Blackstone CEO Regrets 'Heroic Mistake' Of Selling BlackRock

Oct 1 2013 | 10:27am ET

In retrospect, Blackstone Group CEO Stephen Schwarzman thinks it was a bad idea to sell the business that became BlackRock—and the world's largest money manager.

Blackstone sold its 35% stake in the future BlackRock 19 years ago amidst a dispute between Schwarzman and the head of the then-Blackstone Financial Management, Laurence Fink. The deal netted Blackstone $240 million; a 35% stake in BlackRock is now worth more than $16 billion. Schwarzman himself took home $25 million 19 years ago; today his 9% stake would be worth more than $4 billion.

"That was certainly a heroic mistake," Schwarzman told Arthur Levitt on Bloomberg Radio, in an interview that will air on Sunday. "We all stumble on and have some success. But it's a humbling experience to see what you don't do right."

Blackstone created what became BlackRock in 1988, providing Fink and his First Boston Corp. team a $5 million credit line in exchange for a 50% stake in the new mortgage-securities unit. But as the group continued to grow, with assets hitting $2.7 billion in less than a year, Fink continued to award shares to new hires, diluting Blackstone's stake to 35% by 1992.

Schwarzman objected to further reducing Blackstone's stake, and eventually gave in to Fink's demands that he sell it. PNC Bank bought Blackstone's stake in June 1994.

BlackRock now manages $3.86 trillion and is worth $46 billion. Blackstone manages just $230 million and has a market capitalization of $28 billion.

In Depth

The Importance of Stability in the Evolving Hedge Fund Administration Market

Oct 5 2015 | 8:17pm ET

Hedge fund administration has evolved from simple record keeping to an integral,...


Citadel Supports Manhattan Real Estate With Record Deal

Sep 16 2015 | 3:04pm ET

Never count hedge funds out of a big property deal. The Manhattan real estate market...

Guest Contributor

Hedge Fund Marketing To Independent RIA Firms

Sep 30 2015 | 1:56pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth Inc. explains...


Editor's Note

Upcoming Events