Schwarzman Says Selling BlackRock Was ‘Heroic’ Mistake
September 30, 2013 Leave a comment
Schwarzman Says Selling BlackRock Was ‘Heroic’ Mistake
Steve Schwarzman said his decision 19 years ago to sell what would become the world’s largest money manager was a “heroic” mistake. Schwarzman, who runs Blackstone Group LP (BX), the largest manager of alternative investments such as private equity, in 1994 sold a mortgage-securities unit with $23 billion in assets to PNC Bank Corp. for $240 million. Schwarzman, Blackstone’s co-founder, had disagreed with the group’s leader, Laurence Fink, over methods of compensation, and the men parted ways. The unit, which traded mortgages and other fixed-income assets, changed its name from Blackstone Financial Management to BlackRock Financial Management.“That was certainly a heroic mistake,” Schwarzman, chairman and chief executive officer of New York-based Blackstone, said in an interview with Arthur Levitt airing on Bloomberg Radio on Oct. 6. “We all stumble on and have some success. But it’s a humbling experience to see what you don’t do right.”
Today, BlackRock Inc. (BLK), which Fink leads as chairman and CEO, is the world’s largest money manager, overseeing $3.86 trillion in assets, dwarfing Blackstone’s $230 billion. It has a market value of $46 billion, compared with Blackstone’s $28 billion.
Schwarzman, who is ranked 137th on the Bloomberg Billionaires Index with a net worth of $8.8 billion, personally had a stake of more than 9 percent in the business when it was sold, which would be worth more than $4 billion at the New York-based company’s current market capitalization.
‘Biggest Issue’
Levitt, who interviewed Schwarzman, 66, in two parts at Bloomberg’s headquarters in New York, is a director of Bloomberg LP, parent of Bloomberg News. He was the longest-serving chairman of the U.S. Securities and Exchange Commission, leading the SEC from 1993 to 2001.
Asked what worries him most in the current environment, Schwarzman said dysfunction in the U.S. government, such as disagreements between and within the White House and Congress regarding debt, health care and taxes, hinders all businesses.
“It’s now become almost structural uncertainty,” Schwarzman said in the first part of the interview, which aired yesterday. “The biggest issue that worries me is just overall effective functioning of the U.S. government. The periodic crises and dysfunction in Washington creates problems for all of us.”
To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net
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