Good morning. My name is Jennifer, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock Incorporated teleconference to discuss the acquisition of HPS Investment Partners. Participants for today's call will include Chairman and Chief Executive Officer Laurence D. Fink, Chief Financial Officer Martin S. Small, President Robert S. Kapito, General Counsel Christopher J. Meade, and HPS Investment Partners Chief Executive Officer Scott B. Kapnick. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press the star, then the number two. Thank you. Mr. Meade, you may begin your conference.
Thank you. Good morning, everyone. I'm Chris Meade, the General Counsel of BlackRock. Before we begin, I'd like to remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that BlackRock's actual results may, of course, differ from these statements. As you know, BlackRock has filed reports with the SEC, which list some of the factors that may cause the results of BlackRock to differ materially from what we see today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. So with that, I'll turn it over to Larry.
Thank you, Chris. Good morning, everyone. I'm speaking to all of you from Singapore, and the rest of the team is in our New York offices. I want to thank you for joining the call. We're incredibly excited to announce our agreement to acquire HPS Investment Partners. We'd like to welcome all of our future colleagues from HPS. CEO and founder Scott Kapnick is here with us today. We share a common culture as founders of companies focus on delivering for our clients. We look forward to Scott, Scot French, and Michael Patterson joining the BlackRock Executive Leadership Team, and I'm proud that the consideration of this transaction is effectively all in BlackRock equity. We'll have the same interests as all of our significant shareholders alongside our broader shareholder base. Welcome, Scott, and thank you for joining this call.
Thanks, Larry. And I really appreciate all that you've done. And really, the combination of HPS and BlackRock creates an asset manager of unparalleled breadth and scale. And we at HPS are all very excited. We've gotten to know Larry Fink and his BlackRock team in quite a lot of detail over the last few months. Really, a first-class team, highest-caliber organization, and really the best partner we could ask for. It really starts with who we are and the culture. Larry mentioned the performance-based culture. Together, we're going to be a huge force in both the public and private markets shaping the next decade for really financing solutions, private financing solutions. We couldn't be more excited about this opportunity and what BlackRock brings to the platform.
Really, it starts with borrowers and having the breadth and scale that we have to find opportunities and pick those and select those for our investors. A complementary world-class fixed-income platform, best in the business, leader in the insurance industry and OCI solutions. We at HPS have 120 insurance clients, and we're very excited about the ability to work together on that front. Again, largest asset owner in the world, and that access creates huge opportunities for us to create financing opportunities for our clients. The business opportunities are immense. We don't have enough time to really go through it. A lot of you on the phone know us very well and know the opportunities across insurance. The opportunity to deliver GP/LP solutions into the private equity world, the wealth and retirement channel.
One of the things that investors and analysts like about HPS is our breadth across not only pension and sovereign wealth, insurance, and also retail. That wealth channel here and the opportunity to expand with BlackRock's breadth is amazing. The asset-backed lending platform as we get into private IG is a big shift. We'll talk more about that in the years ahead. We're positioned to be a leader, if not the leader in that. And then lastly, our private data that we have in private markets, really paired with Preqin and the Aladdin platform, I believe will really create additional power for those platforms. So I'll stop there. And again, Larry, to you and your team, I commend you. I like the structure of the transaction. As you mentioned, it's all stock. You don't need to know anything more than that from me about what I think about this transaction.
Thanks, Scott. We've always looked at the full breadth of our clients' needs in everything we do, and we build BlackRock around helping clients meet their financial ambitions by providing connectivity to the long-term growth of the capital markets. That strategy informed us in acquisitions going back to MLIM, the BGI, as well as more recent moves to acquire GIP and Preqin. Today, we're delivering across public markets and public and private markets, equity and debt, in the ways that best serve each and every client, from broad-based ETFs to customized whole portfolio solutions. We provide our Aladdin technology to support integrated public and private portfolios. BlackRock is positioned at the intersection of these markets and clients and corporates. We power connectivity to markets, enabling capital flows that contribute to economic growth and drive better outcomes for each and every one of our clients.
Private markets are no longer a separate or standalone exposure for our investors. The blending of public and private in today's reality is a part of the entire markets of today. We're building portfolios that are seamlessly integrated across public and private for our clients. We've seen this barbell in public and private equity for many years, and now we're seeing the blending of public and private credit is a standard for long-term durable fixed-income portfolios and we're constantly growing our fixed-income capabilities for decades and now serve our clients through a diversified $3 trillion platform. Our early days, we're focused on building Aladdin to understand and manage risk in bond portfolios and managing fixed-income assets on behalf of our clients. iShares launched the first bond ETF more than 20 years ago, and last quarter, fixed-income iShares AUM crossed over $1 trillion.
On our own, that would be a top five bond manager, and our high-performing active fixed-income franchise led by Rick Rieder offers differentiated strategies across munis, high yield, total return, and unconstrained portfolios. Private credit is already a major component in the fixed-income market, just as private equity has grown alongside significant returns for public equities. We believe the next phase of growth in fixed-income will be through solutions across both markets. We are building a comprehensive platform of integrated asset management and technology services for asset owners, one that seamlessly spans both public and private and is solely focused on our client needs. We expect the breadth and scale of BlackRock's nearly $4 trillion fixed-income and cash platform to support acceleration of our HPS strong origination and capital formation. Our combination with HPS adds strategic capabilities in credit and insurance.
We're well positioned to meet the growing demand for technology, for data, for transparency across public and private markets with Aladdin, eFront, and soon Preqin. BlackRock's private credit and HPS are highly complementary, and together, we will serve approximately $240 billion of pro forma client assets, primarily in private debt. The planned combination will scale our offering to a top five private credit franchise and differentiated investment performance, offering will span the capital structure, including senior and junior debt solutions, asset-based financing, real estate, and leveraged loans. Our scale across private markets is essential for proprietary deal sourcing, access and to execution of deal flow, deeper liquidity, and hopefully much lower trading costs, all of which will benefit our clients, which we believe will further accelerate HPS's growth. Our enhanced private credit capabilities also position us to provide financing to fuel startups, small and mid-sized businesses.
This, in turn, supports job creation and economic growth. And we believe our shareholders will be one of the biggest beneficiaries of this transaction. We expect it will translate to higher organic growth, greater diversification, and more resilience through market cycles. Successful execution of these goals should also result in a multiple expansion. We view private credit as the most dynamic frontier in the evolution and evolving of financing and in the capital markets. The shift of financing activity towards the capital market presents a durable investment and diversification opportunity for all our clients. Borrowers are signaling their preference by increasingly turning to private credit for its flexibility and certainty of execution. And in the asset-based finance markets, banks are also finding value by partnering with capital market players who can bring financing, underwriting, and structuring expertise.
This enables them to maintain customer relationships without the need to grow their increasingly costly balance sheets. We see this as a significant opportunity in the $30 trillion+ market where private credit holds only a 5% share today. BlackRock brings a deep and long-standing relationship with corporate partners, pension funds, and governments around the world. HPS already has approximately 90% direct origination across several key flagships. There is further opportunity to scale through BlackRock's existing relationships with our largest asset owners globally. BlackRock is the best-positioned asset manager to deliver opportunities for both our clients and corporate borrowers by connecting these two groups. We believe that the acquisition of HPS will position us to have a preferred capital partner with insurers. We already have strong relationships in this channel and manage more than $700 billion in insurance AUM, which has nearly doubled in the last five years.
And our Aladdin technology now powers over 100 insurance companies. HPS brings strategic relationships with many of these largest insurers, bolstering our ability to serve these clients with broader underwriting and structuring capabilities. HPS and BlackRock are aligned to a balance sheet light approach. This means we can move more effectively use of our balance sheet on behalf of our shareholders and generate a higher multiple third-party credit-driven earnings. The opportunity in insurance is a key example of being able to offer and serve our clients' needs comprehensively. We can offer public fixed income. We can offer private credit or a fully outsourced solution. We can provide each and every insurance client our Aladdin technology to help them understand and better manage their own risk. Processing important opportunities in retail alternatives.
HPS has a scaled retail platform of more than $20 billion in total assets and wealth strategies ranging from non-traded senior lending BDC HLEND to credit solutions across the capital stack. We're already innovating this space, including through our recent partnership with Partners Group to enable seamless private credit allocations for wealth investors in a model portfolio. We see additional opportunity to scale our retail offerings with HPS's complementary capabilities. We expect to drive stronger client engagement through what will be our combined private finance solution business, which will be led by the HPS management team. We see great opportunities to be a partner of choice for equity, private equity sponsors, and alternative asset managers with offerings across our entire financing and investment needs.
Whether financing a sponsored company through senior loans or syndicated debt or innovative unitranche solutions, our combined platform will be able to serve the alternative asset management community with excellence and resilience. For sponsors who want an operating system, we have eFront. And for data needs, we'll have Preqin. Our secondary teams can participate in the GP-led restructuring trades, and we're capital providers to private equity funds through our private equity partners franchise. Across channels, clients are looking to do more with fewer. They're increasingly choosing to partner with BlackRock, and we're becoming the capital and technology provider of choice across both public and private markets. Growing public deficits are only going to expand the role and the need of private markets in financing the economy and empowering growth. Our clients are blending public and private as they invest and allocate capital within their portfolios.
Throughout BlackRock's history, we never shied away from making big moves to better serve our clients. As we did when we created Aladdin or when we unlocked new markets through ETFs and built whole portfolio solutions, we're taking deliberate actions to generate long-term financial benefits for our clients. Through coordinated investments, we are bringing meaningful private markets opportunities to our clients. The combination of BlackRock and HPS grows our private markets client assets to more than $410 billion with infrastructure and private credit at the cornerstones of the BlackRock platform. With the closing of GIP last month, we are now offering our clients access to leading investment and operating expertise across infrastructure private markets. The combination of BlackRock's sovereign and corporate relationships and GIP's capabilities and infrastructure have created an opportunity set that have already exceeded our high expectations at the time of our deal.
Our relationship with Microsoft and MGX to launch a global AI infrastructure investment partnership is just an early proof point of what can be achieved with a strengthened private markets platform, and the private credit capabilities we're adding with HPS will only expand this fast-accelerating opportunity set with sovereigns and corporates. Our recent third-quarter results demonstrated the power of our integrated investment and technology platform. We delivered a record financial result in revenues and operating income of over $220 billion of total net inflows and 5% organic base fee growth. BlackRock is operating from a position of strength, and all of us at BlackRock have a lot to be excited about in the work ahead. We have a strong record of successful integrations.
This includes periods when we managed multiple integrations in succession or in parallel, most notably during the 2005 through 2009, which culminated in our successful acquisition and subsequent integration of BGI, iShares, Aladdin, and Others. This is another period when BlackRock will come together to execute an integration that will deliver growth for our clients and growth for our shareholders. This year, we celebrated our 25th anniversary as a public company. We've always been mindful of our duty to be good stewards of our shareholders' capital. Our capital management strategy has been to first invest for growth and then to return capital to our shareholders through a combination of dividends and share repurchases. The success of our historical investments, both organic and inorganic, has never been clearer, and we've generated meaningful returns for our shareholders through our systematic share repurchase programs. We are not market timers.
We generate returns through consistent repurchases. In the last 10 years, we've repurchased 29 million shares at an average price of $498 per share. Today, we're trading at more than double that. This represents a 15% annualized return for our shareholders. For GIP and now HPS, BlackRock Equity is the valuable currency in structuring transactions for alignment with you, our shareholders. Successful integration into our one BlackRock platform to unlock the value of our investments in GIP and HPS will be the utmost priority. So on behalf of BlackRock's board of directors, our leadership team, and all our employees, we look forward to welcoming our new colleagues, our new friends, and clients from HPS. We're united by a common culture of serving our clients with excellence.
And together, we will deliver income solutions for our clients that blend both the best of the public markets, the best of the private markets, in an organized, unified fashion. Let me turn it over to Martin now, who will cover the financial and value for this transaction to you, our shareholders. Martin.
Thank you, Larry. Before I start, please note that we've posted an investor presentation with additional information about the transaction on our Investor Relations website. At BlackRock, we aim to serve clients with excellence and help them design portfolios for the future. I've spoken about building BlackRock's platform around structural growers: ETFs, Aladdin, model portfolios, and private markets. Private markets is a structural grower, especially private debt. We've made strategic moves in the last year to enhance BlackRock's capabilities across investments and data to meet our clients' growing allocations to the private markets.
Throughout BlackRock's history, we've built our platform ahead of client needs and around structural growers. Today's announcement of our agreement to acquire HPS is the next step in that evolution. HPS is a leading global credit manager with client assets of $148 billion, including fee-earning AUM of $107 billion. HPS manages assets across privately negotiated senior debt, junior capital solutions, and debt preferred and equity instruments, asset-based finance, and liquid credit. The combination of HPS with our existing $89 billion in private credit client assets will lift BlackRock's scale in private debt to approximately $220 billion. This will make BlackRock a top five private credit manager by AUM and second by five-year fundraising. Together, we believe we can more deeply serve clients in private credit through significant origination and capital formation at scale.
We also expect to accelerate organic growth by building on proven investment and fundraising track records across both institutional and wealth clients. HPS brings world-class credit capabilities across the capital structure and a wide range of bespoke financing solutions, powered by approximately 800 employees across 14 global offices. HPS has significant origination scale spanning sponsor and non-sponsor channels, with approximately $155 billion committed to corporate private credit across approximately 850 investments since 2007. HPS continues to grow its capabilities in originating and structuring high-grade asset-based finance transactions through real estate lending, consumer solutions, and GP/LP finance. HPS has demonstrated a proven ability to scale without an insurance balance sheet or captive distribution. Over 40% of insurers with assets over $100 billion are active investors with HPS.
It's well aligned to BlackRock's balance sheet light approach and more deeply serving the multi-sleeve private credit needs of our insurance clients, where BlackRock manages over $700 billion of general account assets. HPS has origination capabilities and borrower scale that are complementary to BlackRock's existing direct lending business, which today operates largely in the core middle market. At a portfolio level, HPS's borrowers are primarily larger companies with a higher EBITDA profile and average loan size, and with a greater proportion of non-sponsor origination. It's this expertise and scale that we find particularly synergistic with BlackRock's broad global corporate relationships. We believe it will enhance our ability to be the best strategic capital partner to corporates and clients across both public and private markets. HPS is expected to generate $360 million of post-tax FRE in 2025, with pre-tax FRE margins of nearly 50%.
The transaction increases our fee-paying private markets AUM by 40% and grows pro forma private market space fees by approximately 35% to over $2.5 billion. Turning to the financial terms of the transaction, BlackRock plans to acquire 100% of the business and assets of HPS for total consideration of approximately 12.1 million equity units issued by a wholly owned subsidiary of BlackRock. These units are exchangeable for BlackRock stock on a one-for-one basis at the election of the holder. We refer to these equity units as subco units. Subco units will have equivalent dividend rights to BlackRock common stock. We plan to report EPS as adjusted, as if subco units were exchanged for common shares. A portion of the transaction consideration will be paid at closing, and a portion will be deferred approximately five years.
Approximately 9.2 million subco units will be paid at closing, with up to $675 million of value thereof used to fund a stock-based retention pool for HPS employees. Approximately 25% of consideration, or 2.9 million subco units, will be paid in approximately five years, subject to achievement of certain post-closing conditions. There's also potential for additional consideration to be earned of up to 1.6 million subco units that's based on financial performance milestones measured and paid in approximately five years. In aggregate, inclusive of all subco units paid at closing, eligibly paid in approximately five years, and potentially earned through achievement of financial performance milestones, the maximum amount of BlackRock common stock issuable upon exchange for subco units would be approximately 13.7 million shares. As part of closing the transaction, BlackRock expects to retire for cash or refinance approximately $400 million of existing HPS debt.
The transaction is not expected to meaningfully change BlackRock's leverage profile. Even with share issuances related to GIP and HPS, we will have reduced our share count since we implemented our share repurchase strategy in 2013. Since 2013, we've repurchased 35 million shares or close to $6 billion of BlackRock stock, which generated an unlevered compound annual return of 15% for our shareholders. Over this time period, excluding GIP, we reduced our share count by 23 million shares. For the trailing five years, we've repurchased 11 million shares, completing $7.3 billion of share repurchases at an average price of $649 for an IRR of over 15%. Similar to the GIP transaction, the combination with HPS has been structured to ensure long-term alignment between HPS and BlackRock to best serve our clients, our employees, and our shareholders.
The all-equity structure of the transaction means HPS leadership will become meaningful long-term shareholders of BlackRock. Consistent with the HPS practice prior to this transaction, a significant portion of carried interest and incentive fees that are derived from existing HPS strategies will continue to be distributed to owners and employees to support long-term retention and employee incentives. We expect the transaction to be modestly accretive to as-adjusted EPS in the first full year post-close, which will exclude transaction-related costs. At present, we expect the transaction to close in mid-2025, subject to regulatory approvals and other customary closing conditions. This transaction is an important step in accelerating our ambitions to scale our private credit capabilities and deliver integrated public-private solutions to our clients. We also expect it will further build our earnings mix towards our structural growth areas, including private markets, technology, and the whole portfolio.
We believe this will drive higher and more durable organic growth, greater diversification, and resilience in revenue and earnings through market cycles. Our record third-quarter results last month reflected momentum across our entire platform as clients turned to BlackRock to move in size into public and private markets. Clients want to do more with fewer, and they're choosing BlackRock for our whole portfolio approach and trusted advice. Today's announcement is an accelerant to our ambitions to lead the fixed income portfolio of the future, to scale in credit financing and public-private market solutions, and to better serve our clients, including the largest asset owners across insurance, pensions, sovereign wealth funds, and wealth managers. We look forward to welcoming our HPS colleagues and friends to BlackRock next year, so let's go ahead and open it for questions.
At this time, I'd like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. If you do ask a question, please take your phone off its speaker setting and use your handset to avoid any potential feedback. Please limit yourself to one question. If you have a follow-up, please re-enter the queue. We'll pause for a moment to compile the Q&A roster. Your first question comes from Craig Siegenthaler of Bank of America.
Thanks. Good morning, Larry. Hope everyone's doing well.
Hi, Craig.
Hey, Craig.
So given that Scott Kapnick is also joining us on this call, we wanted to see if he could provide some perspective on his leadership team's thought process behind the decision to sell to BlackRock versus staying independent and going down the IPO track.
Sure. Happy to do that, and thanks for the question.
As you all know, we did think about going public and actually did testing the waters back twice now, back four years ago and then recently. While that was a very interesting path, as we got to know, as I mentioned earlier, as we got to know Larry and the team and the leadership team here, I think the first-class team, very high quality and high caliber focus on clients, that common vision about focusing on outcomes for clients and really giving our employees and our clients the best opportunity for positive outcomes and growth led us to come to this very powerful combination. I'd also say you all have heard Mr. Fink, Larry, talk about the capital markets, development of western capital markets, and the importance of private credit coming together to allow the world to have the appropriate capital to grow.
I think this combination, together with what BlackRock already has, both in liquid tradable as well as what they have in private credit, creates a real force in developing that capital market activity around the world. And potentially over time, I know that he's also talked about expanding horizons as markets outside of traditional credit markets expand. In a 25- or 50-year vision, there's a huge opportunity there also to deliver private capital to allow those jurisdictions to grow. And I would also say that when we looked at it across the areas that I mentioned, we're really able to grow faster, bigger, better for our clients and for our employees. And whether that's what I mentioned, insurance, GP/LP solutions, the whole wealth channel, asset-backed lending. And then lastly, one of the biggest trends in private credit is really moving into private investment grade or asset-backed lending.
And what we're very excited about, we have a big partnership with Guardian and a big partnership with other insurance companies to deliver private credit across multiple asset areas and industries. That partnership now with BlackRock is extremely powerful, and I'm confident that we are and will be a leader in that space, which I think is rapidly growing and very exciting for the future for all of us. Craig, let me turn it around from the BlackRock lens.
Like GIP, we only looked at GIP when we were looking at the infrastructure space. We looked at the players we wanted to determine, and we generally seek out the organization that we see are the best cultural fit, the one that has the most dynamism in terms of business model, and the one that we could readily integrate and provide these full solutions to our clients.
And in the private credit area, it was really only one organization that we really sought out. And I think this is something that we spent a great deal of time on. We're not shopping as a firm. We have an open mind, but when we do our reverse engineering of how we can grow and what firms could be the best and most important in terms of collaboration and building on behalf of our shareholders in the infrastructure space, it was GIP solely. And truly, in the credit space, it was only one organization that we thought to have a conversation with, and that was HPS. And through the conversations with Scott and Michael and Michael, it actually validated what we did independently and how we thought about it.
Then the combination of having our team with Rick Rieder and team working alongside with the HPS team, we actually found even more opportunities to build something that is differentiated and unique. So I think from both lenses, it really came together, but it came together on the power of each other's platform and how we could grow and build beyond that.
Yeah. It might be helpful also just to add from my perspective, the energy and time and commitment to be a public company. These people in this room know and Larry knows. For me, being able to channel that into our investors, creating good returns for investors and taking our entire team at HPS, which was very energized by this transaction and focused on performing for those, is a big positive.
I'd also say that in my dialogues, and I know my colleagues here at BlackRock have found the same with investors around the world, I've been really humbled and really want to thank all of our investors because what they've universally said is that the ownership of HPS doesn't change their original intent to partner with a world-class private team, and really, they are looking for us to continue to enhance their returns and achieve financial goals, and I'm confident that this partnership is going to allow us to do that.
Your next question comes from Michael Cyprys from Morgan Stanley.
Hey, Michael. Good morning. How are you? Good morning.
Good. Good morning.
I was hoping you could expand a bit on the synergies that you see with your existing $3 trillion + fixed income business, not just the synergies on the expanded private credit capabilities, but also public-private opportunities, including ETFs and broader public-private blended solutions.
Absolutely. So thanks for the question, Michael. I think Larry started off very much, I think, setting the macro, which is the future of fixed income. The way clients are building portfolios today is across public and private markets. They're making their allocations to government securities, to liquid credit, to emerging market bonds, to high yield, and then moving right through the credit spectrum into private credit.
We see the same thing with borrowers, right, which is borrowers are looking both to the private markets and to the public markets and often making choices about where they can get more flexible or customized terms versus where they can build secondary market liquidity in their debt instruments, and so this entire ecosystem has evolved to be seamlessly moving between public and private, so we think a single platform that can talk to clients, that can be a repeat player with borrowers across the public and private market, we think that's an absolute unique position in the industry that has real positive effects for both clients and investors as well as borrowers. I just think the biggest opportunity we have in putting public and private fixed income together, Larry's hit it, Scott has hit it, it's really with insurance company general accounts.
We manage $700 billion of insurance company general accounts today. We have 700 billion units of trust that they put with us today to satisfy their policyholders and protect their futures. We take that obligation very, very seriously. But every single one of them is looking to enhance book yield, is looking to diversify those portfolios, and they want to do more private credit. And the private credit market itself is really expanding. If Scott and team had spent a lot of years looking at BB assets, today they have the biggest opportunity to navigate the whole credit spectrum, like all the way up to AA, AAA, and investment grade. That's a huge transformation in these markets and an incredible opportunity.
As I've said on the last couple of calls, if we just meet our clients where they are, our clients wanting to take 10% of these portfolios, the $700 billion that we manage, and turn that into $70 billion of enhanced income for them, we also think that generates a great outcome in terms of base fee and revenue growth. So a win for clients and obviously a great positive trajectory for our business. We think those are going to be some of the best ways to put together public and private fixed income at BlackRock.
Let me just add one other point. It's been validated since we bought GIP. The need for infrastructure debt is going to be enormous.
In my travels in the last few weeks, visiting Europe, visiting Asia, the Middle East, the opportunity that we see in terms of the movement away of using public monies and using now more private monies to build out infrastructure, it really then we'll see the dramatic expansion in terms of private credit that is backed by infrastructure. And I see this as a unique and very timely opportunity to really transform this opportunity. And I do believe, getting back to what Scott was saying, the position that we have with corporates, the position we have with sovereigns is going to allow us to have more fulsome conversations about these types of financing opportunities. And I'm very encouraged even today in my conversations here at Singapore about the opportunities we have going forward.
Your next question comes from Alex Blostein from Goldman Sachs.
Morning, Alex. How are you?
Hey, good morning, everybody. Thank you for taking the question. Good to hear from you. I was hoping we can dig into retail for a second. It's an important growth opportunity for the whole space. HPS has a couple of scaling products, I think HCAP and HLEND. Both have grown really nicely, but I do think they're only distributed through a handful of platforms. So can you talk a little bit about how you're planning to scale their distribution efforts when it comes to wealth management? And then when it comes to capacity, I think Scott and team have been very thoughtful about not taking in too much money to preserve returns in kind of the backbook. How are you thinking about that as you plan to, I'm assuming, expand distribution for these products pretty meaningfully?
Thanks, Alex, for the question. Maybe I'll start, and then I'll have Scott add.
But I come at this having had the amazing opportunity here at BlackRock to lead our U.S. wealth advisory business and all of our distribution and relationship with home offices, private banks, independent broker dealers, the RIA community. And I can't think of a bigger opportunity for BlackRock than bringing these capabilities that Scott and team have built, both in non-traded BDCs, but also in future products, whether it's interval funds or otherwise, to these platforms. As you mentioned, a great deal of the growth that Scott and team have built has been with particular private banks. We think there's great opportunities to really get out to the RIA community where BlackRock has the largest distribution team and the largest model portfolio in the business. We think there's great opportunities in our future partnership across model portfolios in the alt space that will allow us to really meaningfully grow here.
We also have terrific strongholds in European retail and distribution, as well, in Asia and Japan. I think these are some of the best opportunities that we have to grow together. I think Scott and the team, as you mentioned, Alex, have been very thoughtful about how to grow and make sure that investment returns are delivered to clients. So maybe I'll give him a chance to comment on that part of your question.
Hi, Alex. It's Scott, thank you. Thank you. And thanks for all the support over the years. I think you're right. It's a huge opportunity. I think with HLEND, we do believe that that has really been the leading performer in publicly traded, non-traded BDCs. We continue to believe that performance will be elevated.
I think when we first launched it, we were talking about 8%-10% returns, and it's exceeded that, and we see a bright future for that. You're right. We have really been disciplined at the investment flows. I think those are picking up as the M&A market picks up and the opportunities that we talked about to expand our origination capabilities together with BlackRock should allow us to see almost every opportunity that's out there, and I believe that we will have plenty of opportunity to continue to expand those. We have a number of competitors that have BDCs that are three to five times larger. So I think that we have plenty of room on that, and we will be looking to continue to work with our partners in that space, including BlackRock, to work with people to get the right distribution on that.
I think HCAP similarly is very attractively positioned in that wealth channel to achieve 12%-14% returns with half of that in coupon. That's a very exciting product. I think we'll compare very favorably with other more focused on private equity. I do think we also have opportunities. We have not launched anything in Europe. We're not making any announcement about any of that here, but that's a big opportunity for us and actually pairs nicely with some of the BlackRock capabilities in Europe, which I've heard from some of the big investors is very positive. We'll be looking at that. I think there's also opportunity in real assets. We have a big both growing and developing real estate, whether it's real estate, other asset classes that can go in that and that could fit in that as well as some of our leasing business.
So I think that it's exciting from a product standpoint. We're going to be disciplined and very thoughtful about investment outcomes.
Your next question comes from Aidan Hall from KBW.
Great.
Hi, Aidan. How are you, Aidan?
Good. Several down. I just wanted to ask on really the integration of not just HPS, but also GIP and thinking about these are two scaled private market managers, their own operations, their own investment process, their own culture. Larry's referenced cultural fit as being one of the higher hurdles a couple of times this morning, but any additional color you can provide us with, either quantitatively or qualitatively on how you're thinking about integrating these businesses? Is there any portion that will remain independent? Is all of it being fully integrated? Anything that we can kind of talk to as you're thinking about bringing these together? Thanks.
Aidan, let me start, and then I know Larry will add some thoughts. But let me say, first of all, it's hard to believe, but we're only about two months after the closing of the GIP combination. We're off to an exceptional start. Many thanks to Bayo Ogunlesi and Raj Rao, the whole team. We've announced the AI Infra Fund with Abu Dhabi's MGX, Microsoft, and NVIDIA that Larry was carrying through. That's a real first-of-its-kind program to power the GenAI revolution. We're seeing excellent fundraising momentum across various strategies with a lot of lift from the combined teams, strong investment performance, and large-scale infrastructure transactions that we'll be able to report on after the quarter end. We're on track to move the GIP team in New York to our offices in Hudson Yards in January, which we're excited about.
What I'd say is a lot of the heavy integration work on getting people onto the same systems and networks and emails and phones and compliance programs, that's behind us. Still plenty to do, but we are across the board getting very, very positive feedback from clients and employees. I think the learning experience of having done this gives us a good sense of effectively how to recreate a lot of what has been done there as part of bringing the HPS team here to BlackRock. As Larry said, kind of I think kind of culture, people, clients, investment systems, process, like that's everything in getting those things right. We have a really strong track record in organic transactions and the bodies of work that we've done over time. We're really focused on getting those things right.
We're really focused on preserving all of the best of the platforms, so autonomous investment teams that continue their investment processes, those are the things that clients have contracted for both spiritually and legally. We'll continue to deliver all those things across the platform, and the idea is that by putting them together, we add, and so we see plenty of success so far with that in the GIP model where the best of BlackRock and the best of GIP have come together to deliver more for clients as well as those looking for infrastructure equity and debt financing. We believe that we can do the same and execute really well with the HPS team. Let me add to what Martin said. Integration begins in our first conversation, even before we come up with valuation. Integration is, do we agree on the concept of how we deliver for clients?
We both believe that clients come first, and in the case of HPS and in GIP, the philosophies of business were so aligned, and I think also when you think about the consideration of value, both at GIP and HPS, they took their consideration of value in equity in BlackRock. We have a common currency that we're all working together, and I would say very clearly with the GIP partners here in Singapore with Bayo now, it is BlackRock making a presentation to our clients across the spectrum. And I am confident as we integrate HPS and Scott and team, it is about delivering for the client. And the client is not looking for singularity with boutiques. They're looking for the unification of one strategy, one organization representing so we can deliver everything we can to our clients, and that is a very complex delivery platform, but we succeed.
We succeed when we deliver a lot into our clients. We succeed when we deliver across the public market spectrum and now private market spectrum. But the key is that we do have a common currency. We have a common vision. Clients come first. And importantly, as Martin suggested, GIP will be populated within BlackRock's offices in New York. That will be the same case for HPS. And so it is about delivering the totality of BlackRock in a comprehensive way and having aligned cultures and aligned interests. And I can't express a more and deeper alignment than the consideration is in this same common currency that all the historic BlackRock people earn, and that is the BlackRock shares.
Your next question comes from Mike Brown from Wells Fargo Securities.
Hi, Mike. How are you? Good morning.
Good morning.
Mark, can you maybe just expand on the fee-paying AUM growth that's expected here in 2025 and 2026 in terms of what's kind of contemplated in the accretion numbers that were shared? Does that include any major fundraising? And on the cost synergy, is there any kind of cost synergies embedded in here as well? Just looking at that 50% FRE margin, does that already assume some element of cost synergy? And is there any potential to expand that margin over time as you integrate HPS onto the BlackRock platform? Thank you.
Thanks so much. So listen, we're incredibly excited about the growth opportunities. We've consistently told you that philosophically, we do inorganic transactions around growth. We do them around growth because that's what's important to clients. It's about delivering clients more capabilities. We don't do transactions around cost synergies because that doesn't generate value for clients.
We do transactions around extending capabilities and being able to deliver more for them. That's the central thesis of this transaction, that we're going to be able to deliver more for clients. We're going to be able to deliver more for the borrower communities. If I had to say, what are the outsized synergies? You've heard them here. It's insurance where we see a tremendous opportunity if we're able to take and meet our clients' objectives of turning 10% of the GA assets here into $70+ billion at private credit fee rates. We think that's going to generate hundreds of millions of dollars of base fee growth going into the future.
If we're able to successfully take much of the acumen that the HPS team has built in non-traded BDCs and other wealth management vehicles and bring those to the RIA market, I would look at what some other interval funds and non-traded BDCs have done. That's a significant revenue growth opportunity for us, and HPS has consistently generated FRE margins at 50%, so we see all of those things being able to continue to scale and continue to get better and more efficient, and we think doing it at the BlackRock, doing it here at the BlackRock platform can help it go faster with more speed and more certainty, and on that basis, on what I think are some reasonable forward assumptions, we expect the transaction to be modestly accretive in the first full year post-closing to as-adjusted EPS.
Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?
Thank you, Operator. I want to thank all of you for joining us this morning. Today's announcement is the next step in the evolution of our private markets capabilities and our ability to serve our clients in its entirety across all their portfolios. Hopefully, you could see the great opportunities ahead for our clients and then for BlackRock. And we believe this combination will be driving more durable, more long-term growth for our shareholders. Everyone, have a good rest of the year. Happy holidays. Stay warm. Enjoy. Thank you, Operator. Thank you, everyone.
This concludes today's teleconference. You may now disconnect.