Jon Gray: Yes. Alex, you’re right. It’s all interconnected, right? Because if you think about our clients and their numerator and denominator, it’s obviously very tied to what’s happening in the market. So their denominator is — and today, there are challenges, in many cases, they’re over their allocations. Let’s say, they have a 13% allocation to private equity in there at 15% or 16%. . As equity markets rally, then that frees up capital for them to potentially allocate to private again. At the same time, as equity market rally, IPO and M&A activity picks up, and so private equity sponsors, real estate sponsors could sell assets, again, reducing the exposure in the numerator. So these things are tied. We’ve been through these cycles many times.
Our expectation is you will see a pickup in activity. The reason why is inflation uncertainty makes it hard to do M&A and IPOs. We had a lot of uncertainty around the banking issues, we got uncertainty around inflation and uncertainty on how far the Fed would go. And the contours of that looks a little more certain. And I think that’s 1 of the reasons why markets are getting more enthused. Now is it possible we see an economic slowdown, the markets pulled back a bit. We — it’s too early to sort of put out an all-clear sign here, but I think we are beginning to see this pickup in activity. And as markets rally, that tends to lead people to have more confidence to transact, which plays its way through ultimately to our customers. Right now, we’re still — there’s a bit of a lag as you think about it in terms of fundraising activity, but a sustained good period for markets is very helpful for our ability to raise capital, particularly from institutional investors, also from individual investors.
Operator: We’ll go next to Adam Beatty with UBS.
Adam Beatty: I want to ask about the retail wealth management channel. Seems like even though redemptions are still elevated on the BCRED side, it looks like subscriptions are relatively healthy and accelerating. So it seems that the channel as such is definitely improving. On the BREIT side, gross subscriptions maybe not quite so much. So I just wanted to get your thoughts on you’re hearing and seeing from the channel and maybe the outlook for the back half?
Jon Gray: Well, you hit it. In BCRED, there’s obviously a lot of enthusiasm for private credit today, given the attractive risk return, the equity-like returns, taking debt-like risk. And so we have seen strong flows there. Q2, I think we said we’re up 60% versus the flows in Q1, and that’s obviously a positive. In BREIT, there is more negative sentiment, obviously, around commercial real estate, and there was a lot of focus here. As we said in the remarks, the good news is share redemptions are down nearly 30% from where they were at the beginning of the year. The subscriptions remain muted, but we would expect that continued strong performance. We did have three positive months here in a row, which is obviously helpful. some of the overall negative sentiment in markets and negative sentiment in commercial real estate that abating will ultimately change that dialogue.
When that happens, it’s hard to project. I think the key thing, if you think about the product, is that customers have had a really terrific experience inside of BRET. They’ve been delivered in the largest share class a 12% net return over 6.5 years, three times the public REIT market. And it’s that performance, which ultimately we think will drive people coming back to the product and the structure, the redemption structure, the semi-liquid nature, still allowing people to get capital out. But doing it over time and preserving value, I think, has been really important. So our confidence in BREIT remains really high. When that turns, it’s hard to say. But certainly, getting through the redemption backlog over time will be helpful in that regard.
Operator: We’ll go next to Patrick Davitt with Autonomous Research.
