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

Steinbrugge: Top 10 Hedge Fund Industry Trends for 2017

Jan 3 2017 | 9:03pm ET

Each year, Agecroft Partners' Don Steinbrugge predicts the top hedge fund industry...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

DarcMatter: The Top Trends in Alternative Investments for 2017

Jan 13 2017 | 8:22pm ET

The $7 trillion alternative investments industry is poised for continued growth...

 

From the current issue of

Securities and Exchange Commission Chair Mary Jo White will step down as chair of the nation’s Wall Street overseer in January, setting the stage for a potential conservative shift in the regulator’s leadership under the incoming Donald Trump administration.