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May 3, 2013
The Waldorf=Astoria
New York, NY
2013 Blackstone Investor Day
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, Blackstone’s
operations and financial performance. You can identify these forward‐looking statements by the use of words such as “outlook,”
“believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,”
“anticipates” or the negative version of these words or other comparable words. Such forward‐looking statements are subject to various
risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially
from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the
section entitled “Risk Factors” in its Annual Report on Form 10‐K for the fiscal year ended December 31, 2012, as such factors may be
updated from time to time in its periodic filings with the Securities and Exchange Commission, which are accessible on the SEC’s website
at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary
statements that are included in this presentation and in the filings. Blackstone undertakes no obligation to publicly update or review any
forward‐looking statement, whether as a result of new information, future developments or otherwise.
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2013 Blackstone Investor Day
Important Disclosures
Not an offer. The Materials are provided as an overview of The Blackstone Group L.P. and are for informational purposes only, and do not constitute an offer to sell,
or a solicitation of an offer to buy, any security or instrument, or a solicitation of interest in any particular Blackstone fund, account or strategy. If such an offer is
made, it will only be made by means of an offering document, which would contain material information (including certain risks of investing in such security, fund or
strategy) not contained in the Materials and which would supersede and qualify in its entirety the information set forth in the Materials. Any decision to invest in a
fund should only be made after reviewing the offering document, conducting such investigations as an investor deems necessary and consulting the investor’s own
legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.
Performance Information. Past performance is not necessarily indicative of future results and there can be no assurance that any Blackstone fund or strategy will
achieve comparable results, or that any investments made by Blackstone in the future will be profitable. Actual realized value of currently unrealized investments will
depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, any related transaction costs and
the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the current unrealized valuations are based. Accordingly, the
actual realized values of unrealized investments may differ materially from the values indicated herein.
General. Data in the Materials is as of March 31, 2013 unless otherwise noted. Neither Blackstone, nor any Blackstone fund nor any of Blackstone’s affiliates makes
any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein. Unless otherwise specified, the source
for all graphs, charts and information in the Materials is Blackstone. Certain information contained in the Materials has been obtained from sources outside
Blackstone. While such information is believed to be reliable for purposes used herein, no representations are made as to the accuracy or completeness thereof and
Blackstone does not take any responsibility for such information. Certain information contained in the presentation discusses general market activity, industry or
sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
Private Equity and Real Estate. Except as otherwise noted, the Gross Annual Rate of Return represents the compound annual rate of return (“IRR”) before
partnership expenses, management fees, drawdowns for organizational and partnership expenses, and the General Partner’s allocation of profit, but after
partnership expenses withheld from distributions. The Net Annual Rate of Return represents the IRR after management fees, drawdowns for organizational expenses
and partnership expenses, partnership expenses withheld from distributions, and the General Partner’s allocation of profits but does not include taxes or
withholdings specific to certain limited partners. Net returns for Private Equity core funds shown for realized investments and total (realized plus unrealized)
investments, from inception of the business in October 1987. Private Equity core funds represent the flagship global funds (BCP I – BCP VI) and flagship sector funds
(Blackstone Energy and Blackstone Communication funds); does not include Tactical Opportunity and Asia funds. These returns are calculated as the internal rate of
return of the total contributions and distributions (including fees, drawdown of expenses, return of capital and recouped losses) for all investments. Net returns for
global real estate opportunity funds shown for realized investments and total (realized plus unrealized) investments, from inception of the business in January 1992.
Global opportunity funds include Pre-BREP – BREP VII, and exclude real estate debt funds, international funds and co-investment vehicles.
Private Equity, Section X, page 2: Outperformance as compared to the S&P 500 Total Return Index, using the corresponding annual rate of return of the index from
each contribution / disposition date to the quarter end for all investments. The index comparison is provided solely as an indication of returns that could be earned by
investors by making similar investments in the S&P 500 Total Return Index. Blackstone’s funds differ from the index in that, among other factors, Blackstone’s funds
are actively managed entities that bear fees and use leverage.
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2013 Blackstone Investor Day
Important Disclosures
Real Estate. Section X, page 3: Outperformance as compared to the NCREIF-ODCE Index. The NCREIF-ODCE (NCREIF Fund Index - Open-End Diversified Core Equity),
which began in 1973, is a fund-level capitalization weighted, time-weighted return index that consists of 28 open-ended core funds. The average index leverage is
approximately 30% and includes property investments at ownership share, cash balances and leverage. NCREIF-ODCE’s returns are reported on a quarterly basis.
NCREIF-ODCE’s net annual rate of return is provided solely as an indication of returns that could be earned by investors making real estate investments. Blackstone’s
funds differ from the NCREIF-ODCE Index for several factors. NCREIF Returns have been calculated as the IRR of the total contributions and dispositions (including
fees, drawdown of expenses, return of capital, and recouped losses), and the corresponding annual rate of return of the NCREIF-ODCE from each contribution date to
each disposition or return of capital date, or the quarter end for unrealized investments.
Hedge Fund Solutions. Section VIII, pages 1, 15, 16 and 20 and Section X, page 4: The volatility of the indices presented may be materially different from that of the
performance of the relevant Blackstone fund. In addition, the indices employ different investment guidelines and criteria than the Blackstone fund; as a result, the
holdings in fund may differ significantly from the securities that comprise the indices. The performance of the indices has not been selected to represent an
appropriate benchmark to compare to the performance of the Blackstone fund, but rather is disclosed to allow for comparison of the fund’s performance to that of
well-known and widely recognized indices. Summaries of the investment guidelines for the indices presented is available upon request. In the case of equity indices,
performance of the indices reflects the reinvestment of dividends.
Credit. The volatility of the benchmarks presented may be materially different from that of the performance of a GSO fund. In addition, the benchmarks employ
different investment guidelines and criteria than GSO funds; as a result, the holdings in a GSO fund may differ significantly from the securities that comprise the
benchmarks. The performance of the benchmarks has not been selected to represent an appropriate benchmark to compare to the performance of any GSO fund,
but rather is disclosed to allow for comparison of a GSO fund’s performance to that of well-known and widely recognized benchmarks. The names of the relevant
benchmarks and a summary of the investment guidelines for the benchmarks presented are available upon request.
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Table of Contents
I. Introduction
II. Welcome Remarks
III. Financials Overview
IV. Real Estate
V. Private Equity
VI. Portfolio Operations
VII. Advisory and Restructuring
VIII. BAAM
IX. GSO
X. Wrap-Up
Blackstone 6
I. Introduction
2013 Blackstone Investor Day
What’s new...
$108
Credit
$90 $94
$78
’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 Current
________________________________________________
(1) Represents growth in Total AUM from 1995 to present.
(2) Multiple on invested capital represents average multiple on realized investments from inception to present. Liquid returns represent a range of representative liquid strategies from their respective
inception dates to present.
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2013 Blackstone Investor Day
What’s next…
Hypothetical Fee-Earning AUM
70% below our historic rate
($ in billions) $356
$171
If:
8% AUM growth
2x multiple on invested
capital
7–10% liquid fund returns
Current 1 2 3 4 5 6 7 8 9 10
Years
$171
Current 1 2 3 4 5 6 7 8 9 10
Years
LTM 1 2 3 4 5 6 7 8 9 10
________________________________________________
Years
Note: Presentation of hypothetical growth in Fee Earning AUM and Distributable Earnings not intended to project future performance. Calculation of hypothetical Distributable Earnings per unit is intended
to be illustrative and for that purpose contains a number of assumptions including, among others, constant management and performance fee rates and margins over the ten year period, no change in
the number of diluted units outstanding over the ten-year period, a 2x realized multiple of invested capital over an average hold period of 4.5 years for our draw-down funds and an effective tax rate
of 15-20% on taxable income for the ten year period.
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II. Welcome Remarks
2013 Blackstone Investor Day
Credit
(GSO)
Pátria
1,800
employees
Park
Hill
25 offices
$218 billion
Advisory AUM
Hedge Fund
Solutions
Restructuring Tactical
Opportunities
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2013 Blackstone Investor Day
Integrity
Leadership demands
responsibility
Accountability Entrepreneurship
Using creativity to find
Our capital and reputation
opportunities others
are always on the line
overlook
Excellence Teamwork
Nothing less is ever
Always makes us better
acceptable
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III. Financials Overview
2013 Blackstone Investor Day
Sustained Growth: $76 billion of Total AUM in new strategies or acquisitions since the IPO
Value Creation: $17 billion of capital deployed and $18 billion of value gains over the last twelve months
Gain Realization: generated $17 billion from over 115 transactions in the last twelve months
Momentum: Performance Fee “compounding” and increase in realizations impacting financial results
Blackstone’s growth centers on value creation and gain realization for fund
investors seeking long-term outperformance across cycles
Institutional
$23 billion Investors
pension funds, governments
$34 billion
1Q’13 LTM Capital Returned 1Q’13 LTM Capital Raised
and universities
Long-Term
Sustained Commitments
match liquidity to
Outperformance investment opportunities
across all businesses, across asset classes
funds and cycles
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2013 Blackstone Investor Day
Since 2009, Total AUM has grown at a faster rate than Fee-Earning AUM,
reflecting an acceleration in value creation across Blackstone funds
12%
$98.2
$96.1 17%
$69.5
$54.8
21%
$16.7
$11.2
$13.1 $47.1 billion
Cumulative Realizations since 2007
$7.8
$5.2
$2.8
$1.0
$3.8
$7.6 $7.9
$88.5 billion
1Q’13 Fair Value of Performance
Fee Eligible AUM
$14.3
$16.2 $14.8 $15.6
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2013 Blackstone Investor Day
3.9x
$39.6
Drawdown
Funds at Cost
95%
CAGR for Drawdown Funds at Cost
$22.7
$13.8 52%
CAGR for NAV Funds
2010 1Q’13
(1) Value Created represents the unrealized market appreciation of drawdown funds. Blackstone 5
2013 Blackstone Investor Day
$110 77%
$629 of invested Performance Fee Eligible
$96
$91 AUM above high water mark / hurdle at 1Q’13
$83
$362
$322
$55 $228 $34 billion
$133 $38 1Q’13 Performance Fee Eligible Dry Powder
$74
$39
$24
$23
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q’13
LTM
Private Equity Real Estate Hedge Fund Solutions Credit
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2013 Blackstone Investor Day
Economic Income
($ in millions)
$2,179
$2,041 40%
Economic Income CAGR since 2009
$830 $814
34%
cash flow components(1)
$695 CAGR since 2009
$724 $466
Totals may not add due to rounding. See Appendix – Earnings Composition – Calculation of Net Realizations and Net Unrealized. Blackstone 7
(1) Cash flow components include Net Realizations and Fee Related Earnings.
2013 Blackstone Investor Day
$2.2 billion
$1.52 $0.80 Private Equity 1Q’13 Net Accrued Performance
Fee Receivable
$0.99 Real Estate
$0.74
$0.18 Other Investments
$0.72
$0.23 Net Accrued
$0.96
$2.00
Performance Fees A / A+ rated
by S&P / Fitch
1Q’11 1Q’13
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2013 Blackstone Investor Day
2% / 5% 33% / 50%
Traditional BX Traditional BX
Managers Managers
Traditional BX Traditional BX
Managers Managers
Source: Morgan Stanley, Citigroup.
(1) Based on Total AUM growth from 12/31/06 to 12/31/12. Traditional Managers’ growth excludes Blackrock’s acquisition of Barclays Global Investors. Blackstone 9
(2) Operating Margins reflect 2012 earnings margin for traditional asset managers and 2012 ENI margin for Blackstone.
(3) Valuation multiples reflect consensus earnings estimates for traditional asset managers and consensus ENI estimates for Blackstone.
2013 Blackstone Investor Day
Uniquely positioned as the Each business continues 50% operating margins, Blackstone has grown
provider of choice to to innovate ways to create strong and consistent Total AUM 4 times faster
create long-term value value and revenue streams cash flow from Fee than traditional managers
across alternative asset through synergies with Related Earnings and a since 2009 and 16 times
classes and liquidity core expertise and product “compounding effect” faster since 2006
profiles lines on Performance Fees
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Appendix
2013 Blackstone Investor Day
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Total Segments
($ in thousands) 2008 2009 2010 2011 2012 1Q'13 LTM
Revenues
Management and Advisory Fees, Net
Base Management Fees $ 1,041,718 $ 999,829 $ 1,069,471 $ 1,281,185 $ 1,591,403 $ 1,604,644
Advisory Fees 397,519 390,718 426,140 382,240 357,417 348,591
Transaction and Other Fees, Net(1) 96,358 115,040 137,748 247,513 227,119 226,622
Management Fee Offsets(2) (16,437) (17,161) (2,313) (33,393) (40,953) (37,565)
Total Management and Advisory Fees, Net 1,519,158 1,488,426 1,631,046 1,877,545 2,134,986 2,142,292
Performance Fees
Realized Carried Interest 26,953 29,452 244,963 138,907 327,422 608,032
Realized Incentive Fees 12,060 44,812 116,700 89,029 301,464 320,912
Unrealized Carried Interest (1,274,327) 100,304 457,002 971,518 994,190 872,741
Unrealized Incentive Fees (11,935) 65,563 107,624 (24,928) (29,311) 10,323
Total Performance Fees (1,247,249) 240,131 926,289 1,174,526 1,593,765 1,812,008
Investment Income (Loss)
Realized (64,677) 29,544 46,915 102,575 95,398 110,016
Unrealized (691,934) 3,880 501,634 82,689 190,846 227,593
Total Investment Income (Loss) (756,611) 33,424 548,549 185,264 286,244 337,609
Interest Income and Dividend Revenue 29,014 22,492 36,096 38,844 46,630 51,946
Other 13,595 7,096 (618) 7,415 5,149 8,499
Total Revenues (442,093) 1,791,569 3,141,362 3,283,594 4,066,774 4,352,354
Expenses
Compensation 771,426 769,856 859,114 960,569 1,030,776 1,042,981
Performance Fee Compensation
Realized Carried Interest (1,421) 2,844 70,716 43,615 96,433 177,932
Realized Incentive Fees 6,418 22,260 57,600 55,912 140,042 146,298
Unrealized Carried Interest (204,262) (69,824) 165,340 237,944 321,599 332,528
Unrealized Incentive Fees (3,452) 43,641 63,306 (20,759) (44,528) (12,829)
Total Compensation and Benefits 568,709 768,777 1,216,076 1,277,281 1,544,322 1,686,910
Other Operating Expenses 319,216 299,029 344,516 421,342 481,445 486,368
Total Expenses 887,925 1,067,806 1,560,592 1,698,623 2,025,767 2,173,278
Economic Income (Loss) $ (1,330,018) $ 723,763 $ 1,580,770 $ 1,584,971 $ 2,041,007 $ 2,179,076
(1) Transaction and Other Fees, Net, are net of amounts, if any, shared with limited partners including, for Private Equity, broken deal expenses. Blackstone 13
(2) Primarily placement fees.
2013 Blackstone Investor Day
See Appendix – Reconciliation of GAAP to Non-GAAP Measures – Notes for details. Blackstone 14
2013 Blackstone Investor Day
(1) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for Transaction-Related Charges which
include principally equity-based compensation charges associated with Blackstone’s initial public offering and long-term retention
programs outside of annual deferred compensation and other corporate actions.
(2) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes amounts for the Amortization of Intangibles which
are associated with Blackstone’s initial public offering and other corporate actions.
(3) This adjustment adds back to Income (Loss) Before Provision (Benefit) for Taxes the amount of (Income) Loss Associated with Non-
Controlling Interests in (Income) Loss of Consolidated Entities and includes the amount of Management Fee Revenues associated
with Consolidated CLO Entities.
(4) Taxes represent the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes.
(5) This adjustment removes from EI the total segment amount of Performance Fees.
(6) This adjustment removes from EI the total segment amount of Investment Income (Loss).
(7) This adjustment represents the realized and unrealized gain on Blackstone’s Treasury cash management strategies which are
a component of Investment Income (Loss) but included in Fee Related Earnings.
(8) This adjustment removes from expenses the compensation and benefit amounts related to Blackstone’s profit sharing plans related
to Performance Fees.
(9) Represents the adjustment for realized Performance Fees net of corresponding actual amounts due under Blackstone’s profit
sharing plans related thereto.
(10) Represents the adjustment for Blackstone’s Investment Income (Loss) – Realized.
(11) Represents the elimination of Realized Investment Income attributable to Blackstone’s Treasury cash management strategies which
is a component of both Fee Related Earnings and Realized Investment Income (Loss).
(12) Taxes and Related Payables Including Payable Under Tax Receivable Agreement represent the current tax provision (benefit)
calculated on Income (Loss) Before Provision for Taxes and the Payable Under Tax Receivable Agreement.
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2013 Blackstone Investor Day
Unless otherwise noted, all amounts are the respective captions from Appendix – Total Segments. Blackstone 16
(1) See Appendix – Reconciliation of GAAP to Non-GAAP Measures and the related notes for these adjustments.
2013 Blackstone Investor Day
Definitions
Blackstone discloses the following financial measures that are calculated and presented on the basis of methodologies other than in
accordance with generally accepted accounting principles in the United States of America (“non-GAAP”) in this presentation:
• Blackstone uses Economic Income, or “EI”, as a key measure of value creation, a benchmark of its performance and in making resource
deployment and compensation decisions across its five segments. EI represents segment net income before taxes excluding transaction-
related charges. Transaction-related charges arise from Blackstone’s initial public offering (“IPO”) and long-term retention programs
outside of annual deferred compensation and other corporate actions, including acquisitions. Transaction-related charges include equity-
based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. EI
presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages.
• Economic Net Income, or “ENI”, represents EI adjusted to include current period taxes. Taxes represent the current tax provision
(benefit) calculated on Income (Loss) Before Provision for Taxes.
• Blackstone uses Fee Related Earnings, or “FRE”, as a key measure to highlight earnings from operations excluding: (a) the income related
to performance fees and related carry plan costs, (b) income earned from Blackstone’s investments in the Blackstone Funds, and
(c) realized and unrealized gains (losses) from other investments except for such gains (losses) from Blackstone’s Treasury cash
management strategies. Blackstone uses FRE as a measure to assess whether recurring revenue from its businesses is sufficient to
adequately cover all of its operating expenses and generate profits. FRE equals contractual fee revenues, investment income from
Blackstone’s Treasury cash management strategies and interest income, less (a) compensation expenses (which includes amortization of
non-IPO and non-acquisition-related equity-based awards, but excludes amortization of IPO and acquisition-related equity-based awards,
carried interest and incentive fee compensation), and (b) other operating expenses.
• Distributable Earnings, or “DE”, which is derived from Blackstone’s segment reported results, is a supplemental measure to assess
performance and amounts available for distributions to Blackstone unitholders, including Blackstone personnel and others who are
limited partners of the Blackstone Holdings partnerships. DE is intended to show the amount of net realized earnings without the effects
of the consolidation of the Blackstone Funds. DE, which is a component of ENI, is the sum across all segments of: (a) Total Management
and Advisory Fees, (b) Interest and Dividend Revenue, (c) Other Revenue, (d) Realized Performance Fees, and (e) Realized Investment
Income (Loss); less (a) Compensation, (b) Realized Performance Fee Compensation, (c) Other Operating Expenses, and (d) Taxes and
Related Payables Including the Payable Under Tax Receivable Agreement. DE is reconciled to Blackstone’s Consolidated Statement of
Operations.
• Blackstone uses Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization, or “Adjusted EBITDA”, as a measure of
segment performance and an indicator of its ability to cover recurring operating expenses. Adjusted EBITDA equals DE before segment
interest expense, segment depreciation and amortization, and the taxes and related payables including the Payable Under Tax Receivable
Agreement.
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IV. Real Estate
2013 Blackstone Investor Day
Keys to Success
• Same Simple Strategy – Buy it, Fix it, Sell it
• Same Investment Process
• Same People
Current Environment
• Compelling Investment Opportunities Globally
• Competitive Landscape Radically Altered
• Limited New Construction
Note: Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book. Blackstone 1
(1) BREP global funds include Pre-BREP, BREP I, BREP II, BREP III, BREP IV, BREP V, BREP VI and BREP VII; excludes BREP regional funds, co-investments and BREDS.
(2) Reflects invested and committed capital.
2013 Blackstone Investor Day
Assets under management have grown tremendously since 2005 despite the
sharp downturn
$6 $7
2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012
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Key Questions about Blackstone Real Estate
2013 Blackstone Investor Day
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2013 Blackstone Investor Day
9.4%
7.7%
7.8% 6.9%
4.4%
4.0%
2.7% 2.2% 2.5%
0.0%
Annual Deficits ’06 vs. ’12(3) Bank Stocks Pre-Crisis vs. Today(4)
10.4% Asia Bank U.S. Bank Europe Bank
8.6% Index Index Index
7.8%
5.6%
4.6%
2.4% 2.3% -24%
1.2%
-54%
-69%
U.S. U.K. France Japan
(1) International Monetary Fund as of year end 2012. (3) IHS Global Insight estimated as of year end 2012. Blackstone 7
(2) BLS, EU official statistics agency as of February 2013. (4) As of March 31, 2013. U.S.– BKX Bloomberg Index, Asia – Stoxx SXA83P Index , Europe – Stoxx SX7P Index.
2013 Blackstone Investor Day
Global credit crisis also caused enormous dislocation in the commercial real
estate industry
Major Financial Institutions Have Exited or
CMBS Loans in Special Servicing(1)
(% of Current Balance) Downsized Opportunistic Real Estate Investing
8.3%
0.2%
€25
$48
$33 €8
$12 $12 €5 €4
$3 €2
’06 ’07 ’08 ’09 ’10 ’11 ’12 ’06 ’07 ’08 ’09 ’10 ’11 ’12
(1) JP Morgan research, March 2013. Blackstone 8
(2) Commercial Mortgage Alert/BAML as of December 2012.
(3) Barclays as of December 2012.
2013 Blackstone Investor Day
The credit crisis dramatically reduced real estate private equity fundraising
competition across the globe
45%
74% 72%
$40
€8 $9
The credit crisis also significantly reduced new construction of real estate
6.4
83% 64%
2.6
99%
2.3
2.6
0.0
Source: As of year end 2012. Beijing, Knight Frank. London, CBRE. New York, CBRE. Blackstone 10
2013 Blackstone Investor Day
Fallout from credit crisis has and continues to create compelling distressed
investment opportunities for Blackstone Real Estate
Note: Represents BREP’s assessment of the discount to pre-crisis value. There is no assurance that these investments will be profitable or avoid losses. The examples cited herein may Blackstone 11
not be representative of all investments made by Blackstone, both with respect to performance and operating metrics, and it should not be assumed that Blackstone will make
equally successful or comparable investments in future funds.
2013 Blackstone Investor Day
Invitation Homes – Average Purchase Price U.S. Single Family Housing Completions(2)
Units (thousands)
$303K(1)
1,979
Down 50%
Down 67%
$153K
649
Asia continues to grow but dislocated capital markets have greatly reduced
capital flows to real estate
Strong Asia Real Estate Fundamentals…(1) …But Lack of Capital to Support Growth(2)
Office Market Net Absorption 2011-12 Real Estate Public Company Equity Issuance ($mm)
9.2%
$21,589
8.4%
Down 84%
$3,351
0.4% 0.5%
45x
€2,400
40x
24x
14x
€140
(1) Barclays Capital research 2012; U.S. includes GSE and banking system assets. Blackstone 14
(2) Morgan Stanley “Banks Deleveraging and Real Estate” November 2012.
Will You and Can You Exit Current Holdings?
2013 Blackstone Investor Day
+58% +810bps
Note: The examples cited herein may not be representative of all investments made by Blackstone, both with respect to performance and operating metrics, and it should not be Blackstone 16
assumed that Blackstone will make equally successful or comparable investments in future funds. Past performance is not necessarily indicative of future results. See
“Important Disclosures” section at the front of the presentation book.
2013 Blackstone Investor Day
Our strategy of holding assets through the crisis and aggressively deploying
capital since 2009 has resulted in significant gains to date
Multiple of BX Net
($ millions) Invested Capital(1) Accrued Carry(2)
Fund 4Q ’09 1Q ’13 4Q ’09 1Q ’13
BREP VI 0.5x 1.6x $0 $681
BREP/BREDS Other - - 3 49
TOTAL $3 $1,446
________________________________________________
Note: Past performance is not necessarily indicative of future results. There can be no assurance that any Blackstone fund will achieve its objectives or avoid losses. See “Important Disclosures” section at the
front of the presentation book.
(1) Figures represent realized and unrealized gross MOICs. Net IRR's as of March 31, 2013 are: BREP VII 32%, BREP VI 10%, BREP V 9%, BREP Europe III 19%.
(2) Net accrued carry includes co-investment capital for respective funds and is net of performance fee compensation.
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2013 Blackstone Investor Day
$3,708
$1,848
$932
+86%
$501
$681
$213
$30
Note: Past performance is not necessarily indicative of future results. There can be no assurance that any Blackstone fund will achieve its objectives or avoid losses. Blackstone 18
See “Important Disclosures” section at the front of the presentation book.
2013 Blackstone Investor Day
Exits will be aided by two key trends: i) low cost of capital for public companies
and ii) sovereign wealth funds increased appetite for high quality real estate
BREDS II
• $2bn closed on April 9, 2013
• $3bn target fundraise
Note: Past performance is not necessarily indicative of future results. There can be no assurance that any Blackstone fund will achieve its objectives or avoid losses. Blackstone 21
See “Important Disclosures” section at the front of the presentation book.
(1) AUM includes $2.0 billion of capital from the BREDS II initial closing on April 9, 2013.
2013 Blackstone Investor Day
BREP was disciplined deploying capital prior to the financial crisis in Asia but
has significantly increased investment since 2010
Fundraising
• Raised Since ’07: $40+ billion
• In Market: BREP Asia, BREDS II, & Capital Trust
Accelerating Dispositions(2)
• Distributions: Up 86% in 1Q ’13
• Performance Fees: Up 8x in 1Q ’13
• Outlook: Pick up expected in 2013-15
Note: Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book. Blackstone 23
Net IRR’s as of March 31, 2013 are: BREP VI 10%, BREP V 9%, BREP IV 13%.
(1) Includes $2.0bn of BREDS II capital closed on April 9, 2013.
(2) Distributions and performance fees vs. 1Q ‘12. Performance fees are realized only and gross of performance fee compensation.
V. Private Equity
2013 Blackstone Investor Day
Strategy
Global reach
• Offices on 3 continents
________________________________________________
Note: The examples cited herein may not be representative of all investments made by Blackstone, both with respect to performance and operating metrics, and it should not be assumed that Blackstone will
make equally successful or comparable investments in future funds.
(1) Including 8 BEP dedicated Investment Professionals.
(2) Including 7 BCP VI portfolio companies that are co-invested with BEP fund.
Blackstone 3
2013 Blackstone Investor Day
Advisors
Singapore Sydney
Blackstone 4
2013 Blackstone Investor Day
Deal Sourcing / Bankruptcy Deal Sourcing / Corporate Real Estate Asset Joint Investing / Market Global Macro /
Investing / Restructuring Partnerships / Proprietary Optimization and Financing / Insights / Potential Access to Target Identification /
Process Insight Structured Equity Joint Investing Additional Debt Financing Public Market Insights
Blackstone 5
2013 Blackstone Investor Day
2.3x
1.9x
________________________________________________
Note: Past performance is not indicative of future results. See “Important Disclosures” section at the front of the presentation book. The examples cited herein may not be representative of all investments
made by Blackstone, both with respect to performance and operating metrics, and it should not be assumed that Blackstone will make equally successful or comparable investments in future funds.
(1) As of March 31, 2013 the net MOIC s and IRRs, respectively, are 2.0x and 88% for BEP, 1.1x and 9% for BCP VI, 1.2x and 4% for BCP V, 2.4x and 37% for BCP IV, 1.1x and 6% for BCOM, 1.9x and 14%
for BCP III, 2.1x and 32% for BCP II, and 1.9x and 19% for BCP I.
(2) Includes investments made by Blackstone’s Side-by-Side investment entities; excludes LP Co-investments and the portion of the investment funded with long-term financing.
Blackstone 6
2013 Blackstone Investor Day
($ in millions)
1/1/12 – 3/31/13
Fund Realizations Gross IRR Capital Invested / Committed
BCP VI $260 29.9% $2,558
(1)
BCP V 2,969 18.3% 418
(2)
Total $5,889 18.9% $3,971
________________________________________________
Note: Represents gross IRRs as net MOIC and net IRR are not calculated on a deal by deal basis. Actual returns to investors will be reduced by fees and expenses. As of March 31, 2013, the gross and net IRRs,
respectively, are 23% and 9% for BCP VI, 95% and 88% for BEP, 5% and 4% for BCP V, 50% and 37% for BCP IV, 12% and 6% for BCOM, 18% and 14% for BCP III. Past performance is not indicative of
future results. See “Important Disclosures” section at the front of the presentation book. The examples cited herein may not be representative of all investments made by Blackstone, both with
respect to performance and operating metrics, and it should not be assumed that Blackstone will make equally successful or comparable investments in future funds.
(1) Includes ~$500 million of distribution received April 2013.
(2) Includes capital returned, capital invested, and IRR for BCOM, BCP III, and BCP II, as applicable. Excludes LP Co-Investments.
Blackstone 7
2013 Blackstone Investor Day
$5,188
$4,511 $585 April 2013
$3,453
$2,406
$4,603
Note: Net MOIC and net IRR are not calculated on a deal by deal basis. Actual returns to investors will be reduced by fees and expenses. As of 3/31/2013, the net IRRs, respectively, 9% for BCP VI, 88%
for BEP, 4% for BCP V, 37% for BCP IV, 6% for BCOM, 14% for BCP III. Past performance is not indicative of future results. See “Important Disclosures” section at the front of the presentation book. The
examples cited herein may not be representative of all investments made by Blackstone, both with respect to performance and operating metrics, and it should not be assumed that Blackstone will
make equally successful or comparable investments in future funds.
(1) Includes realization activity (including Co-Investments) for the above companies since 1/1/2010 through 3/31/2013.
Blackstone 8
2013 Blackstone Investor Day
Post-crisis private equity deals in the U.S. have been concentrated in sponsor-to-sponsor and take private deals
We have found greater return opportunity in energy-related investments and platform deals
Take Private
29%
________________________________________________
(1) Source: Goldman Sachs, Citi, and Bank of America Merrill Lynch as of April 2013: based on U.S. / Europe deals announced over $500 million TEV where values are available. Figures are by volume.
Excludes minority stake, Real Estate and Infrastructure Investments and 2013 Heinz and Dell Transactions.
Blackstone 9
2013 Blackstone Investor Day
We have invested $9.7B since the financial crisis (mid-2008) of which approximately 40% or $3.7B
is already marked (realized + unrealized) at 2.7x cost
________________________________________________
Note: The examples cited herein may not be representative of all investments made by Blackstone, both with respect to performance and operating metrics, and it should not be assumed that Blackstone will
make equally successful or comparable investments in future funds.
Blackstone 10
2013 Blackstone Investor Day
Relative calm will prevail and equity markets will remain robust as liquidity washes in – we will
continue to sell into this market aggressively
While we are in the midst of an economic recovery, growth will be structurally lower than in past
recoveries
• Fiscal deficit reduction an imperative
• Structurally higher tax rates a reality
• Consumer deleveraging still required
• Interest rates must go up eventually
Unsustainably low interest rates / potential credit bubble
• New issue high yield coupons at historical lows
• Cheap credit benefits sellers not buyers
Assuming these conditions persist indefinitely is dangerous!
• Assumptions concerning exit multiple and timing are critical and difficult to judge
• Must price in margin for error
Blackstone 12
2013 Blackstone Investor Day
Investment Philosophy
We are not passive recipients of the “market return” for intermediated, transparent
private equity deals
We must be able to intervene in our companies to change their fate and believe in one
or more of the following:
• Strategic repositioning – both organically and via acquisitions
Blackstone 13
2013 Blackstone Investor Day
Blackstone 14
2013 Blackstone Investor Day
The current economic and financing environment has made the following
sectors attractive:
• Cyclical opportunities
Blackstone 15
2013 Blackstone Investor Day
What’s next?
Blackstone 17
VI. Portfolio Operations
2013 Blackstone Investor Day
Blackstone 1
2013 Blackstone Investor Day
Our 75 portfolio companies extend across a broad range of geographies and industries, and
collectively represent $109 billion in sales and 734,000 employees
________________________________________________
Note: The examples shown may not be representative of all private equity investments made by Blackstone. With respect to both performance and operating metrics, it should not be assumed that
Blackstone will make equally successful or comparable investments in the future.
Blackstone 2
2013 Blackstone Investor Day
Leverage
32% 25%
51% Multiple Arbitrage
Source of Value
39%
46%
Operational
31% Improvement
36%
18% 22%
________________________________________________
Sources: Goldman Sachs; BCG-IESE estimate.
Blackstone 3
2013 Blackstone Investor Day
Growth Initiatives
(Portfolio Company Initiatives)
$187mm Portfolio
Company
Initiatives:
Operations Productivity
(Portfolio Company Initiatives)
$255mm $442 million
Platform Initiatives
(Group Procurement, Equity Healthcare, Sustainability)(2)
$165mm
$607mm
________________________________________________
(1) Impact of Portfolio Company and Platform initiatives directly supported or led by Operations Group.
(2) Working capital reductions not included in EBITDA figure.
Blackstone 4
2013 Blackstone Investor Day
Industrial / IT / Operations
Chemical / Energy Business Systems / E&Y Working Capital
Financial Controls Optimization
Tech, Media, Telecom
Sustainability
Portfolio Operations Group has grown to 69 FTEs over the past seven years
________________________________________________
(1) North America, Europe, Asia. Includes 2 independent full-time operating advisors.
Blackstone 5
2013 Blackstone Investor Day
________________________________________________
(1) Source: 2012 Kaiser Family Foundation and HRET Employer Health Benefits Survey.
(2) Source: Congressional Budget Office.
(3) Note: Amounts for Medicare are net of beneficiaries’ premiums. Amounts for Medicaid are federal spending only.
Blackstone 7
2013 Blackstone Investor Day
Blackstone 8
2013 Blackstone Investor Day
6.8%
6.0%
$87mm $47mm
4.2%
3.0%
0.5%
Blackstone 9
2013 Blackstone Investor Day
Freescale Semiconductor t t t t t t
Gokaldas Exports t t t t
Hilton Hotels t t t t
Michaels Stores t t t t t t t t
Nielsen t t t t t t
Vanguard t t t t t
Weather Channel t t
Blackstone 10
2013 Blackstone Investor Day
Blackstone 11
2013 Blackstone Investor Day
2013+
Growing
2009–2012
Clear 5-year plan for growth established
Transforming the Core
Acceleration of innovation investments
Hiring of new CEO John Chiminski
(March 2009) Renewed focus on strategic acquisitions
2007–2009 Commitment to Operational Excellence • Aptuit
Building the Foundation
Indirect bullet train launched
Acquisition (April 2007)
Commitment to Commercial Excellence
Creation of Product Venture Group
Sale of Printed Components
Member of Core Trust & Equity
Re-composition of board; strategic
Healthcare
planning process completed
Value pricing initiative launched
Reorganization to create Medication
Site sales of Albuquerque, Osny Delivery Solutions
(France) & North Raleigh
Creation of Development & Clinical
Decline in Packaging due to Printed Segment
Components business and
Creation of two businesses from
underperformance in
Oral Technologies: Softgel and
Sterile
Modified Release
Blackstone 12
2013 Blackstone Investor Day
Leadership
Upgrades
Operational
Innovation
Excellence
Insert Text
Pharma
Solutions Provider
Transformation
Commercial Insert Text Insert Text Strategic
Excellence Direction
Portfolio Organizational
Management Alignment
Blackstone 13
2013 Blackstone Investor Day
costs down 55
40
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
and practices
FY09 FY10 FY11
Developing a strategic Blackstone Operations Supported
Run-rate EBITDA from Value Pricing:
marketing competency $31 million in 2010
In – Defined: 25%
In – Proven: 50%
Best Few:
90%
Blackstone 15
2013 Blackstone Investor Day
Accelerating innovation
Blackstone 17
VII. Advisory & Restructuring
2013 Blackstone Investor Day
Blackstone 2
2013 Blackstone Investor Day
Wide range of advisory services: General advice related to mergers, acquisitions and
• Exchange offers portfolio rationalizations and divestitures
• Debt repurchases Objective advice with respect to capital structure
• Debt and equity capital raises and financing alternatives
• Sponsor representations • Acquisitions • Equity advisory
• Distressed M&A • Third-party sales • Leveraged buyouts
• Out-of-court recapitalizations • Divestitures • Recapitalizations
• In-court reorganizations • Special Committee • Minority investments
• Cross-border reorganizations representation • Takeover defense
• Valuation and expert witness testimony • Initial public offerings • Joint ventures
• Pension and retiree health care solutions • Private placements • Structured products
Blackstone 3
2013 Blackstone Investor Day
U.S. M&A volume down 14% since 2011; however, activity increased in 4Q 2012 and 1Q 2013, with 4Q generating the largest volume
since 2Q 2008
• A macroeconomic backdrop consisting of robust equity markets and low interest rates as well as strong corporate balance sheets
and limited organic growth opportunities suggests that 2013 should generate significant U.S. activity
European M&A activity continues to be depressed with 2012 volume at the lowest level since 2009, leading to increased restructuring
opportunities in the financial sector and weaker economies
Asia-Pacific M&A volume also remained below 2009 levels
• However, Chinese, Korean and Japanese corporates and Sovereigns generally are cash rich and will continue to put capital
to work
Global Announced Transactions
$1,500 15,000
Volume of Transactions ($ in billions)
$1,200 12,000
$900 9,000
# Deals
$600 6,000
$300 3,000
$0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Annual 2006 2007 2008 2009 2010 2011 2012 Q1 '13
Global $3,546bn $4,231bn $2,717bn $1,970bn $2,482bn $2,529bn $2,321bn $527mm
U.S. ($ Vol) Non-U.S. ($ Vol) # Deals (Globally)
________________________________________________
Source: Thomson SDC, Mergermarket as of 3/31/13.
Blackstone 4
2013 Blackstone Investor Day
Healthcare
9%
Europe
Tech 28%
Real Estate
17%
9%
Americas
Energy 61%
10%
Metals & Media
Mining 11%
11%
Financing /
Structured Restructuring
Restructu- Small Cap
10%
24% ring 28%
24%
Large Cap
M&A 72%
66%
Blackstone 5
2013 Blackstone Investor Day
________________________________________________
(1) Dates refer to transactions’ closing dates.
Blackstone 6
2013 Blackstone Investor Day
Given the strength of the capital markets and improved economic environment, M&A
activity should be meaningful in 2013
• Natural resources, FIG, Technology, Consumer and Industrials should be the most
active sectors
• Despite a slow start to 2013, international and cross-border activity is expected to
increase in 2013–2014
• Private equity firms should create more activity
BAP continues to build out its global presence across geographies and industries
• Recently added key members to the Industrials, FIG and Healthcare teams
• Growing business in Germany and China
• Strong collaboration with Pátria in Brazil
• Selectively advising activist hedge funds on M&A opportunities
Blackstone 7
2013 Blackstone Investor Day
The restructuring business is typically highly Credit terms loosened to pre-2007 levels
correlated to the high-yield market and • Dividend recaps
default rate • PIK toggle
2012 was a contradictory year in the markets • Covenant-lite
• Economic: • Overall leverage
– Euro debt crisis
Many speculative grade issuers took advantage:
– U.S. “Fiscal Cliff”
• Refinanced maturities
– Slower China growth
• Issued new, cheap paper
– Unemployment rate grudging reduction
• Debt markets:
– Investors chased yield
– Record high-yield new issue volume
– Record combined high-yield and
leveraged loan issuances
Blackstone 8
2013 Blackstone Investor Day
2012 Revenue by
Transaction Type 2012 Revenue by Client 2012 Revenue by Industry
Other
Energy
1%
11%
Other
31% Financial
Services
Out-of-
16%
Court
Creditor Manufacturing
43% In-Court 40%
57% Company 2%
59% Technology /
Telecom
7%
Media
Gaming 22%
11%
Blackstone 9
2013 Blackstone Investor Day
$270.0 Billion $8.6 Billion $7.6 Billion $4.1 Billion $4.1 Billion $3.1 Billion
Advisor to Advisor to Advisor to Advisor to Advisor to Advisor to
Private Creditor- Senior Lenders of Washington Unsecured Creditor
Investor Committee Committee of
for Greece (PCIC)
Mutual
Regarding valuation of a Regarding its out-of-
mortgage reinsurance court restructuring of Regarding its
In all aspects related asset and potential debt obligations in the prepackaged Chapter 11
During its participation to the Company’s rights offering to U.S., UAE and Mexico restructuring
reorganize the business In all aspects related
in the largest sovereign Chapter 11 restructuring
to the Company’s
debt exchange in history Chapter 11 restructuring
Ongoing $1.8 Billion $1.6 Billion $1.1 Billion Ongoing $625 Million
Advisor to Advisor to Advisor to Advisor to Advisor to Advisor to
(2)
(3)
Restructuring
2011 2009 2011 2011
Banker of the Year
Americas Restructuring
2008 2005 2010 2010
House of the Year
North American
2004 2010 2010
Restructuring House
________________________________________________
(1) Published in the Thomson Reuters Distressed Debt and Bankruptcy Review, Restructuring Advisors Full Year 2012. Ranking based upon market share of U.S. Completed Restructurings.
(2) Award winners selected by the IFR editorial team from a limited universe of participants based on subjective criteria.
(3) Over the last five years, winners are selected based on the deal / assignment performance criteria / index, by an independent advisory group.
Blackstone 11
2013 Blackstone Investor Day
________________________________________________
(1) Source: J.P. Morgan Credit Strategy Weekly Update (3/28/13).
(2) Sources: J.P. Morgan (3/28/13), Moody’s Investors Service (12/19/12), Standard & Poor’s (12/20/12).
Blackstone 12
2013 Blackstone Investor Day
________________________________________________
Source: J.P. Morgan Default Monitor (4/1/13).
(1) Lower rated issuances includes bonds rated Split B or lower.
Blackstone 13
2013 Blackstone Investor Day
20%
BB
10%
0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Years Since Issuance
BB B CCC / C
•
________________________________________________
Source: S&P Default, Transition, and Recovery: 2012 Annual Global Corporate Default Study and Rating Transitions (3/18/13). Percent of issues that subsequently
defaulted in the stated year following issuance.
Blackstone 14
2013 Blackstone Investor Day
Regardless, we are well positioned to enjoy strong deal flow in both strong and weak
economic environments
• Strong pipelines across most industries
• Continued collaboration between groups
– Currently working on 12 deals together
• Ability to find creative, unique solutions to complicated problems
Blackstone 15
VIII. BAAM
2013 Blackstone Investor Day
________________________________________________
Note: See “Important Disclosures” section at the front of the presentation book for more information.
(1) Source: InvestHedge Billion Dollar Club. Data as of December 2012.
(2) AUM data is as of 4/1/13 and is estimated and unaudited; client count is as of 3/1/13. AUM excludes unfunded commitments, which are included in total AUM for external reporting purposes.
(3) Data as of March 2013. Performance prior to 7/1/05 represents Partners NT and performance after 7/1/05 represents Partners OS. Results are net of all fees and expenses for Class F Shares, the largest share class in Partners OS.
Performance for 2012 and 2013 is estimated and unaudited. Performance information since 1/1/2004 includes an allocation of income from new issues; performance results for the Fund will vary for investors ineligible to
participate in new issue income. Past performance is not necessarily indicative of future results. There can be no assurance that the Fund will achieve its objective or avoid significant losses.
Blackstone 1
2013 Blackstone Investor Day
$60
Individual Investor Solutions (e.g., RIC, Distribution Partnerships)
$50
$30
$10
Traditional Commingled Products (e.g., Partners, Park)
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Core – Commingled Core – Custom Accounts Specialized Solutions Individual Investor Solutions
________________________________________________
Note: The projections above are for illustrative purposes only. These projections are not based on any objective data and are simply meant to illustrate BAAM’s opinions on how the diversification of its
business will continue into the future.
Blackstone 2
2013 Blackstone Investor Day
Cumulative Growth in Assets for HF Industry, FoHFs >$1 billion, and BAAM(1)
(US$ in billions)
Cumulative Growth
Since 2001 HF Industry AUM
2001–2012 CAGR 2007–2012 CAGR
2,000%
2,000% $2,500
$2,500
BAAM: 31% BAAM: 20%
1,800%
1,800% >$1bn FoHFs: 14% >$1bn FoHFs: -5%
HF Industry: 14% HF Industry: 7%
1,600%
1,600% $2,000
$2,000
1,400%
1,400% 2001–2006 CAGR
1,200% BAAM: 46% $1,500
1,200% >$1bn FoHFs: 41% $1,500
1,000%
1,000% HF Industry: 22%
800%
800% $1,000
$1,000
600%
600%
400%
400% $500
$500
200%
200%
0%
0% $0
$0
2001 2002
2001 2002 2003
2003 2004 2004 2005
2005 2006
2006 2007
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012
2012
HFHF
Industry ($)($)
Industry BAAM
BAAM FOF
FOF >$1B
>$1B ex
ex BAAM
BAAM HFIndustry
HF Industry(%)
(%)
________________________________________________
(1) Source: InvestHedge Billion Dollar Club. Data as of December 2012.
Blackstone 3
2013 Blackstone Investor Day
BAAM has had positive net inflows every year since 2000
________________________________________________
(1) Source: InvestHedge Billion Dollar Club. Data as of December 2012.
(2) Competitor 8’s AUM includes $8 billion that was acquired when the firm merged with another asset manager in 2012. Excluding this $8 billion, Competitor 8’s 12/31/12 AUM is $8.5 billion, which results in net outflows of $4.4
billion in 2012, and a decrease in AUM of 45% since 6/30/08. BAAM AUM excludes unfunded commitments, which are included in total AUM for external reporting purposes.
Blackstone 4
2013 Blackstone Investor Day
BAAM’s clients have supported our growth and the diversification of our business
Blackstone
Corporations and Capital and
Partnerships Employees
4.3% 2.9%
Endowments and
Foundations 38% 36% 36%
5.0% 52%
Government
Institutions
21.5%
Pension Funds
48.9% 62% 64% 64%
48%
Healthcare
5.2% 2009 2010 2011 2012
High Net Worth
and Trusts
2.6%
Existing Clients New Clients
Insurance Distribution
6.8% 2.9%
________________________________________________
(1) Based on AUM as of 4/1/13.
Blackstone 5
2013 Blackstone Investor Day
HFS BX HFS%
2009 $118.6 $527.8 22.5%
2010 177.1 743.2 23.8%
2011 159.3 772.9 20.6%
2012 241.0 1,162.4 20.7%
________________________________________________
(1) Pre-tax DE excludes taxes, TRA and treasury cash management adjustment for both HFS and BX.
Blackstone 6
2013 Blackstone Investor Day
BAAM
Hedge Fund Solutions: $48bn
Individual
Commingled & Customized Specialized Solutions Investor
Solutions
Regulated &
Customized
Commingled Long Only / Special Individual-
Investment Ventures(1)
Products Long Biased Situations(2) Focused
Solutions
Products
$1.7bn Invested
$17.8bn $23.5bn $1.3bn $3.6bn $1.4bn $0.2bn
Committed
________________________________________________
Note: AUM data is as of 4/1/13 and is estimated and unaudited for 2012 and 2013. AUM excludes unfunded commitments, which are included in total AUM for external reporting purposes.
(1) Representative of BAAM’s manager seeding platform.
(2) Special Situations AUM as of 1/1/13; includes investments from BAAM Commingled and Customized products.
Blackstone 7
A. Industry Dynamics Have Supported BAAM’s Rapid Growth
2013 Blackstone Investor Day
$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 2013E 2014E 2015E
Projections(3)
Net inflows of $34 billion in 2012 were lower than expected(1)
Expected HF net inflows of $123 billion in 2013(2)
________________________________________________
(1) HFR Global Hedge Fund Industry Report, 12/31/12.
(2) Deutsche Bank Eleventh Annual Alternative Investor Survey, February 2013.
(3) Credit Suisse 2013 Global Survey of Hedge Fund Investor Appetite and Activity. 2013 low case and base case hedge fund industry AUM growth forecasted to be 4.55% and 10%, respectively.
Blackstone 9
2013 Blackstone Investor Day
BAAM expects individuals to return, albeit a different market segment (retail) requiring more
liquid, regulated investment vehicles
________________________________________________
(1) Source: Hennessee Group LLC; FSA; TheCityUK estimates, April 2012.
Blackstone 10
2013 Blackstone Investor Day
________________________________________________
(1) McKinsey / Institutional Investor Global Survey on Institutional Investing, 2011. Represents pension funds in the U.S., Canada, Australia, Japan, Netherlands, Switzerland and U.K.
(2) Source: Deutsche Bank’s Annual Alternative Investment Survey, 2013.
Blackstone 11
2013 Blackstone Investor Day
Dodd-Frank, Basel III, and other global Capital Leverage Employed by Hedge Funds and
regulatory changes are reducing the ability of Bank Proprietary Trading Desks(1)
($ in billions, 2008–2010)
investment banks, commercial banks, and
insurance companies to compete with hedge
funds
________________________________________________
(1) Source: Cambridge Associates, 2011.
Blackstone 12
2013 Blackstone Investor Day
$16
$2
Average 10-year rolling Sharpe ratio of 1.7 for
Global Financial Top 10 Asset Hedge Fund the HFRI Composite(3)
Assets Managers Industry
________________________________________________
(1) HFR Global Hedge Fund Industry Report, 4Q 2012.
(2) Global financial assets include equity market capitalization and outstanding bonds and loans; McKinsey Global Institute Financial Stock Database. Assets are as of 12/31/11.
(3) Refers to the HFRI Composite. Past performance is not indicative of future results.
(4) Top 10 firms include BlackRock, State Street, Vanguard, Fidelity, PIMCO, JP Morgan, BNY Mellon, Capital Research, Prudential, and Amundi. Assets are as of 12/31/11.
Blackstone 13
B. BAAM’s Strategy and Positioning
2013 Blackstone Investor Day
HFRI FOF Cnsv MSCI World TR S&P 500 TR FTSE 100 Barclays Agg CSFB HY GSCI
Beta to Partners OS 0.93 0.17 0.15 0.17 -0.02 0.29 0.07
10%
Partners OS
Annualized Return
8% CSFB HY
FTSE 100 S&P 500 TR
6% Barclays Agg Bond
MSCI World
HFRI FOF Cnsv
4%
GSCI TR
2%
0%
0% 4% 8% 12% 16% 20% 24%
Annualized Standard Deviation
________________________________________________
Note: See “Important Disclosures” section at the front of the presentation book for more information.
(1) Reflects the net returns for Partners NT from its inception 7/1/96 through 6/30/05 and for Partners OS from its inception 7/1/05 to 3/31/13. Partners NT is the predecessor Fund to Partners OS. Results are net of all fees and
expenses for Class F Shares, the largest class in Partners OS. Performance for 2012 and 2013 is estimated and unaudited. Annualized return represents the unaudited compounded annual return on investment. Performance
information since 1/1/04 includes an allocation of income from new issues; performance results for the Fund will vary for investors ineligible to participate in new issue income. Past performance is not necessarily indicative of
future results.
Blackstone 15
2013 Blackstone Investor Day
8.0
6.0
Return (%)
4.0
2.0
0.0
(2.0)
(4.0)
1 Year 3 Years 5 Years
________________________________________________
Note: See “Important Disclosures” section at the front of the presentation book for more information.
(1) Net returns over for each time period ending December 2012. Comparison with Mercer’s custom universe “Partners Competitors“, universe comprises 14 funds. Number in brackets refer to actual ranking.
(2) The report included above was created for BAAM by Mercer. Blackstone Partners Offshore Fund Ltd. (“Partners OS”) was compared to a peer group of comparable products selected by Blackstone. The selected competitors are:
Corbin Capital – Pinehurst Partners, Entrust Capital Diversified Fund Ltd. – Class C, Fauchier Partners – Jubilee Absolute Return Fund, GAM – Diversity USD Open Class, Lighthouse (Florida) – Lighthouse Diversified Fund, Mariner
Investment Group – Mariner Select, Permal Investment Holdings N.V., Pine Grove – Offshore Fund Ltd., Prisma – Low Volatility, BlackRock, PAAMCO, Grosvenor and Mesirow. Returns included for Partners OS are net of all fees
and expenses. The time periods shown were selected by Blackstone. Past performance is not necessarily indicative of future results. Utilizing a different peer group or different time period will produce different results.
(3) The universe calculations in the graphic are based on a customized universe selected by BAAM and is not an official Mercer universe. This output should be read in conjunction with, and is subject to MercerInsight MPA: Important
notices and third-party data attributions. See www.mercerinsight.com/importantnotices for details. Copyright: © 2011 Mercer LLC. All rights reserved. This graphic was created by Mercer on 2/4/13 at 6:58pm.
Blackstone 16
2013 Blackstone Investor Day
2001/2002
First customized solution
Investment in human capital 27,095
Open London office
14,997
1,572 6,299
$19.5 Trillion U.S. Retirement Assets U.S. Defined Contribution Market Inflows
(4Q 2012) ($ in billions)
$108 $103
DC Plans IRAs $97
26% $94
28%
$65
$46
Private Annuities
DB 9%
13%
2007 2008 2009 2010 2011 2012
Gov’t DB
25%
________________________________________________
Sources: Investment Company Institute, Federal Reserve Board, National Association of Government Defined Contribution Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division.
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2013 Blackstone Investor Day
Quarterly,
Quarterly,Semi-Annually, Annually
Semi-Annually, Annually
Liquidity (subject
(subjecttoto locks andgates)
locks and gates)
Daily
Daily
Valuation Monthly
Monthly Daily
Daily
Leverage No
Norestrictions
Restrictions Max
Max 250% – 300%Gross
250%–300% gross exposure
Exposure
Concentration Norestrictions
No Restrictions SubchapterM
Subchapter M Restrictions
restrictions
Transparency Limited
Limited EnhancedLevel
Enhanced level transparency
Transparency
Credit –
Structured
Credit – Whole 10.7%
Loans
10.2%
________________________________________________
Note: See “Important Disclosures” section at the front of the presentation book for more information.
(1) Investments shown include investments approved by BAS Investment Committee but not yet funded as well as investments already exited. There is no assurance that funding will occur. The AUM of BSOF was $1,725 million as of
3/31/13.
(2) Asset Class Allocation includes realized deals.
(3) Net performance is presented net of an annual management fee of 1.50% and an incentive fee of 25%, the maximum all-in fees charged to an external investor. Past performance is not necessarily indicative of future results.
Returns are estimated and unaudited for 2012 and 2013. The returns presented above are inclusive of all BSOF investments. Certain BSOF investments may be unavailable to ERISA investors and therefore returns may vary.
(4) From 8/1/11 through 3/31/13.
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$8 $8 $160
$160
$7 $7 $140
$140
$6 $6 $120
$120
$5 $5 $100
$100
$4 $4 $80$80
$60
$3 $3 $60
$40
$2 $2 $40
$20
$1 $1 $20
$0
$0 $0 $0
2007
2007 2008
2008 2009
2009 2010
2010 2011
2011 2012
2012
SAF I Invested Capital SAF I Underlying Managers’ Total AUM SAF I Cumulative Revenue Share (1)
________________________________________________
Asset data represents the first of the year for the date shown (includes inflows) and revenue share data represents cumulative accrual up to and including the year shown.
(1) Cumulative revenue share is plotted to scale on a secondary axis, and is indicative of the relationship between asset growth and revenue share. A portion of the underlying managers’ assets, such as internal investments by fund
managers and employees, may not be subject to full fees. Reflects cumulative information for Blackstone Strategic Alliance Fund L.P. and Blackstone Strategic Alliance Offshore Fund Ltd. and is based on information received from
underlying managers. BAAM / BSAA may not independently verify this information on a regular basis and as such does not guarantee its accuracy.
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Blackstone 22
IX. GSO
2013 Blackstone Investor Day
$59 billion
Alternative Customized
Investment Funds Credit Strategies
$27 billion $32 billion
(1) Pro forma 3/31/2013 AUM to include commitments to our second rescue lending fund that have closed through 4/30/2013. For public reporting purposes, Blackstone 1
the AUM in BDCs is reported within Customized Credit Strategies.
2013 Blackstone Investor Day
$59 billion
Alternative Customized
Investment Funds Credit Strategies
$27 billion $32 billion
________________________________________________
(1) Past performance is not necessarily indicative of future results. GSO returns represent weighted average returns for the onshore and offshore vehicles (if applicable) for the respective flagship funds.
Returns calculated from fund inception through March 31, 2013 except for Small Cap Direct Lending Benchmark which is calculated through 12/31/2012, due to availability of benchmark data.
See “Important Disclosures” section at the front of the presentation book for more information on performance and benchmarks.
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Number of Investments 50 34 60
Blackstone 4
2013 Blackstone Investor Day
“GSO was an excellent partner for Chesapeake in our “We are excited that GSO will become our largest
Utica and Cleveland Tonkawa transactions. They shareholder. GSO made a significant investment in
understood our goals and objectives, worked with us 2008 that provided Cheniere with necessary funding at
to structure a deal that worked well for both parties a time when the credit markets were challenging. They
and were true to their word throughout the process.” have given us the time and support to adjust our
Aubrey McClendon
strategy to changing global natural gas markets.”
Co-Founder, Former Chairman and CEO Charif Souki
Chesapeake Energy Corporation Chairman and CEO
Cheniere Partners
“By combining the financial power and investment “We were faced with two choices: (i) lose control of
experience of GSO with the homebuilding and Almatis to a vulture fund or (ii) partner with GSO
operating strength of Hovnanian, this partnership Capital Partners. GSO developed a very creative
creates an exciting investment opportunity for both financing solution at our moment of need that enabled
organizations.” DIC to retain its ownership in the company while also
providing important capital for the company to
Ara Hovnanian
Chairman, President and CEO prosper.” David Smoot
Hovnanian Enterprises CEO
Dubai International Capital
________________________________________________
The experience and views expressed by officers of certain portfolio companies may not be representative of all portfolio companies’ experience or the future performance of GSO. There is no guarantee that similar experiences will
be enjoyed by portfolio companies of GSO or any other funds managed by GSO in the future.
Blackstone 6
2013 Blackstone Investor Day
________________________________________________
Note: Inception to date net returns through March 31, 2013 for the Funds are 19.9% for mezzanine funds and 14.9% for rescue lending funds. The returns represent weighted average returns for the onshore and offshore vehicles (if
applicable) for the respective flagship funds.
Past performance is not necessarily indicative of future results. See “Important Disclosures” section at the front of the presentation book. The examples cited above represents such flagship funds’ investments in the sectors listed
and are not representative of all investments made by GSO with respect to theme, performance and operating metrics, and it should not be assumed that GSO will make equally successful or comparable investments in future funds.
Blackstone 8
2013 Blackstone Investor Day
# of Fund Products 2 34
# of CLOs 10 53
# of Fund LPs
19 143
≥ $25 Million
Top 10 LPs as a
42% 18%
% of Total AUM
$37 % of Capital
41% 80%+
$31 Locked Up
Assets Under
$9 $24
$23 Management $9 $58
$20
($ in Billions)
$14 Products Hedge Hedge Funds, CLOs, SMAs,
Funds Mezzanine Funds,
and Rescue Lending Funds, BDCs,
CLOs Closed End Funds,
2005 2006 2007 2008 2009 2010 2011 2012
Commingled Loan Funds, ETFs
________________________________________________
(1) 2005–2007 data is pro forma the combination of GSO and Blackstone.
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2013 Blackstone Investor Day
($ in billions)
$97
$89
$75
$53 $54
$50
$41
$25
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Expected (1)
U.S. CLO Issuance EUR CLO Issuance
________________________________________________
Source: S&P Capital IQ LCD. EUR CLO Issuance converted using 3/28/13 F/X Rate of 1.2841.
(1) 2013 Expected is based on GSO’s opinion of the current market environment, which is subject to change during the year.
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2013 Blackstone Investor Day
($ in billions)
$3.3
$3.0
$2.8
$1.6 $1.7
$1.5 $1.6
$0.7
$0.4
$0.2
$-
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(1)
Targeted
________________________________________________
(1) 2013 Targeted is based on GSO’s opinion of the current market environment, which is subject to change during the year.
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2013 Blackstone Investor Day
Advisory Credit
>$2tn transactions / funds raised $58bn AUM
Private Equity
Growth: AUM growth of 10% per year over past five years
________________________________________________
Note: Outperformance represents an average over the time period as compared to S&P TRI. Performance represents net returns for Private Equity core funds from inception to present. Past performance is
not necessarily indicative of future results. Please see “Important Disclosures” section at the front of the presentation book for more information, including information regarding the use of market
indices.
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Real Estate
Growth: AUM growth of 17% per year over past five years
________________________________________________
Note: Outperformance represents an average over the time period as compared to NCREIF-ODCE Index. Performance represents net returns for global opportunity funds from inception to present. Past
performance is not necessarily indicative of future results. Please see “Important Disclosures” section at the front of the presentation book for more information, including information regarding the
use of market indices.
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Performance: 400 bps per year outperformance since 2000 with less
than one-third of the market’s volatility
Growth: AUM growth of 12% per year over past five years; strong
inflows even during the downturn
________________________________________________
Note: Outperformance represents an average over the period as compared to S&P. Performance represents BAAM net core composite, which covers the period from January 2000 to present, although
BAAM’s inception date is September 1990. Past performance is not necessarily indicative of future results. BAAM’s core composite does not include BAAM’s long-only equity, long-biased commodities,
seed, strategic opportunities (external investments) and advisory platforms.
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Credit
Growth: AUM growth of 23% per year over past five years(1)
________________________________________________
Note: Performance represents the net returns of the flagship funds from inception to present. Past performance is not necessarily indicative of future results. Please see “Important Disclosures” section at
the front of the presentation book for more information. Top quartile reference applies to funds for which there is publicly available comparative data.
(1) Pro forma the combination of Blackstone and GSO in 2008.
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Tactical Opportunities
Growth: AUM has grown to $2.7 billion in less than two years, with
$4 billion in sight
________________________________________________
Note: Performance represents net return from inception of the business to present. Past performance is not necessarily indicative of future results. Please see “Important Disclosures” section at the front of
the presentation book for more information.
Blackstone 6
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Other Businesses
________________________________________________
(1) Ranked #1 for 2012 U.S. Completed Restructurings by Thomson Reuters.
(2) Source: Preqin data for current fund-raising mandates.
Blackstone 7
2013 Blackstone Investor Day
BREP and Pátria jointly invest in Private Equity and GSO invest in Emdeon,
Brazilian real estate a leading healthcare technology company
Credit
Pátria
(GSO)
Park Hill helps to raise capital for Tac Opps and GSO co-invest in the equity
Pátria’s funds Shared tranche of a GSO-managed CLO
Park
Intellectual Tactical
Hill Capital Opportunities
Hedge Fund
Advisory
Solutions
________________________________________________
Note: Sharing of information is subject to Blackstone’s internal information wall policy.
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2013 Blackstone Investor Day
Invested over $10 billion across the firm on improving housing fundamentals
________________________________________________
Note: Sharing of information is subject to Blackstone’s internal information wall policy.
Blackstone 9
2013 Blackstone Investor Day
• Brand
• Global footprint
• Speed and information advantage that come with size and diversity
• Ability to gather and share insights from all regions and all asset classes
• Access to broader set of business and government leaders around the world
Blackstone locations
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2013 Blackstone Investor Day
6.0%
4.5%
4.0%
2.0%
0.0%
Give up liquidity
• Excess liquidity extremely costly
Increase duration
• Lower IRRs, but longer compounding
Take more risk
• Using uncorrelated assets to reduce portfolio risk
Be nimble
• Capitalize on dislocations
Make idiosyncratic investments
• Not market-driven bets
• Managers who create their own value
$218
Tactical Opportunities
$76 billion
from new products that didn’t Energy
exist at time of IPO
$71 $76 Real estate debt
$42 Asian real estate
Latin America
$33
$2 Exchange traded funds
$9 $14
$142
$125 $139 Rescue capital
$70 $100 $95
$86 $84 Hedge fund seeding platform
Defined contribution
Hedge fund solutions for individuals
2006 2007 2008 2009 2010 2011 2012 1Q'13
Secondary LP interests
Existing Strategies New Strategies
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2013 Blackstone Investor Day
Retail Fundraising
($ in billions)
$5.9
$2.5 $2.7
$0.6
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Blackstone 16
2013 Blackstone Investor Day
Teamwork is paramount
Be entrepreneurial; think differently; solve problems
Hierarchy is bad; doors are always open
Diversity of perspective makes for better decisions
Keep the small firm feel
Passion for business
Craftsmanship and attention to detail
Robust debate; honest discourse; no excuses
Ego is dangerous; arrogance inexcusable
Care: about each other, about clients, about the work you do, about all society’s stakeholders
Winning is fun
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2013 Blackstone Investor Day