Good day, ladies and gentlemen, and welcome to the Blackstone First Quarter 2018 Investor Call. My name is Derek, and I will be your operator for today. At this time, all participants are in a listen only mode. We shall facilitate a question and answer session towards the end of the conference. You may put yourself in the question queue at any time by pressing star one. If you need operator assistance, please press star zero. At this time, I would like to turn the conference over to Mr. Weston Tucker, Head of Investor Relations. Please proceed.
Great. Thanks, Derek, and good morning, and welcome to Blackstone's first quarter conference call. Joining today's call are Stephen A. Schwarzman, Chairman and CEO, Jon Gray, President and Chief Operating Officer, Tony James, Executive Vice Chairman, Michael Chae, Chief Financial Officer, and Joan Solotar, Head of Private Wealth Solutions and External Relations. Earlier this morning, we issued a press release and slide presentation, which are available on the shareholders page of our website. We expect to file our 10Q report early 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 discussion of some of the risks that could affect results, please see the Risk Factors section of our 10K.
We will also refer to non-GAAP measures on this call, and you will find reconciliations in the press release. Also 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. A quick recap of our results. We reported GAAP net income of $842 million for the first quarter of 2018. Economic net income, or ENI, per share was $0.65, which was down from a very strong first quarter of 2017, as higher fee related earnings were offset by lower performance in other revenue. Distributable earnings per common share were $0.41 for the first quarter, and we declared a distribution of $0.35 to be paid to holders of record as of April 30th.
With that, I will turn the call over to Steve.
Thanks, Weston, and good morning. Thank you for joining our call. Blackstone reported a strong start to the year, highlighted by significant outperformance across our funds as compared to global markets, which you may have heard when Jon spoke. Continued substantial capital inflows into all of our businesses, excuse me, in a very active investment pace. Total assets under management rose to a new record of $450 billion, up 22% year-over-year. Every one of our business segments, private equity, real estate, credit, and hedge fund solutions grew AUM to new record levels. Against a backdrop of declining global markets and a sharp spike in volatility, the value proposition that Blackstone offers becomes even more compelling.
In a world where most investors have become accustomed to everything going up, one of the great attributes of the alternatives business is that it can de-link outcomes and protect investors' capital when negative things happen in public markets, like they have. Blackstone's consistently strong performance across all asset classes and market cycles is a critical differentiating factor for us versus other asset managers. This consistency and stability deepens our relationships with our limited partners and results in them wanting to do more business with us. The de-linking of our performance from market indices was well evidenced in our first quarter results. Our private equity and real estate strategies appreciated between 3% and 7% in the quarter, well ahead of the negative 1% return for the S&P and the negative 8% return to the REIT index.
Our credit strategies outperformed the high yield index, while our hedge fund solutions business delivered a gross composite return of positive 1.3% in the quarter, with less than one-fourth the volatility of the market when the S&P, as I said, went down 1%. What's been happening in markets would suggest this is a good time to invest in low volatility strategies with high returns instead of an index. Not surprisingly, net inflows at BAAM, our hedge fund solutions business, up $2.8 billion were the best in over three years. Blackstone's outperformance starts with being able to choose our spots in terms of sectors and regions, then engaging in significant operational improvements. We're never buying the market. With mostly locked up capital and long-term funds, we have enormous flexibility, both in terms of investing our dry powder as well as timing our exits.
We have the luxury of not having to worry about meeting near-term earnings targets or facing short-term redemptions. Instead, the focus always is on maximizing value, which is what we've shown we can do over 32 years. Our limited partners appreciate our model and how it can drive outperformance with less risk. This is why global allocations to alternatives continue to rise, with Blackstone taking share. Our total capital inflows exceeded $18 billion in the first quarter, which Michael Chae will discuss in more detail. Since the start of 2015, our LPs have entrusted us with the remarkable $289 billion of capital. That's almost $300 billion of capital, which is greater than the total AUM of any of our peers, and that's in only three years. Over that same time frame, we've returned to our LPs $143 billion through realizations.
We continue to expand our global platforms into new adjacencies, as well as create altogether new business lines. In real estate, our Core+ platform has grown to nearly $30 billion in four and a half years, including three permanent capital vehicles with a forthcoming later this year. As I've said before, I believe this business will ultimately reach $100 billion, and we're on our way to doing it. In terms of new businesses, our infrastructure initiative is progressing well. We finalized documentation with our largest investor late last fall and had our team largely in place early this year, which is already reviewing a pipeline of interesting investment opportunities. We expect to have our first close in the second quarter, followed by a series of additional closes over the next year.
I can't comment further on specific numbers given we're in the middle of fundraising, but investor response has been positive so far, with broad interest from pension funds, sovereign wealth funds, and others, both domestically and outside the U.S. Apart from infrastructure, we're continuing to build out our dedicated insurance initiative with some high-quality additions to our team. Our efforts in the retail private wealth channel continue to ramp with several new products and additional distributor relationships. We are in the early innings of our build-out in these vast under-penetrated markets, and I believe our AUM in these areas will ultimately be multiples of what it is today. Our portfolio companies are performing well against a strong economic backdrop with positive growth virtually everywhere. That is largely expected to continue for the foreseeable future. Despite the strong fundamentals, however, stock markets have become unsettled recently.
This is partly due to increasing worries over global trade, including the relationship between the United States and China, as well as with NAFTA. I visited China twice in the last few weeks and have met with the senior leaders involved with their economy. President Xi's speech last week at the Boao Forum, where I was an extremely important one, in which he indicated China is prepared to seriously discuss the start of opening its markets and making other significant changes in its economy. President Trump's positive response to President Xi's speech was also important to what I think should be a very productive future dialogue between the two countries with the prospect for significant change in the trade area.
On NAFTA, talks have taken longer than might have been expected, but I believe it's in all three countries' overwhelming interest to proceed with a revised deal, which I expect will happen over the next several weeks. To the extent the current volatility in the market continues, Blackstone is well-positioned to take advantage of any opportunities that might arise with $93 billion in dry powder capital, the industry's largest. I'll close my remarks today with some comments on our people and our recent succession announcements. At Blackstone, our most important asset is our people. Our professionals are truly remarkable, and I feel privileged to work with them. Each of our businesses is led by someone extraordinary with other highly talented professionals around them. When somebody moves up, there's a deep bench of talent to support the transition and replacement.
Because we typically plan succession many years in advance, it's both seamless and organic. When we launch new businesses, we create additional leadership opportunities for our people. That's part of what makes it fun to work here. The result is a highly successful formula for career development and a way to perpetuate the unique integration that exists across the firm, even as we continue to grow. Sitting next to me today, who you can't see, but I'm sure you'll hear from him, is Jon Gray, who succeeds Tony James, who's sitting next to Jon as the firm's President and Chief Operating Officer. Jon is an exceptional individual and a true culture carrier of the firm. I've known him his entire career, having hired him from Wharton in 1992, so he's been at the firm for 26 years.
He's a gifted investor and leader, and like many others at Blackstone, a homegrown talent. I could not have more confidence in Jon's ability to continue driving the firm forward. Tony, I'm happy to report, isn't going anywhere. He's assumed the role of Executive Vice Chairman and will remain on the firm's investment committees, management committee, and board of directors. Among other responsibilities, he will continue to focus on strategic growth initiatives, of which we have many. Tony's had a profound impact on Blackstone since joining the firm over 15 years ago in 2001. He's a chief architect of many of our successful new businesses and also drove the institutionalization of our investment processes and the ongoing development of our people. We've all benefited enormously from Tony's talent and vision and will continue to do so.
Across the firm, other promotions have occurred with highly talented individuals moving into key leadership positions, including in real estate, our hedge fund area, and our credit business. These changes lay the foundation for the next several decades of senior leadership of the firm and support the seamless continuity of our culture. It is our distinctive culture, built over 30 years and instilled in every one of the firm, that ties us together and drives our company. Blackstone isn't a job per se. It's a mission to be the very best in the world at what we do. To work at our firm, you have to believe this. You have to love what you do and constantly strive to do it better. Our investors count on the consistent output of that culture, characterized by excellence, meritocracy, and the highest standards of integrity.
No one knew that better than my longtime business partner and co-founder of Blackstone, Pete Peterson. Last month, we were all saddened to learn of his passing at the age of 91. Pete's death is a great loss for all of us who knew him, including all of us here at Blackstone. Pete and I built this firm together from the ground up. We had nothing but $400,000 in startup capital and no clients and no LPs, and it's prospered over the subsequent three decades more than either of us could ever imagine. Pete's wisdom and judgment were unmatched, and he was an inspiration to all around him. Pete left a truly lasting mark on Blackstone and on the world, and will truly be missed. Thank you for joining our call today.
I'll now turn things over to our Chief Financial Officer, Michael Chae, another one of our terrific homegrown leaders. Michael, you're on.
Thanks, Steve, and good morning, everyone. The firm's strong momentum continued in the first quarter, highlighted by continued robust inflows, investment outperformance across the firm, and a steadily building store of value. Total revenue for the quarter was $1.7 billion, while economic net income totaled $792 million, or $0.65 per share. Although down from last year's first quarter, which was one of our best quarters ever, these numbers reflect a particularly strong result against a challenging market backdrop. Attractive fund returns across a steadily growing base of invested capital drove healthy performance and principal investment revenues of $953 million. Management fee revenue rose 13% year-over-year to $736 million, our highest quarter ever, while fee-related earnings increased 14% to $333 million. For the prior 12 months, FRE was up 20% to $1.3 billion, or $1.07 per share.
That's roughly double our annual FRE production six years ago, the period through which our fee earning AUM has grown meaningfully and our margins have expanded sharply. Distributed earnings were $502 million in the first quarter, or $0.41 per share, down from the prior year as we sold less in the context of volatile markets. Away from realizations, however, our other capital metrics, investment performance, deployment, and fundraising all continue to demonstrate powerful momentum. Starting with investment performance. Our flagship funds and strategies all outperformed the comparable indices in the first quarter, in many cases by a wide margin. The corporate private equity funds appreciated 6.4% in the quarter, while Tac Opps appreciated 5.2% and Strategic Partners 6.9%, all comparing favorably to the 1% decline in the S&P.
In real estate, the opportunity funds appreciated 3.5%, Core+ 3.4%, BREDS drawdown 4.4%, and BREIT 3%, all well ahead of the public REIT index, which declined 8%, as Steve mentioned. Our performance is driven by multiple factors. As Steve mentioned, it begins with choosing the right sectors on a regional basis, using our size as an advantage to move scaled capital towards those ideas, often across multiple funds, and then creating lasting value in our investments through transformative asset management. Against the backdrop of a generally healthy external operating environment, the result is portfolios that are performing well and expanding in value. In private equity, our portfolio is seeing broad-based strength with EBITDA growth accelerating further in the quarter to the low double digits on a percentage basis. In terms of sectors, we are seeing particular strength in our technology portfolio and in the global industrials area.
In the latter area, a significant driver of the 6.4% corporate PE appreciation in the quarter was our investment in Gates, the largest investment at BCP6, which we took public in the quarter, resulting in a substantial uplift from a valuation standpoint. In real estate, our largest current investments are in sectors with secular growth tailwinds, including global logistics, life sciences, U.S. and Spanish housing, and Indian office. Conversely, our real estate funds have less than 5% exposure to U.S. retail real estate. The public REIT index, on track, has a 20% retail weighting. In BAAM, our composite outperformed the S&P by about 200 basis points with a quarter of the volatility. During February and March, at a time where the S&P was down 6%, our returns were flat.
This kind of performance, protecting capital during periods of significant market downturn and volatility, is in essence proof of concept for our hedge fund solutions business. Strong fund performance across the firm generated $537 million of net performance revenues in the quarter, lifting the net performance revenue receivable on the balance sheet to $3.6 billion, the highest level in nearly three years. Despite $45 billion of realizations over the past 12 months, generating over $1.8 billion of net realized performance revenue, the firm's performance revenue receivable still grew 9% year-over-year. All of this bodes well for future realizations. Moving to deployment. We invested $10 billion in the quarter, our fifth highest quarter ever, driving invested performance revenue eligible AUM to nearly $200 billion. We continue to leverage our global scale and diversity of platforms to find value around the world.
The majority of our capital deployed in the quarter was outside of the U.S. In general, we're still finding attractive relative value in Europe, our largest investments in both private equity and real estate in the quarter were in that region. The firm's single largest investment in the quarter was the acquisition of a 51% interest in a €27 billion face value real estate portfolio from Spanish bank, Santander. This was a landmark transaction, drawing on capital from across the firm, up and down the capital structure. This transaction is an excellent illustration of the firm's ability to identify an area in which we have high conviction and capabilities on the ground, in this case, Spanish housing, and deliver a complete solution in scale.
In private equity, we closed on our take private of U.K. listed payments company, Paysafe, already announced last week a nearly $1 billion synergistic add-on acquisition to the business. We committed to another $5 billion in investments in the quarter, including the Thomson Reuters transaction and the privatization of a Canadian industrial REIT, which we expect to close in the coming quarters. Overall, we believe a more volatile world ultimately leads to deployment opportunities and the potential for excess value creation over the longer term. Moving to fundraising. Gross inflows were $18 billion in the first quarter, reflecting an increasingly diverse number of initiatives across the firm. In terms of highlights, we had closes in the quarter for drawdown strategies in five different businesses.
For the third flagship credit distress fund, which recently hit its hard cap of $7 billion, the second Asia real estate fund, which we expect will shortly hit its hard cap of $7 billion. Our first Asia private equity fund, which is also nearing its revised hard cap of $2.25 billion, our third Tactical Opportunities vintage, and our second real asset secondaries fund. Our Core+ real estate platform has grown its AUM 87% year-over-year to nearly $30 billion. BAAM is experiencing good momentum with its second quarter in a row of nearly $4 billion in gross inflows and its best net inflow quarter since 2014, as Steve mentioned. We continued with our build-out in the high growth retail insurance areas. Although still early stage, we added another $1.5 billion in insurance, bringing our dedicated BIS platform to $24 billion.
In retail, we raised $3.4 billion, with most of this coming from our products that we have developed and customized for the channel, including our daily liquidity hedge fund in BAAM, our new credit interval fund in GSO, and BREIT, which has revitalized and arguably reinvented the non-traded REIT market. For the prior 12 months, total gross inflows exceeded $112 billion, a firm record for any 12-month period. Combined with $32 billion of fund appreciation, total AUM rose 22% to $450 billion, and fee earning AUM grew 23% to $345 billion, both record levels. We are very optimistic about the fundraising outlook from here. I'll finish my remarks today with a comment on the launch of our new direct lending platform and on two capital actions we are announcing today. With respect to our direct lending efforts, we concluded our sub-advisory relationship with Franklin Square earlier this month.
We're excited about the prospects for this business under the Blackstone GSO brand with full ownership of the economics. We are in advanced fundraising discussions with anchor institutional investors and plan to launch in the retail channel in the current quarter, sooner than originally expected. With the strength of GSO's investment platform and Blackstone's distribution capabilities in both the retail and institutional channels, we're quite confident in our ability to rebuild one of the leading direct lending businesses in the world. The after-tax consideration received in connection with the conclusion of the Franklin Square relationship will be used to support a special distribution to shareholders of $0.30 per unit or approximately $360 million in total, to be paid alongside the second, third, and fourth quarter regular distributions, $0.10 per unit in each quarter.
Fundamentally, we are always evaluating all aspects of our capital strategy to optimize value, seed new funds, support new businesses and strategic initiatives, and engage selectively in M&A. Our announcement today of a $1 billion share repurchase program is reflective of the firm's considerable financial strength, which has continued to advance over the past several years. We've amassed a cash and treasury investment balance of $4.5 billion, at the same time have put in place a conservative, low cost, long dated liability profile with a weighted average after-tax cost of debt capital of just over 3% and an average maturity of nearly 15 years today. We have zero net debt and remain A+ rated by both S&P and Fitch, among the highest ratings for any financial company.
Our balance sheet and liquidity position afford us the flexibility and firepower to further expand our favorable distribution policy to include share repurchases. The catalyst to the program is the desire to offset dilution from issuance related to equity awards over the next several years. While we've carefully managed share creep over time to minimize dilution, we've decided to take this a step further with today's announcement. We believe this $1 billion repurchase program, combined with the $360 million special distribution, serve to further enhance an already highly attractive value proposition for shareholders. Most of all, these actions reflect our deeply held belief in the value of our firm and our stock, and our commitment to serving shareholder value over the long term. With that, we thank you for joining the call, and would like to open it up now for questions.
At this time, ladies and gentlemen, if you would like to put yourself in the question queue, you may do so by pressing star one on your telephone keypad. Again, that's star one to put yourself in the question queue. Our first question will come from the line of Craig Siegenthaler, Credit Suisse.
Hey, thanks. Good morning, Steve. Good morning, Michael.
Good morning, Craig.
I just wanted to come back to the buyback authorization. Number 1, does this signal that we could see an increase in stock-based comp above what we've been seeing the last few years? Really question 2 is, if the stock gets attractive in your view, if it gets cheaper, is there any potential to put a decline in the share count or is this really purely to offset dilution?
Craig, to your first question, you should not expect that. These two are not related. You shouldn't expect that increase. Our decision to authorize this buyback and to deliver basically a zero organic dilution policy is really in the spirit of taking our historical discipline around managing dilution and being even more aggressive around it.
Got it.
As for your second question, look, I'd say in general, we've outlined the parameters around how we approach this. We will be opportunistic, and we will be flexible in our approach on this. That's how we're going to think about this.
Okay. Thank you.
Your next question will be from the line of Alex Blostein, Goldman Sachs.
Hey, guys. Good morning. I want to ask you about kind of the scale of the business that you are well on your way of increasing in a variety of different products. I guess taking a step back, it just seems like you guys have more growth initiatives today than you've had in a while. You're investing in a bunch of new businesses.
Yeah.
Yet the FRE margins have actually been quite stable. Looks like 45-ish% this quarter, actually up a little bit year-over-year. I guess, how should we think about the pace on investing, the trajectory for FRE margins from here? Once some of these initiatives get to fully scale, kind of what do you see as a more reasonable run rate a couple of years from now?
Look, I think you correctly noted, Alex Blostein, that our FRE margins have really enjoyed a great trajectory over time. I think we're up about 500 basis points over the last couple of years. We think over the long term, those margins, while we may not continue to increase at sort of that pace, will be stable to expanding over the long run, over the medium to long run. In the very short term, I should note, in the next couple of quarters, principally because of the Franklin Square exit, that will pose a bit of a headwind on FRE growth and perhaps margin. I don't want to make too much of that, but that's worth noting. I'd say at the margin, the current spending on initiatives is also a marginal drag. That's reflected in the current FRE and will be reflected in the coming couple quarters.
The overall message is one of medium to long-term stability around margin, to expansion around margin. In terms of the kind of contribution of initiatives, it really varies. One that we've talked a lot about is the insurance area, and that's one where there will be multiple, and there are, and there will be multiple different elements to that strategy. The types of insurance assets we'll manage under IMAs, a portion of which could be sub-advised, direct LP relationships, insurance companies. They're all varieties of that. I'd say overall, a significant portion of those assets over time, not only do we think they could scale, but the long run, and I underscore long run, marginal contribution characteristics of those dollars are very attractive.
Let me just jump in. Alex, we always invest in the future. In our FRE, for some period of time, have been a lot of different investments in the future, and I think that's one of the things that we're proud of, that we constantly do that. There is investment in the future, but it's not different from the past in that way. The other thing is our permanent capital vehicles, which will account for more and more of the business and are accounting for more and more of the business, have very attractive, once they get to scale, very attractive FRE margins. As they scale, you'll see that having more and more impact on our margins.
Yep, that makes sense. Great. Thanks for taking the question.
Your next question will come from the line of Bill Katz, Citigroup.
Okay. Thank you very much for taking the question this morning. Maybe for Jon, since first time in sort of this format. Thank you very much for joining the call. A two-part question. You've been with the firm for a long time, as Steve highlighted, and I think the firm itself has highlighted a fair amount of opportunity over the next several years. How should we think about, from your perspective, where else you might see some growth? And then maybe a bit more tactically, I was wondering, one of the pushbacks we get on the stock is rates up bad for Blackstone's real estate book. Maybe you could sort of walk us through a little bit more how you think about the real estate platform against that kind of backdrop. Thank you.
Thanks, Bill. I'd say a couple things. Michael and Steve touched on it. Clearly this retail and insurance push are in very early days. If you dimensionalize it, you'd say, in our traditional institutional world, those are $50 trillion pools of capital
Where the pension funds and sovereign wealth funds allocate 25%-plus to alternatives. In retail and insurance, those are $50 trillion in the case of retail, $30 trillion in the case of insurance pools of capital that have low single-digit allocations to alternatives. That creates a lot of white space. Now, the nature of the products, because of regulatory capital requirements, because of maybe yield requirements and liquidity requirements for retail investors, may have to be a little different. The basic idea that people want high-quality investment management at reasonable prices, we think that what's worked in the institutional world is going to work in these two other worlds, and we're seeing it in real time. Michael mentioned BREIT. The private REIT market did not necessarily attract the highest quality managers, and people were charged an awful lot.
We've moved into that space with a really high-quality product, and the market's responded. We see this as areas of tremendous growth that are also synergistic to what we do across the firm because we get more information, more deal flow. It's very beneficial. Those are big. I would also say generally over time, a little more emphasis on growth, which can mean more exposure to Asia. You've seen we're just completing raising our second Asia fund in real estate. We're raising our first Asia fund in private equity. I think Asia, given its growth, significantly higher than Europe and the U.S., we'd like more exposure. Our investors would like more exposure there. Related to growth, of course, technology, life sciences, those are areas where we're doing investing today in Tactical Opportunities and in private equity.
Over time, there could be opportunities to raise dedicated funds there. I think as a firm, we've done a fair amount. We've done well. I think we can raise more dedicated capital. There is no shortage of areas to grow. The key thing, of course, and it relates to Steve's comments, are the virtuous cycle requires that we deliver great returns. Whichever area we go into, we have to make sure that we have the right team, the right process. We feel like the market, it's the right time to enter that market, and we can deliver returns. Once we do, as you've seen with us putting up very little capital, we can grow quite a bit. I think there's a lot of room over time. I know there's always been a concern, "Oh, Blackstone's so big.
Are you near some sort of ceiling?" People continually be surprised. Steve pushes us, says Core+ can be $100 billion. Some folks laugh, and Steve is going to, of course, be the last person laughing here because he's seen the power of the franchise and what we can do as long as we deliver for investors. That's one. On rates, yes, rates rising can have an adverse impact on pretty much all assets, certainly fixed income, on real estate, on corporates. The question is, in that kind of environment, what do you want to own? Because not everything goes down in a rising rate environment. The things that do well, of course, floating rate assets on the fixed income side, which we've done a lot of in GSO in our real estate debt business. On the corporate and real estate side, it's assets that grow faster.
To do that, you need to either buy assets where you're intervening in a big way, as we've been doing on the private equity side with some of these corporate carve-outs, or in sectors where we have real faith in the growth. That has been global logistics for us, as an example, in real estate, where the push online has led to much faster growth. As Michael pointed out in his comments, the big holdings in real estate for us are definitely more growth-oriented. Indian office buildings, life science buildings, single-family housing in the U.S. and in Spain. We've tried to prepare for what we think is coming, which is an environment of higher rates. You can't hide completely, obviously, but I think as a firm, we've oriented our portfolio that way. We talked about BREIT.
That portfolio is almost 50% in logistics versus 8% for the public REIT index. It's got almost no retail versus 20% for the public REIT index. As you think about investing, you don't just buy the market when you're us. You buy themes you truly believe in. You buy assets where you can intervene, and that's how you see the kind of outperformance we delivered in this quarter. Thank you.
Your next question will come from the line of Patrick Davitt, Autonomous.
Hey, good morning. Could you flesh out the negative distress mark a little bit more? Any idiosyncratic marks there, any real credit stress in the portfolio, or really just a reflection of the high yield index? Within that theme, in terms of deals being done away from you, are you seeing any kind of increase in risky lending occurring in, I guess, what people broadly call the shadow lending sector?
Hey, Patrick. It's Mike. I'll take the first. Maybe Jon will take the second. On the distressed, which I would call flattish to slightly down, which is probably a bit actually better than the high yield index, really idiosyncratic. Sort of a name-specific basis for the performance, which was generally pretty good. That's no particular trend there. That portfolio has a fair amount of energy in it, but the energy names basically weren't detractors or additive. They performed about the same.
I would say on the leverage side, we haven't seen markets move to a place that makes you really nervous. High yield spreads have been tightening. Leverage levels on private equity deals have been moving up. Overall, when you look at the banking system and the discipline out there, we're not seeing excesses, and so I think that's a healthy sign.
If you wanted to say what could cause you to be nervous when you start to see excesses in the banking system and financing, that's a sign of caution. We don't see that out there today, but we are seeing leverage slowly creep up, and we're watching that. Yeah. Tony makes a good point, which is the strength of the economy is helping to offset things. If you just look at the growth, we talked about it, but we had in our private equity portfolio, probably our strongest quarter in the last three or four years in terms of EBITDA growth for our companies. Obviously, that's very helpful in the leverage context.
Your next question will be from the line of Michael Cyprys, Morgan Stanley.
Hi. Good morning. Thanks for taking the question. Just wondering if you could talk a little bit about the insurance business initiative. You mentioned that insurance investors don't have much in the way of alternatives allocations today, but you also mentioned that there are some differences with this investor base in the way of regulatory and liquidity requirements. Could you talk about the types of solutions that you can offer, how you're tailoring these products for this insurance investor base, what you're doing differently than peers in this space? Just lastly, could you comment on the risk analytics offering for alternative credit products? It seems like a new direction for Blackstone just in terms of offering technology solutions. Sorry for the long question.
Okay. Well, on the products, I think insurers, just as backdrop, their challenge is traditionally they bought government bonds and corporate bonds, which delivered adequate return for them. Of course, in a very low interest rate environment, that doesn't work. Also, their liabilities have been going up because of longevity. They're looking for higher returns. What can they do? They can do more, even under their constrained regulatory capital requirements. They can do more of our traditional alternative products. That's stop number one. Number two are more structured products that may have the appropriate ratings, that meet their NAIC requirements, but generate higher returns on average. That can be in areas like CLOs. It can be in non-conforming mortgages. On the resi side, it can be in commercial mortgage debt. There's a whole universe of things that we touch.
If I just gave you a simple example, in the commercial real estate space, we often will make mortgages, sell off the A loan, hold onto a B piece. For the folks who own that A loan, that's a very attractive piece of paper and gets good capital treatment. There's opportunity inside of our firm, given activities we're already conducting, to generate favorable risk-adjusted returns for them. I do think to this product, because there's so much demand from the underlying insurers, the key thing we'll be able to deliver to them, these things that work in a regulatory framework for them, I think that's really the key. Again, that's why I think Blackstone's so well-positioned. Because of the breadth of our platform, because we're in credit, and private equity, and real estate, and debt, and equity, we're pretty uniquely set up.
I think it's harder for other firms to deliver what we can.
Thanks. Just on the technology offering on the analytics side for insurance.
Yeah. Mike, we're not planning in the near term having an external technology offering. We're proud of the technology we developed. Often, and other times we have spun some of it off as third-party capable, there's nothing near term on that at this point.
Okay. Thank you.
Your next question will come from the line of Rob Lee, KBW.
Great. Thanks, and thanks for taking my question this morning. I'm just curious, there's obviously you have a lot of new business initiatives taking place as you pointed out for a while now. I'm just curious, given that it seems like there's so many opportunities ahead of you, I'm more curious about where you don't think there's, in the alternative space, where are places you're not that interested? Obviously, putting aside things like investment-grade credit or liquid listed equities, where in the alternative space do you think, "Gee, it's just not a market we're interested in"? Would it be venture capital or something? Just trying to get a feel for where you think is just, and why you think that wouldn't be something you'd be interested in.
I think for us, it's really a scale question. If there are markets, we've looked at some emerging market areas, but we just can't deploy capital and scale. That doesn't work. Some of the true VC stuff may be, again, harder for us. As part of larger platforms, there may be an opportunity. In general, we look at most of the alternative space as attractive to us. We'll get to it over time. I think the question we often get is, do we want to go into, let's say, long-only listed equities? The answer is generally no. Maybe there are some exceptions in very targeted areas. We look at alternatives broadly, globally, still see a lot of runway. The short answer to your question, really where we can't get the scale is where we wouldn't go.
Your next question comes from the line of Ken Worthington, JPMorgan.
Hi. Good morning. Just maybe to follow up on Franklin Square, in your comments to replace the direct lending business. You mentioned both institutional retail products here. Is the likely path likely to be more retail or institutionally focused? On the retail side, does the SEC's fiduciary rules outlined by the SEC sort of impact your ability to or maybe how you reach retail here? Then maybe lastly, based on your conversations with the various investors, how does the fundraising environment look for direct lending right now? Thanks.
Hey, Ken, it's Joan. We will start institutionally and in retail initially with the big wirehouse platforms. This will ultimately be much more retail-oriented product. I think that's where most of the eventual growth will come. In terms of demand and DOL and all the other changes, I think similar to how we thought about constructing BREIT is how we're giving a lot of thought to our product. I think we think about pricing, net returns to the investor, how we deliver it, service, all of that will be delivered with the same excellence as we do everything else here. We are very optimistic that we're going to be able to replace that capital over the next few years.
Okay. Fair enough. Then just maybe to follow on Craig's question earlier, on your purchase authorization, you tripled it. The $1 billion is sort of a splashy number. The message around it seems kind of watered down with the primary use to really just offset dilution, which seemed pretty limited anyway. When was the last time you actually used the authorization? You've had the authorization. When's the last time you actually used it to buy stock, and was it ever in the open market? What ultimately is the message we should take away here? Again, it feels part splashy, part boring, what really should we think here?
Ken, I'll start. It's Michael, and it's the first time we've been accused of splashiness. We'll take that maybe as a compliment. Look, first of all, the $1 billion, your splashy number, that is about 5% of our free float, our public float, which I think is in line with sort of median sizing for companies' programs. We think it's a sensible number. As I mentioned, we've always been fairly disciplined about managing organic dilution, and we want to be more aggressive here. Putting neutralizing organic dilution as a parameter around this program, we think it makes sense to put sort of scale and structure and also allow us to execute with some consistency programmatically over time and not just sort of fire and forget as is sometimes the case. You asked about history. We utilized about 20% or so of that original authorization, 25%, quite early on.
It was generally not open market purchases. I would view this while we inherit a legacy program, and it's really a de novo program with a distinctive kind of new approach. We think it makes sense, and it's a step we want to take. Ultimately, we're thinking all the time about how to serve shareholder value. We're in a position now with our balance sheet having grown steadily stronger and giving us more and more flexibility. Our free float has steadily expanded to a point where we can do these things without impairing liquidity in the stock. We're in a great position, and we're constantly thinking about how to do things to serve value over the long term.
I just would add to Michael's comments. This group, at this table in particular, but across the firm is highly shareholder-focused. The employees own 50% of the company. We do pay out 85% of our distributable earnings. This is going to be incremental to that, and we're constantly thinking about what's the way to maximize value for this company, and trying to get the market to recognize the quality of the business we operate.
Okay, great. Thank you very much.
Yeah.
Your next question will come from the line of Glenn Schorr, Evercore.
Hi there. Just one quick follow-up. You mentioned the best net accrued carry in three years. Obviously, this quarter had a little volatility in it. Just curious, I'm not sure if anything got postponed, delayed in the volatility backdrop, but maybe thoughts on what the near term and more intermediate pipeline might look like for exits.
Sure, Glenn. Look, I think as we said at the beginning of the year, 2017 was always going to be a tough act to follow. It's also early in the year from a visibility standpoint, and as always, these things are market dependent. Having said that, the performance fee receivable growth point is, as you know, an important one. Not only did it grow 9% year-over-year, it grew 8% just in the quarter. As you know, that's the nature of our business model, that a quarter where you see less exiting is a quarter where you often also see even more growth in terms of value in the ground. Another way of thinking about it is our unrealized fair market value of our investments. Our drawdown investments is actually up 16% in the last 12 months.
Even during a time we've sold a tremendous amount, our position has gotten meaningfully stronger, which is a great place to be. We're obviously active in looking at exit opportunities in the real estate area. We have a number of things both in Europe and the U.S. under contract. It's our constant process of refilling the cupboard, and we feel really good about our position over the long term.
Okay, thanks. Appreciate it.
Thanks, Glenn.
The next question comes from the line of Devin Ryan, JMP.
Great. Thanks. Good morning. In private wealth solutions, you touched on direct lending. Can you talk about any other kind of newer initiatives that could be coming? Obviously the education process, just trying to think about that as you're rolling out newer products into what seems to be an increasingly kind of wide distribution network, and obviously the industry is pretty fragmented as you get beyond kind of the wirehouses. Just trying to think about how you do that as you continue to grow and add new products as well?
Sure. I think that the best way to think about it is that the growth is going to come from further penetration of the channels that we're already in, and that's a huge opportunity. Second, that we're expanding into other channels like independent broker-dealer and RIA. Third, which is new product.
In each of those, there's a big pull based on the comments that were made earlier, which is essentially $0.97 out of every dollar is still in daily liquidity product at a time when you have longevity issues, need for yield and return, and you have a lot of advisors who historically just haven't been well-educated enough in the alternative spectrum to feel confident putting it in the portfolios, even though their firms are recommending that. We started with Blackstone University. We've had about 3,500 advisors go through that. We're really doing a lot more in terms of pushing things out digitally. We're having regional roadshows. We're really trying to address hundreds of thousands of advisors rather than the small numbers. We have initiatives in all of those areas. I think you'll continue to see new products rolling out.
We have one additional, separate from the BDC, a credit product that's a floating rate. Really, what are we trying to address? We want uncorrelated returns. We want to be able to protect against rising interest rates and inflation. We want to increase the overall returns of their portfolios. I think this last quarter, as was mentioned earlier, really highlighted that in a period of volatility, that is what we can provide, the value propositions there. There's a lot more pull. We are the only firm really with excellence in returns across every alternative area. It's not just individual product. We can weave together entire solutions.
Thank you.
Your next question will come from the line of Michael Carrier, Bank of America Merrill Lynch.
Thanks, everyone. Just a quick one, Jon. I think on the other call you mentioned some of the, whether it's strategic initiatives or growth outlook, and one was maximizing shareholder value. Given what you guys laid out, I think you got the growth outlook kind of nailed down. When we think about either the growth in FRE, which recently has been very strong, even the consistency of the distribution or even expanding the ownership base, where, maybe incrementally are you going to be more focused over the next few years given what has already been kind of put in place?
Yeah. I think for us, the challenge with public markets is they tend to be pretty short-term focused. One quarter markets are off, and we may not sell as much, and our results are lumpier than other companies. If you look at our company over a longer period of time, the earnings power of the company and the AUM growth are unmistakable. For us, continuing to grow the business, which as we talked about in that virtuous cycle, do a great job for investors, they give you more capital. When that occurs, that should lead to this growing fee earning stream, and then performance fees, you should have a larger and larger base.
I would say continuing to execute against that strategy and showing market participants the power of this model, the idea that we have 50-plus % margins, we utilize very little to no capital, we're in a terrific space, that we're going to continue to execute that way. Now around your question specifically, are there things we can do to maximize value this quarter? We've got a couple. We've got a special dividend. We announced a buyback related to keeping our share count constant. We'll constantly be evaluating what's the right thing to do. We are a very shareholder-friendly company. We want to maximize value. We have enormous confidence in the base business. I don't know many businesses in the world that can grow the way we do with so little capital. The prospects, the sector they're in, has such a favorable outlook.
I know that doesn't answer what is next quarter or the following quarter, but just like this company has over 30 years, the last 10 years, five years, I think the same story plays out, and I think market participants will begin to recognize this and appreciate it.
Mike, let me just jump in, too. What's not appreciated by the market is these permanent capital vehicles not only lock up your capital and scale to higher FRE margins, but they drive steadier carry realizations because a bunch of them are going to be done episodically by investor on marks without forcing us to sell the assets. It'll have a smoothing effect, which I think will please the market and make it a higher multiple revenue stream.
Okay, thanks a lot.
Our final question will come from the line of Brian Bedell, Deutsche Bank.
Great. Thanks for getting me in. Maybe if I could just move over to the infrastructure topic and the fundraising pace there. I know that's starting up a little bit more aggressively this second quarter. Maybe Jon, if you can talk about how you're viewing the pace of that fundraising over the next couple of years, whether you think you'll hit the internal $20 billion target within the next three years, and then what kind of opportunities are you seeing in that, and what areas are looking a little bit more challenging?
The $20 billion, just to clarify, is a long-term commitment from our lead investor, and that sort of sits on the shelf, and as we raise third-party capital and deploy it, we can call it down. We don't have any internal target for when we'll raise the outside money or how we'll deploy it over time. Will we deploy it, if that's the question, yes. We're pretty confident that in the fullness of time, we're going to raise matching funds and build a very large business. There's no set time limit. A lot of this is going to relate to the opportunity set and the deal flow.
The good news out of the box is when you look across regular way infrastructure, when you look at midstream needs, utility needs, there's a lot of capital needed in these areas, and that gives us a lot of confidence about the scale this business can grow to. We have not set a specific time limit or target. The nature of this commitment is very helpful for us because we're building, again, another long-term permanent capital vehicle. Adding on to what Tony said, this is set up in a way where once the funds go in, we'll have them for the long term, which is the right way to own infrastructure assets. This should grow to be very large. It should grow to be a permanent part of Blackstone. We're going to do it like everything we do in the right way.
The market and the opportunity set will determine how fast it happens.
Right. You'd be very disciplined in deployment as you look at that.
For sure. Disciplined in deployment. What makes this fund, I think, particularly interesting is there's a shortage of large pools of capital that can do really big things at reasonable return levels. We think that's an interesting part of the market. We're hopeful big opportunities will come along, but as you said, we'll be disciplined.
Yeah. Okay, great. Then maybe just to follow up the C Corporation question. I guess any updated thoughts on what you guys are thinking about that if KKR decides to move, I guess they would be the closest one to move in that direction if they decide to do so. How would that impact your view of whether, and to what extent you think, any shareholder friendly types of actions that you might be able to take going forward, how are you viewing that as a potential arrow in the quiver, so to speak?
Yeah, Brian, it's Michael. What I'll just say is that I think our posture is consistent with what we talked about last quarter. We're monitoring carefully all aspects of the issue. We're not in a hurry. This is a race that does not necessarily go to the swift, and you have one shot at making a thoughtful decision. What others of our peers do, if they do anything, we'll obviously observe and see what the learnings are and continue to look at this. As we talked about, and as maybe we demonstrated this quarter, we're open-minded about taking actions that we think are good over the long term for shareholders. We want to be very careful about it.
Great. No, that makes total sense. Thanks very much for taking my questions.
Thanks, Brian.
At this time, I'm showing no further questions in queue. I would like to turn the conference back over to Mr. Weston Tucker for any closing remarks.
Great. Thanks everyone for joining us today, and please reach out to me with any questions.
Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.