Blackstone Group Inc. (BX) CEO Steve Schwarzman Presents at Bernstein’s 36th Annual Strategic Decisions Conference (Transcript)

Via SeekingAlpha.com

Blackstone Group Inc. (NYSE:BX) Bernstein’s 36th Annual Strategic Decisions Conference May 27, 2020 1:30 PM ET

Company Participants

Steve Schwarzman – Chairman and CEO

Conference Call Participants

Patrick Davitt – Senior Analyst, U.S. Asset Managers, Autonomous

Patrick Davitt

Good afternoon, everyone. Before we get into the good stuff, I just wanted to remind you all that we’re doing an interactive Q&A today through Pigeonhole. There’s a link on the left side of your screen to access Pigeonhole. When you click that link, it will open up a new window in your browser. That video will continue in the prior browser. You can submit your own questions on the box at the top. You can also vote on the questions already submitted by pressing the up triangle next to any question. So please go ahead. Click on that link now. Hopefully everyone has done that and you can start submitting your questions for Blackstone right away.

So this will be the first of three alternative asset manager conversations at this year’s Strategic Decisions Conference. We’re thrilled to have an executive that I believe needs little introduction. Blackstone Co-Founder, Chairman and CEO, Steve Schwarzman. Blackstone has $538 billion of AUM, makes it the largest alternative manager in the world with dominant positions across private equity, real estate, credit and hedge fund solutions. So Steve has his finger on the pulse of what is going on across multiple asset classes, multiple geographies, which I think is particularly an important perspective today given the ongoing COVID crisis.

Question-and-Answer Session

Q – Patrick Davitt

So with that in mind, let’s start high level with a macro discussion, Steve. There’s clearly a disconnect between the public markets that continue to kind of track back to their pre-COVID highs and many economists view — against what many economists view as a recovery that could be more L shaped than V shaped. So given the challenges the economy faces and potential for more L shaped recovery, I think it be helpful to start with a broad update on how you see this playing out from here?

Steve Schwarzman

Well, like any investor, you have to have a point of view. And I think it starts with the most disruption we’ve had. Forget my lifetime really in close to a 100 years. And this one was voluntary, unlike the Great Depression, where it was a collapse. So, we have a lot of unemployment. Some people say it’ll get to 25%. The question is, how quickly can you normalize? What I’d say to start is, is that particularly in the United States, although around the world, also the Central Bank and the government has done quite a good job in terms of basically replacing the missing revenues, GDP revenues that have disappeared. And I always thought that the stimulus would be somewhere in the $4 trillion to $5 trillion area. And after the next stimulus package, I think we’ll be there. And that leaves aside the trillions of dollars the Central Bank, the Fed is putting into the system. And so I think they bought us. And when I say us, I don’t mean the financial community. I mean regular people. They bought a level of continuity with their lives. And so we don’t have a complete disruption and devastation financially for them that they could. That doesn’t mean that every person has been underwritten. But it’s a very substantial underwriting through the system.

However, almost everyone has had some decrease in their savings. And when you recover from a downturn — and this is more than a downturn, it’s a restart except for certain parts of the economy, which have done well to service the people. That restart tends to be slower because consumers can tend to want to refill their savings rather than just start wildly spending. And so it’s a more measured decision. Consumers first buy the things they need for sure. But after that, they start rebuilding their balance sheets. So I expect, we expect, obviously you’ll have very sharp numbers coming in the first few months as people go back to work. But that ability to sync up the whole system is much more complicated as people rebuild their savings.

However, you have to look at this and say, what are we doing here? We’re dealing with a pandemic and all of the type of public health things of staying at home and social distancing and a variety of other things. But that will last until we get a vaccine. And once the population is vaccinated, those type of issues which we view as central now and everybody likes to talk about as if that will be the only thing that happens for the rest of somebody’s life intuitively, that’s what they’re saying. That won’t be the case. Because once you are vaccinated, assuming that vaccines are proven, you’re going to feel much more comfortable to adopt most elements of your life. And so, the question as an investor is how soon that can happen, which nobody knows. It’s a bit of a guess. It used to be a year to year and a half, which would have been miracle in the development of vaccines. You have over a hundred different attempts at that going on, with 100 shots on goal if you’re playing hockey, you’re going to score a number of points. Right? And I think that’s what’s going to happen. There are three different types of vaccines being developed, and some people believe that by year end, which is actually pretty close, we’re almost in June, you might have not just a solution but beginnings of large scale production.

So if you look at this economic situation and say, Steve, a year from now, we could have a vaccine. This is the optimistic case with lots of supply. Then the recovery, of course, will be pretty good. And I think that’s what the stock market is underwriting. And that’s one reason you have these very high stock prices relative to some of the performance. But the S&P, for example, is very heavily weighted to technology and healthcare, and those things have held up quite well. And so the S&P isn’t quite indicative, if you will, of the full range of stocks, but it’s still been pretty terrific. So what we see now is on a global basis, I don’t want to eat up all my time on the global stock, I want to talk about Blackstone. It is, what are we doing at different stages in this? So you start out buying securities that have collapsed. And we bought $11 billion of securities in the first two or three weeks. The last two or three weeks of the quarter we reported that. And those things, obviously, are enormously profitable, taken as a group. And then you start lending money through our credit units to people — companies that are distressed. They’re not distressed because they’re better companies, some of them are just shocked and they need money to go forward. And then you start looking at other companies to invest in on a broader basis that will be recovering. And so, each of our giant areas at the firm and Blackstone is by far the largest alternative asset firm, each have a cycle in effect of the type of investing they do. It’s tougher to buy companies now when nobody wants to sell them because any way they can give money not to sell their business at a bottom. They will do. That changes as you get further out in the cycle. And meanwhile, our private equity people can buy debt in companies that either we own or someone else owns. And there’s always a way of making money in these types of volatile situations.

Patrick Davitt

There’s something you said there I wanted to touch on later, but I’ll throw it in here. I think there’s a view from the investor community that this kind of dislocation is ultimately what a business like yours wants. Obviously, there’s a balance between what you already have in the portfolio. Do you think that all of this fiscal support that we’re getting kind of derails that view to an extent, or is it just going to be a little bit more drawn out than maybe what we saw in the GFC?

Steve Schwarzman

This is different. GFC was a financial crisis with the banking system and the mortgage securities. This is a cessation of business voluntarily. So our banks are in really great shape there, particularly in the United States. And I didn’t listen to [James] yesterday. But his stock and all the bank stocks responded. This is not the problem. Looking backwards at the global financial crisis, it’s much different. This is much more profound in a way and easier in another way. We don’t have those broken financial institutions now, and a little bit in the mortgage area. But fundamentally, a very strong financial system. So credit to the regulators and the people who put us in those positions and the banking executives. This is just a slower restart of businesses that we asked to close, some of which will never restart. Some of the smaller businesses that will go out of business now have to be formed. So it’ll be interesting. And everyone has their own idea of what opens first, what opens last, with most people saying that international travel, international hotels, airports, that stuff will be sort of at the end. And then you’ll have all kinds of things that rush back at the beginning.

Patrick Davitt

That makes sense. Okay, thanks. So if we think through and beyond this pandemic, how do you expect your priorities would shift at all, especially as it relates to cutting costs or increasing levels of investment or where you would like to increase investment to take advantage of what’s going on?

Steve Schwarzman

Well, I think in our business, you follow where the growth is. Now that’s the best way to make money. It’s hard to cost cut your way to prosperity. And when you buy businesses that grow, you put them or leverage. You get more income and you get a higher PE typically when you exit. So that’s where we go. And so we’re looking at a lot of interesting technology types of things, businesses that can be improved with technology, healthcare areas, because that’s going to be an area of enormous growth. And what we’ve done is play those things in other ways with hard assets, for example, in real estate we’re the largest purchaser of warehouses. So you wonder why we would do something like that? Well, we do it and we started buying in 2011 and now we’ve purchased over 1 billion square feet of real warehouses. And so that’s large actually in terms of square feet. And we did it because we realized that online shopping would need warehouses to be able to ship their goods to their customers. And that has been astonishingly successful as a place to concentrate because those shipping costs to the warehouses are very small compared to the entire cost of goods. And you need those warehouses. And the closer they are located to major metropolitan areas, the more those warehouses are needed for same day shipment. And so, the rents on those go up much, much higher than any other asset class.

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So picking the right places to go to play that, those themes, it doesn’t just have to be done with software investing, which we’ve done a number of issues – number of deals. But you take where those trends are going and you pick them up in other parts of your investment business.

Patrick Davitt

That makes sense. Thanks. It looks like on Pigeonhole everybody wants to talk about real estate. So maybe I’ll pivot to that. Obviously, you’re one of the largest real estate owners in the world. So what’s your outlook on that business now? And could you touch on the possibility that corporates reduce their office throughput as a result of all this and perhaps what Blackstone’s exposure is to maybe that long tail risk?

Steve Schwarzman

Yes, sure. I would be glad to do that. I think we at least think we’re the largest owner of real estate in the world. So we actually know something about this area, but we’re not the largest owner of all types of real estate. We basically sold our malls some time ago. Very little retail exposure for the same reason that we thought online shopping was going to do enormous damage to malls. So we don’t have exposure there. Probably three, four years ago, we were the largest owner of hotels in the world. Now that’s way down into single-digits for us unfortunately. We’ve concentrated in warehouses and apartment buildings, which by the way have held up quite well in terms of payment of rent and office buildings. But what we did with office is we sold almost all of our New York office, which just turned out to be pretty smart.

And we’ve got more location on the West Coast and Silicon Valley and Seattle and other places where office demand is really growing. And of course we have exposure around the world. So what we found is that rent payments are quite high, as I said, on our apartment units. Office, we haven’t had much problem in that area. So surprisingly, that’s all held up extremely well in the areas where we concentrate because we don’t believe that all real estate is created equal. You think you’re just buying real estate, you could really do quite badly. In this cycle, hotels are mostly empty and they’re just starting. And so those have been a very bad place to be investing through this cycle.

The question you asked about what’s going to happen to office buildings is actually quite interesting. And at this point, the answer is no one is sure. This working from home is, on one hand, very efficient as here we are. You’re at your home, I am in my home, we’re talking and we’ve got all these other people. It’s very efficient. At one of our meetings, somebody said, well, why don’t we do this all the time? And I said, well, one reason is you can’t train new people like this. It works pretty well with existing people who you know, and you can even meet some new people. But to run a great organization, you have to keep hiring people. They — particularly if you as a business are growing, you need more people and those people have to learn your culture. They have to know not just the mechanic of how you do a piece of work, but how do we think about it? How do we think about risk? What do we believe is the right, wrong approach to be doing things from an ethical perspective, from sort of criteria of how we operate? And that’s really hard to do on television. You have to have people sitting around talking about situations. It’s much more interactive.

And so I think this idea of just working from home will be a certain number of people that spend more time. Ironically, we found our tech people are the best suited for that, even though, the investment people can do it. And at Blackstone, we haven’t had much in the way of dislocation at all with our businesses. But I think what is going to happen is we don’t — we’ve not heard the tale yet of the damage psychologically for people “working at home.” And I was watching Nightline the other day, which is a television show on around midnight, shows you something about my life. They talked about how alcohol consumption was up 455% in April — from the previous April.

So a statistic like that tells you that something happens when your patterns are disturbed and you’re limited in terms of your flexibility and you’re spending all your time in effect at home. Now, in the future, you won’t spend all your time at home. And there are efficiencies, of course, from working at home to articulate. But I think at least in the short-term, you’re also going to have more distancing and office leases typically in the United States are for the most part 10 year leases and then you burn them down. So say there’s an average of five years for offices where we’re going to be through a lot of different cycles. We’re going to have — that seems we’re going to have people back to work, all those types of things. And I think there’ll be some people who take a different approach. Some meetings will happen on Zoom. On the other hand, one of the trends in office has been packing density and we’ve been really densifying using technology, space.

I think now there is going to be a trend to have more distance, at least in the next year or so, maybe two. And that creates more need for space at the same time that other people won’t want to come in, at least in the short-term. So I think we’re going to have to play this one out, depending on industry in terms of the use of space, I think it’ll definitely cut down on building and construction for office. That’s my personal view. And we’ll see how it goes.

Patrick Davitt

That’s helpful. Last one kind of on the current positioning. Obviously, having locked up capital is a huge benefit to your type of business. So how — particularly versus traditional investors, how do you think about managing a portfolio of risky positions or levered positions through a crisis of this magnitude without losing the position, so to speak?

Steve Schwarzman

Well, I think sort of your, but the attendees who aren’t as familiar with us as some of the other people will be evidently of a range of people who really know what we’re doing in alternatives. And then there’s some people who want to know. Basically, unlike you, we’re in the money management business at Blackstone. But different than the normal money manager you give money to and they invest it for you and when you wanted back, they mostly give it back to you. And some people, lock it up for short periods of time, 30, 60, 90 days, sometimes a year. But basically, you can get your money back if you’re in liquid securities. We, for the most part, not all of our business, but for the most part are involved with private securities. So you can’t get your money back immediately. And so what we’ve done as an industry is raise money where we can keep that money for very long periods of time; in many cases, 10 years or 12 years. And about 20% of our money is in perpetuity. And so we have a completely different model for running our business, which is that our management fee income is remarkably stable compared to loan-only manager, if you will, or a credit manager, because you can always take your money back if you don’t like them. And so that cash flow stream gets a really great valuation because it’s around for so long.

But what it allows us to do is, the managers, and why it’s important that we have that, it enables us to ride through cycles like this one. And you don’t have to sell when customers would normally want to get money back. Normally, customers want to get money back when they shouldn’t want it back, it’s near lows, and they force performance issues. Historically, that have not been good.

Look, what we do is we work our way through those down cycles and can invest to grow businesses over quite long periods of time. And then we put that on leverage. And historically, at any rate, we’ve made over long periods of time close to double the stock market. And it’s not just because of leverage, it is because you’re growing these businesses and investing in them and you pick good ones.

Now, one example of how this works is, in the last cycle with a company called Hilton, which almost everybody has heard of, was comprised of a lot of different brands. And we bought it and we bought it a year before the global financial crisis. We thought a crisis actually was coming. And we constructed the company in a good way. We had a good plan. Nonetheless, when everything goes down, it’s hard for your assets not to look like they’ve gone down because they have. But doesn’t mean end of story. We don’t sell them. We don’t have to sell them. Nobody asks us to sell them. And so that got down to three-tenths 30 percent of what we paid. And everybody was all upset that we made a mistake. We didn’t think we made a mistake. We just ran into the global financial recession and we kept it. We kept investing in it. And it ended up being the largest profit in private equity history. We made $14 billion on this. We sold that at around 3 times of profit from the original cost. From the bottom, it was over 10 times profit. And so these types of times is where we can make money. We can buy the debt of that company when it — when everybody is worried about it. And so our model is ideally suited for these types of situations. And we end up buying typically less when prices are high.

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Patrick Davitt

You touched a bit on the investment opportunity, obviously the other side of the coin, too. The current position is, how you put your dry powder to work. So do you think there’s enough opportunity for all of the dry powder out there to make an appropriate return as you look at the investment opportunities out there? And more specifically, I’m getting some questions on energy. Do you still consider it an investable asset class? To put it short.

Steve Schwarzman

I appreciate that question. That’s an interesting one. But let’s just step back for a second. There’s up to $2.6 trillion of, in effect, what they call dry powder or investable money in private equity. I was looking the other day at the scale of the different asset classes in the world, and you get up somewhere over $200 trillion. And so if you’re just looking for a private equity deal with your 2.6 billion in one little area, in one country, you could make the case. Theoretically, there’s a bunch of money. Once you look at the world and of course it scales biggest in the United States and Europe, given these are developed parts of the world, that there’s always opportunity. And the wonderful thing about our business at Blackstone is it’s typically in each fund we have. It’s not just one fund. We have over 50 different funds doing different things. They’re all just not buying a company, some are lending money. Some are buying minority interest. Some are buying complete control. And some are investing in hedge fund areas. Some are buying into individual managers. That each one of our areas typically doesn’t have to do more than 10 investments a year, sometimes more. But usually if you have a staff of really qualified people and you need 10 investments a year, just to make the case, and you have the whole world in which you can invest, how could you not find 10 interesting things? If you look at it just sort of as a whole, you could get a little nervous. But we’ve not found. We’ve been doing this now for 34 years. We’ve always found that there are interesting things to do.

But it’s a little like hockey in the sense that when it’s harder, you can still invest, but you only get three or four shots per game. When things are better, you can have 30 shots. So it’s just easier at certain points in the cycle and then it gets harder. And so the first thing you have to do is be aware that it’s harder or it’s easier. So now we’re in a cycle of recovery for a whole bunch of assets. For some, they’ve just barreled along, and they’re at high multiples. And those are the FANG stocks and other types of things in technology. And it’s the great retailers that provided — sort of like Walmart, these are not — during the pandemic, these are not investible for firms like us. They’re much too big. So we’ll find plenty of activity around the world. And they’ll be a point where real estate will be a really interesting purchase. And there’ll be some companies that get into trouble or don’t recover, right? And so we’re optimistic that we’re going to be able to find a lot of good things.

Patrick Davitt

And then in energy specifically I guess there’s a concern that it’s uninvestable at this point, but you obviously have a lot of dry powder specifically dedicated to that.

Steve Schwarzman

In energy?

Patrick Davitt

Yes. Yes.

Steve Schwarzman

Oh! My goodness. Energy is fascinating. Okay? This is like Mr. Toad’s Wild Ride. And it was funny. I was sitting next to the head of one of the three largest energy companies in the world, probably about three years ago. And he is a guy I knew pretty well. And I said, well, what do you think about oil prices? And he said, well, I’ve been doing this for 40 years and they’ll be somewhere between $20 a barrel and $120 a barrel. And anybody who tells you, they know where it’s going to be, this is lying to themselves, and I just know it goes up and down. And I know I’m going to run my company, so we survive and basically can thrive in any of those environments. And I must say, he at least turned out to be right. And you’d expect somebody who runs one of these giant companies to have something a bit more profound to say. That was — turns out to be profound. And we were negative, which I’ve never even heard of in energy, what was it, four weeks ago? And now on WTI is of somewhere around $33, $34 and with a radical cutback in production and energy. [Technical Difficulty]

Different things to invest in. Some are very high risk, such as punching holes in the ground, which is called upstream. And that’s a tough business. There are other parts of the energy, complex like pipelines which don’t have that volatility. So they have longer term contracts. And so that looks like at certain points, that’s interesting to invest in. The debt securities across the board in energy have pretty wild outcomes as a function of the company itself as well as the macro outlook in energy.

Energy is sort of simple to understand. If you look at the oil business, for example, it’s got roughly $100 million of barrels of production. And even though it consumes somewhere between $98 million and $100 million — 98 million and 100 million barrels of production were consumed. So you’re more or less in balance. Well what happened with the pandemic is that the consumption went down from close to 100 million barrels to somewhere around 70 million. My goodness, the whole concept of supply and demand was destroyed. So if you kept producing the same amount. The commodity would just pancake, which you did. Then what happens, of course, is the people producing that oil and gas, they basically say, my goodness, everything I’m selling, I’m losing money on even on a cash cost basis, I got to stop production. So they stop investing and they’re trying to get down to lower levels, probably around 90 million barrels, something like that now or at least planning. And the question is, how much does consumption go up when we turn on all the factories? People go back to work and we start using more?

To the extent it closes up on that 90 million, you’ll have oil pop. So how do we know negative in four weeks? So $34 a barrel. That’s amazing. And you’d make the same case that $34 could go to $50. And that may pretend — just may pretend that happened in two years. Some people would make an enormous amount of money. So is it this simple? The answer is it’s investible, if you’re smart and you decide what level of volatility and risk you want to tolerate and what your mistake is. And so it’s turned out to be dangerous or when it’s going down, we’ll see how it is going up. But somebody is making or losing a lot of money in energy.

Patrick Davitt

For sure. One that a lot of people are voting for on the Pigeonhole related to the investment opportunity in real estate is, I think you kind of touched on retail and office, but more specifically, lodging and gaming, what you see as the opportunity given the displacement there?

Steve Schwarzman

Well, that’s interesting. We have very big exposure to gaming. And in fact, I think we’re the largest investors in Las Vegas. We own sort of operating casino. We own the real estate underneath casinos. We have office buildings there. And we also have warehouses in Las Vegas. And we have exposures in other part of the world. That business is just shut right now. But it will open like all things, and people will go back. They tend to always go back. People like gambling. Odds are there won’t be as many of those high priced games. They won’t be paying back a lot, they’ll be using more slot machines and other types of things. But those types — some of those of businesses are more like sort of entertainment businesses, they have great shows, great restaurants, and there will be a future for those assets. But we’ll see that around the world. We just bought into a gaming business. They only have two of them actually in Australia, and we bought into the largest one. And we made like an instant short-term profit on the stock as soon as we bought it in. And I think those businesses will return. There was sort of like the hotel businesses, they eventually return. And so you asked me for my view on that industry. That my view.

Patrick Davitt

Fair enough. So we’ve covered the macro, the positioning, the investment opportunity, which is, I think, a good lead into the issue. Most investors care most about, which is your outlook for fund raising and fee related earnings growth. Do you think the crisis has meaningfully changed your run rate — your runway to long-term earnings growth? And then through that lens, which strategies do you think are best positioned for this environment over the next couple of years?

Steve Schwarzman

Well, we’re quite fortunate at Blackstone we’d very ambitious set of fundraising targets over the last I guess approximately two years, and we raised $250 billion in a two year period. For those not familiar with our industry, that’s almost the size of most of our competitors. I mean there’s only perhaps one or two competitors that’s bigger than that, having raised money for 30 years. So doing that in two years was pretty amazing. And it was an acknowledgment that our style, our form of managing money is really — gives terrific returns over long periods of time. And so we’ve completed, in effect, what you would say is our sort of biggest sort of fundraising cycle. We continue to be very active. And I think people this year are expecting us to raise at least $70 billion. And I think that’ll probably be achievable.

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And so what we find is that institutions continue to like to give us money. What happens when stock markets crack is everybody freezes. They don’t know what their obligations are to give money to other people and to fund deals and their realizations go down. And so they stop. And also the size of their fund shrinks, if the stock market is down 33%, right? It’s enough to put anybody out. What’s happened now is that stock markets have recovered. Most bonds have recovered. Certainly investing great bonds. And so there’s much more confidence in U.S. domestic investors.

Surprisingly or not, the sovereign funds around the world have not stopped their investing. They’ve been sort of very enthusiastic and retail investors who usually just run away because the world has been pretty good to them. Look at where the S&P is. We’re finding — raising money for our funds at retail is being extremely good. We have one experience and I have Weston Tucker who is my Investor Relations person. I’m going to tell a story. You can jump in and stop me if some lawyer would say I’m doing something wrong but proffering. And we sold sort of 400 million of it in two days at one investment and one distributor, one giant firm, $400 million in two days retail from one firm is really pretty amazing. And so I think that to the extent that we have a product that we want to be raising money for — our funds have almost always been oversubscribed. We have rights and we limit the amount of money that we take from institutions at retail because we don’t want our performance to be bad. And most money managers just take all the money they can get. We don’t do that. And so there’s a certain premium that goes with that style. And so when we decide we want to raise money for something, it’s — over the last 10 to 15 years, it’s been pretty easy as long as we perform.

So, on the money raising side, I don’t think you need to be concerned about sort of the firm. What I would say on fee related income, because I think you mentioned that as well, but what goes with raising money and growing the firm in a sensible way, orderly way, is that you have a management fee income that goes with that because what that’s used for primarily is to hire great people and keep them in and set up. So the profits from those businesses keeps going up as the firm keeps growing. And I think people are expecting the analyst community for us to have at least $1.70 this year of fee related earnings. And I think we’re optimistic about that or something more. But — so the firm is in a very good shape on all of these metrics. We’ve got enormous liquidity and A plus rating. I mean we’re not concerned about things that many people are concerned about, worry about them all the time. So if you worry about them all the time, you don’t have to worry about bad things happening to you. If you take steps. So I think we’re very well positioned for growth in the future.

Patrick Davitt

To that point, it’s obviously a compelling story as we think about the investability of the stock and particularly there’re ways of having a lot of kind of general appearance here today. Blackstone has been hesitant to revamp the voting and governance in order to be eligible for broader market indices like Russell, particularly — possibly S&P 500. So what is your reticence to make the changes necessary to be eligible for those? And maybe what would you need to see from the others that are making those changes to maybe drive a [rethink] from your position?

Steve Schwarzman

Yes, that’s a good question. We decided to convert to C-Corporation to a corporation. We didn’t do it for years because we basically thought that having a sort of the best tax position was the right thing. What we didn’t realize is that we were excluding either legally or by custom two out of three investors. It didn’t like to own master limited partnerships. So in effect, we were basically beating our heads against the wall. But what we didn’t realize, we were being hurt, hard to imagine that we missed that. So we did the conversion. And we’ve had amazing reception, an amazing stock price performance. And so, we’ve had a bunch of buy-in from index funds. We’re not yet in the S&P 500. It sort of surprises me because there are many, many companies that have dual class voting that are in the S&P. What happened is they used to do that as a matter of course. And then there was one company they didn’t like who did it. And then they sort of decided, I’m never going to do that again. The problem, in a way, is that the companies that are in the S&P that comprise dual class, I think it’s roughly 17%. Something like that. Basically had performed at double the rate as regular companies. So excluding dual class companies, which is like two or three year old phenomena or something, really, really over time doesn’t make a lot of sense because why would you exclude the companies that are doing twice as well as your other companies and they’ve had them for many, many years anyhow. So I am hopeful that job — and we’re the largest that is not included. And I’m hopeful that for a variety of reasons that they will change their point of view. And we will see. [Logic] was saying that they would do that because just it makes sense and they’ve done it in the past. So really try and get rid of those companies that historically have provided their top performance. Why would you want to get rid of, Berkshire or Google or whatever the numbers in sort of famous companies just because they’re dual class. So I’m somewhat hopeful that, that will change.

Patrick Davitt

Fair enough. We’re about out of time. There’s one that’s near and dear to all of our hearts that a lot of people want you to answer. If you want to defer, that’s fine. But do you think higher taxes are almost unavoidable after this crisis and all of the printing of money, the security?

Steve Schwarzman

Well. I don’t think you can borrow. $5 trillion over time are uninspectedly without consequences. And so I would not be surprised that there need to be some increase in tax revenue to support that spending and we were running deficits [anyhow]. And so, hopefully we can get high growth. That’s usually the way out of that box. But it wouldn’t surprise me if we had a higher tax burden as a result of the pandemic spending.

Patrick Davitt

Great. Thank you. Well, we’re out of time. Is there any closing thoughts you’d like to share? Thank you for your time.

Steve Schwarzman

Other than, I think that we’re going to be 35 years old this year, October 1st. We’ve seen a lot of stuff. We’ve been through a lot of stuff. We’ve got a terrific culture at the firm. It’s a workaholic, meritocracy, high integrity, zero defect culture. Do the best thing you can for your customers and work as a team and openness and debate and no internal politics. And we actually — those aren’t commercials. So it’s actually what we do. And we have sort of a special culture, which is why we voted as one of the top 30 companies in the world by outsiders, not by ourselves. I always think we get much better. So it’s not self-satisfaction in any way. And so, we’re special firm. We’re in the invention business. What can we invent that we haven’t done before that can be in touch with something new, where we can do better for people? So, we have amazing people at the firm. My partner, John Gray, who is the President is 50 years old. That seems young to me, even though I sort of think I’m 38. But the reality is, that’s actually not sure. And John is amazing. He is like an amazing player and can do every facet of the job probably better than me. So we have real depth of management. And terrific business positioning in everything we do. And if the world gets better, which it will, then it’s going to be good for us. And it’s always good for us. And that’s because we worry all the time about what can go wrong. And we have a simple motto, which is, don’t lose money because it’s like a doctor do no harm. So if you start out, it doesn’t sound too startling, but you always have happy customers.

So then this thing, I wrote a book. So now I’m in the advertising business of what it takes. And it shows people how to be successful and how to make organizations successful and how to learn from your mistakes because we all make them, have hired the right people. And it’s very funny. People who laugh all the time — definitely when they read this because they e-mail me and tell me that, and it changes people’s lives. And the only reason I know that is I get this torrent of e-mails tell me that. So if you’re in the financial business in particular, like a lot of the people watching, this is a wonderful read. It only takes about seven hours and you don’t even need a giant investment of time. And you’ll learn a lot about the world you live in. And you’ll each see a lot of yourselves and the difficulties you have being successful. I’ve had and everybody hasn’t. And we all ultimately prevail if we have enough will and faith in what we’re doing. So I couldn’t resist that commercial. You can turn it off or if you want it.

Patrick Davitt

No, it’s great. Well, thank you so much for your time, Steve. Thank you, investors. Please remember to go on the conference website and take the processes on the Blackstone stock. So thanks a lot, all.