When we work in investment grade or noninvestment grade, much of it’s been around revolvers, which historically have had much lower loss ratios. And we were able to go through these portfolios and look at the credits we’re taking. We do this, of course, not as Blackstone but on behalf of our investors in various vehicles and funds. The returns — we’ve been doing this, by the way, for a number of years. And I just think our ability to look at the underlying credit as opposed to just make a macro call is our competitive advantage and our ability to do this and scale with the bank. So I see this as a win-win. It helps banks with some of the Basel pressure, balance sheet pressures they have and we’re able to generate favorable returns. So I think this is a very good thing for the system overall.
I think we’re doing it in a quite responsible way. Our team is very experienced in how they execute these transactions.
Operator: We’ll go next to Crispin Love with Piper Sandler.
Crispin Love: So in recent weeks, there’s definitely been a shift in the rate outlook as we’re likely in a higher for longer scenario, which is very different than just three months ago. So can you just talk a little bit about how that might impact your outlook for investment activity and putting dry power to work going forward and then just how it might shift the areas where you’re most excited about deploying capital?
Jon Gray: Well, I do think it extends the investment window a bit for our $191 billion of dry powder. I think as people were getting closer to anticipating rate cuts, you saw big rallies in both equity and debt markets and that can make it a little bit tougher to deploy capital. In some ways, it’s helpful for financings but it also can drive prices up. From our perspective, because we’re buying assets so often for longer periods of time, the fact that a rate cut may happen 90 days or 180 days later is not really a long term negative and if anything, allows us to get into some assets at more favorable pricing. So the way I would think about it is it extends out to deployment period. It may slow some of the realizations and push them out a bit as well.
But when we think about delivering value for our customers, we see it as a positive. Obviously, for businesses like our credit business, which is mostly floating rate, it enhances returns for our underlying customers. I do think it’s important to note that unlike October and the end of the summer when rates moved and spreads really gapped out, we haven’t seen that accompanying change. So market seem to be in a much healthier spot. But I do think it probably prolongs the investment window here. And as we keep saying, we’re not going to wait for the all-clear sign. You saw a big ramp-up. We had $25 billion of deployment in the quarter. And I think in terms of commitments and then as of quarter end-plus beyond the quarter end, we have another $15 billion that’s committed.
So you’re seeing us move. We did our first deal in growth in quite some time. Real estate, we’ve talked about, we’ve obviously accelerated there. In our secondaries business, the pipeline of deals we’re looking at is about 2x where it was 90 days ago. So we’re seeing a pickup in activity. It won’t be everywhere. But I do think it creates more of a chance for us to deploy capital at prices we find attractive.
Operator: We’ll go next to Brian Bedell with Deutsche Bank.
Brian Bedell: Maybe just to add on to that question on that pace of deployment in two specific areas, real estate and credit. Just going back to the comment you just made, Jon, about extending the period. But does that make you sort of more excited about potential opportunities given that’s extension of the period that could depress prices in real estate? And with massive dry powder, especially in real estate, could that bring that level of deployment back up to sort of prior year levels in the mid to high $40 billion ranges? And then just secondarily in private credit, a little different dynamic with less dry powder but more fundraising. So I guess, same question there or do you think you can get up to sort of similar types of record levels in the mid to high $40 billions in like on, say, for 2024 for deployment?
Jon Gray: Brian, it’s hard to put numbers on things, so I’ll talk about it directionally. I do think when rates go up, the market tends — the public markets tend to move much more than what we see in the private market. So for real estate, I do think that creates more opportunity for scalable deployment as some of those stocks move on, particularly if the debt market hangs in there. And so that disconnect can create opportunity. We’ve seen a pickup in Europe in real estate as well, some of that relating to distress, and there’s very negative sentiment, even though the fundamentals on the ground are actually pretty good in our chosen sectors. And we’re seeing overall in Europe, I think there, we’ll see rates come down more quickly than the US, which is helpful.
So short answer, yes, it should help real estate deployment. On private credit, we’ve got a lot of momentum, particularly in the investment grade and asset based — asset backed area, that’s where we’re probably most active right now. The need for capital around digital and energy infrastructure, enormous. The needs for power tied to digital infrastructure but also electrification of vehicles, reshoring, very significant. And there’s going to be a huge need for capital. So we see that almost regardless of the interest rate environment. I do think on the direct lending side, we’ve seen some spread tightening. Rates coming down will be helpful to see deal activity and I think at that point, we’ll see a pickup. But regardless, our pipeline and credit both on the investment grade and noninvestment grade size has accelerated.
