Blackstone 4Q16 Earnings Call Notes

posted in: Notes | 0

Stephen Allen Schwarzman

Really extraordinary that the S&P finished last year up

“The fact that the S&P ended up 9.5% on the year with positive momentum and surging investment confidence, in fact the highest confidence level in 15 years, is really extraordinary. Needless to say, many active managers didn’t participate in this 9.5% gain.”

Clearly there’s anxiety

“I’ve spent a great deal of time recently traveling and meeting with different heads of state, business and political leaders from around the world, who are looking for insights into the new administration. It’s clear there is a good deal of anxiety both inside and outside of the country around potential changes in U.S. policy.”

But there are policies designed to create GDP growth

“Major changes that are underway are designed to create significantly higher GDP growth in the United States, targeting a rate of growth as high as double the average of the past eight years. Higher growth should drive higher employment and wages as well as greater labor force participation. And we believe this will also extend the business cycle.”

Chairing a committee for the administration

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

The one thing that Steve Schwarzman wants from the administration is to improve retail access to alts

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

You’ll get tax reform out of the house, but Senate is not as up to date

” this would be the biggest tax reform in certainly 75 years, maybe 100 years. So it all fits together and it’s meant to fit together, not to just have take one piece out and say, well, this is unfavorable. You have to look at it all which is the way the people are putting the law together, are looking at it. On the other hand, you have to get a law passed and this is not the easiest lift with all these new concepts. And my guess is that you’ll get it out of the House because it’s got enormous momentum in the house, but then it has to go through the Senate, which is not nearly as up-to-date on what’s going to be coming at them and then you have to go to confidence and make it work.”