Blackstone shares are now 11 percent above the IPO price, sending Schwarzman’s net worth up $784 million so far this year to $11.3 billion, according to the Bloomberg Billionaires Index.
Birthday Party
The industry-beating performance marks a turnaround for the private-equity firm, which went public in June 2007, four months after Schwarzman held a 60th-birthday party at the Park Avenue Armory in Manhattan that in conjunction with the IPO became symbols of the excesses of the last credit boom. As U.S. housing crashed in 2008 and mortgage losses fueled a global credit freeze, Blackstone’s stock plunged. Schwarzman publicly complained that analysts and investors weren’t valuing the stock correctly and in December called its return to $31 a “huge relief.”
Blackstone sold BlackRock, which was once its mortgage- securities unit, to PNC Bank Corp. in 1994. Schwarzman, Blackstone’s co-founder, had disagreed with the group’s leader, Fink, over methods of compensation.
“That was certainly a heroic mistake,” Schwarzman said last year.
Christine Anderson, a Blackstone spokeswoman; Randall Whitestone, a spokesman for Carlyle; and BlackRock spokesman Brian Beades declined to comment.
’Early Innings’
Private-equity firms pool money from investors to buy companies, manage them and then sell them for a profit in 10- year cycles. They typically keep 20 percent of profits from investments as a so-called carried interest on top of an annual management fee of 1 percent to 2 percent of committed funds.
Buyout firms’ earnings don’t follow a linear trajectory because they’re driven by the timing of exits as well as “mark- to-market” valuations of fund holdings, which are vulnerable to market swings. Managers of traditional stocks and bonds, which manage investment offerings such as mutual funds and exchange- traded funds, get most of their income from management fees, making earnings more stable.
“There’s still a lot more learning and understanding to be done by investors of how a private-equity firm operates,” Red Rocks’ Goldman said of investing in managers like Blackstone. “We’re making progress, but we’re probably still in the early innings.”