Blackstone Inc. · NYSE:BX
Blackstone — 2014 Credit Suisse Financial Services Forum
31 slides from Blackstone's conference presentation, Feb 12, 2014
Slide 1: Blackstone Alternative Asset Management
Blackstone Alternative Asset Management February 12, 2014 2014 Credit Suisse Financial Services Forum
Slide 2: Important Disclosures
Important Disclosures Forward‐Looking Statements These Materials may contain forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things,
Slide 3: Table of Contents
Table of Contents I. Blackstone Alternative Asset Management 3 II. Industry Dynamics Have Supported BAAM’s Rapid Growth 12 III. BAAM’s Strategy and Positioning 18 Blackstone 2
Slide 4: I. Blackstone Alternative Asset Management
I. Blackstone Alternative Asset Management
Slide 5: BAAM has established its position as the industry leader
BAAM has established its position as the industry leader Largest discretionary allocator to hedge funds in the world(1) • $55 billion in AUM(2) (over $20 billion larger than the next largest fund of hedge funds competitor(1)) Separated from traditional competitors • 31% AUM CAGR since 2001 for B
Slide 6: Innovation has been the key to BAAM's growth
Innovation has been the key to BAAM’s growth Historical Growth by BAAM Business Segment ($ in billions) AUM: $12bn 5 yr CAGR: 67% Specialized Solutions (e.g., Direct trading, Seeding, Purchasing Hedge Fund GP interests, Long Only) & Life CAGR: 42% Individual Investor Solutions (e.g., RIC, Mutual Fun
Slide 7: Diverse array of commingled and customized investor solutions
Diverse array of commingled and customized investor solutions Customized Individual Commingled Long Only / Special Investment Ventures Investor Products Long Biased Situations Solutions Solutions AUM (1) $2.6bn invested $19.3bn $27.9bn $3.4bn $4.8bn $1.6bn $1.8bn committed Diversified, Tailored acco
Slide 8: BAAM's growth has outpaced the industry
BAAM’s growth has outpaced the industry Cumulative Growth in Assets for HF Industry, FoHFs >$1 billion, and BAAM(1)(2) (US$ in billions) Cumulative Growth Since 2001 HF Industry AUM 2001–Jun 2013 CAGR 2009–Jun 2013 CAGR BAAM: 31% BAAM: 18% >$1bn FoHFs: 13% >$1bn FoHFs: ‐5% HF Industry: 14% HF Indust
Slide 9: Diverse and institutional client base
Diverse and institutional client base Institutional composition of our client base provides the business with stability Emphasis on transparency, knowledge transfer and investor education Institutional investor base allows for customization and innovation BAAM Client Breakdown by Investor Type(1
Slide 10: Deep relationships with institutional investors: Asset flows from existing vs. new clients
Deep relationships with institutional investors: Asset flows from existing vs. new clients Flows from existing investors remain the majority of BAAM’s gross external inflows Net BAAM Inflows(1) BAAM’s existing client base often (by investor status) provides seed capital for new products(2) Resources
Slide 11: Select financial highlights
Select financial highlights BAAM Fee Breakdown $650 $520 $215 $390 $11 $93 $260 $31 $2 $61 $97 $407 $302 $345 $130 $181 $217 $231 $257 $0 2007 2009 2008 2010 2011 2012 2013 Management Fees Incentive Fees BAAM Loss Carryforward BAAM Assets Accruing Incentive Fees $3,750 $35,000 $2,945 $3,000 $28,000
Slide 12: BAAM continues to be a high-growth business
BAAM continues to be a high-growth business BAAM has maintained strong financial performance across major metrics… Hedge Fund Solutions (“HFS”) Summary Financials ($ in millions) 2009 2013 CAGR AUM $28,799 $55,657 18% Revenue 313 649 20% Economic Income 170 377 22% ________________________________
Slide 13: II. Industry Dynamics Have Supported BAAM's Rapid Growth
II. Industry Dynamics Have Supported BAAM’s Rapid Growth
Slide 14: Hedge fund industry growth continues after financial crisis
Hedge fund industry growth continues after financial crisis AUM Growth (Hedge Fund Industry)(1) ($ in billions) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E Projections(2) ______________________________________________
Slide 15: Institutions driving recent growth in hedge fund industry AUM
Institutions driving recent growth in hedge fund industry AUM Hedge Fund investor base is now predominantly institutional(1) Hedge Fund Industry AUM by Investor Type(1) 52% 56% 56% 69% 74% 77% 80% Institutional Individuals 48% 44% 44% 31% 26% 23% 20% 2001 2003 2005 2007 2009 2011 2012 BAAM expects
Slide 16: Hedge funds becoming a larger part of institutional portfolios
Hedge funds becoming a larger part of institutional portfolios Pension Funds are increasing allocations to hedge funds Average Pension Fund Allocation to Hedge Funds(1) A majority of institutions, including pension 6.8% 6.4% plans, endowments, foundations and insurers, reported increased hedge f
Slide 17: Hedge funds continue to attract talent given their flexibility
Hedge funds continue to attract talent given their flexibility Capital Leverage Employed by Hedge Funds Dodd‐Frank, Basel III, and other global and Bank Proprietary Trading Desks(1) regulatory changes are reducing the ability of ($ in billions, 2008–2010) investment banks, commercial banks, and in
Slide 18: Hedge funds currently represent only a fraction of global assets
Hedge funds currently represent only a fraction of global assets Comparison of Global Financial Assets(1)(2)(4) ($ in trillions) Total capital invested in hedge funds exceeded $2 trillion for the first time $214.6 in 2012(1) Hedge funds represent less than 2.0% of global financial assets(2) Av
Slide 19: III. BAAM's Strategy and Positioning
III. BAAM’s Strategy and Positioning
Slide 20: BAAM has produced attractive risk-adjusted performance
BAAM has produced attractive risk-adjusted performance BAAM Principal Solutions Composite Beta to Indices: January 2000 – December 2013(1) HFRI FOF Cnsv MSCI World TR S&P 500 TR FTSE 100 Barclays Agg CSFB HY GSCI Beta to BAAM Composite 1.07 0.18 0.17 0.18 0.03 0.31 0.73 Risk Return: January 2000 – D
Slide 21: Historically, BAAM has mitigated loss in severe equity market downturns
Historically, BAAM has mitigated loss in severe equity market downturns Largest 10 S&P 500 Monthly Losses (July 1996– December 2013(1)(2)) 4% 2% 0% ‐2% ‐4% ‐6% ‐8% ‐10% ‐12% ‐14% ‐16% ‐18% Oct 2008 Aug 1998 Sep 2002 Feb 2009 Feb 2001 Sep 2008 Jun 2008 Jan 2009 Sep 2001 May 2010 S&P 500 TR HFRI Conse
Slide 22: BAAM has produced attractive risk-adjusted performance
BAAM has produced attractive risk-adjusted performance Since the institutionalization of BAAM’s business in 2000, on an annualized basis the BAAM Principal Solutions Composite is up 6.77%, outperforming the HFRI FOF Composite Index (+3.77%), HFRX Global HF Index (+3.56%), MSCI ACW TR Index (+3.19%)
Slide 23: BAAM: Negotiating attractive exposures and terms with managers
BAAM: Negotiating attractive exposures and terms with managers Underlying Manager Strategy Size(1) Negotiated Structures & Transactions(2) Asset Weighted as of January 1, 2014 As of January 1, 2014 64% of AUM is in negotiated structures & transactions ________________________________________________
Slide 24: BAAM: A Global Business Constantly Evolving
BAAM: A Global Business Constantly Evolving 2000: Tom Hill joins BAAM as President & CEO 2008 / 2009: In the wake of the financial crisis, BAAM does 2001: BAAM establishes its presence in London not restrict investor liquidity and provides $8.4 billion in capital to investors 2002: Structure
Slide 25: Product Structuring: Innovation Process
Innovation Process Client Collaboration to Joint Research Effort with Problem Solving Identify Opportunity Managers Internal BAAM Process 1 2 Idea Proof of Product Structuring Generation Investment Final Product Concept 4 3 Manager Sourcing, Fund Negotiations & Structuring & Onboarding Operations Ne
Slide 26: Product Structuring: Case Study BSCA
Innovation Process Case Study: Blackstone Strategic Capital Advisors (“BSCA”) Client Collaboration Joint Research Effort • Large, early stage investors desired • BAAM explores appetite of hedge access to hedge fund General Partner Problem Solving fund managers for a strategic partner economics 1 Ide
Slide 27: Hedge Fund Ownership: Blackstone Strategic Capital Advisors
Hedge Fund Ownership: Blackstone Strategic Capital Advisors Overview Opportunity Set BSCA will focus on acquiring meaningful, strategic minority Hedge fund managers continue to capture market share, while positions in established alternative managers industry dynamics are ideal for consolidation
Slide 28: Product Structuring: Case Study BSOF
Innovation Process Case Study: Blackstone Strategic Opportunity Fund (“BSOF”) Client Collaboration Joint Research Effort • Prospect managers confirm willingness • Clients communicate they have an to operate in a fund structure increased appetite for co‐investments Problem Solving • Begin to regularl
Slide 29: Product Structuring: Case Study Blackstone Multi-Manager Fund
Innovation Process Case Study: Blackstone Multi‐Manager Fund Client Collaboration Joint Research Effort • A large, traditional asset management • BAAM educates managers on firm expresses interest in alternative Problem Solving operating in a ‘40 Act structure investment exposure 1 Idea Generation 2
Slide 30: Additional Disclosures
Additional Disclosures Index Disclosure: The volatility of the indices presented throughout this material may be materially different from that of the performance of the BAAM funds presented. In addition, the indices may employ different investment guidelines and criteria than the Funds; as a result
Slide 31: Disclosures Relating to Negotiated Structures / Transactions
Disclosures Relating to Negotiated Structures / Transactions Number of Negotiated Structures / Transactions: Data as of 1/1/14. Count includes customized vehicles, vehicles with negotiated fee discounts, seeding platform funds and co‐investment deals that occurred during each year presented. Volum
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