that's been coming to market. I won't, I won't belabor it. I think these guys did a great job answering it, but it really is just the type of company coming to market. The growth profiles of these are just garnering a higher valuation than, than, than other assets. Yeah. Interesting. Okay, terrific. Thank you. Looking at the next slide, I'll share a couple perspectives. As you look at this slide, which attempts to frame the different channels we focus on when it comes to overall deal origination. I would just start by saying that for us at Blackstone Credit, origination is the ultimate team sport. Although you see, I don't know, a dozen or so circles on there representing different channels that we originate deals in, in reality, we go to market as one fully integrated team globally. So we're not. There's not 12 different teams out there originating deals. It's one team leveraging these different channels on a global basis with really one goal, which is to maximize the set of opportunities we see. We look at a lot of data to try and track, basically, our market share and our hit rate, and I am very confident that we don't miss big deals in the market. I think as Brad was saying earlier, we never take that for granted. We do see most of the big deals in the market, but what my team and I are most focused on is going out and finding and creating the best opportunities, not waiting for things to come our way. I'll just hit on a couple of different of these channels in a little more detail. Private equity will always be, and is, and will likely always be the largest driver of deal activity in the private market, and that's certainly true for us as well. We cover about 200 sponsors globally, and that is definitely a competitive market. There's a lot of other private credit lenders who do the same thing. I think there's a lot of things that make us different. You've heard some of that today, and you'll hear more about why we think we deliver something different to a private equity buyer. Secondly, we leverage our sector expertise that these guys have spoken about in technology, healthcare, and SRG to really drive deal activity with sponsors, but increasingly with corporate issuers in those markets. And that's a scalable model, a scalable approach. We've gone deep in those three sectors, and there's other areas like insurance services, where we've got great expertise in a lot of investments, and you'll see us continue to build that out. Third, we really have a unique internal sourcing advantage, and Brad touched on this in his opening remarks. We're the biggest CLO manager in the world. We're the biggest private lender in the world. We've got over 3,000 companies that we lend to today, and we actively mine that group of portfolio companies to create deals for the private market, which is... nobody else can do what we do there. And we also leverage the broader Blackstone, which we've talked about. So our private equity business, our real estate business, our GP stakes business, our secondaries business. There's a lot of relationships that exist across Blackstone, and we can leverage those different differentiated relationships to drive deal flow for us. Then last, I would highlight our advisor coverage effort, which includes leading M&A firms like Moelis, where we think we have a different value proposition to bring to these firms, given our complementary business models. They sell companies but don't have capital. We're, we are not in the M&A business, and we have a lot of capital, so it's very constructive for us to work together. And also, we believe Blackstone is the number one fee payer to Wall Street every year. That is a unique advantage that we can use in a very constructive way to drive collaborative relationships across the firm and create opportunities for us on the proprietary deal flow side. So Roger, you know, piggybacking on that comment, you know Blackstone as well as anybody else. You do business with us in credit, you do business across the firm. How does this work in practice on a day-to-day basis? How do you and your team engage with us in credit, but also the rest of Blackstone? I was expecting a hardball question. No, no, all softballs today. This is a, this is a softball. Look, I mean, honestly, the most important thing you've done is you've made this relationship between the two firms a strategic one. And look, you, you, you invested in our understanding of how important it was to you, from the senior management on down, to build the credit business. And I think if, if we think about the way that we build relationships and, and, you know, maybe we get to do deals together, maybe we don't, what we're trying to isolate is the most important strategic thing to a particular client and helping them to build that. That's what we've done with, with you guys. It's been a real strategic imperative for us, and I'd call out a, a couple things that you guys have done. I don't see Emily Yoder in the audience. You know, Blackstone made a decision several years ago to hire someone and put them in a position of seniority, the senior-most management team, to evaluate these relationships and cut across all of the different business lines, trying to understand how you pull that lever that you guys have, which are those relationships with the street. Look, Emily's done a spectacular job in that, and the difference, the change in our relationship over those couple of years has really been significant. She and I have attacked the places in our dialogue that really needed to be improved, and I think we've really seen, you know, a lot of that. If I think about what ought to be important to Jon and to the management team in terms of building a growth, diversified investment manager, it would be to actually have synergy across the business lines. You talked a little bit about it. It's easy to talk about. We look at and work with everybody who's in the large alternative asset space. You guys do a fantastic job of cutting across that and actually getting real synergy out of those businesses. Let me give one quick transaction example 'cause I think they're- Sure ... they're interesting and instructive. So we have a client of our firm, a well over 10-year client. We've done many transactions with them. They wanted to take advantage of the strength in credit markets last year and refinance their entire capital structure, and it's a company that Blackstone has a relationship with, not just in credit, but across the firm. So again, speaking to the synergy there. Because we have these relationship channels open, you guys were able to really help to prioritize this for us, and I think we were able to do the same thing for you, and you guys delivered speed, certainty, and then you were flexible, right? Because this was a competitive process, the credit markets were firming, the terms that our client was receiving, significantly better than where the conversation started. But in the end, they got a great, they got a great solution. They went with the firm they wanted to go with, the firm that they had a relationship with. The pricing was significantly tighter, which is a benefit of the competition that we were able to bring. It was a great deal for the client, and hopefully a great deal for you guys. Yeah, it was a great one. Great outcome for us. I agree with you. I think the role Emily plays is unique- Right ... among firms like ours, and you all will get a chance to hear from her later about about how we do that. Let's pick up this theme of our of our industry focus and focus a little bit on the BXSL portfolio. As you guys know, technology software is our biggest area of exposure, where we've got over $35 billion invested on the private side and on the liquid side. Viral, why don't we flip it over to you? You sit on top of all this. What are you seeing across the portfolio today in terms of company performance? Yeah, let me give some context, Chris, to that, 'cause I think when you look across the software and the technology sector, you know, different parts of the sector are performing a little differently, so I think it's worth kind of just touching on where we've invested. The majority of our technology exposure is software, is SaaS software. About less than 10% of the business is actually tech-enabled services for BXSL, and we have a de minimis amount of hardware. So it's really SaaS software, and we like that because it has long-term secular tailwinds driving the sectors, and they're defensive business models, right? The business and the portfolio is built to be defensive. High recurring revenue businesses, high gross margin, low CapEx, low fixed cost, right? All of these characteristics allow companies to be defensive, have options if in the case of cycles, and that improve their business quality. We also invest in large-scale businesses and growing businesses. So the weighted average revenue of our technology businesses for BXSL when we closed on these transactions was around $500 million. It's up to around $850 million today, right? So these businesses are scaled, they're growing. So if you look at that cohort of companies, Chris, it's actually performing quite well, and I know we have our risk panel coming on later that's going to touch on some of those trends, so I'll leave that to the side. But, maybe just to give you guys folks, like, three broad things that I'm seeing across the sector, both in our portfolio and frankly more broadly, is first, growth-top line is slowing, right? There's no question about it. Top line is slowing, but it's being accompanied with increasing profitability. So if you think about our the businesses that we're investing in, high gross margins, low fixed cost, as that growth is slowing, companies are pulling sales and marketing costs out, and you're seeing margins go up. So if you look at our book today, while growth is slowing, it's still quite strong, and you're seeing increasing, EBITDA margins and increasing free cash flow. So it's a pretty good credit story for us, you know, in a number of those businesses. The second big trend, I think, across the sector we're seeing is this bifurcation of, you know, must-have versus nice-to-have software businesses. You know, in the past, sit down with a management team, every management team tells you this is mission-critical software. We're now actually finding out what is mission-critical software, right? And when you see it in the numbers, it's companies that have good retention rates, good renewal rates, and importantly, pricing power, right? That's companies that are showing that, mission critical, everything else you're seeing kind of fall off pretty meaningfully. And then lastly, you know, liquidity rates get talked about a lot. There is a difference in terms of which companies are being impacted more. Interestingly, the lower growth, high margin businesses are actually having a tougher time with rates, and that's typically because those optimized margin businesses just have more debt on them, right? And they have less options, right? They can't grow into their cap stacks, they can't cut costs much further. Conversely, if you're looking at a higher growth business with maybe suboptimal margins, those businesses now are pulling cost out, and they're actually growing into their cap stacks. They're actually able to deal with interest burdens a little better. So that's kind of broadly some trends that we're seeing across the book. Interesting. So not every software company is created the same? Not all chicken. Okay, good to hear. Let's have the same conversation around, around healthcare. Brad- Sure. ... what, what are you guys seeing from a trends perspective, and how does that inform where the team's looking for new investments? For sure. I, you know, Viral's comments in terms of scale, assets, and market leaders, I think are, that's pretty uniform across the sectors that we invest in, so I won't go there, but maybe to focus a little bit more on, you know, the dynamics within healthcare. You know, overall, it's a market where the demand only moves in one direction, really underpinned by the demographic trends, you know, in the U.S. And so, the question is, within that context, a market that's experienced inflation pretty much uninterrupted over a two-decade period, how is it that parts of the market are under pressure, but parts of it are growing really rapidly? I think there's really, you know, there's a couple areas, labor being one of them, regulatory, and a desire to bring reimbursement costs down being kind of a whole other area, that are driving most of the problem children in healthcare. So we pretty studiously avoid those parts of the market, things like generic pharma or hospitals, and pivot to being on the right side of that equation and how that equation is evolving. So, you know, number one, healthcare IT, because at its root, it's a cost reduction mechanism, so if you can provide care to people, and do it more cheaply, or if you're bringing solutions that help providers you know, deliver care, more cost-effectively, you're on the right side of what's happening in healthcare, and so we've been pretty prolific there. You know, across the platform, we have over $6 billion of exposure there. And then in our life sciences, kind of subsector, we really have very differentiated expertise. We actively partner with our life sciences team on the private equity side, which sits in Cambridge, 36 MDs and PhDs, you know, very technical backgrounds, and that really enables us to do two things. It, it helps us go out and proactively source deals with public biopharma companies. You know, and that's been an area where we've seen an increasing need for capital, very attractive economics, but you really have to have the technical know-how and the relationships to go kind of actualize those deals. And being active in that market has really helped us proliferate investment themes for our sponsor clients in the pharma services arena, and a lot of that is actually where we've been very active with Moelis. If you think about, you know, drug manufacturing or clinical testing, commercialization and marketing services, sponsors tend to really like those businesses because they're growth assets, as we've been discussing. And knowing kind of who is positioned to benefit from that trend helps us be really, sort of proactive in terms of going into our banking relationships and saying, "Hey, we like that company."... How do we get in front of them? How do we get in early on a sale process? If you don't mind, if I add- Don't mind. We're in the content business, you know. That's what we traffic in, and so the ability to learn from you guys, to learn from the what you're seeing cutting across all of your portfolios, really significant add for us. Interesting. Good partnership. Kristen, question for you. These guys both talked about slowing revenue growth across the portfolio that we're seeing. You spoke earlier about the cost-cutting that you helped companies perform. Can you share some perspective on your team's ability to help these companies actually grow revenue and create equity value that way? Oh, yeah. So it's a big focus of ours, is cross-selling across the entire portfolio. So we'll first work with them on building marketing materials. We will then put together preferred partnerships that's co-measured with the opportunity that we're presenting them, and then we'll make introductions across the entire portfolio. And so a great example of a successful cross-selling company that we were invested in is Datasite, which we successfully exited in Q3 2022 with $35 million in realized gains, and we continued to be strategic about equity commitments. And so when we sat down with this company, you know, Datasite provides virtual data rooms, which many of our strategic partners leverage, and we put together a goal of $1 million for revenue in the first year, and at the end of that year, we hit $4 million of revenue. And right now we sit and at around $15 million of, of revenue, and that's because we also included and called upon our strategic partners to help sell this very relevant project- product too. So I'm sure we've called Roger in the, in the past- Yeah ... to make sure Moelis is using them. Probably once or twice. Prolific. Multiple times, actually. Yeah. Thank you. You can create value by cutting costs or driving revenue. Yes, absolutely. Either one works for our sponsor clients. Well, we certainly love case studies at Blackstone. Maybe we'll use one last case study to bring us home, which is a deal we recently did, HealthComp/Virgin Pulse, which we love for a lot of reasons, including the fact that it sits right at the intersection of technology and healthcare. Brad, maybe I'll turn it to you to kind of walk us through this. Sure. I mean, you hit on it in terms of, I think, why, why we like the assets. I think, you know, to unpack the story a little bit, you know, this is sort of a classic Blackstone execution. You know, HealthComp and Virgin Pulse are two assets, as you said, independently, which we like. HealthComp is a TPA, Virgin Pulse is a digital health and wellness asset. But they're assets that we knew because of our liquid exposure to them historically. And so we had a lot of familiarity. I think in the case of HealthComp, we're actually their largest lender on the liquid side, prior to this deal coming together. In terms of how the deal came together, it's the combination of the you know, deals being a team sport, I think, as you said, very active coverage effort with the sponsor who did this deal, New Mountain Capital. I see Justin Hall sitting in the back there. We've done 10 deals with them. We have $3 billion of exposure. It also so happens to be the case that we, in our stakes business, own part of the GP. Between Justin and our stakes business, they call us on everything. So you've got the incumbency with the assets, you've got the positioning to be a first call, and you've got the scale then to solve for the entire capital need. This was almost $1.6 billion capital commitment. We did it entirely ourselves as a sole lender. And then in terms of the day after, we have the ability to really create value for these assets, you know, along the lines of what Kristen was referring to. Virgin Pulse, their digital health and wellness offering is really designed for large enterprises. It's an employee driven product. Even though the ink is barely dry on the deal, we're already actively focused on how do we roll that out and get some adoption within the Blackstone portfolio. So the incumbency, the relationship, the scale to do all of it, and then the ability to actually drive value and, and, and help make that a more valuable asset for the buyer, hugely differentiated. Yeah. Great, great case study to sort of summarize, I think a lot of what we've tried to highlight today about what really makes us different in the market. I mean, fundamentally, we provide capital to our clients, and then everything we do beyond providing capital, whether it's our scale, our sector expertise, the relationships we bring to bear, and the Value Creation Program, completely change our relationship and our ability to drive value for our sponsor clients. We go from just being a lender to being a value-added partner who can help them make money, and I can tell you, having spent 25 years as an investment banker and in private credit, nobody we compete with can do anything like that. So let me end by saying thank you to our panelists for your insights today. Thank you to our audience, both in the room and on the webinar for being here today, and also for your support of BXSL. Thank you very much. Thanks, guys. I'll turn it over to Jon Bock. So that was a fantastic discussion, and so now what we'll do is we're gonna move from finding assets to selecting them and financing them, which is often the heart of how one generates an attractive credit return. But like everyone believes they're good drivers in this room, if we were all to ask, you know, "Who in this room is a good driver?" Every manager believes that they're adept at selecting good assets. And so I actually think it might be good to turn to the BDC sell-side analyst community on this topic. So enjoy a quick discussion with Robert Dodd at Raymond James, and then welcome our CIO, Michael Zawadzki, to the stage. They'll all talk about selectivity, right? And they'll all have a presentation with an inverted funnel, and it's like, "Oh, look, we start off and we look at X number of thousands of deals every month, and we only approve 3%." And it's always between 2% and 5%, every single one. Every manager ...every one of them. The best performing BDC, inverted funnel?... 2%-5%. The worst performing private credit manager, sorry, BDC. The worst performing, 2%-5%. The issue is not whether you're selective, whether you, you're selective or not, it's whether you're making the right selections. Please welcome to the stage, Michael Zawadzki. All right. I love Bock's intro music, and Robert, wherever you are, thank you for that intro. I'm glad we didn't put the 2%-5% on our funnel slide. Saved us there. But really appreciate all of you being here today, and I do think those comments, Robert, are appropriate, and I think will be a big focus of what we speak about in this next section. Because in today's environment in credit, with base rates high, spreads wide, you all know this, the return opportunity is fantastic. But it's fantastic so long as you select the right assets, you invest in the right credits, and we'll talk about how we do that here today. The most popular question I get when I'm out meeting with all of you is, "Are you worried about rising defaults in the credit markets?" And the answer I usually give surprises people, because while it's my job to worry about our portfolios, I'm actually quite excited about the current investment environment, not just because of the high return opportunity, but because of the dispersion that I expect to see going forward. And we'll talk about where we expect to see that dispersion, but higher dispersion in credit performance leads to higher dispersion in manager performance. And I think what we hope you take away from today is that we're ready for the current investing landscape. If you look at our portfolios, Brad mentioned we have over 3,000 credits across Blackstone that we manage. We had only one default in the third quarter. If you look at your BXSL portfolio, as you know, we have a nonaccrual rate that is close to zero, well below market averages. What I do with my team in the Office of the CIO, which is around 60 people today, is we bring a unified, consistent approach to how we underwrite, how we execute, how we manage these portfolios, and we leverage all the data, all the insights, all the capabilities, all the scale of Blackstone. Why that matters is because that drives a repeatable investment process that is designed to mitigate losses and deliver strong returns through cycles. Okay, strong investment performance starts with your initial underwrite. We're fortunate to have an investment committee process that's now approaching its twentieth birthday. So we've learned a lot along the way, just like a kid growing up, and we've got a proven and consistent approach to how we approach underwriting. Our bias is towards capital preservation and asset quality. Over time, we have built a scorecard that we grade every credit along the same metrics. You see some of those metrics along the left-hand side. We have found that those metrics are the key drivers of asset performance and credit success. But it's equally important to be nimble and react to changing market dynamics, just like we're in today, a very fluid market. And you see some of the things we're focused on in our committee discussions on the right-hand side, and these again, are the areas where we can see things in, not just our portfolio, but the broader Blackstone portfolio and say, "Yeah, this is something we should focus on." We learn a lesson in our liquid business, we bring it over to our private business. And I wanna give you a couple of examples, 'cause the way these things really come through is with tangible examples of how we're using our process and our insights to make better investment decisions. You know, I won't spend a lot of time on this slide 'cause we spent a lot of time on the last panel talking about sectors, but I wanna give you the why, the why on the sector. For those of you who I've visited with in the past and spoken about our underwriting approach, you might have heard me refer to the three S's: seniority, sector selection, and scale. So you'll hear about all three of those things, because those are three fundamental drivers of resilience in credit investments. But on sector selection, we spoke about our expertise. Why have we built expertise in those areas? That's the left-hand side of this page. We built resilience and expertise in those areas because what we saw over 25 years of data was that areas like software, areas like healthcare, areas like business services, they are low-defaulting sectors, and we've avoided areas that have structural or secular declines, retail, deep cyclicals, legacy media and broadcasting. Those are the areas that lenders have had issues over time. So you look at our portfolio, 90% are in the low-default sectors, versus 45% in the broader market, and virtually no exposure to the higher-risk sectors. We call those areas with low defaults, good neighborhoods. They have high growth, high free cash flow, low cyclicality. But it's not just about the neighborhoods, and you heard Brad Colman talk about this specifically on healthcare. It's where you live in those neighborhoods, what blocks are you on? And that's where the dedicated sector expertise comes into play. And I thought the discussion around healthcare was really critical, because when you think about healthcare, when you look at the broad sector, you're gonna see a lot of dispersion. You actually see that in the public markets. Companies that have low margins, companies that are exposed to government reimbursement, they're struggling. You look at our portfolio, healthcare IT, life sciences, outsourcing. As Brad covered, we're seeing very strong performance, very good tailwinds. We're on the good side of healthcare. Again, where you invest matters. Okay, I wanna talk about data. You hear a lot from us about data, and I just wanna show you a couple of insights. These are extracts from our investment committee memos. The top goes is from one of our deals that we looked at in the tech space. Viral covered this. We have $35 billion of exposure to tech and software, and so when we look at a new deal, we could benchmark, in this case, that black triangle, against every other company we've invested in, in this sector, in our portfolio across key metrics, and you can see how it stacks up. It's in the green. That's good. I'm a simple person. It's easy to follow this. We can tell right away that this is a credit that looks good relative to our broad exposure in the sector. It's probably something we wanna lean in on. But those insights don't just stop within the walls of Blackstone Credit, they expand broadly to Blackstone. We get monthly CEO surveys from our private equity portfolio companies, and they tell us a lot of insights real time, right? You go to the CEO of a company, he's telling you what's happening now. I get quarterly financials, that might be 45 days after a quarter end. And so these insights are critical. They feed back in our process. I promise you, we didn't plant that 72% expect to be financing privately stat, but it is true. That is where the market is headed. You've heard that throughout this session. But these insights that we glean throughout Blackstone, critical, fundamental to our investment process. Another great example, a deal comes in, Mimecast, a $1.5 billion take-private financing opportunity. We get a call from the sponsor. This company does email cybersecurity. The very first thing we did when we got this call was, we walked across the Chief Technology Officer of Blackstone, and we said: "Can you do an anonymous survey of all of our private equity portfolio companies and ask them, 'Who do they use for email cybersecurity? How hard is it to switch? If they raised prices by 10%, would you stick with them?'" And you see some of the feedback we got back, which was, this company is a market leader. It's incredibly sticky with strong pricing power. What more could you look for in a credit underwrite? We got that within 48 hours, and it drove $1.5 billion financing for our portfolios. But equally importantly, it drove that feedback loop that Viral spoke about earlier. You know, we can then take those insights, share it with our sponsor, and they're likely to call us again and again because you're adding value beyond just capital. What I hope these examples are showing you is what we're doing here is repeatable and it's hard to copy. You can't do these things unless you have the $1 trillion-dollar platform that we have at Blackstone. You can't do these things unless it's in the DNA of the people who work here to work together, to integrate, to help each other. And I think that's what we've spent many, many years building, and it gets better and better as time goes on. So those are the building blocks. So how does it show up in your portfolios? This is actually one of my favorite slides to talk about, because this is tangible. This shows what is going on in your portfolios that matter in the current market environment. Are you worried about slowing growth? You can see our BXSL portfolio is growing at three times the market average. If you're worried about inflation and margin pressure, you can see we have high-margin businesses that are prepared if wage inflation continues, even though more broadly, we see inflation coming down. If you're worried about high interest costs chewing up free cash flow, you can see that we have very high free cash flow conversion, capital-light businesses. Or if you're worried about multiple compression, you can see at less than 50% LTV, much safer than the market average, lots of room to absorb multiple compression in the market. The portfolio we have built is purpose-built for today's environment. It is purpose-built for the challenges that we think about, that I'm sure all of you think about. That's by design. That's how our investment committee process works. That's how the team that originates deals, that's how they're thinking about risks and how to underwrite credit, and you see it real time, and that's leading to the stronger growth and the very, very low default rates you see in this portfolio. Okay, so we've spoken about how we make the investments. Now let's talk about the equally important job of protecting those investments when we've made them, once we've made them. Documents, everyone's favorite topic, maybe the second most popular question I get when I'm out on the road: What's going on with credit documents? The thing we care most about in credit documents is protecting the collateral base, asset stripping, leakage. You can see 100% of the deals in this portfolio have protections against what we believe to be the most important point. Again, that doesn't happen by accident. That's by design. We have dedicated in-house lawyers, who look at every one of our deals to make sure that we're sharing best practices and getting the terms that we want. We have a proprietary document scoring system. Every investment committee memo I see grades the doc. I know right away, "Hmm, this one looks poor. You got to fix these couple of terms." I can tell you, I got an email when I woke up this morning, Brad and I, about a deal where we couldn't get the doc terms we wanted, and we passed. And so this is something we're focused on. We think it will be a huge driver of protection in the market, a huge driver of high recoveries in case we do make a mistake, and it's part of our process. The other great way we protect your portfolios is by using accretive and flexible financing structures. We have a 20-person capital formation team led by Victoria Chant, who I know many of you know. You'll see her here in a moment in the panel. That's a big part of what we do. If we have the lowest cost of capital in the market, we don't have to take excess risk on the asset side because the all-in yield on a levered basis will be attractive, and that's what we've achieved here. Low cost, flexible financing, long maturity runway, lots of excess liquidity, lots of flexibility on what we can do on the asset side. You can't do that unless you have a large, dedicated effort that you've built up over a long period of time. When you're Blackstone and you have the deep, deep integration and relationship with the banks to structure financing vehicles that work for us, and you saw it with our revolver extension recently, where we got 100% agreement on the extension on the most favorable terms in the market. You'll see us continue to lean in here as a competitive advantage. And then, of course, portfolio management. You know, once you've got the assets, how close of an eye are you keeping on those assets? You heard from Kristen earlier, portfolio management is about offense and defense. I'm gonna talk about the fun part, the offense, the value creation, I'll maybe talk about the defensive part of the field. The best thing we can do in portfolio management is to be proactive and to be engaged, and make sure that our portfolio management, screening committee is as active and involved in decisions as we are on the, on the front end when we're underwriting a deal into investment committee. And that's what we do. We have a dedicated screening process that meets weekly on the portfolio. We have a dedicated watchlist process. In fact, we go over that quarterly with Jon Gray and Michael Chae. We're doing it on Monday. This is a huge focus for us, and it's quantitative in nature. I'm not waiting for someone to raise their hand and say, "I've got a problem." We're seeing data on every portfolio company every week. If we see leverage creep up, if we see a mark come down, if we see underperformance, we know about it right away, and we can do something about it. We have a 25-person team who is dedicated to this function, and when we have an underperforming credit, they take ownership. And they've got restructuring backgrounds if that's needed. They have operational background if cost takeout is needed or management change is needed. They own these names, right? They're not buried on someone's to-do list. We are taking ownership whenever we see challenges in our portfolio. Fortunately, they don't like to hear me say this, but that team's not all that busy today, 'cause if you look at what's going on in our portfolio, it's performing incredibly well. You know, not just, you know, close to zero non-accrual rate, but the leading indicators you would look for: covenant amendments, PIK requests. How many of your deals are marked at a discount? You see here, we have less than 1% of the portfolio marked below $0.85, and that hasn't moved. In fact, it's gone down slightly over the last year, and that's, again, a testament to the underwriting process, the asset selection, originating great opportunities, and if we see issues, addressing them proactively and early to protect the portfolio. So we've made a ton of progress in our CIO function. I hope that's coming through. You'll hear a lot more about it during the panel. But what I want you all to hear from me directly is we're not close to finished. There's lots more room to run here. Our scale, as we get bigger, that drives this function 'cause it gives us more insights. For those of you who were here with us last night, and you heard Steve speak, he said, "We don't necessarily need to be smarter. We just need more access to information to make better decisions." And that's what we're doing, and that's what we'll continue to do. We'll use data sciences. We'll use AI. They're such high priorities at Blackstone. It feeds into our process. It feeds into our portfolio management. We're gonna be front-footed on our portfolio, because while credit issues are benign today, while the portfolio is performing great, we're not gonna be complacent. We've got to be ahead. We've got to be early. We've got to be seeing signs quickly and reacting to them, and identify the next themes. You heard about our investment themes, that we're focused on today, but we got to find those investment themes for tomorrow. It's not just playing defense. You hear me talk a lot about that, but it's also about playing offense and find those new areas to lean into, where we see strong trends and strong opportunities, and really building a systematic function that leverages all of those structural advantages of Blackstone, the scale, the data, the insights, the capabilities, the integration, and driving best-in-class underwriting, execution, and portfolio management. So with that, I'd love to bring up our panel to go into some of these topics in more detail. Teddy Desloge, CFO of BXSL, will moderate, and welcome on stage. Please welcome to the stage Teddy Desloge, Ana Arsov, David Trepanier, Victoria Chant, and Josh Laifer. You're in the hall of fame. The world's gonna know your name. 'Cause you burn with the brightest flame. The world's gonna know your name. All right. I love these music choices. Thank you, B. For those who don't know me, Teddy Desloge, I'm a portfolio manager and the CFO of BXSL, and we have a revered group of leaders on stage with us today. And what I, what I love about this group is we all have very different perspectives on some of the same topics that are very topical today within private credit: defaults, fundamental trends, financing trends, manager differentiation. We'll hit all of these and more, and we have a fun closing segment to bring it home. So let's start with introductions. First, to my left, Ana Arsov. We're excited to have her today. Ana was recently named the Global Head of Private Credit and Co-Head of Financial Institutions Group at Moody's. Many of you likely know her. She's a leader in the BDC industry and has a unique perspective on assessing risk at, across managers and portfolios. To her left, David Trepanier. David is Head of Global Structured Products and Credit Financing at Bank of America. David has been a great partner to us over the years, David, 20 years or so working with, with Blackstone, and he is a true expert in securitization and financing markets. To his left, Victoria Chant. Victoria co-leads Capital Formation and Lending at Blackstone. She was the former head of financing at Citigroup. She manages over a 20-person team, really originating, underwriting, and managing our liability base at Blackstone Credit. And then lastly, Josh Laifer. Josh has been with us for nearly 8 years. He started on the underwriting side of the business, covering sponsors, underwriting credits, before helping stand up our CIO initiatives a couple years ago. Josh really drives our watchlist initiatives, so you'll hear from him today. No one closer to company trends we see on the ground. ... Let's start with a question related to BXSL's portfolio, and Josh, I'll start with you. We show here on a slide BXSL's senior positioning. You've heard it earlier, there's been resilience that we've seen to date, 98% first lien, 47% LTV, and a non-accrual rate of just 10 basis points despite having a fully seasoned portfolio. So Josh, starting with you, would you have expected to see this resilience sitting in your chair a year ago? And looking forward to the next year or two, how do you think about market defaults, and how is BXSL portfolio positioned? Thanks, Teddy, and good morning, everyone. We're all credit people by nature up here, so naturally, we're inclined to expect the worst, but at least then we're prepared for it. I think probably across the panel, we've all been expecting, you know, this looming recession right around the corner for at least the last 18 months, and it keeps pushing out to the right. We've been pleased with the performance of our thematic and sector biases and, and frankly, surprised to the upside with the performance of the economy. If you look at, you know, job prints, GDP prints, you know, really up until recently, they've been consistently quite high, and that's really supported the KPIs in the portfolio for us and the broader credit markets in general. Just to level set, the credit markets today are starting from a very healthy place. We've had really historically low defaults for the last couple of years. It's been quite benign, and portfolio fundamentals across credit tends to be pretty good. But when you think about, you know, particularly what analysts are saying and projecting for public markets, and a lot of analysts are calling for kind of 3%-5% defaults over the next year or two, a big part of that is really just pulling back towards the long-term averages. We think private credit will outperform that, and we think BXSL is well-positioned to outperform, you know, in particular. A couple reasons for that. First, you know, we have incredibly high underwriting standards and access to better diligence. As you all know, we're not in the moving business. We intend to hold our positions to take out, and that's really the mentality that we approach every new deal with. The bilateral nature of what we're doing when we underwrite deals and the relationships we have with sponsors really also helps a lot. As you heard, we lead over 80% of our transactions. And then on the sponsor side, you know, we're really partnering with the best and well-capitalized sponsors in the market. That gives, you know, our companies access to, you know, their checkbooks to support our positions, should anything go wrong. And lastly, I'd say we've set up the portfolio intentionally to really focus on historically low default sectors like software and shy away from high default sectors like deep cyclicals. So we think we're well-positioned to outperform going forward. Yeah, Josh, default's obviously something we think about a lot, investors are very focused on in this cycle. Arguably, recovery is more important from a return perspective for investors in credit. How do you think about recoveries in this environment? Sure. We think recoveries are really going to be the more interesting part of the story, going forward. And, you know, similar to defaults, we think we've set the stage for outperformance. You heard B mention it before, but from a documentation perspective, we think that's going to be a key driver. Broadly speaking, private markets, we find, have better documentation standards than public markets. And, you know, within Blackstone Credit, we've benchmarked our portfolio against our peers. We find we are consistently more protective in our documents. That means we're able to protect our collateral. Portfolio construction, our portfolio is almost entirely first-lien senior secured, so that means in a default scenario, when it comes time to recover, we're first in line to get our money back. And then lastly, institutional infrastructure of managers will matter a lot. So at Blackstone Credit, we've got 24 people dedicated to asset management. We also are able to leverage the broader resources of Blackstone, you know, more broadly, excuse me. That means over 100 senior advisors and operating partners. So when we think about our institutional DNA as a firm, managing businesses, creating value is what we've really grown up doing, and we think that's gonna drive improved recoveries as well. Yeah. Thanks, Josh. Sticking with the same theme, Ana, in your role as Global Head of Private Credit at Moody's, you have a very broad view of the landscape, and you follow the industry very closely. In your view, where are the risks today that investors should be focused on? Thank you for having me. I mean, I'm not going to disagree, but it's good for rating agencies to have a little bit of more conservative view, as you can imagine. So, but I think that in a nutshell, would agree on a lot of the big themes. I mean, just to summarize, we obviously having higher rate environment, higher for longer, just to kind of inform our base case, is that rate cuts are not going to be coming until probably our base case is May, and we're expecting maybe 100 basis points rate cut a maximum of next year. That's kind of our macro view. We are still. You know, we're seeing obviously weaker growth. We're going to go from 2.4%-1%, GDP growth. That's the base case of lending. Then we are thinking, you know, we're looking at just broadly inflation costs, but really service cost and a lot of your portfolio is service, as we know, and that is still quite elevated, particularly from a people perspective and staff. So that's going to be still a continuing challenge from our perspective. So when you look at kind of the, you know, the macroeconomic story, on our base case, it's not terrible, but it's certainly we are looking at a more negative trend for next year. So that's, that's the risks. And then this is what if we are surprised on inflation from an upside scenario, then we can see even higher for longer rates outside of the cycle, which obviously, for highly levered companies, is not gonna be great. But nevertheless, when we step back from that and we look at a little bit of why, you know, in the context of the environment, maybe all of you are scratching your heads, and you're probably reading our research, and a number of lead analysts are here, we did decide to start differentiating in the portfolio, first on the upside. And actually, BCRED and BXSL were one of the only five names in our 25+ growing, and this is public. We have a number of private engagements as well. They're on a positive outlook. And certainly, you know, reconciling those two trends, it's something that I would like to spend some time talking about. First and foremost, where we're focused on is the franchise, and we're focused on underwriting, we're focused on documentation. Specifically to Blackstone's point, we did spend months and months and months, and also with our lawyer, in legal terms, we do have our own lawyers as well, spend a lot of time looking through the docs process. And that was a very important process as we were looking particularly for a platform like BXSL and BCRED as well. We're kinda looking at jointly. I know this is not a BCRED investor day, but I think it's very important to think about what we're seeing across both platforms, is that, Blackstone does spend a lot of time on documentation. But nevertheless, we do see that the larger deals are having a weaker documentation. But nevertheless, from a Blackstone perspective, we got satisfied that the sampling, the portfolio, that it was... We do think that there were stronger covenants here than definitely in the BSL market from a comparison perspective. When we look at asset quality in our metrics, we are actually basing our case from the only data that's out there, really, from a long-standing perspective, is defaults and recoveries in the BSL market. We probably will agree with you that recoveries will be better because of some of the protections and that you have in your deals. But overall, recoveries for the whole industry, we are expecting to be weaker because of predominance on the unitranche deals. And then when we look at specifically to Blackstone, I think the very important thing for our positive outlook was what Victoria does, and Victoria will talk about what she does. But the type of, we spent numerous hours looking at the banks, and this is you guys who provide credit, obviously, to Blackstone, and you know, it's a key differentiation factor. And when you look at where... You know, I wear both hats, looking at bank ratings, and non-bank finance, and spend a lot of time in something called regional bank crisis this year, as you might not have missed, and I know what the banks are doing and undergoing, and this is gonna be quite a challenge from funding perspective and liquidity perspective. That extra dollar of funding, and particularly renewal facilities, coming, you know, let's say, 2025 cycle, et cetera, is the banks are not gonna be there, and, and, and for the BDCs as well. What Victoria and team and overall Blackstone has, from a relationship perspective, is quite unique. If I can take one... two key characteristics of why we decided to go, of the 5 positive outlooks to our Blackstone entities, is, number 1, seniority of portfolio. It's the most senior portfolio in the BDC universe, and number 2, the banking relationships. Yeah. Yeah, that's interesting. And you know, dispersion is something that I hear in that comment, whether it's differences with the public private market or what we heard from V around sort of industry and software. You know, David, you evaluate the underwriting and risk management capabilities of the largest managers in the private credit space. What are the key areas you focus on in assessing managers, and where do you see the most differentiation? Sure. Thanks. So when we, you know, look to extend credit to direct lenders, we really think about it from a framework of we're lending to lenders. And so everything's looked at from the perspective of extending credit to people who also do what we do, but in a kind of, you know, it's a private capacity. So it starts and stops, I think, with origination. That's where, you know, your asset funnel is key to driving selectivity, driving documentation. Are you leading transactions? Are you participating in them? Scale matters, but it's not just scale. It's 'cause there's definitely scale players out there that don't have an ecosystem that can also drive value in the companies and drive that expertise. So origination's key. Are you an incumbent lender? We know, as lenders ourselves, relationships matter in this space. Incumbency is key also to seeing high-quality deal flow, driving documentation, which protects creditors. And if you're participating in other people's transactions, you lose all of that, that power of driving, driving documentation. So there's a direct lender leverage that are positioned to not only help drive outcomes for lenders, but also enhance the company. Portfolio composition's key. So the origination platform will bring in a higher quality portfolio if it's got a bigger deal funnel. And then they can drive value not only through asset selection, but also through the leverage profile applied on the asset portfolio. And so we look for, you know, a lot of the themes we've touched on today, like less cyclical portfolios, less, you know, stretch, you know, stretch unitranche in the transactions. Safer credit profile, with judicious leverage applied to it, is critical on the origination side. Then we go ongoing portfolio management and the infrastructure of the ecosystem where this is gonna be managed. So obviously, experienced and tenured team. So this is where scale, scale matters in all of these respects, on the origination side, portfolio management side, and the ecosystem. The financing side also is critical, for scale, but it's not just the only attribute that matters. So you need an experienced and tenured team, consistency in the team, how long has that team worked together, and the depth of the credit bench. We also like to see responsibility and accountability over the entire life cycle of an investment. So it's not just an origination, how is that incentive? Do they live with that credit through the life of that credit, you know, through the process? Frequency of dialogue with the companies and sponsors. How connected are they to who they're lending to? And then ultimately, the sponsors of the company, and do they work together in partnership? It's very key, 'cause again, thinking of everything as a lending to lenders is very much a relationship business from start to finish through that investment, and that's very key. And then the flexibility of the capital to provide comprehensive solutions, not just from a financing perspective, but then also driving value through the expertise within the organization is key. On the process infrastructure points, transparency, timeliness of reporting on the underlying collateral, quality of reporting of timeline back to us as the lender is critical. So these are all things we look at as we, you know, partner with people like Blackstone, and we see that partnership, we see the quality of reporting. Then this is a unique thing that I think is done well at very few shops, but the stability and breadth of financing sources. A lot of people focus on the asset side of the balance sheet and asset selection, credit selection, which is critical. But also, you can drive a lot of value through the right side of the balance sheet, and, you know, the financing sources are critical in how... what we look at. So one, and again, scale matters here again as well. Are you dependent on a single broad source of financing, whether it's bank facilities or the CLO market or unsecured market? Where, where are you financing yourself, or do you have access to a breadth of financing sources? So you'd have that flexibility. What's your degree of leverage? How much liquidity do you hold? So deep sources of liquidity and committed capital are key. Fund structure matters. Are redemptions allowed in the fund? And how are those redemptions funded over time matters to us. So we look at both the left side, the quality of the balance sheet, as well as the quality of the financing. And very few people bring it all together on both sides of the balance sheet. I want to go deeper on that topic. Yeah ... in a minute. But before we do that, I do want to move just to the topic of fundamentals- Sure ... and really what's going on in the portfolio. We have a slide here that shows two stats that all investors are very focused on, right? Interest coverage and earnings growth. BXSL's portfolio, 20% higher than the market on interest coverage and nearly double the earnings growth. Josh, if we switch back to you for a moment, can you just comment on how we identify, assess, and manage risk in the portfolio? Sure. So we'll start with the risk framework, and B touched on this, a little bit earlier, but our process is really designed to maximize touch points with our portfolio, daily, weekly, monthly, you know, quarterly. We start with objective criteria when we screen for risk, so we'll look at changes in EBITDA, changes in leverage. We can then overlay any subjective outlook or bias. Do we have a particular, you know, concern or outlook for a company or an industry? We look for leading indicators, so are we, you know, are we seeing companies with excess revolver draws? Could be a sign of stress and liquidity. And we like to... We actually like to look at a lot of the factors in combination. So we'll run an analysis, for example, of show me companies where, you know, revolvers are drawn more than 30%, leverage is up more than a turn since close, and interest coverage is less than 1x shocked for current base rates. You put that through the model, it spits out less than 1% of our portfolio. It's really just a couple of names, and we're very focused on them. So then, what do we do about it? We will always, in a challenging situation, put a member of our 24-person asset management group as a deal captain for these credits. We like that for a couple reasons. It brings a highly specialized skill set to challenging situations, but it also actually creates a really nice separation of church and state. So we like the fresh set of objective eyes coming in and reevaluating these sorts of scenarios. We just think it's good process for the way we manage the book. The good news for us, the majority of our borrowers are growing and deleveraging. We've seen, on average, nearly a half a turn of deleveraging since close in BXSL's credits. So it's really a pretty small list today. And in your seat, Josh, you're focusing on the watchlist credits, but you also see the broader portfolio. Are there any themes that you can touch on that you're seeing today that are interesting to you? Sure. I think there are two themes I'd highlight from the portfolio broadly. The first is that a lot of the COVID dislocation that we've seen and all kind of dealt with over the last couple years, we seem to be moving through that. And you know, it's increasingly in the rearview mirror. The COVID over-earners seem to be coming down to earth. We actually don't have a lot of those in the portfolio, not 'cause they were necessarily bad businesses, but they were incredibly challenging to underwrite, given everything that happened in the world over the last couple years. So, you know, if you look at our portfolio, we don't have a lot of cleaning pro- you know, manufacturers or pet product distributors in the book. There's a reason for that. But you know, kind of kidding aside, the dislocation from COVID seems to be abating, and the inflation, you know, as you've heard, you know, seems to be settling down. Particularly, you know, we're seeing less pressure on wages and supply chains are unlocking. So that's very, you know, that's very supportive for margin, and we expect that trend will continue. And then the second theme I'd highlight is our strong bias towards high-quality sector selection seems to be paying dividends. So we've had double-digit top and bottom line growth across the portfolio, and we, you know, we expect that those trends of outperformance are going to continue. ... if I may just kind of from a debate perspective, we always debate with portfolio, and it's generally is the propensity on the negative side, because I want to make sure that the investors kind of see the other side, is propensity of peak loans and recurring revenue loans. And then when you look at particularly tech and software, we are hearing, and this is more of a question for you, that the so-called recurring revenue and price stickiness is not as sticky these days, and actually there are large contracts that are being renegotiated with 20%-30% discount. So how are you thinking with, you know, broadly the sector, you, you know, exposed to software and thinking about the, you know, particularly 2021 vintage and how that was underwritten, and in the context of everybody bet that software is going to be an absolutely new in class, and I'm just curious how you think about that? Sure. We've really liked software as an asset class, as you've heard, and software has been one of our best performing asset classes. You know, we actually, I'd say, kind of agree that there's probably gonna be some bifurcation in the software space, and we've intentionally set up the portfolio with that in mind. So, you know, our software portfolio across Blackstone Credit, BXSL, these are typically, you know, on average, multi-billion dollar enterprises, TEVs, very high recurring revenue, very high retention. We really focus on scale and retention when we underwrite names in the software space. And, you know, to be honest, from the portfolio perspective, in almost all cases, we've seen retention really hold up, which I think is validating for the way we've underwritten the credits. And then on the flip side, you know, again, I would actually agree with that. We do think you will see some... you know, or you may see some signs of stress in some of the smaller technology names and more speculative technology names. We've tried to avoid that, both through being in larger enterprises, and then I'd say also in the end markets we've prioritized. I think Viral, you know, spoke about, we want to be in cyber, we want to be in ERP. We've de-emphasized ad tech, martech, things that are a little bit cyclical. So, I'd say overall, we actually agree, but we've constructed the portfolio to accommodate that. I have one more debate, again, just from a rating agency perspective. This is, you're kind of getting a preview of what, what our pretty much monthly credit discussions look like. The one that we've debated a lot with Blackstone and some of your larger peers is about the funnel. And, you know, we know that what's happened in the BSL market, and it's been, kind of really nice situation for you and maybe two more, three more peers. Yeah. You capitalized on that, and you're pretty much dominant in the larger deals structure. The whole debate around diversification, having small deals versus large deals, yes, we do believe that large deals, larger companies will perform better. Yes, we do believe that sponsors, particularly a fund where you're in a fund life cycle, and if you're a significant part of the fund, there will be incentive to support that. But nevertheless, what happens from just funnel when you get into a little more normalized BSL market? We wrote actual research on this. I welcome everybody to go to our private credit research site, that we do think the competition will accelerate, which will be negative for creditors. Yeah, I mean, I think on that point, it- the direction of travel and overall growth in the market is really important to contextualize it. So, you know, if you were to go back five years ago and look at private credit share of the market versus where we are today, our share capture is quite large. So even today, you know, we're- we think we are under-penetrated in the size of this market. It's a, you know, kind of a $4 trillion market, and we're a $1 trillion piece of it. If you just start even rolling through or re-rating the share, excuse me, where we are from a market share perspective today, as transactions just work through the system, you know, the funnel—there's gonna be a tremendous tailwind in terms of the size of the funnel. So even though you've seen, you know, more capital has been raised in the space, you know, it's about supply and demand, and we think the demand will continue to be there to more than absorb the supply. I think the other interesting stat that I always point to is 2021, tightest that we've seen coming out of COVID, obviously, in the credit markets. Very active BSL market, loans, in a lot of cases, trading above par and repricing tighter. You would expect more deals to get done in the private – in the public market versus the private. And if you actually look at the data, the number of deals done in the private market was greater. That was the inflection point that we saw, in 2021, and I think that's just been sort of perpetuated with what's happening in the banks in the last 24 months. We have time for one more question, and I want to move back to liabilities, very important topic. Returns come from the left and the right side of the balance sheet. You know, we illustrate here our low cost versus the market. Victoria, can you just speak to what goes into BXSL's liability profile? How do we build it? How do we do it differently than our peers? Yeah, happy to discuss that. So I manage the capital formation team, and we manage the liabilities, so that right side of the balance sheet that we discussed, and we really run that like a business within the business. I think that Blackstone differentiates itself by treating it as an investment process, and they're really managed in a very similar way to our assets. So we have dedicated underwriting, origination, capital markets, portfolio, liquidity management, and we work very closely with Josh's team. I'll tell you, if I'm ever having a great day, and I feel like I have too much pep in my step, I can call him, or I can call Ana... Definitely bring me back to earth. But we really want to focus on making sure that we're looking at all the risks in the portfolio and managing to that. So for BXSL specifically, we obviously have a great example here in terms of how we manage the debt stacks. So we're accessing diversified sources of funding. We've done that over a long period of time. That's allowed us to be very opportunistic, and we're very large participants in these markets.... So we're able to access lower cost of funds, and that, and that's evident today in what a lot of our peers are doing in terms of accessing capital. It's really translating into 225 basis points of lower cost of debt relative to our peers, which we think is a really phenomenal thing for investors. Yeah. Great. Well, we're out of time. Thank you, guys. I think, as I think about some of the key points we discussed, one, portfolio positioning, critical, right? Defaults increasing, seeing dispersion, where your position will lead to dispersion in returns. Two, manager selection, very, very important, more important now than ever. And then lastly, not all capital structure is created equal. Access to liquidity, low cost of financing will outperform. So thank you. Let's give our panel a round of applause. We will be taking a short networking break. For our virtual audience, please stand by. Ladies and gentlemen, please make your way back to the town hall. The program will begin shortly. Ladies and gentlemen, please make your way back to the town hall. The program will begin shortly. Ladies and gentlemen, please make your way back to the town hall. The program will begin shortly. Okay, everybody, everybody, come on in. We've got everybody in the back. If we can scoot in, get close to your neighbor, enjoy that. I, we wanted to see how many people we could absolutely fit. This is fantastic. Come on in from the back. I see a lot of smiling faces.... It is an absolute pleasure to introduce our keynote discussion. And, when we think about as we go into the discussion of value add, what I want you to think about is how we've built things. You've heard that in terms of our origination franchise or our underwriting franchise. Building is very important at Blackstone. As we come in and we get close, 'cause we'll be having our panel starting shortly, I want you to take a look at this video on what it's like to build with Blackstone. There has never been a better time to build. The best builders chart the path forward, pinpointing where the world is going, and investing in the solutions that will take us there. At Blackstone, we've been building for nearly 40 years, building deep trust with our investors by delivering through market cycles. Building resilient businesses, life-saving medicines, and real estate tailored to the changing ways we live and work. Building a network of portfolio companies that can spot trends and adapt before the competition. Building a secure financial future to help safeguard the individuals who safeguard us. There has never been a better time to build. Build with Blackstone. Welcome back to the 2023 Blackstone Secured Lending Investor Day. Please welcome to the stage, Jon Gray, Steve Klinsky, and Weston Tucker. If you start me up. If you start me up, I'll never stop. If you start me up, if you start me up, I'll never stop. Did you pick this stardom? ... It wasn't my choice. Okay. We'll give the credit to Mr. Bock. Well, good morning. Welcome. I'm Weston Tucker, and I lead Blackstone shareholder relations efforts. And it's an honor to participate today in the inaugural BXSL Investor Day, and in particular, to moderate a discussion between two leaders in the alternatives industry. I am very pleased to welcome to the stage, Jon Gray, President and Chief Operating Officer of Blackstone, and our guest speaker today, Steve Klinsky, Founder and CEO of New Mountain Capital. As everyone, I'm sure knows, New Mountain is a leading private markets manager with over $40 billion of assets under management across private equity, credit, and net lease, and an outstanding long-term track record of success. Blackstone and New Mountain, as I think you heard on one of the other panels this morning, have been involved in many investments together in various ways, and Blackstone even owns a direct stake in New Mountain via our GP stakes business. So Steve and Jon, thank you both very much for being here. So we'll jump into the discussion on private markets in a moment, but just given all the movement in markets and bond yields, Jon, given the perspective that you have with the size and scope of Blackstone's portfolio, I think it'd be helpful for the audience to hear some of your views on the macroeconomic environment. Sure. I guess I'd start being a little bit optimistic, and that is we just continue to see inflation coming down across our portfolio. We've been talking about that now for about a year, and we see it in multiple ways. Goods costs are now basically deflating. I would say labor market wages are growing in the 4s, down materially from where they were a year ago, and we'll talk about it, but the path of travel, I think, on that is lower. And then, the biggest component of CPI shelter, the government showed you this month that it's up 7%. It's a little bit like telling you what the weather was 9 or 12 months ago. Real shelter costs are running about break even, modestly positive, and so I think you'll continue to see better-than-market expectation prints on CPI over time. I think the other good news, and I'm sure Steve sees it in his portfolio, is the economy has been more resilient than any of us would have expected, particularly in some of the better sectors in the economy. Unemployment remains low. We've seen pretty good revenue growth at our companies. And defaults, very relevant to this discussion, we have 3,000 non-investment-grade borrowers in our Blackstone credit business, and in Q3, we had a total of one new default. So very healthy corporate credit market today. I think the risk and the issue is that if you keep rates at the level they are, it ultimately slows the economy. If you think about 7.5% for a mortgage or 7.5% for a car, companies that have to refinance at higher rates, it's a little bit like taking oxygen out of the room. We've begun to see sequential deceleration in revenue, still positive, but growing more slowly. I think most tellingly, our companies, which were hiring a year ago, 7 or 8% more people, are now pretty flat in terms of headcount. So we would expect next year, we'll see more of a slowdown. This is not 2008, 2008 or 2009 from an imbalance standpoint, where you had big issues in housing, consumers, businesses, banks were way over-leveraged, but I think it's the natural outcome of what happened. We had. I described it yesterday at the Goldman Sachs conference, like a four-act play. Act one was a lot of monetary and fiscal stimulus during the pandemic. Act two was the inflation that came about as a result of that. Act three was central banks saying, "Hey, we got a problem here," raising the cost of capital dramatically, shrinking their balance sheet. I think Act four will be a bit of an economic slowdown, and I think that's a reasonable expectation to have out there. Probably a little more cautious on growth relative to market expectations, but a little more optimistic on inflation. ... Very helpful, Jon, on the baseline macro environment. Turning to the topic of the day, private credit. Steve, you've been a pioneer investor in both equity and credit over many years. How do you think about the private credit asset class, as an evolution? Yeah, well, first of all, thanks for having me here, and we have great respect and relationship for Blackstone, so I'm very happy to be here. Just for some background, I came to New York, my first day of work was October 1, 1981, when the ten-year Treasury was 15.84%. The highest rates in history were literally the day before I started work at Goldman Sachs. And, you know, so these are not the highest rates in history. This is - I would - I'm very similar in the macro outlook to what Jon said. I'd be, this is kind of rainy weather. It's not a crisis like 2008 was or COVID was. And I think both private equity and private credit, we run both, can be great asset classes and are great asset classes. Private equity is great if you buy a non-cyclical business and really add value to it. We think of ourselves as a business that builds businesses. How do you take a safe base and add to it? So, you know, it's public knowledge, we sold a company called Signify this year, that we bought for around $500 million, we sold it for $8 billion this year in this market because we had transformed it. So that's the key to private equity. And the key to private credit is, I love the class of private credit. We've been in it since 2008, and we entered after the crash when debt prices were so low. But let's say you have the best software company in the world, and someone pays 20 times EBITDA for it. To be the senior 6 with 14 parts of equity underneath you, there may be risk in what the multiple is on exit on the 20, but it feels really good to be the 6, and it's been floating rate, it's been going up, its fixed rate, you know, long-term bonds were getting killed. We were doing great, and Blackstone was doing great, and, so I think it's a wonderful class, and I think it's... We'll talk about it later, but very still misunderstood, not followed enough, huge spreads to what a mortgage retrades or something else trades at. So I'm very positive on both classes. And, you know, obviously, a big personal investor, and we're big- we invest in our own funds ourselves very heavily in all of these products. Thank you. Jon, turning to you, your perspective on the evolution of the private credit asset class. Well, I guess what I'd say is, if you step back, I like Steve framing it back to 1981, 'cause if you went back then, you would have seen a world that was basically 60/40 for most investors, maybe it was 70/30, and it was all liquid. Liquid stocks, liquid bonds. And what we've seen over the ensuing period is private assets take an increasingly larger piece of that 60% or 70% because of the outsized returns: private equity, real estate, infrastructure, growth, you name it. And yet, when you go to that fixed income bucket, it has stayed remarkably liquid. There was a little bit of distressed debt. There are a few people who do a bit, but for the most part, that stayed liquid, and certainly when rates were very low, people weren't really thinking about, "Should I go into that asset class?" I think today, the same opportunity exists to generate higher returns by trading away some liquidity. Now, nobody's gonna take their full liquid fixed income book and turn it into private debt, but could you take 20 or 25% of that? And those are a lot of dollars. And the question is, you know, why would you get a higher return for doing this? It's different than in private equity, where it's, to Steve's point, a lot about the value added, the intervention, and what you're doing. In private credit, what's happening is a couple things. One is, you're essentially bringing the lender directly up to the borrower. So if you think about what happens in the leveraged loan business when Steve's firm or our firm on the private equity side buy a business, we, you know, a financial institution will originate that loan, they'll take a couple points, they'll sell that to a CLO manager. We happen to be also a very large CLO manager. You know, the CLO manager will assemble a bunch of those loans. They'll charge a bunch of fees for managing, of course, then there'll be a CLO done, there'll be underwriting fees, rating agency fees, all this stuff. And then, what ultimately goes to the buyer of the CLO is a lot of the economics have gone out along the way. And what is direct lending? What does Blackstone Secured Lending do? You know, what do we do here? We're basically just coming right up and making the loan. And then it has this other really nice benefit, which is, as a borrower, you get certainty. So banks, because they're in the moving business, have to tell the borrowers, "Okay, the loan's 550 over, but I can flex to 700, and I can change the terms 'cause I got to distribute it." Whereas the direct lender, the BDC, can say, "Here's the price of the loan." And that is very advantageous. You also have one counterparty or maybe two you're dealing with, as opposed to when you want to make a modification, hundreds of people who owned your loan, and you can do things that are more customized. You can have delayed draw term loans, you know, that work better for your business plan. Maybe it's an acquisition strategy for the company. So what's essentially happening here is investors are seeing an opportunity to generate higher returns, and borrowers are finding something that is more user-friendly. The outcome of that is a share shift. Now, is it all gonna move in direct lending to private credit? No. The banks continue to have a very important role in many types of transactions. The broadly syndicated loan market, you know, at some points, will tighten, may have a lower cost of capital, but this area, I think, will continue to grow because of some of its competitive advantages. I think the key is, and the misunderstood thing we can talk about is, the level of risk, and Steve articulated it well, is just much lower than people recognize. I mean, this, BXSL, the average loan was originated, even in the very strong period, in the mid-40s loan-to-value-... Today, the new loans you're making are in the mid-30s loan-to-value, just because the borrowers can only afford so much interest expense. If you went back to the bubble period of 2006, 2007, people were borrowing 70%-80%. So we're definitely in a healthier period in terms of credit in the marketplace, in terms of the risk-return. So Jon, just following up on that for a moment. Given the dramatic growth in private credit, it's not unusual to pick up a newspaper article that makes the case that we're in a bubble. So given some of that evolution, the change in LTVs, what would your response be if somebody came up and said, "This is growing too quickly, we're in a bubble period? Well, to me, the sign of a bubble is people taking on excess credit risk and undercharging for it. So I think 2006, 2007, I, I remember when we were buying a business, borrowing 80% and getting charged at sub 200 over or something. I mean, if, if I look back at that, there was just an enormous amount of leverage in the system. Today, loan-to-values are the lowest they've ever been in my 32 years in private equity. I've never seen them as low, and the spreads are above historic levels. So those are generally not indicators of a bubble. What we're seeing here is share shift back to what we talked about earlier, and people are seeing that share shift and thinking it's signaling something else. But it's actually just signaling that there is a more efficient way to distribute this credit and get higher returns to the underlying investors and satisfy the needs of the borrowers, and that's why the business is growing so much. Steve, turning to you, I'd, I'd love to hear your perspective on the safety of the asset class- Yeah ... as it's grown. Yeah, I think this, again, is one of the great misunderstood facts. I mean, you know, the really negative name for what we do is shadow banking, which sounds like we're sitting in the sh... You know, there's lots of lights out here. We are fully regulated, you know, we're doing SEC filings. We have something called New Mountain Finance Company, which is our publicly traded one. You know, we'll show name by name what's our multiple of EBITDA on each loan, and I mean, you can't be more transparent about it. And the safety factor, again, it... You know, when you think about George Bailey in It's a Wonderful Life, it's not how big your building is. If you have depositors who could leave on a moment's notice, as Silicon Valley Bank showed, you inherently have a lot of inherent risk, no matter how well you manage it. And a normal bank is 9-to-1 levered. A firm like New Mountain Finance, and Blackstone has similar versions, we have permanent capital. There are no depositors who can pull. We're not buying the loans to syndicate them out, we have them, so the loans go up and down in value, but you can't have a run on the bank. And we're levered, like, 1-to-1 or closer to 1-to-1, not 9-to-1 or 1.1-to-1. So it's actually a much safer structure, and it's only because it's new or not understood that it sounds. You know, people just haven't studied it. Of course, the traditional banks don't want to tell you that because that's not to their interest to say it. But, I mean, it's just obvious on its face, if you don't have depositors and you're less levered, it's a pretty good way to have a position to make a loan. So I'll stop there. From a borrower perspective, a question that investors sometimes ask is, if there's cheaper financing available in the broadly syndicated loan market, why would we continue to see those borrowers select a private credit manager? Yeah, I think it goes back to some of the things I was talking about a little earlier, which is, it's not just about the cost of the funds, it's also about who you're dealing with. If you went back to the old sort of George Bailey world, you had a banker who was your counterparty. Once your loan is broadly syndicated, the only way you can make a modification is to go out and get 51 or 66 or whatever the threshold is. That's a lot harder than picking up the phone if New Mountain or BXSL is your counterparty and say, "Hey, I'd like to make a change to the loan. I, you know, can we expand this facility? Can we do this?" That's just a much easier way to deal with somebody. And particularly for the private equity sponsors, who are often very acquisitive. They have a business they like, they've got a management team they like, they want to grow the business. Having flexible capital and a lender who can work with you to say, "Yeah, I can advance you more," as opposed to, "To go do that acquisition, I've got to go refinance my entire capital stack." So ironically, because the way the debt is distributed now by financial institutions, it's the private lenders who look and feel more like that older world in terms of relationship banking. And so, again, I would say what I said before, the banks are hugely important. They do so many valuable things in our system, but this is one edge in this space, because banks can't really hold non-investment grade corporate credit in real size, and these vehicles are designed specifically to hold them, so they can hold these and have a real dialogue with the sponsors and make changes real time. In so many of our loans, you know, the business started out in one way, there's a new acquisition, something's happened, they're doing something with their capital structure, they call us, and they find that very attractive to have that dialogue and flexibility. Turning from the borrower to portfolio health, while higher rates certainly benefit lenders, they can also create pressure for borrowers. Steve, I'd love to hear your perspective on the current state of sponsor-backed businesses today in terms of portfolio health. Yeah, you know, I think it's. It goes... There are 5,000 private equity firms owning 30,000 companies, so there's no one. It's like, what does restaurant food taste like? There isn't one answer that will tell you about every restaurant and every meal. My own firm, I'll speak about my own firm, we're getting through it quite well, because on average, we use 4x debt-to-EBITDA when we buy a new company. And we worked very. The biggest pinch point on private equity recently was actually kind of September of 2021, when inflation was hitting, supply chain was hitting, the government wasn't even talking about inflation yet. You know, we started working our companies through back then to get their prices up, to get their supply chains open. As Jon said, if anything now, there's deflation in some of the ingredient costs, and so forth. So I think most good private equity firms have managed through this period. And for new deals, we've continued to be active on new acquisitions, and we are getting some, I think, some very, very strong acquisitions this year, where instead of doing an auction, it was, "Hey, let's have certainty in a one-off proprietary negotiation with us." So it is more challenging for the deals done right before the interest rates run up, but they should, hopefully... I describe it as walking up the hill in the rain versus down the hill in the sunshine, but a good company survives it just fine, and it's a great time for fresh money. And Steve, what's your perspective on sponsor support in the event that markets encounter more than just a bump, and companies start having- Well, well, this is, again, a very significant positive that I'm not sure is understood. Again, go back to that 20x EBITDA company with 6x debt and 14x equity, good software business, 10,000 clients, and all that. If interest rates move up, and they're... No one's gonna throw away the keys on 14 parts of equity in a major software business because interest rates went up a few hundred basis points. So, and sponsors, it's not like 1981, where there was 99 parts debt and one part equity. Sponsors are well-capitalized. There are other third parties who will put in money to delever balance sheets. So as a, as a lender in our credit arm, we've had a number of positions that the debt's been reduced significantly recently by the sponsors, you know. I know Blackstone's had the same thing. It goes with less levered... We're under 40% loan-to-value, very similar to Jon. So, more equity underneath you from better sponsors means you also get more sponsor support. Jon, I'd love to hear your perspective on that, on that same topic. Well, I was just gonna start back on the credit side. It's been remarkable how well credit has held up. BXSL has virtually no defaults. I would say part of this is... I would concede that as the economy slows, some companies will face more pressure, because I think rates are gonna stay elevated here, because the Fed is cautious on inflation, and so there could be some challenges. What we've done to try to counter that is focus on low loan-to-value, focus on larger companies. I think the average company in this portfolio is something like $700 million-plus of revenue. They tend to default at lower rates. Try to lend to less cyclical, less capital-intensive businesses, healthcare companies, software companies, business service companies, they're more resilient. And so what we've seen to date is, the companies have done an excellent job navigating through this environment. And of course, you know, these stocks are priced at levels now where, you know, you're yielding double-digit-plus returns, and then earnings are a couple of hundred basis points on top of that. So you have a nice cushion in the event a couple of things do run into challenges. So I think there's been a lot of concern. There certainly was 12 months ago, when the stocks in this sector were under enormous amounts of pressure. There continues to be this lingering concern. But to date, we've seen remarkable results, and again, I'd go back for us, where we focused, and then just the overall much lower leverage amounts than what has been experienced in the sector. Jon, what's your view on sponsor support? Well, my view on sponsor support is, it's one of the great things about lending in this space. Steve said it right, which is, particularly on the bigger companies, it's very painful for a sponsor to let these businesses go. And so they're either them putting in funds from their reserves or them finding a hybrid equity manager, somebody else to come in. And so what you're seeing, and I think that's part of the default, is there are things happening at companies. We've seen sponsors support plenty of these businesses that maybe didn't anticipate 550, you know, one-month SOFR, and they've stepped in. And so it's an additional level of security that is very helpful, and again, not fully appreciated by the marketplace. What's fascinating, I just think in the whole sponsor world, if you look in the CLO business, I don't think there's ever been a loss in an investment-grade senior CLO. Much better than triple-A bonds. Well, it's sort of an amazing thing. There's just a misperception in my mind around risk in this space, and that's why you get to earn the excess returns you are today. As we're at BXSL's Investor Day, I'd be remiss if I didn't ask a few Blackstone-specific questions. But Steve, you have a clear choice to work with any lender in the market. When you think of financing and the partners that support you with that financing, what causes Blackstone to come to the forefront? Steve, you should know this is a trick question. Well, you know, we have a great relationship with Blackstone. We don't... First of all, New Mountain does not lend to our own private equity deals, because we don't want to have a conflict where we could be on both sides of the table. So we want to get the best third-party lenders we can find. Very often, that's Blackstone, and for all sorts of reasons. One reason is the scale of Blackstone allows them to stand up for the check and make a full commitment, plus just the intelligence of the team—the, you know, the knowledge, the trustworthiness, so it's all of those things. You know, my own firm as a lender is kind of, there's two ways to play it: one is the scale Blackstone has, the other is to just cherry-pick loans, again, with incredible relationship. We can do that. We can cherry-pick loans on our side and do very well, and then Blackstone has the scale on its side. But both strategies work, and Blackstone's been tremendous, and, and we're thrilled also to be a lender to some of Blackstone's best deals. So it's a, it's a good relationship in both directions. I would just add to that, that has been, for us, a real competitive advantage, which is do things in size. And so the fact that we have the largest non-traded BDC, we've got a bunch of institutional customers who invest with us, it allows us to show up and say to a sponsor, "Oh, you want to do a couple billion-dollar check? No problem." And in credit, being able to deliver certainty to the counterparty who's got an acquisition... And if you think about it, particularly in public company context, when you start talking about bigger transactions, you don't want to call 100 people because you know the risk of this going out. So again, scale matters in those situations, being able to speak for a larger check size, and that's definitely worked with businesses like Steve's, who's obviously got very large-scale investments. Jon, can you talk about sort of the knowledge base and the integration of Blackstone in terms of benefiting our activities on the private credit side? Well, if you think about investing, it's always about pattern recognition, seeing a bunch of dots, connecting them. And if we should have one advantage with more than $1 trillion of AUM, it's that we get to see more than anybody else, more in almost every asset class, every geography. And so when our credit team's going out to do a deal, they're not able to, because of the Chinese wall, talk to somebody in private equity or real estate about what they're doing, but they're like: "Tell us about the landscape in this industry or this sector. What's happening in home building, or what's happening in this business services area?" And to have those insights is extremely helpful when you're being a lender. I think that has been a part of the special sauce to avoid some of the sectors that are more fraught to go longer. You know, we talk often at Blackstone about good neighborhoods, be it energy transition or digitalization, life sciences, some of these areas, travel, and we've mirrored a lot of that in our credit business because of the insights we see in our equity business. So I really think having this broader perspective has helped everybody, but I think it's been particularly helpful in looking at credits in this space. Speaking about broader perspective, we have enough time, I think, for just a quick-hit question, just for each of you. Take out your crystal ball for a moment, and just looking forward to 2024, what is the biggest surprise you anticipate in the private credit markets in 2024? Jon, starting with you. You know, I think maybe two. I think the growth will continue. I don't know if that's a surprise, but I just think for the reasons I talked about earlier, that trend's going to continue. And two, I think the predictions of mass doom will not come to pass, just as they did not come to pass this year. I would expect, given a slower economy, some increase in defaults, certainly, but a lot of the prognosticators, I think, will have to hold out for the future. Yeah. No, I have, I have a very similar view. I mean, I think there will be some defaults. I think it will still be, overall, a tremendous asset class. And again, the spreads, why, when you look at yield products, why BDCs can be yielding meaningfully in the teens and other things are in mid-single digits with similar risk, I think is still just an aberration, that it's a newer asset class, you know, not in the S&P 500 index. It's not as well understood. And one of the surprises, or maybe just eventually, that will start to narrow more based on merit. But, you know, I think it's kind of steady as she goes in the space. Terrific. Well, Steve, thank you for joining us. Jon, thank you. Give these distinguished speakers a round of applause. Thank you all. Thank you. Great. Thank you for your questions. Thank you, gentlemen. Jon, thank you. Please welcome to the stage, Kate Rubenstein. I do love that song. I'm in the mood. Thank you, Jon, Steve, and Weston, for that insightful discussion on how private credit will continue to be strategically advantageous for sponsors. Hi, everyone. I'm Kate Rubenstein, Chief Operating Officer of BXSL. In conversations with advisors over the past few months, I've started to hear the question, "As syndicated markets return, what happens to private credit?" It tends to be asked with just a twinkle of gotcha in the eye. So a quick detour before addressing that question. My husband, Dustin, is an evolutionary biologist, he's a professor at Columbia University, who studies how animals cope with changing environments. It's not uncommon around our dinner table in the evenings to talk about change, how it affects bird behavior for him, and how it affects people and markets for me, just like we're doing here. Well, perhaps not bird behavior here, but evolution. You heard Weston use the word twice earlier. So how markets have evolved and how they will continue to evolve together and apart. Okay, so back to the question of what happens as the syndicated market returns. The premise to this question, at least as it's been posed to me, is that public and private credit must be in conflict. But are they? Healthy and robust capital markets support M&A activity, which is good for everyone. Banks want the client, we want the asset, and banks will continue to be important sourcing partners for us. This is not a zero-sum game. There may not be a single right answer to the question of what happens now, but there is an opportunity for a robust discussion, and so it is my pleasure to hand it over to Emily Yoder, Head of our Global Bank Relationships across the firm, who will lead a discussion in greater depth on private credit and investment banking in the changing market environment. Please welcome to the stage Emily Yoder, Mohit Assomull, and Brad Marshall. Wow, that's some good pump-up music. I like it. Thanks, Kate, and so great to be here with everyone today. Thrilled to spend time with you all. Briefly introducing my panel, needs no introduction, Brad Marshall. You've heard a lot from him today already, but we're gonna keep it quick and focus on our, our main focus, Mohit Assomull, Global Head of Capital Markets at Morgan Stanley, who's been at the firm for 27 years, has held various roles across investment banking, capital markets, both in Asia, Europe, and now in the US. And so thank you so much in advance- Thank you, Emily. ... for your time here today. So I've been told by Jonathan Bock, we have to get user engagement high, so we're gonna start out with a question on the screen. Let's take a look. The question is, "Based on your read of the market today, what kind of pickup do you expect in pipeline for new LBO financings in 2024? A, nonexistent, B, gradual, or C, substantial." So we'll give everybody a moment to vote. Okay, gradual. Okay, not surprising. I think what we want to do here is really focus on Mo's view, given Morgan Stanley is a leading global franchise for banking. I don't want the optimistic banker view. I want to know what your real view is. How did you answer this question, and why? Great. Thanks, first of all, for having me, Emily, and great to see everybody. I actually think we've been in gradual for most of this year, and so to cut to it, I'm actually gonna be closer to substantial for next year. That may be a little too aggressive, but I'm definitely constructive towards substantial. And part of that is, this year we've had real headwinds, macro, geopolitics, higher financing costs, and yet there's been a little bit of activity, partly because that negativity has been offset by CEOs wanting to do things- Mm-hmm ... after a period of almost zero supply in 2022 and early 2023. And so I do think that we're gonna... You know, the gradual that we saw for at least the second half of this year will continue to pick up. We've seen some more interesting strategic deals, more tactical deals, in the second part of this year. We've seen most of the financing markets open up, you know, whether it's the IPO markets a little bit, much more on the credit side, more M&As being announced, with financing packages behind it. So I do think that actually we're set up... And by the way, the consumer and most of corporate America has been pretty healthy all year, despite inflation and some of the macro. So I do think that we're set up for a pretty constructive 2024. Okay, good, good. Brad- You didn't pay me to say that. I did not pay him to say that. All right. It's a good time of year to say, you know, we have a bullish outlook for 2024. Certainly, it's been a quieter couple of years in the cycle. So Brad, I want to hear how you answer this question. I know on Monday at our Monday Morning Meeting, you said you had 17 deals in Heads Up Committee, so that's got to be good news, pickup you're seeing. But specifically from private equity sponsors, what types of deals are you seeing now? Yeah, and I am paid to give the right answer here. So you can discount it, but- Question wasn't about politics. Yeah. That's right. But I actually agree with Mo. You know, we have seen a gradual shift. We are seeing the pipeline increase. It's probably up about 50% since the summer. Not nowhere near where it was in 2021, but there is this gradual kind of momentum shift, and it's a little bit in line with what Mo said, what Roger said earlier, companies want to transact. ... and there's a big pipeline of deals that wanna be brought to market, and the one thing that's getting in the way of that, is valuations. And, not to kinda repeat what Roger said, but that's kind of been the gating, issue all year. We saw 8 deals, this year where we were the lead financing, provider, all $1 billion-plus transactions that got pulled from the market because valuations, were probably one or two turns, inside of what their, what their goal was. So those deals, will probably be the first ones that come back to, to the next year. One of the things that we've been doing in U.S. where we've been deploying capital, we've been looking at some of those situations where the deals got pulled, and telling the sponsor of the company, "We'll recap your deal, so we'll refinance it today, and we'll give you a portable capital structure," meaning you take that capital structure, you can go on active basis or on a targeted basis to try and sell that company, but you have the financing already in place. So a lot of our activity has been in that regard this year, add-on financings, really using our existing portfolio companies to drive deal activity. Perfect. So I think we should take a step back. I wanna think about financing these types of transactions as a business. Mo, you know, given the current regulatory backdrop right now in the market, for Morgan Stanley specifically, where do you guys see the most opportunity set for your clients? Is it on the lending side of these transactions, or is it on the M&A side? So the simple answer is both. Of course, you'd expect me to say that. I do think in an environment like this, it is sort of super important for the winners to be able to offer the advice all the way through to the financing. And I say that because the way we've thought about it at Morgan Stanley is we've built a moat around our, I think, best-in-class M&A and investment banking practice, combined with our ability to finance complex situations. If you can offer that package, I think you can actually succeed. Partner with folks like you, and I know we'll sort of get into that at some point. Being able to offer that to our corporate clients- Mm-hmm ... whether it's for carve-outs or separations, whether it's for an IPO, whether it's for a private solution or a public solution, whether it gets into a broadly syndicated refinancing or something new for acquisition, those are the dialogues we're having right now with most of our corporate clients. And after a period of six, seven quarters of almost no activity, it goes back to sort of the gradual point, you know, we're picking up there. And the ability for us to be able to offer that early advice, work with them all the way through it, and then help finance, structure finance, and then trade it, is super important. I don't think you can really do one without the other in this market. Yeah. And I do think, though, your ability to, you know, have such a front leadership position and advice is unique to Morgan Stanley. I don't think everybody has that same franchise. You all also have an incredible franchise on financial coverage, regional bank coverage. A lot has obviously gone on this year. So what advice would you give to a CEO thinking about starting a LevF in business today? Would you say to lean into that? How would you answer that? I would say leaning in with just that feels like nothing more than just an arbitrage of current market conditions, perhaps. If you can lean in and combine it with, let's say, as you used it, the advice, and build a more integrated capability, that to me makes sense as a business to run with returns through the cycle. But if you're saying, "Well, you know what? I can finance it," put aside capital, restrictions perhaps, or prioritization of capital, but just leaning in with a lending business, I don't think is much more than a short or medium-term endeavor in these markets today. Mm-hmm. I do think you need to be able to offer that, that holistic solution, or partner with somebody that can do that. Mm. Right, when you can do that, where you can get the scale, and then you can combine some advice, that may make some sense. But otherwise, you've really got to think about a holistic versus just a narrow set of a toolkit. Mm-hmm. Mm-hmm. So what you just said there I think is very interesting. You know, Brad, on the partnership point specifically, let's focus there. How does Blackstone partner with the banks to drive origination to our business, to create deal flow? What are we doing that's unique? Yeah. What Kate said at the start was interesting. There's been this view, probably from the press, where, you know, it's banks against private, you know, credit lenders. And if you take a step back and think more practically, and look at it from Blackstone's perspective, we're one of the largest loan buyers in the world, so we partner with Morgan Stanley and their peers in that regard. We buy things from their balance sheet, to help, you know, the bank out. So we're partnering with them in a lot of kind of, you know, different ways. And when I look at just BXSL, for example, you know, Morgan Stanley helped raise the capital, along with JP Morgan and B of A for BXSL. They gave us advice when we wanted to go public. They are in our revolver, so they're lending to our vehicle. Their equity capital markets and debt capital markets business have raised capital for that vehicle. So this ecosystem is all around a vehicle like BXSL. But to answer your question on origination, you know, I don't know if you remember my slide from the very start, we talked about the evolution of private credit. It used to be everything went to the public or public markets. That's just how it worked. And then we were in a short period where actually everything was being done in the private markets because the public markets were shut down for a period of time. Now we're in this hybrid world, where actually both markets are open again. Private markets may be a little bit more than the public markets, but they're still both open. So when Morgan Stanley's going to that client, they want to deliver both solutions, and we are the largest private capital provider. We're a big public buyer, so we will partner with them. And the bankers kind of sees it value add for us to be able to deliver an alternative solution, such that they can continue to serve their client by giving them the right advice and giving the right access to capital. So we partner with Morgan Stanley quite actively in this regard. We pay them, and so it's not a free service in that partnership, because they are, in some ways, an outsourced originator for us. We cover sponsors really well. They cover corporates, incredibly well, and that's a way to extend our kind of footprint out in the market. So I think, Mo, getting your perspective here is critical. Morgan Stanley has one of the leading banking franchises, leading capital markets franchises. You've been there for nearly three decades. You've also seen Blackstone grow, expand across geographies, strategies. You've grown up with us. And so getting your perspective on how do we differentiate ourselves, what do you think Blackstone does relative to other large private credit lenders? How do we compare? You know, we use the word, and Brad said it a couple times, partner or partnership a lot, but it actually does make a difference because whether we're running a very quiet sell side with a financing process or something a little bit more public that's a little bit more of an auction, whatever the process is with our corporate client, when we're able to reach out to one or a small group of potential financing partners, alongside ourselves oftentimes, the obvious is you need somebody that has the scale, they can respond quickly, and that can respond with complexity. Because every one of our clients, particularly in these markets, right, nothing is easy, requires something a little bit more bespoke, and they need to hear today, tomorrow, by the end of the week, whether something is possible before they start getting inbounds, before they think, "Okay, maybe instead of going down this path, I'll go down this path." So if we're really doing our jobs on the banking and capital market side, it's giving holistic advice to our corporate client, but that means we need to bring in somebody that we trust. And obviously, we've worked with you guys for forever. But you actually are able to show up quickly and with size, and if it needs to iterate to something that's quite bespoke and complex for that issuer... Again, we don't make many calls oftentimes. You need to be an early call more often than not. If we know you've got the sector expertise, if we know you've got the financing or the structuring expertise, so that makes it a lot easier. And so I do think even though that word sometimes is overused, it's really never been more important in this current environment as we're trying to help our corporate clients get to the other side of whatever they're trying to achieve. Mm-hmm. Well, listen, I would just like to say that, you know, Morgan Stanley has been one of the most forward-leaning relationships to think about how private credit is really transforming this industry and how it's going to increase opportunity set between our firms. So you're not just focused on one business line decreasing, you're really focused on the whole pie. And what we believe is, this is an expanding toolkit for everyone, and we feel that your holistic approach and, and how you think about us, how you cover us, how you service us, will mean that you'll have an outsized share of what we do, of a, of a growing, expanding- I think even if we tried to forget about you for a quick second, Emily won't let that happen. I know she doesn't want me to say this, but she is on us in a great way building the partnership at every level of our businesses, right? Because it may be the banker with one financing solution, so we can get into the weeds of what our corporate client is trying to achieve. It could be the capital markets teams working with yours. You obviously have not just the scale, but the ability across your product and asset classes to be able to provide a solution, so... If we forget for a brief second, Emily's there to remind us. So it actually works really well, where we can do that with a very small group of potential partners, and so this is it becomes easier when we have folks like you to work with. Thank you. Well, I know Brad and I really appreciate your time today, and it's great to see everybody, especially in the holiday season. So wishing you all the best. Big thank you. They're gonna change the stage, and then we'll get on to the next panel. Great. Nice to see everyone. Thank you. Thank you. Please welcome to the stage, Carlos Whitaker. Gotta love these music selections. Thank you all for being here. Thank you for joining us in person and virtually to our first-ever Analyst Day for BXSL. Before Blackstone, I spent 21 years at an investment bank in public market assets: stocks, bonds, derivatives, leveraged loans. A few years ago, I pivoted my career into private market assets, private credit, because of the significant growth opportunity that I know you've all heard about today. So as President of the fund, part of my role is spending time with a lot of you, our investors, and listening and talking about our business and the industry. And also in that communication, part of my job is to communicate to you what our goal is in our private credit businesses. Our goal is to create the private credit business with the most scale and the most efficiency in the industry. As public equity investors or as public bond investors, you're all familiar with that pattern in industries where whoever can derive the most scale and efficiency evolves to being one of the market leaders or, if not, the market leader. So as we think about the smartphone company, we know the name of that company. If we think of the electric vehicle company, we know the name of that company. We wanna get to a point where you think about private credit, you know our name as the company with the most scale and efficiency. The beauty about BXSL, it is affiliated with broader Blackstone, so that is going to give us an ability to drive even more scale and efficiency as the private market, private credit asset class continues to grow and evolve. We're well-positioned. I think today you've heard about some of the issues that a lot of our investors raise as we have our talks. I would really highlight three buckets, and you've really heard about all three today already, so I'll be very brief so we can get to the next panel so you can hear from investors, directly. But the issue of defaults continues to come up. I think we've addressed that in some of the panels. We generally expect higher interest rates for longer. It's likely gonna lift the level of defaults in private credit, but how we've positioned our portfolios, we believe we are well-insulated from that. The other question that tends to come up is: Is private credit a bubble? Hear that a lot. You see that a lot in the press. Our view there, based on what Jon Gray just said, is it's not a bubble. You're actually seeing no excesses in lending as of now, and so I think that is a point to really appreciate, and I think the market currently underappreciates that point. And then the last issue that is constantly raised is differentiation. How are you different from other direct lenders? And I think today you've really seen how we are different, particularly from the Blackstone Value Creation Program. I mean, you heard specific examples from Kristen on our team on how her team helps drive value creation incrementally to our private equity sponsors. And so with that, I'll shut up so you can hear from some of the investors who we have here. We have a wide range of top investors, public equity investors, public debt investors. You're also gonna hear from our very own Joan Solotar, who runs our Global Wealth Solutions business, and this panel is gonna be moderated by my friend, partner, co-CEO of BXSL, Jon Bock. Thank you. ... Please welcome to the stage Jonathan Bock, Jean Hsu, Joan Solotar, Raj Ahuja, Richard Lee, and David Miyazaki. All right, thank you. Thank you everyone for enjoying today. This is actually one of the most exciting panels because it is an industry first, right? Often, too many times folks are gonna talk at you trying to explain items, as opposed to truly listening to underlying investors and shareholders. And so, really what we have is a best-in-class institutional investor panel for a discussion on the BDC space. And so a few introductions. To my left, Jean Hsu, Global Head of Private Debt at CalPERS, who needs no introduction, and also Joan Solotar, who leads our Global Wealth Management or PWS, Private Wealth Solutions business at Blackstone. And then, of course, to her left, Raj Ahuja, Head of Alternative Investment Strategy at Global Credit at OMERS, and to his left, Richard Lee, Portfolio Manager at 1832 Asset Management, and then also all the way over to the left, Dave, it's a pleasure to have you. Longtime BDC investor and Managing Partner at Confluence, and so it's a pleasure to host you all here. So now let's actually have some fun with a few final sets of questions, 'cause I do think it's important. We've got a lot of institutional capital in the audience, okay? So we'll scan this, we'll pull out our phones, okay, and we've got this audience poll question to ask, okay? Let's flip the slide here. We've got this poll question, which is, "In 2024, I'll be doing the following with my private credit allocation or private credit in a wealth sense, my BDC allocation," same thing. "In 2024, I'll be doing the following with my private credit allocation. I'll increase it modestly, meaningfully, I'll decrease it modestly, or I'll decrease it meaningfully." Let's see what the answers are. We'll cue some music here. Okay. Okay, so survey says... It's coming out here. We'll push it out here. Okay, so we've got lots of increasers, interestingly. And I know you've heard from prior panelists today, as folks talking about kind of capital coming into the market, that's actually an interesting result. Because, many times when we hear about risks of private credit, we see folks maybe out there seeing one item out there, but then acting in a different manner. And so let's just start with this. So, Jean, you're an important investor across all asset classes, okay? When you start to think about how you've approached the private credit space, you know, how have you approached this as an investment over time? And then more importantly, maybe give us a sense of how you answer the question. Oh, okay. So, we take a look at the private credits about 8 years ago? Yeah. Okay. I should not say we take a look only. We are serious, okay? We did the RFP, and you know, the RFP take one year. Okay, so when in this first panel, I heard, is that Kristen? Yeah. Talk about they do online RFP, so I'm thinking maybe I should call her up and see how we can improve the, improve the process. So after one year, what our finding was like, okay, in three aspects. Number one, we all know that back then, that the CLO market is very active, right? So a lot of the smaller facilities actually was able to get into the broadly syndicated market. So what we are concerned about, there is a higher probability that whatever is left in the private market will be the left over for this broadly syndicated. Oh, yeah. So that's number 1. The second one is, it seems that all the managers that we surveyed, the size is a little bit too small to move the needle for CalPERS, okay? And then the third one is the fee was outrageously high. So all the premiums that we got from the private markets, it comes back to pay the management's fee, and it's not much left for us. So for those three reasons, we decided to pass. It is, like, a very clear decision we passed back then. But about 3 or 4 years ago, we decided, "Hey, it seems that the market has changed a little bit. Mm. And then we see their, like, their managers come to us, say they spot the trend of that they're going to take over the BSL, BSL markets, a larger company, better quality, and then the scales will matter. So we decided, okay, maybe we give it a try. What we did is that we, you know, we incubated that in our optimistic strategy, where I was the head back then. So we give it a try to see, can we really identify managers who can really create alpha rather than just the beta, and then is the size really matters for CalPERS? Mm-hmm. I think we're very lucky that we come in at the right time. So we were able to, you know, incubate that, grow it, and then have substantial commitment. And then about two years ago, that we go to our board, of course, with a lot of education ahead of time, and then we got approval to have private debt as a standalone asset class on par with our fixed income, our equity, private equity, and real estate. However, we view private debt a little bit different than maybe, you know, you guys look at. In the past, the private debt and private credit, they are interchangeable, right? But what we defined private debt is that we see it as a mirror image of whatever you have in the public debt market, with the exception of treasuries. Okay, so in the public market, you have corporate, you have investment grade, you have high yield, and then in the borderline, you have broadly syndicated loans, like, kind of in between the public and the private. And then in the private side, you have just direct lending. Hmm. And then in mortgages, you have Ginnie Mae, Fannie Mae, everything else, and then, you know, private is everything before it goes into the pools, and then re-performing, non-performing. In the commercial real estate side, you have CMBS in the public market. You have a lot of things like the insurance company held or on the bank balance sheet. Those are all private. And then the transitional property lending that the BDC is doing, right? So those are private. And then the very last sector is actually the ABS of the world, but on the private side: credit cards, student loans, autos, cell towers, containers, everything, but before they, you know, securitize. So this is a talk of the town. The last panel talked about private and public. We really see things kind of evolving. Yeah. And then, I think there are a lot of opportunities, not only on the credit side, corporate side, but also on other sectors. If you were gonna, you know, answer that question, if you were to go back and say, you know, "How are you allocating?" What, what would you say? I think I'm contemplating in between, like, A and B. The reason why I'm not sure is because, you know, Blackstone is, like, $10 trillion, right? No, no, $1 trillion, sorry. 1, 1, 1 trillion. So I'm not sure, like, the, the number that we're going to do, if it, if it's meaningful- It's old ... or, or not. So what we're planning to do is that if you think about we, we usually do drawdown funds and not a permanent capital. So the drawdown funds are you have, like, ramp-up period, and then you have rundown period. So in order to get to a percentage of, like, whatever matters for CalPERS, we have to commit almost twice the amount in order to get to the deployment. So we had allocation currently at 5% right now. 5% for CalPERS is, like, $25 billion deployed. For $25 billion deployment, I'm thinking, like, every year, especially the next couple, 2, 3 years, we have to do more than $10 billions a year. In case that we get allocation a little bit higher than 5% and then the CalPERS size grows a little bit, then it'll be a little bit more. You will help me decide if it's meaningful or it's not. I think $20 billion is more than meaningful, Jean. That's absolutely. And so, Raj, when you think of all the money that's gone into private credit and the BDCs, I know at OMERS, oftentimes folks might think of this as a trade, right? I've got an opportunity to move things in and out. Is it a trade or is it a core allocation, and why? First of all, thanks for having us. Oh, yeah. Very nice of you. I think just for context, at OMERS, we've been growing, and similar to Jean, I guess, we've been growing our private credit exposures over the past 10 years or so at this stage, and it's had a nice run and a nice growth. For context, when we say private credit, largely, we are saying senior direct lending- Yeah ... which is a core allocation for us. We do traffic in other parts of private credit as well, some specialty areas, et cetera, which might be a bit more opportunistic and- Yep ... and depending on market conditions and so forth. When I expand on that, what I'm really trying to get at is, you know, for flexible balance sheet like ourselves, where we are largely a relative value investor across the credit spectrum, whether it's IG, high yield, liquid, illiquid, large-cap, middle market, it's really just optimizing the use of our next dollar that we want to put in the business. So when we think about that and observe our history with private credit or senior lending, we've seen private credit delivers pretty strong risk-adjusted returns through various market cycles, hence our preference to continue growing those exposures prudently in this market as well. Of course. Additionally, another thing which is important for more mature funds like ourselves is private credit offers a fairly attractive income profile, where essentially you're clipping a pretty healthy spread over the short-end rates or base rates across various rate cycles, which is positive for us and in a relatively short duration asset class. So continues to be a strong message why we think it's a core allocation, and the market's obviously growing in other peripheries as well. Now, that actually prompts another great discussion, and so we can pull up a slide here. We'll just queue it behind me. Which is, you know, here you hear institutional investors with a significant amount of capital and focus in on the market, and now it's time to turn to the individual, right? And so in terms of private credit exposure there, so, Joan, you know, we hear about this broad interest, but looking at individual investors, you lead the Private Wealth Solutions group, and there's substantial growth in this individual investor category, right? And so the question is, with private credit as a very important focus, how would you describe the growth opportunity that exists inside this channel? Yeah, I mean, I think I'll go beyond private credit just for- No problem ... the moment. There's been a lot of challenge to what, you know, the traditional 60/40 portfolio, and historically, until pretty recently, wealthy individuals, unless they were qualified investors, really didn't have access to private investments, broadly speaking. And if you think about what most investors are looking for, it's one of two things, right? They're looking for cash in their pocket in the form of yield, and the ability to create growth, wealth over time in terms of appreciation and the compounding effect. And private credit really speaks to that former bucket in a big way. Yeah. Really similarly, we think of it as all weather. So when I look back to low interest rate environment, zero interest rate environment, the spread was super compelling. You couldn't find yield anywhere else. Then flash forward today, even versus cash money market, the spread is super compelling. In terms of where we are in the journey, in, you know, baseball inning terms, I think we're still in spring training. And I say that- Yes ... because everywhere I go in the world, I'm answering the basic question around: What is private credit? What is private equity? What is private real estate? And that says to me, we're so early in really getting to that point. But I would say the adoption and investment has been at a faster pace than I expected when we launched. That'd be one of the surprises, I guess. I'm kind of thinking of- That would be- So I was wondering- ... one of the surprises. So, and I think it's one, because you have institutional quality firms now bringing these- Yes ... with trust and brand. And two, as we know, you know, the opposite of what you see in the public markets, scale is a huge advantage in private markets. Bigger companies perform better than smaller companies. You have more tools, as you like to say, to not just make a loan, but to make a loan better and the like. And so, very little in the way of measurable historical losses, even during cycles. So we've had pretty quick take-up, but it still feels quite early. So, so that's exciting 'cause you've got an individual growth component, we've an institutional growth component, and now we get to talk a little bit about structure, right? So, so, Richard, you know, you get the opportunity to consider many structures, right? GP, LP, you can consider debt or equity if it's of a different structure. You do so many different things. What are some of the benefits of the public BDC structure, what BXSL operates under, that you like compared to others? Well, first of all, thank you to Blackstone for having this great event and inviting us. So just for context, I've had the good fortune of looking at various structures, whether it's LP, semi-liquids, publics. Yeah. If we're being intellectually honest, there's puts and takes- Indeed ... for all structures. It often is dictated by clients' needs or your mandate and policy. Now, having said all that, with respect to public BDCs, it's a nice, easy access point for the average investors to get access to the private credit asset class. And of course, you have the daily liquidity function, as well as getting that consistent dividend stream, which many retail investors highly value. But I would say, probably the most important thing is, it's stewardship over structure, is how I would think about it. And what I mean by that is, the beauty of public BDCs is that, you are, at times, able to buy these at very attractive entry points. Sometimes these BDCs, they are beholden to temporary market forces, and you can buy these sometimes 80-90 cents on the dollar. Yeah. I think last night's dinner, Brad talked about how you bought BXSL on December 2022, your total return would be close to 30%, and you would've been able to capture an embedded yield of close to 14%. So that, that's a very attractive value proposition for me as an active portfolio manager. Yeah. Now, the other side of the coin is, what I talked about is stewardship. If the BDC manager prudently manages the capital and performs the full cycle, the market does and have rewarded them with a premium valuation- That's right ... which you don't get with necessarily the other structures. Right. And really, for me, the icing on the cake is, then you have this premium currency where you can compound your NAV a little bit faster- Yeah ... than some of the other structure. So, when you equitize a credit-like instrument, and it's in the public domain, there are those nuances that you have to be mindful of. Yeah. But again, it's taking advantage and being thoughtful about, your exposure. That's very thoughtful, and that actually brings up a... We'll bring up another slide here. So Dave, when we start to think of this value that can be created, a lot of your folks here are investing in the S&P, right? Or other financials, right? And so what we're showing here is BXSL and our total return relative to that of other financial stocks or other substitutes. And what you can see is that the volatility's 75% lower, with the return nearly 1.5 times higher, which some might say is a compelling addition in a portfolio manager's allocation. Now, Dave, when you manage money on behalf of the BDC asset class, how do you outline its attractiveness in light of some of these types of results that can be created? Well, I have to express my thanks to Jon and Blackstone for the invitation. For those of you who know Jon, this story won't surprise you, but last night at dinner, somebody said, "So- ... how have things changed at Blackstone since Jon arrived? Okay. Some Blackstone people made the comment that, "Well, it used to be a lot quieter. Okay. That's right. And that's not surprising, of course, but regarding the structure, the use of BDCs and public BDCs, I think that a really important role that they provide is a way to express the utility of the private credit markets in a public market vehicle. Okay, so we've heard a lot about what happens in private credit, and the ways that lending can be structured in such a way that there are excess returns that can be captured, and it's not fully realized by institution or individual investors at this point, but this is the bridge that gets created from the public BDC, and it's a very, very durable structure. One of the things that a lot of people don't realize is that if you go back to the great financial crisis, there was not a single BDC that went bankrupt. In fact, none of them even missed a payment on their debt facilities, and they got no help from the federal government. The only industry in this sector to get no help from the federal government. Now, they certainly wanted it, they certainly asked for it, but the industry was too small to really get a lot of attention. And so that's real testimony. And then we come into 2020, and now you're in a situation where the industry is still not getting help, and in fact, when things like the Paycheck Protection Program came out, private equity sponsors are specifically excluded, right? Mm. We have the same situation, no bankruptcies. It's a very, very durable structure. But I was thinking about what Steve was saying earlier, and it being New York in December, and George Bailey, and thinking about runs on banks. The thing about it is that the BDC investor can withdraw money out of the bank at any point in time, just like a depositor could, but if everybody's queued up at the same time, they're not gonna get 100 cents on the dollar for their deposit, right? It might be 95 cents, it might be 80 cents. And then you step in. Right. And that's the dynamic that we are working through, and that does create bouts of volatility. But I think it was interesting in what happened earlier this year with Silicon Valley, was that there was a real beginning of a distinction forming between the deposit-based structure and the BDC structure, and this is how we get to have the lower volatility profile through a rather disruptive timeframe. And so I think that there's a lot of progress taking place in the evolution of this industry. When BXSL came out, I was really pleased to see the alignment of the management team with the shareholders. I've... In my experience, I have had the opportunity to talk to most of the management teams in the industry, and they hear what I have to say, but very few of them listen. And I'm used to that, 'cause I've raised a couple of teenage daughters. But it was really great to see the structure that Blackstone brought into the BDC industry, because it's kind of forcing the hands of other BDC managers to emulate that kind of structure, and it's one that's getting contemplated today by many BDC managers that are hoping to cross into the public arena. So there's a lot of positive evolution that's taking place. That's a function of what we're doing today, right? So that, that's really coming from actually listening to the leaders in the space and outlining their concerns, and that's something that Joan and our leadership trains us to do quite well. And so, you know, of course, if we're looking at the underlying percentages here, 'cause we wanna get a little specific to the portfolio. David, we can just double-click on it. When you start to see first lien, senior secured, then, of course, dividend yields, I guess the question is, as you look at this, how much of a difference does that make in terms of how you allocate capital in the BDC space? And you can see here with BXSL, clearly, almost all senior secured with an attractive dividend distribution. No, I mean, I think that this is what you want from a sector of publicly traded securities, is a lot of different choices, right? And, I'm not sure that the investor base is entirely familiar with the differences on the left side of the balance sheet. Yeah ... or the right side of the balance sheet of BDCs. But if you peel it back, and you have an understanding that higher rates may cause credit pressure, that defaults might rise, you might think about, "Well, how can we be defensively positioned?" And so maybe we wanna move into BDCs that have more of a first lien exposure. Maybe you wanna move into BDCs that lend to larger borrowers. And this creates a much different exposure, even though you're still in BDCs- Right ... versus going into smaller BDCs that are dealing with companies with EBITDA in the $10 million-$20 million range. So I think it's really important to have that. And you also have a little bit more confidence in understanding that the mark to market every quarter is probably gonna be a little more have higher veracity, because they're larger first lien deals that are- Yeah ... easier to price. That makes complete sense. Now, one of my favorite topics here, manager differentiation, right? We've heard all this, well, quite a bit about it today. And so I, I'll go with our institutional investors here on the panel, so Jean and Raj. Okay.... I mean, how many fund managers have broken down your door in the last 20 minutes, right? And so here's the question: When everyone's pitching a reason why, why you should invest, I'm curious, which of those reasons, like, why you should invest in them, why their platform, which of those reasons resonates the most with you, and which ones don't? Jean, we can start with you, we'll go to Raj. Okay, so I'm thinking it from, like, a life cycle of how, you know, we invest and all the way to the maturity. So it's like, you know, at the beginning, you want to see who can help you source, right? So Blackstone's name definitely like, you know, they will get a call. And, you know, especially when there's, like, large transactions, that they will be able to speak for the check, then that is very good. And then as you go along that, then can they negotiate documents? They will have to be the lead in order to negotiate the documents. Right. So that's very important for us. And then it comes to, like, the portfolio management side. So, in this stage, transparency and communication is very, very important for us. So we are. Like, if Brad Marshall is still here, he's our, like, Zoom friend. And then Teddy, Teddy is here, too. Okay, Teddy, Teddy is our Zoom buddy. Okay, we talk to Teddy, like, every month. So we have a very clear picture and transparency about what they are doing, so we are helping everybody monitoring what they are doing. And then now, as it goes a little bit further, when I started to accumulate enough, individual line items in my portfolio, then we need financing. So we talked to Victoria, who was on earlier panel. Yes. She's helping us, like, what's the best out there? And David Trepanier, who was also on the panel, he did promise. Oh, he's right here! He promised that, yes, with, like, the combination of Blackstone and CalPERS, that we would get the best rate from Bank of America. Dave, I'm holding you accountable for that. And then, now it comes to, okay, when the credit cycle turns, what are the important things for us? Do they have a good workout team, right? Do they have enough resources? And yet, at the end, when the situation really goes really bad, which, knock on wood, we don't want that to happen, Blackstone does have a private equity team that they can help take over and run that. So that's what we are thinking of. It's like, not only like who is pitching you, and then who has good conversation, who has good relationship with you, it's the whole life cycle of your fund, that you want it to be successful right at the beginning, all the way to the end. That makes complete sense. And Raj? Yeah, similar to Jean, but I'd say we actually don't have that many partners, so it's just part of our strategy. It's handful, small, and strategic in nature, so a little bit different. But for us, it's relatively simple, given the evolution of our platform and kinda involvement in the space. It's like you wanna have a long-term, stable, conservative credit culture, and of course, workout capabilities are equally important. But just a credit culture which is focused on downside, truly capital preservation, and kinda hitting singles and doubles, not trying to hit home runs, is kinda the- Yeah ... the nature of the game. It's sometimes I say, like, we like to partner with folks that wanna deploy money, and next day wanna get their money back on the deal and make a call pro and keep doing it, type, type thing. So it's just how private lenders or credit folks generally think about it. And other than that, obviously, size, scale, incumbency, track record, all that stuff matters. The only other thing I'd mention is, as you know, use of leverage in our space has been evolving over the years. So you guys are terrific at it, so use of thoughtful leverage, new forms of leverage to protect your portfolios, especially when you want it to be protected at the right time. So I think that's certainly an area that's important for us. It's a very important one. I know that we stress that constantly. And so maybe we can cue another slide here, because Joan, this shows that opportunity that existed in those very spring training discussion that you mentioned, in terms of allocation. But, you know, not all managers, right? Everyone will show this and talk about the opportunity that exists, but not all managers are the same. And so accessing the individual investor is harder than most would expect. And so here's the question I'd ask you is: When it comes to working with the individual investor channel, where do private credit managers get it wrong when it comes to that channel, and where do we get it right? Yeah. Well, I think we have to talk about, like, what it is that we're bringing to individual investors. And, I agree, more than structure manners, matters. Right. So structure is important in terms of figuring out your liquidity and your capital calls, basically your liquidity management. It has to be a good structure. But after that, it's basically who's the manager? Yeah. How careful are they as stewards of your capital? We've been able to build up trust, and in many ways, become the reference institution on the institutional side, and that's really what we're bringing to private wealth. I think where managers get it wrong, and sometimes it's just a function of what the firm can offer- You're right ... is, you know, they're single product focus. So many of them are commission-based salespeople. Yeah. They're walking in, and no matter what the environment, and whether it's good or not, like, "This is what I have to sell you, and I am going to sell this to you." That's not our approach. As my team will tell you, 'cause I say it every single week, "We are not a sales organization." There is no one on my team who is paid by commission. We are there to partner with financial advisors, provide them education, share all of the intellectual capital that we have at the firm, which is pretty tremendous, to help them be smarter. Talk about how these funds and assets fit into a fuller portfolio. No one on my team is saying, like, "You've gotta buy this!" You know, it's now, at the end of the day, we are able to raise substantially more capital, I think because of all of that. I have 300 people on my team. This is a big priority for us, and, you know, when we created it, it was like, well, we're serving institutions both with good returns and excellent service, we need to do exactly the same. Someone on my team noted this week that Steve was talking about his week, and he had equal enthusiasm for his meeting with King Charles and investment advisors, and I loved that. But they know that it's a power of the firm. And I think the other thing that is hard to see from the outside, and it can only be tested through cycles, the care that goes into every investment, whether it's a loan, a real estate investment, private equity, is unbelievable. So the firm does very well dreaming the dream, but protecting on the downside, and the mantra, "Do not lose clients' money"- Right ... is really what rules the day. And so when you compare us with, you know, you showed, our first liens versus others. Yours, yep. You can say, like, "We're gonna provide you with double-digit return," but, like, how are you getting there? Are you putting on more leverage? Are you going lower in the capital stack? At the end of the day, we wanna provide excellent returns, but we wanna do it in the most conservative way that we can by not going out on the risk spectrum. So I think it's really all of that. And in good times, it's hard to distinguish, but as we know, having lived through many, many cycles, it's when you're going into a rougher economy that we will continue to see spread of performance. You know, real estate, sorry, has been a little earlier in the cycle, and when we look at our real estate fund versus others, the spread continues to widen. Yeah. I expect the same will happen in credit. Agree. I agree. And in fact, that differentiation allows us to get the audience involved here. And so this differentiation, here, just scan the QR here, another one, if it's coming up, right, that next question. All right, which is, today, two-thirds of the publicly traded BDCs, we'll call it the BDC index here, it's trading at a discount to NAV, right? And so this is primarily driven by what, right? Poor historical underwriting, expected future poor performance, right? The, you know, things that the markets forward looking on, asset liability mismatches, right? Or a poor incentive alignment, right? Whether it's dilutive rights offerings, high fees, or OID scrapes, oftentimes found in the BDC space. Okay, we'll cue the music. Which is it? Which is it? What's causing that discount? So we'll pull it up. I'll be interested to see, 'cause, Dave and Richard, I'm gonna come to you once we see these results. All right. All right, let's cue it up here. Survey says... Okay, so it's B, expected poor future returns, i.e., expected future losses. And so, Dave, and then Richard, but how did you answer this question when you're thinking about what primarily is causing the BDC space to trade at a discount, and some of that dispersion that Joan referenced? You know, I, I think that there's a little bit of each of those, like, components that are- Yeah ... that are playing a role, right? But I think when it comes to BDCs, one of the things that I find to be poorly understood among managers is that you do have to go out and earn investors' trust. You can't just drop in because you have a big name that's well-known on the institutional front, and the man on the street investor's gonna know who you are and trust you. Good point. You start that clock when you come into the public arena, and you have to be consistent with how you're doing things. You know, there are numerical references that you can look at, like ROE, and see whether or not... Because that kind of captures everything, right? Your underwriting, your fees, your capital raising, all these things that need to happen over time properly get captured in the ROE. If you're doing things that compromise that, then the investors will begin to learn not to trust you, right? If you're charging too much in fees, if you don't have a look back. One of the things I've oftentimes said to managers is that, "if you won't lower your fee, then I will," basically by saying, "I'll buy your stock below NAV," then I'm effectively getting the assets at a lower management fee. Okay, so that's one way that it can push you below NAV, if investors begin to feel like that's, that alignment isn't right. If, if you're positioned in a whole lot of things that people don't trust the mark on, or maybe you're not very good at marking your book because you have a lot of CLO equity, or you've got a lot of second lien debt that is kind of choppier. You have a long history of having credits in your book marked near par, and then suddenly they default, right? These are all things that begin to compromise trust, and as you look into an environment where we may potentially have an economic slowdown or a recession, then people aren't gonna wanna have... You know, it just comes down to trust. Mm. So in a lot of ways, I suppose it's not surprising people think that we're here because of what could happen in the future, but it probably reflects a big part about, yeah, how suboptimal the performance has been in the past. Makes sense. And, Richard, just as a follow-up, how'd you answer that question? I actually would say all of the above. Okay. Maybe just to dig a little bit deeper to what David said, I think the markets, you know, they've gotten smart enough to see sort of the nuances of the ROE. Yeah ... erosions from some of the- Those things. Those things. Right. Let me just... When I was preparing for this event, I just kind of did a side-by-side analysis, and there's about 20 or so public BDCs. In my opinion, there's a reason why BXSL trades at a premium multiple, because it is in the exclusive position of having all of these characteristics. One is obviously strong underwriting, losses, basically virtually no losses. Right. 2, but then how are you getting these? How are you managing the right side of the balance sheet? To the nice lady from Moody's, BXSL is only a handful of BDCs that has a positive rating, and if you look at their debt spreads, probably one of the tightest in the industry- Which- ... which then feeds into the ROE that I was talking about. It has one of the lowest fee structures with a look-back, which I think is huge. Full OID capture, which again feeds into the ROE. So, you know, and then also obviously very, very prudent ALCO. Yeah. You know, it's not, it's never just one thing, but it's the combination of things that you put into the stew, and you blend it together, and that's really the output of why I think it's a very, very well-structured vehicle. Can I add one thing? Yeah. Because you mentioned the fee structure, and this is also, I think, you know, one of the innovations, if you will. So when we created this, actually it was private, then we took it public, the fee structure was first of its kind. Yes. We're like: "Okay, we're gonna lower the fees, we're gonna charge on NAV. We're not gonna put in, capture all the excess. We're gonna give it to them." And it speaks to what I said earlier, which is, all of that return goes to the investor, so that you do not need to go out on the risk spectrum. Right. If you wanna charge double the fees, if you're keeping acquisition costs and, you know, whatever, and you're trying to get the same yield, there are only a few ways you can do that. That's right. Right? It's either adding more risk or adding more leverage, which is essentially adding more risk. That's right. And that, it's important because it comes into the calculus of preparing for the future. And so, you know, we can, we can hide these, these slides behind, 'cause I want to end on one last question. This relates to the platform, which is to say this: Many of you have opportunity to invest with a lot of different managers, and, and clearly, Richard, your response was, was spot on. I, I think what we'll do is, I'll start to my left, but, you know, why do you place your trust in us? Essentially, why Blackstone, and what is it about us that's unique relative to what you see out in the market today? Oh, I can see that he's trying to force me to repeat what I said. Yeah. No, no, no. I think you've absolutely got it right. I'm glad to do it. No, no. Okay. So it's like, scalability is very, very important for institutions the size of us. If you think about our size, it's actually you should not envy our size because it's very difficult to create alpha. So size, the manager who can help us scale, super, super important. Yeah. The manager, later on, can help like, really thoroughly monitor that, and they have the resources to throw into, you know, problematic issues. That helps us. In the value accelerator, that, that things, that help us. Then at the end, it's like, you know, in case things is, you know, not as expected, can we do a little bit better? Yeah. Right? Yeah. And then one thing, which is also very important, is the alignment of interest, the fee. We were able to... You know, Blackstone is very commercial, that we were able to have very reasonable fee, and then that all adds back into what we can get back to our retirees and then taxpayers. That's right. That is, like, very, very important. Thanks. And Raj? A few points for me. I'd say, kind of ability to kind of leverage the broader Blackstone platform, and you see it over the years. We've partnered on a number of things over the years, so you kind of see it coming and benefiting portfolio companies, ultimately better returns, better results, so that, that's certainly a big one. On credit specifically, I'd say, the use of kind of the data mining or the data- Yeah ... aspect of things, and using those kind of data-driven insights for making better incremental decisions and more informed decisions is certainly a big differentiation from our perspective, and that's the data side. The other side is kind of, things do go sideways from time to time in our space, and having open, candid discussions with the team and kind of being, you know, open and transparent about situations, outlooks, et cetera, is hugely valuable to folks like us. And lastly, I think Gene was touching a little bit on it, but the team's ability to customize solutions or think thoughtfully about various bespoke needs for folks like us that might have, and giving a lot of rigor to it is a huge differentiation as well. Yeah. Richard and Dave, I know you- I would, All right. I would say... So I've had the opportunity to invest across various asset classes, and for private credit specifically, the analogy I use when I talk to my team is, like, the nature of private credit is like running 10 marathons. You just need, you need that endurance of the whole team. Mm. When you're managing, what is it? 300 loans, 500 loans for some of your vehicles- Yes ... you really need that bench strength, right? And constantly be doing it, right? So I always use the analogy, it's always easy to start the race, but- Yeah ... but then you just need to be able to maintain it. Talking to, just getting a little bit of snippet of your portfolio management team, things like that, that probably doesn't get as rewarded and appreciated from the outside looking in. Yeah. I think those are just some of the things that I think about. Certainly saw that from Lafe today. Dave? You know, I think when you're investing in BDCs, I'm talking about publicly traded BDCs, but it's relevant to anything that's not listed as well. It's like other companies in the financial sector. You're investing in people, right? Yeah. And you have to have the right minds, and you gotta have the right hearts. And the right minds, I think we've seen here today, that Blackstone has all the right minds. But there are brilliant people in this industry, but if their heart's in the wrong place, then they're gonna go out there and make brilliant investments and keep most of that return for themselves, right? And so it's really important to understand where people's hearts are, too. And over the years, it's been interesting meeting a cast of characters, many of whom, Jon, you would put into a fishbowl, and they really didn't like this. But you find out things about what they're doing that really reveal a lot about where their hearts are. Are they really aligned with the investors? Are they really trying to do what, the most that they can on behalf of the investors? And even today, when I meet, some of them are existing publicly traded BDCs, other ones are looking to come in, you just get the sense that there's still a lot of people out there that are trying to get away with as much as they can. They're basically like, "Okay, we know what the right thing to do is. What is the minimum amount of the right thing we can do to exist in this space?" And that, of course, doesn't work out very well for the investor. And I think that the care and the attention that you see, not forced upon Blackstone, but is volunteered by Blackstone- Yeah ... reflects a different kind of paradigm toward the investor, toward the client. And that's a very important one. There are other many, well, very well-managed BDCs in this space, but I think collectively it's important for the good guys to keep raising the bar for the industry. That's very kind because I think we heard this, people, and the people-differentiating factor. I'd say over my career, people pick people, right? I understand there's algorithms and views and processes, but it does come down to the right minds and the right hearts. And so if it is all about people, I've got one last question for you we're gonna bring up. Okay, 'cause it is all about people, and so if you had to spend- Wow ... a 15-hour layover, maybe a little bit of career risk in this question. But if you had to spend a 15-hour airport layover with a Blackstone senior executive, guys, who would it be? Jon Gray, we heard from him today. He was excellent. Mike Zawadzki, also fantastic. Victoria Chant, leading our liabilities, fantastic. And then, of course, Brad Marshall. Okay, so we're gonna, we're gonna listen to the results here. All right, hold on. Everybody's voting. I know this will be the most anticipated... This will be the most anticipated slide here. All right, most anticipated answer. Okay, we're building. All of you online, thank you for voting. Okay. People are still voting. Oh, we're still voting. People are asking to vote. Okay. No write-in candidates. No write-in candidates. Okay, all right. So, so now that's it. All right, here we go. All right, we'll kill the... And, and hold on, 'cause, you know, ladies and gentlemen, he wasn't even on the ballot... but everyone has suggested to have a layover with Steve Schwarzman. Guys, please give them a wonderful round of applause. Thank you so much. We'll exit, we'll exit stage left, and Stacy will come out and close us here. Please welcome to the stage Stacy Wang. Wow, I think I would've picked Steve, too. Great one there. Hello, everyone. Thank you so much for joining us. What a full morning of engaging discussions. I hope you enjoyed it as much as I have... We made you sit through a lot this morning, so feel free to relax, stretch a little. We're nearing the end, I promise. I just wanna begin by thanking all of you for being here with us today, and thanks everyone who's joining us from the web. This is very special to us. Today marks the very first BXSL Investor Day. It's important because BXSL is an important part of our franchise here. We covered a lot of ground today, from originations to underwriting, from private markets to private credit, and the intersection where private credit and banking meet. Here are my takeaways. One, we heard from the originations team that the private credit market is poised to continue to expand, and here at Blackstone, with our powerful platform and the powerful, a platform of over $1 trillion in AUM, 500 professionals that are dedicated to credit, and this network that we have that helps identify trends, helps us provide insights, and the data that helps us connect dots, which we heard, last night, all of that as we're deploying capital, is very, very powerful. And we are, well-positioned to select the right assets, in the right neighborhoods. Or better said, in Michael Zawadzki's words, "You need to be living on the right blocks." And you also need to be on your toes, right? Because we also heard that a level of dispersion is coming in this market. But at the end, we're not just a lender, we're not just a capital provider. We're pulling together all of the resources of the entire platform to partner with the portfolio companies to help them drive and create value, and at the same time, de-risk our own credits. And second, we heard from Jon Gray and Steve Klinsky about the evolution of this asset class, and private credit is the next mega trend, and this is going to continue to grow, and we have been well-positioned to capture that growth with our expansive team, with our significant dry powder, with our broad asset base. And third, which I think, in fact, is the most important, is that we've had a unique opportunity today to hear directly from investors' panel. And trust me when I say that we take to heart the thoughts and views that you share with us. So please continue to share those views, and we look to continue to deliver to you performance, transparency, and alignment. Since this is about BXSL today, you've seen this slide already, but I want to end with this. A couple of key stats that I wanna highlight. The highest NII, with a true first lien portfolio, equity-like returns, with a portfolio that has essentially, close to zero defaults and non-accruals, and all set up with the lowest fee structure compared to our public BDC peers. But what's important is that it doesn't just end with the numbers. Another key theme that you've probably heard throughout the day, you've noticed, is about people. Jon said it best: "People pick people." So we really hope that this opportunity has provided you a chance to get to know us a little bit better, and it doesn't end here, because I look forward to many more dialogues with each of you in the future. Just one last note, I've already gotten a couple of requests on this. If you're interested in the playlist from today, please drop off your business card in the box outside. For those of you who are on the web, email us directly. You'll get a personal email from Jonathan Bock, and that's his personal playlist. With that, I wanna thank each and every one of you for being here, for joining us on this journey, for your confidence and trust in us. I just ask that let's give it up one more time for everyone who spoke today, for all the presenters, and importantly, for the entire team that's behind making this day possible. Thank you so much, everyone.