Blackstone Inc. (NYSE:BX) Q4 2022 Earnings Call Transcript

Blackstone Inc. (NYSE:BX) Q4 2022 Earnings Call Transcript January 26, 2023

Operator: Good day, and welcome, everyone, to the Blackstone Fourth Quarter and Full Year 2022 Investor Call. During the presentation, your lines will remain on listen-only. I’d like to advise all parties that this conference is being recorded. And with that, let me hand it over to Weston Tucker, Head of Shareholder Relations. Weston, please go ahead.

Weston Tucker: Perfect. Thanks, Matt, and good morning, and welcome to Blackstone’s fourth quarter conference call. Joining today are Steve Schwarzman, Chairman and CEO; and Jon Gray, President and Chief Operating Officer; and Michael Chae, Chief Financial Officer. Earlier this morning, we issued a press release and slide presentation, which are available on our website. We expect to file our 10-K report next month. I’d like to remind you that today’s call may include forward-looking statements, which are uncertain and outside of the firm’s control and may differ from actual results materially. We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our 10-K.

We’ll also refer to certain non-GAAP measures, and you’ll find reconciliations in the press release on the shareholders page of our website. Also, please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blackstone fund. This audiocast is copyrighted material of Blackstone and may not be duplicated without consent. On results, we reported GAAP net income for the quarter of $743 million. Distributable earnings were $1.3 billion or $1.07 per common share, and we declared a dividend of $0.91 per share, which will be paid to holders of record as of February 6. With that, I’ll now turn the call over to Steve.

Steve Schwarzman: Well, thank you, Weston, and good morning, and thanks, everybody, for joining the call. 2022 represented the most challenging market environment since the global financial crisis. Central banks around the world embarked on one of the most aggressive tightening cycles in history. Combat the highest inflation in a generation. In the United States, we saw the highest level of inflation since 1981. Federal funds rate here rose from basically zero at the start of the year to 4.5%, the largest increase in 50 years. Equity markets fell sharply as a result with the S&P down 18% for the year, NASDAQ down 33%, public REIT index, not to be forgotten, down 25%. The intra-year movements were even more extreme, these indices down 26% to 37% at their lows.

In credit, the high-yield and high-grade indices declined 11% and 13%, respectively. Overall, the 60:40 portfolio at one of the worst years on record. And against this extremely unfavorable market backdrop, Blackstone delivered earnings and dividend growth for our shareholders. Distributable earnings, for example, rose 7% to $6.6 billion in 2022, while fee-related earnings increased 9% to $4.4 billion, a record year for the firm on both metrics, despite the collapse in equity and debt markets. The fourth quarter, although we had fewer realizations due to the environment, we generated strong DE of $1.3 billion, reflective of the firm’s substantial earnings power, which has grown dramatically over the past several years. Most importantly, Blackstone distinguished itself compared to almost all diversified liquid securities managers by preserving our limited partner’s capital.

The year in which the typical investor lost somewhere between 15% and 25% of their money, our limited partner investors had a highly differentiated outcome. Our flagship strategies in real estate, private credit and secondary’s appreciated 7% to 10%, while those losses were recurring elsewhere. Our Hedge Fund Solutions business achieved a gross composite return of 5% with positive returns every quarter of the year. Our corporate private equity, tactical opportunities and liquid credit strategies were down only modestly for the year between 1% and 3%. One of Blackstone’s core principles since our founding in 1985 involves the preservation of capital as a necessary component of the investments we make. We assess investment opportunities rigorously always with a focus on not losing our clients’ money.

In addition, of course, we seek returns that significantly exceed public market benchmarks over time. This year, we are proud that we again executed on this foundational principle. Our approach to investing has enabled us to grow from having no assets in 1985, to becoming the largest alternative asset manager in the world today. As you would expect, our investors are rewarding us, including remarkable inflows of $226 billion just in 2022, which drove 11% growth in assets under management to a record $975 billion. Our inflows this year alone qualify as a top 10 alternative manager out of the over 10,000 alternative managers globally. But Blackstone and others started in the alternatives business, institutional investors provided almost all of the capital for investment.

That business remains robust today as institutions are continuing to increase allocations. The vast $85 trillion private wealth channel, a new generation of investors is starting to experience the benefits of alternatives as well, a development led by Blackstone, where we have the largest market share. 20 years ago, we started raising money in this channel by offering access to the same high-quality products we offer to institutions. Over a decade ago, we built a dedicated private wealth team, which today comprises approximately 300 people globally, where we invested significantly to establish the leading sales and service organization in our sector, interfacing with the largest wealth distribution systems. Six years ago, we launched our first large-scale customized products for individual investors.

These products were designed to provide attractive returns by investing in longer term assets and therefore, capture the premium for liquidity, which is the basis of much of our business. And we structured these products to provide liquidity over time, subject to limits as it is essential to match the time horizon of investments with the duration of capital. This is a foundational principle of portfolio construction. And these products have worked exactly as intended. Blackstone’s largest product in the private wealth channel, BREIT, has delivered 12. 5% net returns annually since inception six years ago, for its largest share class, earning over three times the public REIT index. Been a lot of talk about public REITs. We’ve out-earned them by three times.

In 2022, BREIT’s net return was over 8%, while equity and debt markets were melting. And its growth in net operating income, 2022 was 65% higher and public REITs through the latest available public data, that’s some performance. Blackstone’s second largest product in this area of BCRED, has achieved 8% net returns annually, significantly outperforming the relevant credit indices and is yielding over 10% today, exclusively in floating rate debts. The response to our performance has been extremely positive. In 2022, our sales in the private wealth channel totaled a remarkable $48 billion, not exactly what you’re hearing in the media. In the fourth quarter, despite market headwinds, our sales were robust $8 billion, including $4 billion in our perpetual vehicles and $4 billion in other strategies.

On a net basis, after repurchases, we saw positive net inflows in this channel of $3 billion overall in the fourth quarter with strong demand for our drawdown products. Specifically, our perpetual strategies saw moderate net outflows in the quarter of approximately $800 million. As one would expect, flows in these strategies are impacted by market cycles. We believe we’re seeing a temporary decline in an otherwise very positive long-term growth trajectory. Firstly, speaking, I’ve been in finance for over 50 years and I’m frankly quite surprised by the intense external focus on the flows for BREIT at a time of cyclical lows in stock and bond markets. For those of us that build and create businesses, what’s going on is highly predictable. It should be expected that flows from high net worth individuals would decline to nearly all types of new investments in this environment.

Having navigated five major market declines in my career, I’ve learned that focusing just on what’s happening at the bottom of cycles. This leads the public regarding likely future trends for appreciation and growth in well constructed and historically high-performing products. My experience is these market bottoms often last for relatively short periods of time are followed by a resumption of historic trends. At Blackstone, we are focused on the long term, not next month. And rather than simply counting balls and strikes, we’re working to win the World Series. And as we all know, not all World Series are won four games to 0, all people remember is who won the World Series, and that is our intention, and that has been our experience with the vast bulk of our products.

Our funds are built on performance and our consistent experience over nearly four decades has been that with strong returns, flows will follow. The need for very high-quality products in the private wealth channel is very substantial, and we’re bringing something highly differentiated in terms of our portfolio and performance. What we’ve created for individual investors is so good that one of the most sophisticated institutions in the world contacted us and indicated they wanted to invest as well. Earlier this month, the University of California system invested $4 billion in BREIT and is investing an additional $500 million beyond that, which we announced yesterday with an effective six-year hold. This investment builds upon a 15-year relationship between our firms.

I had the pleasure of meeting with UC’s Chief Investment Officer over the holiday period, and he said they consider BREIT has one of the best positioned real estate portfolios in the United States. This investment provides BREIT with substantial additional firepower and flexibility, and represents a powerful affirmation of the portfolio and its performance. It also illustrates the significant advantages of buying products from Blackstone. Investors and our funds get access to the full capabilities of our firm, not just those of an individual portfolio manager, including our intellectual capital, relationships, creativity and the many other benefits that come from our leading market position. We use these advantages to drive the best outcomes possible for our customers.

Our distribution partners understand this as well, and they’ve told us they plan to continue to expand their client’s access to alternatives. Blackstone’s commitment to the private wealth channel is stronger than ever. And we believe our performance in this cycle will ultimately provide impetus for significant growth in this area. Our returns in the face of adverse markets and adverse media are proof of concept and our disciplined approach to institutional asset management applies for the benefit of individuals as well. In closing, as we move into 2023, Blackstone is uniquely positioned to navigate the challenges of today’s world on behalf of all of our investors. As a whole, our portfolio is in excellent shape with an emphasis on downside protection, as well as upside when asset values ultimately recover from this cycle.

With almost $187 billion of dry powder, we have more capital than almost any other financial investor in the world to buy assets opportunistically when values are low and liquidity is scarce. We have lived through many cycles and have always emerged stronger, growing the firm to greater heights. Public market and investors who don’t understand our model historically, upon the risk missing out on Blackstone’s substantial long-term stock performance. Our people own 36% of Blackstone’s equity. I can tell you, this is a group that is extremely bullish on our firm’s prospects. And with that, I’ll turn things over to Jon.

Jon Gray: Thank you, Steve. Good morning, everyone. The true measure of our success is the returns we generate for clients. Despite a very tough year for markets, we’ve continued to deliver for them. Nearly all our flagship strategies outperformed the relevant public indices in 2022, as Steve highlighted. The result of how we’ve positioned investor capital along with our value creation focus. We do not own the market. It matters where you invest. There is no better example of this than in real estate, where we’ve achieved 16% net returns annually in our global opportunistic funds across the many economic and interest rate cycles of the past 30 years. More recently, given our concerns around rising interest rates and inflation, we concentrated over 80% of our current real estate portfolio in sectors where strong cash flow growth could help offset these headwinds, including logistics, rental housing, life science office, hotels and data centers.

Logistics is the largest exposure across Blackstone, comprising approximately 40% of the entire real estate portfolio. Fundamentals globally remain extraordinarily strong. In recent months, re-leasing spreads, the increase in rents as expiring leases roll over, were 65% in our US holdings, accelerating to a record 75% in December, approximately 50% in the UK and 30% in Europe overall; 20% in Australia and 100% in Canada. At the same time, construction starts for warehouses, along with most types of real estate are now falling sharply, which is further tightening and already constrained new supply pipeline. Of course, these exceptional fundamentals do not apply everywhere. In traditional US office, for example, secular challenges have been exacerbated in a post-pandemic world.

We’ve written down the equity value of traditional US office assets dramatically since 2018. And fortunately, such assets represent only 2% of our global real estate portfolio versus approximately 50% 15 years ago. In private equity, our concentration in the travel and leisure, energy, and energy transition areas have had a meaningful impact on our results. We largely avoided unprofitable tech and did nothing in crypto. Our thematic approach has led to 14% year-over-year revenue growth in Q4 for our corporate private equity operating companies. Margins in our portfolio have proven to be resilient, reflective of our focus on high-quality businesses with pricing power. And in our non-insurance corporate credit business, with nearly $200 billion of total AUM.

Over 90% of our investments are floating rate, which has benefited returns as rates moved higher. Finally, in BAM, we emphasize macro and quant strategies yielding outstanding results for our investors in liquid securities. The strength of our returns over decades, reinforces the Blackstone brand and allows us to serve investors in more areas. While the fundraising environment remains challenging, we are in a differentiated position with LPs globally. We’re seeing the greatest demand today for private credit strategies, including from insurance clients and for infrastructure. In credit, the current environment is favorable for deployment given the significant increases in base rates and wider spreads. Moreover, our investors benefit from our direct origination capabilities, which is a key differentiator for insurance clients in particular.

That’s leading to robust growth in this area with $8 billion of inflows in Q4 from our large insurance mandates, bringing platform AUM to $160 billion and we have line of sight to over $250 billion over time from existing clients alone. This includes our resolution platform, where we recently announced an incremental $1 billion commitment from Nippon Life, Japan’s leading life insurance company to help accelerate the company’s growth. In infrastructure, we raised $3 billion in the fourth quarter and $10 billion in 2022, bringing AUM to $35 billion in just five years. Performance has been outstanding with 19% net returned annually since inception. Again, it’s about where we chose to invest, including inflation protected areas like digital, transportation, and energy infrastructure.

Turning to our drawdown fund business, we’ve raised approximately $100 billion to-date for the current vintage of flagships, advancing toward our $150 billion target. In corporate private equity, we’ve closed on over $15 billion for the new flagship and believe we will raise roughly a similar amount as the prior fund in a difficult private equity fundraising environment. In secondaries, we completed the fundraise for SP’s flagship PE strategy at over $22 billion, the industry’s largest, as well as SP’s GP-led continuation fund at $2.7 billion. We also raised additional capital in Q4 for our renewables and energy transition-focused strategies in credit and private equity, targeting over $10 billion in aggregate. In real estate, we commenced fundraising for our latest debt vehicle, which we believe will be comparably sized to its $8 billion predecessor.

And later this quarter, we expect to start raising our seventh European opportunistic strategy, targeting a similar size to the prior fund, which was €9.5 billion of third-party capital. As with fundraising, our global scale and our reputation as a partner of choice are key advantages in deploying capital, particularly when the world becomes challenging. Our largest commitment in Q4 was for a majority stake in Emerson Electric’s Climate Technologies segment. This $14 billion corporate carve-out was the result of a year-long dialogue, completed at a time when traditional financing sources were largely unavailable. Emerson remains our partner in the investment. The ability to source, structure and finance such a complex transaction at scale in a difficult investment environment highlights the very best of Blackstone.

Other investments in Q4 included CoreTrust in partnership with HCA, another bilateral discussion with a high-quality corporate and the privatization of Atlantia, one of the largest transportation infrastructure companies alongside the Benetton family. We’re starting to see some interesting opportunities arise from the market dislocation, including from real estate funds seeking liquidity, leading to investments in logistics portfolios in Canada, the UK and Sweden, but it will take time for a volume of large-scale opportunities to emerge. Our latest fundraising cycle has positioned us very well with $187 billion of dry powder. In closing, we continue to see global LPs increase their allocation to alternatives and Blackstone is the leader in the space.

For shareholders, our firm represents exceptional value. We’ve grown distributable earnings 20% annually for the past 10 years, more than double the rate of the market. We’ve done that while paying out nearly 100% of our earnings through dividends and buybacks. Moreover, the share count has barely grown over that decade, and we continue to operate with minimal net debt and no insurance liabilities. It is an extraordinary business model, and our brand and relationships with customers have never been stronger. With that, I will turn things over to Michael.

Michael Chae: Thanks, Jon, and good morning, everyone. Firm’s results reflect strong performance in difficult markets. Our business continues to demonstrate remarkable resilience and fundamental strength in terms of investment returns, inflows and earnings power. I’ll first review financial results and then we’ll discuss investment performance and key elements of the forward outlook. Starting with results. Despite the challenging backdrop, fee-related earnings, net realizations and distributable earnings, all saw a meaningful positive growth for the full year, with FRE and DE reaching record levels, as Steve highlighted. FRE increased 9% to $4.4 billion or $3.65 per share, powered by very strong growth in management fees and healthy margin expansion, notwithstanding a decline in fee-related performance revenues.

Our expansive breadth of growth engines and the activation of new drawdown funds throughout the year, lifted base management fees 25% to a record $6 billion for the year and the 52nd straight quarter of year-over-year base management fee growth at Blackstone. At the same time, FRE margin expanded 75 basis points to 57.1%, the highest level ever for a calendar year, reflective of the firm’s robust margin position and ability to manage costs with discipline in a difficult environment. Fee-related performance revenues were $1.4 billion for the year, driven by strong returns across our perpetual strategies, with contribution from 12 discrete vehicles. Looking forward, the setup for this high-quality revenue stream in 2023, and beyond is quite favorable, which I’ll discuss further in a moment.

Distributable earnings increased 7% in 2022 to $6.6 billion or $5.17 per common share, driven by the growth in FRE, along with a 4% increase in net realizations. The shape of the year was impacted by our realization activity, which, of course, is market dependent. We saw a record first half driven by certain large realizations of note, while the pace of sales slowed in the second half, reflecting overall market activity levels. FRE remained a balance to earnings throughout the year, 2022 comprising four of the firm’s five best quarters for FRE in history. In the fourth quarter, FRE was $1.1 billion or $0.88 per share. The year-over-year comparison was affected by the change in the crystallization schedule for BREIT’s fee-related performance revenues in 2022.

Previously, each full year’s revenues crystallized in the fourth quarter, which moved to a quarterly crystallization in the first quarter of 2022. Notably, excluding these revenues, the firm’s FRE growth in the fourth quarter was positive 7%, more in line with the full year. Distributable earnings in the fourth quarter of 2022 were $1.3 billion or $1.07 per common share, down from the prior year record quarter. Stepping back, despite a muted backdrop for realizations for much of the year, our distributable earnings were above or well above $1 per share every quarter for the past six consecutive quarters, which had only previously occurred three times in our history. This reflects well the elevation of our earnings power that is underway. Turning to investment performance.

Against the volatile market backdrop of 2022, our funds protected investor capital. In the fourth quarter, the corporate private equity funds appreciated 3.8% with strength in our travel-related and energy holdings along with our publics broadly. Our portfolio companies are well positioned overall with continued strong revenue growth and resilient margins. In real estate, the Core+ and opportunistic funds depreciated 1.5% to 2% in the quarter. In the context of rising cost of capital, we’ve continued to increase cap rate assumptions across the portfolio, driving the fourth quarter decline. Notwithstanding this impact, our real estate strategy still saw significant appreciation for the full year due to robust cash flow growth across our holdings.

Of note, 10-year yields have moved meaningfully lower since year-end, which, if sustained, should provide additional valuation support over time. In credit, the private credit strategy is appreciated 2.4% and the liquid strategies appreciated 3%, reflective of a resilient portfolio, generating strong current income against a stable backdrop for credit generally in the quarter. And in BAAM, the BPS gross composite return was 2.1% in the quarter, the 11th quarter in a row of positive performance. Overall, our portfolios are performing well in a challenging external operating environment. Turning to the outlook. First, as it relates to realizations, we expect sales activity to remain muted in the near-term given market conditions. And as always, when markets ultimately stabilize, we would expect realizations to reaccelerate as well.

With respect to FRE, we continue to expect a material step-up over the next several years, led by the combination of first, our drawdown fundraising cycle; second, expanding contribution from perpetual strategies; and third, the substantial largely contractual growth of our dedicated insurance platform. In terms of the drawdown funds, the fee holiday for our global real estate flagship has ended, and 2023 will include a nearly full year contribution of management fees. We expect to launch the investment period for the corporate PE flagship later this year, subject to deployment which will be followed by an effective four-month fee holiday. We will launch various other funds in the coming quarters depending on deployment. In total, only $56 billion of our $150 billion target was earning management fees as of year-end.

Federal strategies continue to grow in number and scale with over 50 discrete vehicles today, a combined fee AUM of our four flagship strategies BPPE, BREIT, BIP, and BCRED, grew 30% in 2022 to $184 million. This sets a substantially higher baseline for fee revenues entering the year. In addition to NAV-based management fees, over 30 of the perpetual vehicles are eligible to generate fee-related performance revenues, and the firm will continue to benefit from the layering effect of these revenues. We previously noted that the BPP platform has four times more AUM subject to crystallization in 2023 and 2022 concentrated in the second half of the year. Finally, in insurance, we ended 2022 with over $100 billion of AUM from our four large clients, generating $450 million of management fee revenue for the year.

As these mandates grow over time, both organically and by contract, we anticipate fee revenues just from these mandates will more than double to approximately $1 billion in four to five years, including strong double-digit growth this year. These revenues carry attractive incremental margins given our extensive existing capabilities. So, to summarize, with multiple embedded key drivers we have strong confidence in continued FRE expansion in 2023 and beyond. In closing, despite the uncertainties in today’s world, we entered the new year from a position of fundamental strength. Our earnings power is elevated dramatically for the past several years. And looking forward, we have great confidence in the future. With that, we thank you for joining the call and we’d like to open it up now for questions.

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Q&A Session

Operator: Thank you. And the first question is coming from Craig Siegenthaler with Bank of America. Please go ahead.

Craig Siegenthaler: Good morning Steve, John. Hope everyone is doing well.

Steve Schwarzman: Good morning. Thanks.

Craig Siegenthaler: So Infrastructure Partners is generating sizable inflows pretty much every quarter now, AUM is around $35 billion. What’s been driving the improvement in fundraising momentum at Infra? Is it partly the inflation had qualities? Is it more contribution from the private wealth channel? And also, is PIF still matching every dollar of inflow? And I think that was up to $40 billion.

Jon Gray: So, Craig, I would say the key reason it’s grown, echoing what Steve was saying in his remarks, is performance drives inflows. So, this vehicle, if you look in our filing, has delivered 19% net since inception five years ago, really remarkable for a fund that had a much lower targeted return, and so that’s obviously attractive. I do think you hit on a key element, which is the inflation protected nature of hard assets, particularly in this portfolio. What it owns in transportation infrastructure, an area we went very long post pandemic, investing in Atlantia in Europe, the Autostrade in Europe, Signature Aviation here in the United States. That has been very positive for this fund, are pushing digital infrastructure, data centers and towers, where there’s really strong underlying demand.

And then energy and energy transition, of course, given what’s going on. And so, it really has a really exceptional portfolio that investors find attractive in an inflationary environment. It’s delivered very good performance. And in general, I would say our customers are under allocated to infrastructure and want to hold more here. And so, I think, it’s one of the things that everybody has been so caught up on one product flows. Meanwhile, here’s a product that didn’t exist five years ago, has $35 billion of AUM, grew 53%, is delivering phenomenal performance, and I think we’ll grow to be much, much larger than it is today. Specifically, you talked about private wealth. It’s not really a product so far that we’ve tapped into the private wealth channel on.

And then, as it relates to our partners at PIF, yes, they are still matching us up to a certain size under our agreement. We also in the number have some co-investments. So there’s still some additional capital. But I would just say, the response from investors broadly here has been extraordinary. And what we’ve built from scratch, what Sean Klimczak, who runs that business has done, is truly exceptional, and we’re really proud of this business and have a lot of optimism about the future.

Craig Siegenthaler: Thank you, Jon.

Operator: And our next question is coming from Glenn Schorr with Evercore. Please, go ahead.

Glenn Schorr: Hello. Thanks very much.

Steve Schwarzman: Hello.

Glenn Schorr: So, I think, Steve put it well earlier when talking about its essential to match the duration of assets with the capital. And there’s a perception or reality in some ways that the quarterly liquidity products don’t do that. Now, they work and you’re protecting shareholders. So I understand, they hit the bottom line. So my question is, we’ve been talking about for a while now and experiencing retail, the private wealth channel contributing 30% to 50% of flows for the company. So I’m curious how you evaluate the client experience, the client being the SA, the platform, the end client that’s asking for money and has to wait. And so, the bigger picture question is, do you still have confidence in that 30% to 50%, do you need some reinnovation of product wrapper? I know, I asked something like that last quarter, but we have thee months more of conversations. So I’d love to get your mark-to-market on all of that. Thanks, so much.

Jon Gray: Thanks, Glenn. I think what’s fascinating is, when we talk to our clients, their experience versus the media narrative. So what we’ve heard from our clients is, they’re quite pleased. They’re quite pleased that they invested in a product that has produced 3 times the rate of return as the public REIT market. So they look at what’s happened here is positive. Our clients and financial advisers understand that this was a semi-liquid product, that the basic trade-off was to trade some liquidity here for higher returns and that there were always, from day one, six plus years ago, limitations on liquidity. Now, there may be a small subset who’ve expressed some unhappiness. But frankly, the vast, vast majority of our customers are quite happy.

And so we think about this, like a great restaurant that serves food, the weather outside is bad and the markets are tough back to Steve’s comments. There are not quite as many people showing up right now, but the food is still really good. And we think as the world reverts, as we work through the backlog of redemptions, we’re going to continue €“ we will see flows return. And by the way, we saw in 2020 a cessation of flows. You can look at products like this over time. People are just taking a snapshot of today, and they’re focused on the flows. What I find fascinating was yesterday, we posted our 8-K saying that, same-store estimated NOI for BREIT was 13% for the full year, which is extraordinary for a portfolio of this size. No one covers that.

What they’re focused on is what the flows are next week. To us, what matters is delivering customer. So I do believe, fundamentally, as we get through this challenging period, people will come back to these products. I think as you talk about liquidity, could there be tweaks to these different products over time on the liquidity features, BCRED, for instance, does quarterly versus monthly. We’re not changing anything today, but certainly, people are going to look at these. But at the end of the day, the product has delivered as designed. It’s delivered strong performance. It’s delivered on the liquidity promises it had, the media has created a different narrative, but the customers are fundamentally happy. That’s why I believe as the world normalizes, we will again begin to see flows.

Glenn Schorr: Thank you.