Good day, ladies and gentlemen, welcome to the Blackstone Fourth Quarter and Full Year 2015 investor conference call. My name is Katina, I'll be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will facilitate a question and answer session. If at any time during the call you require assistance, please key star followed by 0, a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Weston Tucker, Head of Investor Relations. Please proceed.
Thanks, Katina. Good morning, welcome to Blackstone's Fourth Quarter 2015 conference call. I'm joined today by Steve Schwarzman, Chairman and CEO, Tony James, President and Chief Operating Officer, Michael Chae, our Chief Financial Officer, Joan Solotar, Head of Multi-Asset Investing and External Relations. Earlier this morning, we issued a press release, slide presentation illustrating our results, which are available on our website. We expect to file our 10-K report later next month. I'd like to remind you that today's call may include forward-looking statements, which, by their nature, are uncertain and outside of the firm's control and may differ from actual results materially. We do not undertake any duty to update any forward-looking statement. For a discussion of some of the risks that could affect the firm's results, please see the Risk Factors section of our 10-K report. We will refer to non-GAAP measures on this call.
For reconciliations, you should refer to the press release. I'd also like to remind you that nothing on this call constitutes an offer to sell or a solicitation for an offer to purchase any interest in any Blackstone fund. This audiocast is copyrighted material of Blackstone and may not be duplicated, reproduced, or rebroadcast without consent. A quick recap of our results. We reported economic net income or ENI per unit of $0.37 for the fourth quarter and $1.82 for the full year, which were down from the prior year periods due to lower appreciation across some of the funds. Distributable earnings were $878 million in the quarter, or $0.72 per common unit, and $3.23 per common unit for the full year 2015.
That full year amount is a record, it's up sharply from 2014 due primarily to greater net carry in our private equity and real estate businesses. We'll be paying a distribution of $0.61 per common unit to unitholders of record as of February 8th, which brings us to $2.73 paid out with respect to 2015, that equates to an 11% yield on the current stock price, which remains one of the highest of any large firm in the world. With that, I'll turn the call over to you.
Good morning. Thank you for joining our call. 2015 was the year in which Blackstone achieved several milestones, including reaching record assets under management of $336 billion. Continued expansion of our leadership position in every business we're in, as illustrated by record capital raised of $94 billion and record capital invested of $32 billion. Both stunning. Our best year ever for capital return to our shareholders at $2.73 per common unit, as Weston just mentioned. Of course, we celebrated our 30th anniversary. We entered 2016 with great confidence in our business and its prospects. The public markets, however, have certainly had a challenging start to the year, with the narrative that's been dominated by concerns over global growth, energy prices, high yield credit, China, the Fed, and the U.S. presidential elections.
Investors have been caught in a down cycle of pessimism and oversold conditions as markets have corrected. In times of turbulence, having locked up capital can be a tremendous performance advantage, both in the ability to deploy scale capital at very good prices and to hold our investments during inevitable downturns. While it's always possible that a market correction becomes something more significant, we at Blackstone do not see a recession in the U.S. We do believe that global GDP growth is slowing, and we've seen a slowdown within certain sectors and regions in our global portfolio as a result. On balance, however, our portfolio companies remain in terrific shape. Our private equity companies grew EBITDA in the fourth quarter versus the declines in the broader market, which we've witnessed now for several quarters running.
In real estate, our properties are reporting healthy fundamentals across the board, including mid-single-digit growth in office rents in the U.S. and the U.K., and continuing, albeit somewhat slowing, hotel RevPAR growth. Our company CEOs mostly expect solid growth in 2016. Overall, our investment returns were quite strong in 2015. You'd never know it looking at our stock, but they were quite strong, with most of our funds well ahead of global markets. Our corporate private equity funds, for example, appreciated 7.4%, while our Tactical Opportunities funds were up 9.3%, and Strategic Partners, our secondaries business, rose 19.4%. Our real estate and our opportunistic funds appreciated 9.7%, while our newer Core Plus platform was up 19.1%.
Our products we do for our limited partners as a group dramatically outperformed the S&P total return of 1.4%, typically by multiples of five to seven times. Not exactly something you should be punished for. We delivered these results despite the ongoing public pressures in our public stock portfolio, which are baked into these returns. Importantly, the locked-up structure of most of our funds means that we're never forced sellers and can wait until markets improve before exiting public positions. Having 10-year funds, for example, means that things that happen over a few months or even a year don't impact us the way they do other investors. We don't have redemptions in our drawdown fund. Even in our liquid funds, capital flows remain healthy.
Our hedge fund solutions area, for example, reported strong net inflows in 2015, including in the fourth quarter, when we typically see seasonally higher redemptions. One reason for that is we've outperformed public markets in that area as well, quite significantly. We're seeing strong demand for credit products as high yield spreads have gapped by hundreds of points and liquidity has declined. Our credit business overall is benefiting from these trends, with great demand for financing at much higher rates of return than six months ago, and we are deploying much, much more capital as a result. In fact, the fourth quarter was a record quarter of deployment for GSO, as it was for our private equity and real estate segments.
GSO's existing investments are being negatively impacted on an interim mark-to-market basis, but that doesn't reflect the inherent credit quality of the overall portfolio or its ability to have principal return and interest paid. Blackstone stock, as I've referenced, has been under severe pressure, and the alternative asset management group has been one of the hardest hit in terms of stock price declines. Despite this, I have every confidence in our firm and our current position. While our stock has declined 40% from market high levels last year, I think it's important to ask what's different for Blackstone today versus early last year when the stock was significantly higher. What has happened to our business? Well, we're 16% larger in terms of AUM than at year-end 2014, with sharp growth in every single business.
The $94 billion we raised last year is the size of many of our peers and exceeds the annual fundraising of our next four largest public competitors combined. We invested over $32 billion in our drawdown funds and committed another $6 billion to investments that haven't closed yet. That is by far a record for us, with a heavy tilt towards later in the year when the investing environment was more favorable. We returned $43 billion to our fund investors through realization. I believe our sustained high level of capital deployment over the past several years is planting the seeds for eventually harvesting significantly larger future distributions than what we're generating today. Blackstone is, I would argue, the best-positioned firm making long-term investments to capitalize on the changing investment landscape. We have the industry's largest dry powder at $80 billion.
I expect we'll raise tens of billions more in the coming quarters as limited partners look to a franchise they trust, a safe pair of hands, one that has navigated these types of environments successfully, like we've done for 30 years now. Our LPs continue to allocate greater amounts of capital to the fast-growing alternative space, particularly to Blackstone, as The Wall Street Journal reported last Friday on its front page. Our public equity sales have been slower in the past two quarters for obvious reasons, but that didn't materially slow the overall pace of realization activity in 2015. That also means that there's more in the ground today, compounding value, which will eventually be realized for our investors. Despite that, we still had a huge year, a record year for realizations. We've also launched several new funds and businesses in the past year.
This is where Blackstone really sets itself apart from other firms in our industry, and frankly, most others in the world. The foundation of our culture, and therefore our success over the past 30 years, is innovation with safety. While most companies struggle to build great businesses outside their original success, it is a core competency of our firm. We continue to quickly launch and scale new products, leveraging our talent, knowledge, and brand in order to take immediate advantage of market opportunities. For example, our Real Estate Core Plus business has grown to $11 billion in size in only two years after its launch, and it has incredible runway ahead of it. In our hedge fund solutions area, our new multi-manager hedge fund platform has grown rapidly to $2 billion in AUM, using only eight portfolio managers currently, and we've been very pleased with their performance so far.
Our secondaries business, SP, which Tony James was instrumental in founding at DLJ before Blackstone acquired it in 2013, is now raising its seventh buyout fund and several new funds targeting $10 billion, or many multiples the size of their main fund when we acquired this platform just three years ago. Our Tactical Opportunities business, launched three years ago, is already $15 billion in size and is benefiting from many of the opportunities opened up by the bank's pullback in certain areas. In real estate, our commercial mortgage REIT, BXMT, is benefiting from the same trends. BXMT is exclusively a senior mortgages lender with floating rates, so you don't have to worry about rates going up, which people seem to be fixated on, with collateral underwritten by our world-leading real estate platform. Yet it is today trading at a 10% yield for senior floating rate debt.
It's trading below book, which means you're now basically getting the Blackstone real estate franchise for a negative value, and that makes no sense. That's the world right now in equities and leverage credit. We've seen versions of this movie many times before with always the same outcome, outsized returns for someone. To answer my earlier question, what's changed for Blackstone over the past year, that we've continued to build and extend our leadership position in basically every area we're in. Our stock price decline is reflective of what's happening in the public markets and the market-to-market movement of certain of our assets, which we do not believe is indicative of their fundamental value as measured by their operating results and their prospects. This temporary decline in value should normalize over time. Our firm's in terrific shape with strong momentum in every area.
We continue to generate high levels of current cash flow for our unitholders with a distribution yield, as Tony mentioned on our earlier call, based just on fee earnings with some other flows that is at the top quartile of the S&P 500, that is without the help of any realization, which constitute the majority of our earnings over time. The trajectory of our fee earnings is sharply upward, which you'll see in the future, which Michael Chae, who's going to speak next, will discuss in more detail. We remain highly profitable with strong growth prospects and downside protection in the form of stable and growing fee earnings and a rock-solid A+ rated balance sheet with about $4 billion in cash. Right now you're getting Blackstone on sale.
As I've shared before, we've done an implied stock price analysis for the next 10 years based on what we believe to be conservative assumptions of AUM growth of 8%-12%. By the way, last year it was 16, so we just like doing some numbers for you at 8%-12%, as well as lower than historical returns for our drawdown funds in the mid-teens instead of higher, and mid-single-digit returns in our liquid strategies, which historically has been much higher. The implied total value for Blackstone shares over that 10-year period would be in the $100-$125 per share area. That is including distributions and using what I believe is a reasonable yield of 5%-6% on our cash flows.
That $100-$125 per share value equates to a multiple of money to you as investors of between four and five times today's stock price, or an IRR of about 19%-22% annually compared to the 10-year Treasury, which as you know, is around 2%. I guess the question is, would you prefer 2% or 20% annually? It doesn't seem like a tough decision to me, but it apparently is to many of you. I'm in the minority. If an investor can do better than four to five times their money in 10 years, they ought to go ahead and find something to do it with. I'm personally not selling my BX units, and I believe great things are ahead for this firm.
At Blackstone, we continue to benchmark ourselves against the best performing companies in the world and feel quite good about our progress, delivering strong growth, high margins, and terrific returns for our LPs. Nevertheless, we're always striving to do better and to do more, 2016 will be no exception. Our shareholders can be assured that Blackstone will never stand still. We will keep blazing the trail forward, and I hope you will all remain with us or join us if you're not already a shareholder for this wonderful adventure. Thank you for joining our call today. I'm going to turn things over now to our Chief Financial Officer, Michael Chae, who's doing a really terrific job. I guess this is his second earnings call.
Thanks, Steve, and good morning, everyone. Despite the significant downdraft in markets that we experienced for much of the second half of last year, which has continued into this year, Blackstone generated favorable earnings, cash, and capital metrics for both the fourth quarter and full year. The fundamental pillars of our business remain extraordinarily strong regardless of market conditions. Our full-year distributable earnings of $3.8 billion, up 25% from the prior year, was our best ever and also the best ever for the alternatives industry, with the prior record being our own 2014 performance. The primary driver of this was a $610 million increase in net realized performance fees and investment income from $2.3 billion-$2.9 billion, with year-over-year increases in both private equity and real estate.
Reported fee-related earnings declined modestly from $1 billion in 2014 to $936 million in 2015, with the underlying strong trajectory of our asset and management fee stream growth offset by two items. First, we completed the spin of our advisory businesses on October 1st, 2015 was without what is typically those businesses' seasonally strongest quarter. Second, as discussed last year, we changed the deferral policy for our equity-based comp plans in the fourth quarter of 2014, which provided a benefit in that quarter to FRE. Adjusting for these items, FRE was up strongly in 2015, and we expect it to be up strongly again in 2016. ENI was $2.2 billion for the full year 2015, down from a record 2014. In the fourth quarter, our ENI was $436 million, reversing the $416 million loss of the third quarter.
The lower rate of fund depreciation in 2015 was due primarily to the declines in our publics and to a much lesser extent in the second half, which affected. Excuse me. The decline in our publics, which affected most of our businesses, and to a much lesser extent, certain unrealized markdowns in energy and credit and currency translation effects on some of our non-U.S. holdings. Importantly, the locked-up structure of most of our funds means that we are never forced sellers and can wait patiently until the time is right before exiting. In fact, excluding our hedge fund solutions business, 94% of our fee-earning AUM are in funds with long-term lock-up structures and have a weighted average remaining life of approximately eight years. This is the heart of our business model and fundamental competitive advantage.
In this context, I think it is informative to look at our historical experience with public market exits. In the past 10 years, we've IPO'd and fully exited 11 companies through the public markets, representing $3.7 billion of invested capital. We took them public at a 40% gain on average from the prior quarter mark, patiently timed our secondaries, generally at successfully higher values notwithstanding market fluctuations, and realized a final cumulative multiple of invested capital of 3.6 times on average. Today, we have $24 billion in publics in our private equity and real estate funds, which of course is greater than in past periods, given the significant growth of the firm.
Although our publics have been under pressure with the broader market so far in the first quarter, which could impact ENI in the near term, we feel good about our companies and remain confident in our ability to exit them over time at attractive rates of return. Currently, our public stocks are marked at a 1.8 times multiple of cost in aggregate, reflecting significant built-in gains even at current levels. As a companion point, we feel very good about our private portfolio. At times of stress in the markets, it is worth noting that our portfolio remains marked at a material implied discount to the multiples of market comparables. As you know, over time, our IPOs and private sale values have consistently come at large average premiums to prior carrying values. Let me now dig in a bit more into our 2015 performance at the business unit level.
How did we navigate the truly tricky year? First, performance. The competitiveness and growth of our firm begins and ends with investment performance. In 2015, our private equity segment funds outperformed the S&P 500 by approximately 1,000 basis points. Our real estate's BREP funds also outperformed the S&P by about 1,000 basis points and the REIT index by over 1,100 basis points. Our hedge fund solutions composite outperformed the S&P by over 300 basis points and the HFRX Global Hedge Fund Index by over 600 basis points. Second, realizations. As Steve highlighted, we returned to our investors $43 billion in realizations in 2015, following a $45 billion year in 2014. That's $88 billion in 24 months. In real estate, $21 billion this year and $41 billion over two years. In private equity, $13.5 billion in 2015 and $29 billion over two years.
In credit, $8 billion this year and $17 billion over two years. We feel very good about having capitalized on favorable market conditions from a realization standpoint. Next, deployments. How did we navigate the tricky year from a deployment standpoint? In corporate private equity, we stepped carefully through what we saw as a challenging terrain. We committed $3.5 billion in capital, in a sense, quietly in 12 deals with an average deal size of less than $300 million, largely in off-the-run, value-oriented plays with an average purchase multiple of under eight times EBITDA, average leverage of under four times EBITDA, we did none of the large, highly leveraged LBOs, a number of which are now hung up in the financing markets. In real estate, we leveraged our singular platform and consummated hallmark deals that we were uniquely positioned to do and which often capitalized on increased market dislocation.
The GE deal, Stuytown, or public to privates, among others. In BAAM, we launched our multi-manager platform at a time when subsequent market turbulence revived opportunities for short alpha, and our team capitalized on this environment. As critical were the things we didn't do. In energy, we have raised over $8 billion of dedicated capital in private equity and GSO to take advantage of the current dislocation, and almost all of it remains undrawn. In terms of existing exposures, we are mark to market, and the full-year impact from our energy investments in 2015 was about 5% of our ENI of $2.15 billion. That includes all of our energy investments in private equity and credit, not just oil and gas and E&P. That includes investments in energy sectors such as power and renewables that are not directly affected by oil and gas prices.
In terms of our credit area in general, the fourth quarter was a difficult one for the market overall and for parts of our portfolio, particularly certain energy-related and event-driven situations. This situation has obviously continued in January. The vast majority of impact was from unrealized markdowns and in companies where we feel good about their prospects. Historically, I would note, GSO has experienced realized losses of less than 50 basis points from its drawdown in direct lending funds. While in the near term, we should plan for continued market pressure that may further affect these marks, we expect that eventually markets will bottom, stabilize, and recover.
In the meantime, we bring to a credit market that is seeing unprecedented dislocation and increasing liquidity pressure structurally, the ideal investment platform, where approximately 80% of our capital base is in locked-up or permanent capital structures where we are not forced sellers and are poised to strike as buyers opportunistically. Indeed, with some $15 billion in dry powder, our team at GSO has a record amount of funding at what, in their view, will ultimately be the best time to deploy capital in the credit markets since 2009. The last topic I'd like to address this morning is the outlook for distributable earnings, which includes both our growing fee-related earnings as well as our expectations for performance fees. We have significant embedded growth in our fee earnings just based on capital that has already been raised and also fundraising initiatives currently underway.
2016 will include the full year benefit of BREP VIII. In private equity, BCP VII will launch, though there is a six-month fee holiday which will delay the onset of fees. In addition, we have multiple new funds being raised which will positively impact this year, including among others, in European real estate, real estate debt, and Core Plus, Strategic Partners flagship secondaries fund and other SP products, Tactical Opportunities products, GSO Capital Opportunities Fund and other products, or private equity, and inflows across a wide range of BAAM products. These fundraises are progressing very well across the board, and we expect in the aggregate another very robust year of inflows that will add meaningfully to FRE in the near term. With respect to realizations, we have a significant pipeline of situations with the potential to be monetized at the right time and in the right conditions.
Although the near term could be impacted by more limited public market sales, we have other means to generate realizations, including potential private sales, as well as the current yield portion of our performance fees. As of year-end, the approximately half of our net accrued performance fee receivable that is from vintages 2010 and prior is nearly all public and/or liquidated. In the vintages since 2010, we've deployed $104 billion in capital in our drawdown funds alone, or about $21 billion per year on average over that five-year time period. A substantial portion of which is still in the ground in companies that are fundamentally strong and performing well. While the investments in these funds are seasoning, their ultimate potential is not reflected in current marks.
Although we've had several years of significant realization volume, the ratio of capital deployed to the cost basis of realizations has averaged 1.6 times for private equity and real estate, meaning we've been putting well more into the ground than we've been taken out. The cupboard is not emptying, on the contrary, has been refilling. Today, we sit with $80 billion of dry powder, $34 billion or some 73% more than this time last year, facing into an even more interesting investment environment. In closing, although the environment has become more volatile for investment management, it is exactly in these types of environments that our firm thrives and builds upon our existing leadership position. We believe we have a powerful and valuable business model advantage.
Over the last eight quarters, our fee revenues per dollar of fee AUM have averaged three and a half times those of the largest traditional asset managers. Our total revenues, including performance fees per dollar of fee AUM, have averaged eight times those of traditional managers. Our AUM has grown at over 20% average annual rate for the last five years, and we expect to stay on a robust trajectory. The vast majority of this AUM, as I mentioned, is locked up for an average of eight years. Most importantly, we bring to this environment a record over three decades of having approximately doubled the return to the public market and other benchmarks.
While we reached several new records in 2015, we believe we have never been better positioned to capitalize on the many opportunities in front of us and to achieve even greater milestones in the years to come. With that, we thank you for joining our call, and we'd like to open it up now for any questions.
Katina, before you prompt for questions, I'd like to just remind everybody, if you could just limit your questions to one main question and one follow-up. We've got a pretty full queue, and we want to make sure we get to everybody. If you have additional questions, you can queue back in.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your touchtone telephone. Your first question comes from the line of Luke Montgomery, representing Bernstein Research. Please proceed.
Just in terms of deployment in energy and other commodities, I think you had $7 billion or $8 billion of dry powder last quarter. I think you also suggested that the Energy PE fund and GSO were biding their time, at least through the first half of the year. I think I hear you saying now you feel the opportunities are riper for capital deployment. Maybe you could speak to your appetite in the current environment and flesh out some of the things you're looking at.
Yeah, Luke, it's Tony. Let me just clarify a couple of things. Michael said over $8. I said $8.5 I think I said, $8.5 of dedicated energy funds. Most of those funds co-invest with another fund. For example, our private equity energy fund takes about half of the deals, it drags along a similar amount of private equity capital. If you add all of the capital we have available for energy, it's closer to $15 billion. Just to clarify so there's no confusion. Yes, it's hard to call the exact turn, but as I said before, these prices are not sustainable. The nice thing about oil and gas wells are the decline curve is fairly sharp, so they deplete quickly. These aren't copper mines, which can produce for 50 years.
If you're not drilling a lot of new wells and you're producing, which is what's happening, which is why there's a surplus, very quickly, supply self-corrects. Whether it's sometime in the next we could survive these prices for several years with the investments we're making, and still we expected prices to be up $65, $75 in four or five years, and we'll make some very, very nice returns. When we look at energy investing, we look at surviving a long time where prices are today, and then still getting very, very nice returns if we get back to prices $60 or above, which are well below prior peaks. Ironically, the lower prices go today, the higher they will be in five years from now, because the more other new drilling and whatnot gets shut off.
Yes, we think it's a very interesting time to put money out now. There's a lot of companies that desperately need capital. You can come at the top, some cases, top of the risk stack, top of capital stack, and still have equity-like returns. In other cases, great companies with good assets, just have no alternatives. Actually, I think as the cycle unfolds, it'll get better and better and better, because when prices start to move up, the activity level will pick up quite quickly. I think it'll actually even get better as prices move up as a way to deploy capital.
Okay, thanks. Really helpful. I think one of the questions we get is around how you're marking the private positions rather, in private equity and real estate. Because it's DCF-based, those marks might not reflect what you could sell them for today. My understanding is that you actually aren't allowed to mark to sale, and I heard you that the fundamental cash flow growth looks strong. You have a long horizon. I think you might have even addressed the question indirectly already, but I was hoping you might speak to the concerns that private marks could be masking a decline in distributable earnings over the intermediate term.
Sure, Luke, it's Michael. As I mentioned in my remarks, our private portfolio remains marked at a material implied discount to the multiples of market comparables. Over time, again, as we talked about, our IPOs and sales have consistently come at large premium to prior carrying values. If you step back, that's because in our private valuations, we focus intently on fundamentals and what the right long-term historical average of multiples are for a given asset or an industry. At the same time, we do keep an eye on whether our implied carrying multiples at a given point in time are appropriate relative to current market multiples, which we consistently feel they do and definitely do today. We feel good about it, and that's a little bit of an insight into our process.
Well, let me comment a little differently on that. First of all, last time, as you know, went through this, we did not have big markdowns in the portfolio, much less than the public markets. When we sold, we had big markups and realized big gains. I mean, even BCP V will be coming in gross to double investors' money. Why is that? It's because we're not just buying public stocks here that mark up and mark down. When we buy, we're buying companies. We're going in there, we're creating value by significantly increasing their earnings and their growth rates and their margins and their return on capital and enhancing their management teams. That goes on whether the stock market goes up or down. We create a lot of value, and our private companies appreciate even in declining markets.
All right. Thank you very much. Appreciate it.
Your next question comes from the line of Bill Katz representing Citigroup. Please proceed.
Okay. Excuse me. Thank you. I appreciate you taking my questions. First question is on just the pricing backdrop. I think one of your competitors was out recently in a talk, mentioning that there's potential for downward pressure on both the two and the 20. I was wondering if you could comment on what you're seeing or what you would anticipate, if any, type of pricing change as it relates to some of the drawdown businesses that you run.
Yeah, I was surprised at that, actually. We haven't been experiencing that. We have sold out or I guess it was better characterization is blown out every fund that we've marketed over the last X number of years. Occasionally, we have some sort of negotiation over massive amounts of money in the multi-billion dollar categories that would be special account spread over a whole lot of different types of products. What that other group was saying, we have not experienced that. If you look at the kind of returns that we've talked about, Michael had a lot of stuff he was saying, but I think his last sentence or two said something like, we've averaged around double the S&P, something of that type, on funds that are trying to get those kind of returns. When you provide that kind of super performance. What you find is you end up having great long-term partnerships with limited partners where it's a win-win type of arrangement. That's pretty much what we're experiencing.
That kind of super performance. What you find is you end up having great long-term partnerships with limited partners where it's a win-win type of arrangement. That's pretty much what we're experiencing.
Yeah, let me comment on that. One of our main businesses, Tactical Opportunities, we're seeing the precise opposite. We're having a significant increase in fees to carry in Fund Two than we had in Fund One. They're both oversubscribed.
That's helpful. All right, Steve, I was debating whether or not I was going to ask this, but since you spent a lot of time on it in your prepared remarks, I figured why not. When you reported third quarter earnings, the stock was 33. By your math, you can get a 4x return on your investment if you were to purchase Blackstone today. If I look at page 23 of your supplement, which is one of the better supplements, by the way, you lay out all your MOICs, both realized and total invested, none of it comes close to 4x. How do you think about capital return or capital priorities as you look forward? Has your thinking changed at all in terms of buyback, given where the stock is today, since nothing's quote unquote changed in the business model?
We get asked about stock buybacks, and for us, first of all, our model of projecting what we're doing, we think is actually quite conservative. The question is, why aren't we doing a massive stock buyback now? One of the reasons is that I like cash. I like it, like a lot of entrepreneurs like cash, whether it was the Microsoft people or the Google people, the Apple people. You like cash because it gives you the opportunity to take advantage of opportunities. What happens is we're being approached, for example, by a number of different organizations that want to affiliate with Blackstone because we pay out. We're trying to please people, including ourselves, and we pay out almost all of our earnings, and we have sort of sky-high yields by the standards of other companies.
For us, if we buy stock in them, we're leveraging ourselves up, and we need our cash for two reasons. One is acquisitions, and the other is at the rate we're growing, we have to keep putting money into funds. Limited partners believe that if you don't invest in your own funds, you don't show confidence or alignment. We always want to have a lot of money around because our ability to start new products is really remarkable. Last year we grew at 16% after giving all this money back, and we keep coming up with new products.
To put ourselves in a position to do major share buybacks and not be able to fund the growth of the business, which puts money in the ground for long term, and we grow from Fund One to subsequent funds very rapidly, would not be investing in effect for the long term. Nothing wrong with buying stock at this price, nothing. If we think we're compromising our ability to grow one of the greatest companies in the world, it's just a question of how do you allocate that? They're all good allocations, but I'm a great believer in taking advantage of every investment opportunity for the benefit of our limited partners. If we do a great job for them, they have trillions and trillions of dollars.
If we keep getting a vastly disproportionate amount because of the performance, that's great for our public shareholders over the long term. That was a long answer, but I wanted to tell you how at least I think about it.
Bill, let me add a little color from my perspective to that. First of all, we absolutely think this stock is an unbelievable buy.
Right.
We're all in on it personally. I don't know exactly how much Steve owns these days, but it's a lot of stock.
Same as I always do.
He hasn't sold a share since the IPO.
Right.
We're all in on the stock. We think it's a fantastic buy. Secondly, the value that Steve talked about of the $100, one of the things that drives that is the organic growth rate that we've got that takes capital to fund. If we stopped having the capital to fund the growth, I'm not sure we'd necessarily be ahead of the game. That's really not the point. We're here to build a great institution that takes its place with the enduring great companies of America. We've got an amazing opportunity and a clean shot to do that with nothing in our way.
We've got daylight between us and all the other competitors, and we think we're supposed to go build that legacy, and do something really special here, and not take advantage of short-term trading opportunities, buying in a few shares because they're a little low.
Bill, I'd like to just clarify one thing you stated in kind of the setup to your question. I think you alluded to the page in our 8-K with our investment records and our historical MOICs, which range 1.8, 1.9 times. The assumptions underlying the sort of analysis and model that generates Steve's discussion and view on our long-term equity value creation, it's premised very much on that 30-year history of producing those types of multiples of money.
Which then produces DE over time, which supports a yield that supports the stock price Steve mentioned. I just wanted to be very clear about that.
Understood. Thank you, guys.
Your next question comes from the line of Mike Kemm, representing Sandler O'Neill. Please proceed.
Hey, guys. Good morning. First, Tony, I think on the media call you mentioned a range of something like $1 to $3 of distributable earnings this year, depending on realization activity. First, is the low end essentially just based on fee-related earnings? At the high end, what sort of general market backdrop would you need to generate that level of realizations?
Let me be clear. I was not in any way making a projection about what we might be in 2016. I was simply pointing to the structure of our business, where we're in a position now, depending on realizations, to get somewhere between $1, in any year, $1, which is driven largely by fee-related income and some of the recurring income investments we have, like interest on debt and stuff like that you get every year, regardless of market. To this year, where we got over $3 in DE. We're a $1 to $3 payer on a stock of mid-twenties. What kind of yield is that makes any sense?
What I was pointing out is, I wasn't trying to make a projection as to what the realizations would be in 2016, although I will say, I don't see any reason why we can't have significant realizations in 2016 on top of the $1 that comes largely from fee-related and other recurring income.
Got it. Okay. Understood. Steve, since you mentioned wanting to maintain cash on hand for potential acquisitions, just curious if you could maybe comment on where you might be focusing your attentions and then what you're sort of seeing in terms of the competitive landscape, in terms of competition and/or pricing trends.
Well, giving away inside information on widely spread calls is a bad idea. We get approached by different types of managers, whether they're long-only managers, alternative managers of all sizes. What's happened is every time that someone has affiliated with us, their business has exploded with growth. We have our own sort of list of priorities, which we think makes sense, then we get over the transom type of inquiries. What we're interested in doing is expanding when it makes sense, with businesses that we can really enhance with people who share a similar value system. We are not trying to do anything for the short term. For us to actually buy something, there has to be a fit of values and culture and risk aversion. What I've figured out is that there are no brave old people in finance.
Usually, you get wiped out by being brave when you're younger. We have a number of things we're looking at. What tends to happen is we have an advantage, actually, of real liquidity in our stock. We typically are about half the market cap of our whole industry. If anybody is interested, potentially, in liquidity, we're a very good home, but we're quite discriminating. We don't want to do anything that dilutes ourselves and changes the culture of the firm. We like building them ourselves, but we found some really terrific opportunities and more of this stuff comes out of the woodwork when you have adverse market cycles than when you're at tops. At tops, everybody's self-confident and happy, when the tide goes out, you see who's wearing bathing suits or whatever.
It's not, I think.
Whatever. Maybe I was more anxious to have them be wearing them. We're seeing some activity now. We'll see what happens with it.
I just want to comment. We've made seven or eight acquisitions. The returns on all of them have been terrific. I don't think you'll see transformational things that change the course of the firm overnight, but we'll continue to do smart acquisitions where we can build a lot of value. None of them will be ego-driven, by the way, to have bragging rights for more AUM or something.
Got it. That's helpful. Thanks for taking my questions.
Your next question comes from the line of Patrick Davitt representing Autonomous. Please proceed.
Good morning, guys. Thanks. Good morning. My question's around the credit comments that Tony made on the media call. Could you walk us through, from GSO's perspective, what kind of leading indicators they are looking at that give them comfort it's a good time to ramp up investment as much as they have? In other words, what leading indicators do they see that show that the issue is not broader than energy? In that vein, at what point do you worry about the liquidity-driven price declines bleeding into real credit issues?
Okay. Well, let's put energy aside.
Energy.
I think if you look at Michael can help me out here. If you look at the implied default rates on the pricing of low investment-grade credit today, away from energy, they're something like, Michael, 4% or 5%?
I think about 4%.
4% or 5%. Yet, we see to actually achieve those default rates, you would have to go into a recession and a financial crisis similar to what we went into in 2008 and 2009. We don't see that at all. Leading indicators is not quite the way we view it. What we view it is inherent value right now. The yields are too high for the embedded credit risk, and therefore it's a good buy. We're putting money into the market. We're getting additional money from investors to continue to do that. I don't think this is something we're going to plunge it all in one day, though. We're somewhere in a good part of the cycle, and we'll continue to take a series of bites in that part of the cycle.
I would say the same thing for energy about where we are in the cycle and the bites we're taking. Obviously, in energy, you're going to have some fairly high, actually default rates, and so we're embedding that into our scenario too. I think that the illiquidity of the market has driven pricing of less than investment-grade credit unreasonably low, yields too high for the risk, and so we're taking advantage of that.
Yeah, just to give you one idea without a name, there's one security we were discussing the other day with sort of a yield of 17% at somewhere around six times EBITDA in terms of value through the debt. Well, we buy companies all the time at six to seven times EBITDA. If you could get a 17% cash yield, gee whiz. Remember, treasuries are two, it's not so bad. The market's gapping out. You have to hand it to the regulatory environment. When you get rid of basically dealers, stuff just gaps. Our job is to take advantage of that for our investors.
Thank you.
Your next question comes from the line of Kenneth Worthington, representing JPMorgan. Please proceed.
Hi. Good morning. In terms of financing, you're putting a lot of money to work. How are you finding the financing markets? Are they less accommodative?
We're still getting by.
Let me try it again. You're putting a lot of money to work. How are you finding the financing markets? Maybe where are they less accommodative? To what extent are you seeing others having a hard time closing deals? You mentioned some hung deals. How widespread is that, really? I assume that you assist on and you get preferred financing treatment. Is the financing market inconsistent enough yet for this to be an advantage to you?
Okay. We're getting financing on the deals we want. Actually, in most of the cycle before the credit markets turned down, we felt the credit markets were giving too much debt for the companies, and we weren't taking all that was available. We just didn't think it was healthy to have capital structures that are over-levered. Those have come down a little bit, but we're still getting five, six, sometimes six and a half times debt to cash flow for our companies. However, as Michael pointed out, a lot of the investments we're making are lowly leveraged, and we're getting the returns that we target, sort of 20% plus without much leverage by driving the operational change and the growth of the business. Our returns, as I've said over the years, don't come from leverage. They come from what we do with the companies, number one.
Number two, excessive leverage environments push up prices that sellers get when they sell the company and force us to pay more and lower our returns as an industry. It's not good. This backup is good for private equity. Make no two ways about it. There's more values, there's fewer buyers, and there's lower prices out there when we make the investment. In terms of others' problems, the problems were concentrated in the really large deals at very high prices, where sponsors were mostly doing public to privates. There was one big carve-out where that was the problem. The market's working through those. Some of those deals are being repriced. Some of those lenders have taken the lumps and moved on. Some of them have gotten done pretty well, actually. It depends on the specific situation.
The market likes plain vanilla, solid businesses right now. You can still finance those well. If it's a turnaround or a falling knife kind of deal, it's hard.
Great. Thank you very much.
Your next question comes from the line of Michael Carrier, representing Bank of America Merrill Lynch. Please proceed.
All right. Thanks a lot. Just the first question, I guess just on the current portfolio, I guess it's two parts. Just first, I think you mentioned that they're still seeing EBITDA growth, but any details there? I think as we're later in the cycle, people worry about, or investors worry about slower growth. Maybe from an economic standpoint versus what you guys can do or the portfolio companies can do to drive growth, what's the outlook? When you look at the returns, whether it's this quarter or for the year, any breakdown for the public returns versus the private side of the portfolio?
Well, I'll let Michael deal with the second part. Our corporate companies are having EBITDA growth in the low single digits, low to mid single digits, depending on the company. Our real estate, I would say, are mid to high single digits.
I would add that in our portfolio, if you look at the economy overall in the U.S. for corporates, the most pain as Tony has alluded to last quarter now is around kind of the industrial companies that are most export exposed to the sort of global economy. Our private equity portfolio happens to be lighter on that kind of thing, heavier on some other industries, which for a reason, we've selected sectors carefully and tend to be relatively growthier. That is why in aggregate, as we've talked about, while we see some deceleration, even our own portfolio, we are still outgrowing the sort of public market overall meaningfully. On the performance of our publics and privates, we don't sort of break that out per se. I'd say two sort of dimensions to it. One is, obviously, over the course of the year, there were some fluctuations.
The third quarter publics generally were down. In the fourth quarter, they recovered. You saw that flow through our ENI in the third and fourth quarter in terms of us basically having an ENI decline in the third quarter and then more than reversing that in the fourth quarter. I'd say the other dimension is certain sectors have been hit more than others. In the real estate area, where lodging is a significant component, lodging stocks have been hit harder than other sectors. You see some sort of sector differentiation there, and then through the course of the year, you saw obviously ups and downs.
Okay. That's helpful. Michael, maybe just a quick follow-up. You mentioned just on the FRE outlook given some of the funds that fees will be turning on. Just want to get a sense, when you think about maybe the net of fees turning on and step down of funds, then probably more importantly like the FRE margin as we go into 2016 and 2017, because I guess 2017 you'll have kind of a full year of both of the flagships. Just wanted to get a sense on where that would typically range as the fees are starting to ramp up.
Yeah. I would say overall, Mike, that sort of we have a lot of visibility on FRE for 2016 based on funds that have been raised and will be activated this year. The trajectory is really good. That is notwithstanding that, for example, as I mentioned, BCP VII will activate this year sometime early mid-year, and there's a six-month fee holiday. In fact, the real substantial contribution from that fund will occur in 2017 when there's a full year effect. I make that comment about the trajectory of 2016 notwithstanding that, and that obviously will help further in 2017. Overall we have a lot of visibility on that, and we feel good about that.
Okay. Thanks a lot.
In terms of the margin, Mike, I think if you look at kind of a historical over the years, last year the margin, as I alluded to, reflected a bit that change in the deferred comp policy. When you sort of adjust for that, we've been on a upward march from an FRE margin standpoint for years now, and we believe we can stay on that.
Just a note for the group here, an interesting statistic. While we raised $94 billion last year, and I think I mentioned this year, of course, we don't have our two humongous flagship funds coming in the market, but we still have plenty to do, and we'll have lots of fundraising. Our fee-earning AUM, getting to your point, was up about 14, 15% last year. We actually think it'll be up comparably in 2016 over today. Continues to kind of chug along. Part of that is the fundraising cycle, but part of that is when the fees kick on, and part of that is deployment. All that plays through to have very steady, rapid growth in fee-earning AUM.
Got it. Thanks.
Your next question comes from the line of Michael Cyprys representing Morgan Stanley. Please proceed.
Hey, good morning. Just to start off with a question more on the broader macro environment. It seems as if there's a circularity right now in the marketplace with China's currency devaluing, U.S. dollar appreciating, oil prices collapsing, and equity prices falling. I guess just how bad is it? What's the contagion risk? What gets us out of this kind of funk here? What's the real risk to the U.S. economy?
I think it's always hard to know what everybody thinks. Sort of from trying to feel a consensus, it's been very negative towards China. I think that's because people have looked at the way China has dealt with its securities markets by first of all running them up to unsustainable levels and now having them sort of go down and trying to intercept them on the way down to cushion the fall. That's been reasonably unsuccessful, and it's given a bad tone.
of a bad perception. China is similar with the stop and start on the currency, which has really hurt confidence in the non-Chinese world. China itself has about 52% of its economy in services which are growing, from what everybody can see, in excess of 10%. Last year it hired 14.4 million people, more than they hired when they were growing much faster. Wages last year were up significantly in China, so it doesn't have the feel of something that's certainly in free fall, because it's not. The other 48% of their Chinese economy is having a more mixed-up picture from sort of declines in the steel business and sort of backing up against building infrastructure. There's going to have to be some rationalization in that sense.
If you have half of your economy growing at 10-plus, and the rest is a mixed picture, you're not in a world of hard landings, other than the fact that people have lost confidence in some of the policy directions in the marketplace. I think that's a bit overdone. As we look at the world, the commodities, China buys about half of the world's commodities, and they're not buying as much. Although, this may be shocking to you, that their purchase of oil in the last year was up 10%. I don't think most people know that. The wash through the developing economies of the world, as less commodities are bought and the prices sort of really collapse, has put a lot of minerals mining and that kind of stuff in structural oversupply.
People are shutting mines and stopping development. That's a long cycle type of approach, which will lead to slower growth in the emerging market. It has to, it's not just emerging markets. It's a country like Canada, for example, which is a big resource country. They're not growing. Some quarters they're in recession. We sort of looked at it as sort of a slowing of the world. The U.S. is experiencing that to some degree. Europe's going through stimulation with QE and Draghi. We own a lot of stuff in Europe, and Europe seems pretty solid to us. Might even do 1.5%. I don't know. The U.S. probably ought to do, if anybody's guessed, 1.5%, 2%. That's like half of the world. China's going to do, I forget what's reported.
I don't know whether it's four, five, six. Call it five. That's 14% of the world. You start running out of difficulties. Although, some of that remaining part is really falling into a bad position, whether it's Brazil in recession, Russia in recession. India's doing sort of quite well. They're reporting seven. Some of that's got an inflation adjuster in it or whatever, so maybe it's five and a half. India's a pretty big place. Places that were growing, Colombia, six, they're going to grow maybe one and a half, two. There's just a bit of a slower world. Part of the issue of why people ask these questions is that some of the stuff's happened so quickly. Like with oil, for example, it's just potentially destabilizing certain producers. You saw this morning that the IMF is in Azerbaijan.
I was in Azerbaijan like three years ago, it's really humming. Now they got the IMF visiting, that's what happens with very quick moves. Some of these things will reverse. They don't reverse in one quarter to convenience anybody. If you have 20% declines in CapEx going into oil exploration with a 4% decline curve, gee whiz, do that for a few years, something's going to change, and it will. I think we look at all this and say, "Okay, if that's what's going on in the world, where do we play? Where are we worried? Where do we play? Can we play in size?" We do things that are conservative with big upsides, add a lot of value. Certain of our overall businesses are really in great shape, the industries we invest in.
It's not the end of the world. If you look at the stock market, you have to conclude it's like the world is ending. Well, I don't think the world is ending. I think we're going through an adjustment. People like ourselves, who own long-term things and add enormous value, end up at the end of the day being mega winners. That is my view. It's also because it's empirically been true, nothing has changed within the firm in terms of capability of people, capital, all the great things that enable you to do this stuff. That's sort of how I see things.
I would add, I think people are overreacting to the stock market. We had a, whatever, a seven-year bull market without a correction. We were just statistically got to be way overdue for a correction.
Yes.
The backdrop of the S&P companies' net income is weak. It's been zero. P/Es have gotten high. People look at the average S&P, that's kind of a distortion. Look at the median company in the S&P, because the average is dominated because it's market-valuated by Apple and a few huge names. Look at the median P/E of the S&P, it's high. We had a correction, big deal. There's enough going on. I think people are overreacting to that. The implications of what Steve said about China are, it's healthier than it feels to people that trade with China, because a lot of where the growth is internal services part of the economy, which doesn't drive their imports or someone else's exports. I think a lot of people that try to trade with China, it feels slower than it really is for that reason.
Yeah. I was watching TV, the head of P&G was on, they asked him about China. He said, "Gee, it's my second-biggest market, both revenues and profits. Things have slowed down a little bit, but it's still terrific for us." I think that it's a more nuanced world, not a simple world.
Great. Thank you so much for that. Just if I could ask a quick follow-up on the leverage, the financing market comment from earlier. That the markets are still open, it seems, for you. I guess, just how do you think about the risk in terms of credit availability drying up? What parts of your business could be most impacted? Also, what parts would be least impacted? Because I think there are some areas where you use less leverage and not much of any financing. Can you just help us think through that and how you manage around that in the environment?
Okay. Well, I think all of our businesses will earn more money on the new investments they make in that scenario. I think in terms of private equity business, which is one that people will go to right away, an awful lot of what we do, things that don't require much leverage because they're growth equity, they're building new infrastructure. When we build a solar field in Mexico or an offshore wind farm in Germany or things like that, they're not leverage-driven, obviously. So, as Michael mentioned, we're not doing a lot of big, highly levered public to private. Will it impact us? Yes, I think it'll impact us by giving us more buying opportunities. In every environment, in the 25 years or more that I've been doing this, we've always been able to get access to credit. Always.
The amount of credit may go down, the source of the credit may go down, the structure of the credit may change. We've always been able to access credit in the private market to some degree, and that's usually more than compensated by the lower prices. If anyone's going to get credit in that market, it's Blackstone. On the real estate side, again, real estate is somewhat impacted, but it's a different credit market. We were able to do secured real estate financings even in the depth of the crisis. We'll still be able to. If you're right that somehow the credit market completely dried up for real estate, boy, that would be interesting. Again, we've got the capital, we've got the equity capital. Other buyers won't have access to either the equity or the debt.
I would think that would be great long term. Our credit business, again, locked up money. They'll be the lender of last resort. They'll be able to basically write senior loans at 20% kind of returns, equity kind of returns. If you look at what happened to their MEZ returns, they're in the 18%-20% area. That'll be fantastic for them. All in all, I think in that scenario, by the way, you probably have massive down legs in the stock market, too. I don't see how you can have a shut down credit market and not some kind of panic associated with it. Steve?
One thing. There's a cycle to this stuff, right? What happens is when credit really tightens, if it's available, prices go down, as Tony James was alluding to. We'll look at something. We were just looking at debating something the other day in our Tac Ops business. What's the unleveraged rate of return that we should get for something? With no credit, we were debating on this one, well, should it be 15? Should it be 16? This is no leverage, right? If you can buy something that's making 15%-16%, as soon as markets normalize, make pretend that your worst scenario comes true. There's no really credit available. You can set things up at 15, 16. Oh my goodness, this is like nirvana because credit always comes back. You put credit on it and you're making, like, 24%-25%.
This is how we got into the real estate business. In 1992, there was no credit. You couldn't borrow anything, right? You really couldn't. We went out and started buying real estate from the RTC and other people. I didn't even know how to price it. I just did it at 16. Right? 16 sounded good to me. Right? What happened is that 16, when you put leverage on it, became like a 24. In that case, with real estate, we just filled up the empty units in the buildings, and the 24 became like 45% compounded, and then rents went up and we made 55%. When you enter this type of period, Tony James was pretty joyful, I thought, and excited about it. Asking the question, you obviously think it's horrible, which is why you asked the question. When you live through this game.
It's big money to be made, it's not because of the credit thing. You use that credit cycle. GSO will make tons because everybody needs credit. The idea that credit is optional in the global economy, credit is not optional. You'll get it at whatever price from whatever the purveyor is that's got it for you. Then you get way more options to extend credit. It's safer to extend credit. It just is unfamiliar to be in that part of the cycle if you have a monolithic model of how the world works.
Specifically to Steve's point, in each of private equity, Tac Ops, and real estate, we've done deals now on the assumption there's no credit, still return hurdles, we're also very confident that somewhere two, three years we'll have credit. It's not an issue, I don't think.
There you go. Thanks for that.
We get excited about this stuff.
Your next question comes from the line of Daniel Fannon representing Jefferies. Please proceed.
Thanks. I was hoping to get a little more color on hedge fund solutions and some of the strategies that are seeing increasing demand currently and into the fourth quarter.
Okay. Well, I think the real star there is our Senfina business, which is our new sort of proprietary multi-strategy business, which has had fantastic returns.
We're not allowed to say what they are.
We're not allowed to say how fantastic they are, they're fantastic.
Trust us.
That I think is, we could almost sell an unlimited amount of that, number one. Number two, the daily liquidity product we have where we're actually offering institutional quality BAAM returns to individual investors who can come in or out as well. I think we could sell an almost unlimited amount of that right now. Then we're getting some very good responses to our drawdown funds, which either provide seed capital or buy minority stakes in established hedge fund managers. Those are all sort of hot areas for us. They're all high margin areas for us. That's where a lot of the growth is. In the core hedge fund solutions business, they continue to raise money. They continue to have money over income inflows that exceed outflows. I think that's solid as well. This is the environment where that business shines.
That business, they're a way to play public markets in a lower risk way, much less volatility, 20%-25% of the volatility. They're set up to protect value on the downside, but not quite participate fully to the same degree as the market averages in the up market. Right now, their outperformance is just sort of really surging.
Just one other area. They're actually getting quite a lot of inflows in their mutual fund type product.
That's what I said, daily liquidity.
Which that's been the biggest one.
Through the other channel.
Great. Thank you.
Your next question comes from the line of Devin Ryan, representing JMP Securities. Please proceed.
Yeah, thanks for taking my question. Appreciate the remarks on the dynamic in the public markets right now. Just understanding that you guys have the ability to be patient, you still have to have a view on when you believe your price objective is going to be met for a specific investment, which I assume has been pushed out in some cases recently. As you said, the capital markets reopen here at current valuations. How do you balance that element of timing on some of the more mature investments today? And then related, is there an increasing number of positions that were on a path for an IPO or follow-on that are now moving into the M&A bucket?
Well, all of our investments are always in both the M&A and the IPO bucket and the recap bucket for that matter. There's not a bucket that we put them in. A lot of times when we sell something, it's a dual process. I'm not only getting much change there. We have a number of investments that, frankly, we'd be happy to execute sales at current prices. We'll continue to take some money off the table. We have a number of assets that are for sale in the private markets that'll move forward. To the extent that we delay an exit, I guess what we look at is the return we can earn by waiting. We expect to earn a 12%-15% return each year by waiting. Actually, we and our LPs, and I actually think our shareholders get richer if we wait.
Got it. Helpful. Thank you.
Your next question comes from the line of Alex Blostein, representing Goldman Sachs. Please proceed.
Hey, good afternoon, guys. I'll keep this one real quick. In your comments around realized performance fees, a chunk of that is being driven by just the, call it current yield or sort of the interest, the coupon essentially you guys are getting on your investments. Any sense to help us size that? Again, just going to get back to the question of if folks were to try to assess the downside in distributable earnings, that would be obviously a much stickier part of realized carry or realized incentive fees. Any way to size what that was in 2015?
The second part to that, I guess, as we move forward, I hear your comments on deployment and credit opportunities at the yields that you're seeing right now, should we think of those type of incentive fees kind of, I guess, growing over the next year or so?
This is maybe something you should take offline with Joan and Weston, but I'll make a general comment. The bulk of our sort of low end of the distributable range of about $1 is fee-related earnings from fees. The other stuff adds a little bit to it, but they're not huge dollars. In our, quote, "realized" form of incentive fees, the bulk of that are asset sales. The vast bulk of that.
That makes sense. Thanks.
The next question comes from the line of Glenn Schorr, representing Evercore ISI. Please proceed.
Hi, thanks very much. Wonder if you could just help fill in the blanks. Throughout the commentary I heard today, of the $15.7 billion of capital put to work, I see in the slides the $5.3 billion in private equity and comments around $2.6 billion in energy and European direct and high yield credit. I'm just looking for a top-down view of where money's being put to work right now besides the things that I just called out.
Well, sorry, where it's being put to work now?
Well, I apologize. In the fourth quarter. I'm just filling in the blanks.
In the fourth quarter.
For the other $15.7, yeah.
Glenn, out of the $15.7, real estate was a bit more than half of that. The private equity segment was about kind of a third, 40%, and you cited the corporate private equity component of it, then there's Tac Ops, which was very active as well, and SP. Then GSO is the balance. At around 20%, call it 20-ish percent of that $15.7. As we talked about, the environment, late as the year went on, got more and more interesting for them from the mezzanine standpoint as the leverage finance markets kind of locked up, et cetera.
In fact, that deployment for GSO was an all-time record quarter for them.
People think about the deployment going forward. Last one, where are we on catch-up for BCP V? Other than that mark, just the market did what it did in the fourth quarter.
I know over time we've had kind of different metrics to measure this. We talked a bit about the percentage due of the catch up. That was around 83% a couple of quarters ago and down to 73% or so more recently. Right now it's around 70%. Maybe a different way to look at it is kind of what portion of our LPs are in full carry versus catch-up, and that last quarter I mentioned kind of 50/50. Now it's a little less than 50% in full carry, a little more in catch-up. That will move around based on various factors.
Okay, thanks very much.
Your next question comes from the line of Brian Bedell representing Deutsche Bank. Please proceed.
All right. Thanks for taking my questions. Most have been asked. Just maybe just to zone in a little bit more on the realization and exit backdrop. Mostly in both the private equity and real estate segments. Just looking into 1Q and 2Q in terms of your pipeline and sort of where the market sits. Can you do, and I know it's always hard to do, but somewhat frame the size, the potential for both of those two segments over the next two quarters as sort of the market sits now for where we can move back up toward a $10 billion type of gross realization trend, or are we going down from current levels?
I really don't want to get into projecting realizations by quarter going forward. We're opportunistic and nimble. We definitely will have realizations in this market at these prices. If you want to get some more color from that, I think Joan and Weston can talk to you.
As always, we move into a new quarter with some contracted sales that will close in the first or second quarter, there is that.
Do you view it more robust for the real estate segment rather than private equity, at least right now?
Most likely, yes.
Yep. Okay, great. Just to follow up on energy, maybe I missed this, but can you just outline again what you have in energy dedicated dry powder and then energy currently invested, just by the two numbers?
I'll deal with the dry powder.
To invest that in every investment, that takes about 60% of each investment. Well, today 50%, but we'll move to 60%, so call it somewhere in between. The private equity funds take the other 40%-50%. You should think of that as $9 billion-$10 billion of dedicated energy capital. In GSO, we have a dedicated energy sleeve of about $3.5 billion, and there's another about a billion and a half in the other products that are associated with that similarly. It's about $14 billion-$15 billion all in terms of dedicated energy, and is virtually all dry powder at this point.
I'm not sure we covered it. How much is invested in energy?
Yeah.
Michael, do you want to answer that?
Yeah, I think, obviously, private equity and credit are the main areas of the firm where there's energy. In credit, where energy generally is known as a significant portion of the high yield bond market. For us, across all of our GSO assets, the percent in energy is sort of in the, call it low teens. In private equity, as Tony mentioned, we obviously have general funds, the BCP funds, and then we have BEP. BEP is, of course, dedicated to energy. Importantly, those energy investments are sort of half and half assets that are E&P oil and gas assets that are directly affected by those commodity prices, and the other half are in sectors like power and renewables that are not. That's sort of the structure of our holdings in private equity.
Okay, great. Thanks very much.
Your next question comes from the line of Chris Kotowski, representing William Blair. Please proceed.
Hey, guys. Good afternoon. On the new products and innovation front, can you maybe just give us an update on Core PE? When we should start to hear a little bit more about that? Beyond Core private equity, I know you can't mention specific products, but how many other new products do you have in the pipeline ready to launch this year?
Core PE is really a neat thing. It's neat because the Core Plus area in real estate is about three to four times the size of the opportunity market. Our performance across the board in real estate is perhaps the best in the world, and has been for a very long time. There's enormous potential growth in that business, and the deals we've done so far look like they're really attractive from the perspective of our investors. This is the kind of business where it's really locked in money, very long period of time. I have very aggressive expectations for that business. I think I scare our people internally on a regular basis. I think that business, which has done $11 billion in its first two years, and it's in a ramp-up.
We'll be able to really hit stride and doing some back of the envelope numbers myself this morning. Because we were looking at projecting sort of growth rate for the firm. It's part of the model that I talked to you about. If we raised, when this business is more mature, $10 billion a year for something like this, that's almost like a 3% growth in our AUM. We were projected like at 8% model. This is like just one product of many products at the firm. It's natural for us. Investors like it. We've done it principally in the U.S. We can expand this all around the world. We do have a pool of capital for Asia. This is like a wonderful adjunct to real estate. We've got some other fixed income products we're looking at. It's very exciting.
Yeah. Let me address your question. First of all, Core PE, which you asked about, that will finish the fundraising early this year, you should start to hear more about it, so to speak, to use your words, later this year as we start to do the first deals. The number of new products across the firm is probably not a terribly meaningful number, but we've got, I would say, five to 10 really cool new things.
Yeah.
At least one, usually several in every major segment.
Right.
We're working on them all.
It's really fun. This is great.
All right, thanks. If you don't mind, could I just ask, since Steve, you mentioned earlier that you're looking at other alt managers, traditional managers all the time. Would you ever consider buying a traditional manager? If so, what would be the main criteria that you would look at?
Well, we sort of haven't evolved to that level of sophistication yet. If you were to do something like that, they'd have to be special. It wouldn't just be a long-only manager because there are interesting numbers on a page. They'd have to be unusual. They'd have to have an unusual culture. They'd have to be something self-sustaining. You never want to be buying anything or affiliating with anything that's just sort of a generic thing that has some interesting numbers that you could buy cheap. We want to be with the best in
In an area. We love that, being the best, look at synergies that could work between the businesses in terms of intellectual capital or different types of distribution or something. This is not people like ourselves sitting around saying, "Aha, that's a big area. Let's go buy something." We don't operate that way. We don't operate that way internally in the alternative area. We just don't do that. It would be a little of, I think, a needle in a haystack kind of a thing. If we ever did something like that, you'd say, "Wow, that's amazing." There'd be something really terrific with it. We're not sitting around saying, "We're out of oomph in the alternative business," that we're tapped out and let's just start wandering because we've got nothing better to do, and we've got a manifest destiny to stupidly grow.
That's how we think about it.
I just want to underscore, Steve said all right, but just so we don't see the wrong thing pressed.
Yeah.
There's hundreds and hundreds of long-only managers that we have zero interest in. We're looking for something very, very special, if we're looking at all, that would be able to sustain superior investment performance, have real synergies, be a leader, be elite, have something very special, franchise. I'm not even sure they exist.
Right.
These might be unicorns.
Yeah.
We're open.
I wouldn't be sitting around putting that one in your report as Blackstone's looking for. If Blackstone stumbles into it, we'd know it if we saw it, but it's not like we're out there hustling around, sifting through things, and you're about to get surprised.
Understood. Thanks for the color, guys.
Your final question comes from the line of Eric Berg representing RBC Capital Markets. Please proceed.
Well, thanks very much. Thanks for fitting me in at the end here. Earlier in the call, in the discussion about the marking to market of the portfolios, you described it as, if I took away the correct impression, as being anchored by DCF, but sort of mindful of what's going on in the public markets. You don't ignore the public markets, but they're not certainly the sole or may not even be the principal driver. My question is this: given that the cash flow, the EBITDA of the companies, the portfolio companies, and of the real estate is improving, why conceptually did the mark and the associated unrealized incentive income and carried interest in the December quarter, while it improved from the September quarter, both of those numbers were still negative pretty much across the company.
If the value of the businesses is hanging in there and the properties, why did the mark and the associated incentive income numbers remain negative?
Well, I think there are a couple things, Eric. First, you have to take into account if you're looking at realized and unrealized, so you look at total performance fees. Obviously, when we realize things, there's sort of a flip, if you will, of unrealized going into realized.
Right. No, I was actually talking about unrealized only.
Right.
Right. Every time you sell an asset, your unrealized goes down, correct?
Yes. Fair enough. Thank you. Thanks for that reminder.
Yeah, that is what I mean by a flip, and that is in those numbers because we had another good realization quarter. When you could strip all that out, we had positive appreciation, and not as high as in some prior quarters. That's why you get a quantum of positive economic income that is positive but maybe lower in amount than in some earlier time.
Eric, this is Weston. It's the total performance fee that has to do with the mark on the asset, not the unrealized performance.
Yep. Thank you for that.
Great.
We'll now-
Okay. Thank you, everybody, for your time today. Thanks, everybody, for your time today. If you have follow-ups, please give me a call.
Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.