The syndicated market has a lot of competitive advantages. So I think they both coexist. But I think in the new origination market, more and more of that will move to direct lenders.Adam Beatty Great perspective. I appreciate that.Jon Gray Yeah. And I would just point out, we’re big players in both. We’re the leading investor in CLOs and we’re the leading direct lender as well. Sorry, go ahead.Adam Beatty Yeah. Excellent. Fair enough. Yeah.Operator We’ll go next to Mike Cyprys with Morgan Stanley.Michael Cyprys Great. Thank you. Good morning. So a question on investment performance. Blackstone has generated very strong returns historically, but just as you look out over the next decade, I’m just curious to hear your perspective around Blackstone’s ability and also the overall private markets industry’s ability to deliver excess returns over public markets.
And the question is on what sort of environment would you say the scope for outperformance is more versus less, and what are some of the opportunities there and steps you could take to enhance your ability to generate excess return, such as with direct origination and also harnessing artificial intelligence?Jon Gray So I would say for the last 30 plus years we’ve been at this now, we’ve continued to have durable advantages over public markets in our investing. And I think it comes down to our sector selection, the advantages of scale, and often inefficiencies and marketplaces, our ability to intervene in companies, which is really important with our portfolio operations team and then our capital allocation decisions for these companies.And that formula has continued to work extremely well in very good environments and very challenging environments, and I don’t see any reason why that goes away.
In fact, we think as we get larger, we get better at this. We get better at scale because of the competitive advantage of size and the private markets. But we also have more inputs.If you think about investing as pattern recognition, connecting dots, I don’t think there’s any firm in the world who gets to see more dots than we do. And so we can see something that’s happening in the United States and how it’s relevant in other parts of the world. You can see that in our global logistics investing. I think there are real powerful advantages from our scale and our model.So we think these return premiums will persist over time. In terms of technology, Steve can comment, but I would just say we’ve made a huge investment here on data scientists. We’ve got more than 40 of them.
Every time we do a deal in private equity, in real estate infrastructure, we’ve got a data scientist on the deal team. We’re embedding them in our portfolio companies. We realize the world’s changing quickly and we want to invest in that and be ahead of it.Steve Schwarzman That area. This is Steve. That area is really sort of exploding. And we saw this probably five to six years ago. And we started a department here with fantastic people. We use them on due diligence, interestingly. Because when you accumulate large databases, sometimes it’s hard to figure out what’s going on with them.And we have that ability to do it. This whole generative AI area, which is fascinating, we’ve had our people sort of out in California meeting with a lot of the people involved in the whole AI area funding College of Computing at MIT and AI ethics area in Oxford.And so we have a very unusual network here.
Commercial of the firm of knowing what’s going on. And I was with somebody last night who involved in this sector — outside of the Blackstone [indiscernible] call just a dramatic increases in our efforts [indiscernible] that kind of power applied to databases but very important outcomes in some of these large language models will be erratic for a while.But as this is applied, for example, individual businesses of their own — generate over time of those databases. The [indiscernible] is one of the risks of large databases. You’ll be able to do really very, very unusual things analytically on that model, which most people don’t do that. So strap yourself in on this one. Next question, please, Katie.Operator Thank you. We’ll go next to Ken Worthington with JPMorgan.Ken Worthington Hi. Good morning.
Thanks for taking the question. I’d like to focus on BREDS. The pace of inflows has really picked up over the last two quarters. I assume helped in part by your insurance relationships. So maybe first, how is demand for BREDS developing from your non-insurance clients? Secondly, how are commercial real estate conditions impacting the size of the addressable market for BREDS from the investment perspective? And then lastly, deployment remains very light similar to the other parts of your real estate business. Can you share the outlook for deployment for BREDS? And are the factors impacting deployment any different from core or opportunistic real estate?Jon Gray Well, I think our real estate debt business has a really great spot today. Banks are quite focused on CRE exposure shareholders, regulators, and that is leading to a pullback.
So if you have fresh capital to deploy in that area, I think, it’s quite positive. It can be on the new origination side in our latest BREDS fund, which we’re in the process of raising.It can also be in liquid real estate securities, debt securities where people are just cautious and trying to reduce exposure. We talked here at the beginning of the call about the massive differentiation across real estate. And now at times you see people just pulling back regardless of the sector they’re exposed to.So I think the opportunity in real estate debt will come first. And I think it’s a very favourable time to be a lender in that space. Obviously the office sector in the US is the one cautionary area where there’s more exposure, although debt loan to value levels were much lower than they were in the last downturn.I think overall the opportunity exists here with insurance clients and with regular way institutional clients.
We’re going to continue to pursue it broadly. It’s one of the great things about Blackstone is we have so many different engines out there. In real estate, we not only have this equity business, we have a very big real estate debt business, which alone is $60 billion in most firms, that would be quite sizable.But inside our nearly trillion dollars, it doesn’t get a lot of attention. But I do think it’s an area of growth for us. I think we’re obviously raising the next drawdown. And for the insurance clients and institutional clients in more liquid areas, I think there’s a lot of opportunity.Ken Worthington Great. Thank you.Operator We’ll go next to Brian Bedell with Deutsche Bank.Brian Bedell Great. Thanks. Good morning, folks. Maybe just to pivot to BREIT.
Jon, you talked about the potential for mark-to-market improvements in rent. How would you think that kind of layers through over the course of the year? I mean, obviously, the hedge on the long bond hurt a little bit in the first quarter. But as we move through the year, are you optimistic that performance profile will improve? And as investors think about the redemption request, do you think it will be more of a factor of overall risk of appetite in the market or do you think the BREIT investors will see that performance improvement potential and therefore even reduce those redemption requests and potentially turn this product net flow positive later this year?Jon Gray Well, ultimately, Brian, it’s performance that matters. And I think what’s remarkable, there’s a lot of attention, as you know, on the redemptions.
What’s quite remarkable is that in the first quarter, we saw 9% estimated same-store cash flow growth against this very large $100 billion plus portfolio of commercial real estate.And it speaks to the positioning of the fund, our exposure in rental housing, not just traditional rental housing, but also in single family rentals, in student housing where there’s real strength. It’s the logistics where you have this big mark-to-market. We have some hotel exposure and one area we haven’t talked a lot about, BREIT has a data center business that is doing extraordinarily well.And we believe that the positioning of BREIT in those sectors and its focus on the Sunbelt, again, the fact that we chose to invest most of this in the Sunbelt in places like Texas and Florida is a real difference maker.
And we think as you look over time, that’s what really matters here.Now, as you look forward, what’s going to impact the redemptions? I think it’s a combination. I think it will be multiple months of positive performance. We’ll show people and give them confidence as well as volatility in the marketplace coming down. Right now, we’re seeing investors cautious really towards all equity vehicles.And we’re seeing something better in terms of flows today in BCRED, because investors are more open to the debt business. But we think this is just a question of time. If we deliver, given the portfolio we built, the structure we’ve got here, this is working for investors, as we’ve talked about, 12% since inception, triple the public REIT index. That’s ultimately what matters.
The portfolio positioning, what’s matters, and then as that performance shows up, as markets become a little less volatile then I think you’ll see a resumption of more positive flows here.Steve Schwarzman One thing that John mentioned was data centers. And we own one of the largest data center companies in the world. The growth in that area as a result of the changes with AI are going to be really, really substantial. The need for data centers is going to escalate. And I point that out just as an area of competitive advantage for us in our funds.Brian Bedell Great. Thank you for all that color.Operator We’ll take our next question from Alex Blostein with Goldman Sachs.Alex Blostein Hey, guys. Good morning. Thanks for the question. So I was hoping we could expand the credit discussion a little broader to sort of all things private lending in prior periods of dislocation, Blackstone really used it as an opportunity to sort of build out new businesses.
And direct lending has been going there in that direction for a while. CRE, as we talked about, looks interesting. But what else is out there that you think is currently performed by the banks that could fit the private model? Where do you see the biggest kind of disconnect between supply and demand? And maybe talk a little bit about your ability to raise capital around those initiatives.Jon Gray Great question, Alex. I would say the asset backed area is the greatest area of opportunity today beyond what we’ve talked about in direct lending to corporates as well as commercial real estate. The regional banks generally play a very large role in home improvement loans and auto loans, equipment, finance. Those are all areas of opportunities.I’d also say NAV lending to funds is another area in the asset backed space.
We see a lot of opportunity and what’s happening today is there are banks out there who have very good relationships with borrowers who want to continue to generate this flow and we can be a long term partner to them and take a share of that flow.And we’re in a number of discussions. And I think what you’ll see here is some potentially funds, but a lot of more targeted SMAs, particularly with insurance clients and I think also with some of our traditional pension clients. And what’s happening here is the private equity and alternatives business started in the equity space taking money out of public equity allocations.I think the opportunity today is in fixed income to convince institutional investors to take a little less liquidity and to partner with somebody like us.
So I think you could see this with our large institutional clients scaling up quite a bit and certainly in the insurance arena. And that’s why we said we really think it’s a golden moment for private credit.Alex Blostein Great. Thanks for that.Operator Thanks. We’ll go next to Finian O’Shea with Wells Fargo.Finian O’Shea Hi, everyone. Good morning. A question on the growth opportunity in retail. Can you talkabout the competition with cash and how you’re positioning products for success against higher money market yields? Thank you.Jon Gray Well, what I’d say is in our drawdown funds that we sell, we’re obviously targeting much higher returns. So there there’s less of an issue. If you look again at what we produced in our private credit vehicle BCRED.
