KKR, Carlyle… all eyes turn to Blackstone’s succession

Two industry giants have unveiled details of their transitions from founder control to the next generation. Will Blackstone’s Schwarzman be next?

Carlyle has done it. KKR has done it (sort of). But Blackstone has yet to pull the trigger on announcing its succession plan.

It’s difficult to imagine a firm of Blackstone’s size and stature not having a carefully crafted succession plan. Arguably the firm began the process back in 2004 when co-founder and CEO Stephen Schwarzman handed over the role of president to Tony James (who is now also chief operating officer), and there is already new leadership in its private equity and real estate arms.

One of the firm’s co-founders, Pete Peterson, retired in 2008, but 70-year-old Schwarzman, who remains chairman and CEO, shows no signs of going anywhere.

If Schwarzman were to step back, who would fill his shoes?

Top of mind for many in the industry is global head of real estate Jon Gray. He’s been with the firm since 1992 and helped to build out the largest real estate platform in the world, with $111 billion in investor capital under management. That’s more than a quarter of the firm’s total AUM. He was elected to the firm’s board of directors in 2012, and also sits on the firm’s management committee.

Last November Gray turned down the opportunity to become US Treasury Secretary, saying in a statement that he still has “much work to do at Blackstone”. Could that include leading the firm?

Former deal guy-turned chief financial officer Michael Chae is another strong contender. Chae started his career as a private equity investor in the 1990s, first at Carlyle for around a year, and then at Blackstone in the late 1990s after attending law school. At the end of 2010 he was despatched to Hong Kong to lead the business there, and was named CFO the year after his return to the US, replacing Laurence Tosi who had left in the summer of 2015 to join Airbnb.

“Michael has a great knack for both seeing the big picture clearly but also being very detail-oriented,” Tony James told Private Equity International in a recent interview. “He is strategic, but also makes sure every ‘i’ is dotted and every ‘t’ is crossed. You want your CFO to have those two skills.”

Another possibility is Bennett Goodman, who founded credit business GSO Capital Partners alongside Tripp Smith. GSO was acquired by Blackstone in 2008 and oversees more than $93 billion in various direct lending strategies, leveraged loan vehicles and distressed investment funds. Goodman was appointed to the board of directors in 2015 following strong growth and performance at GSO.

“Bennett heads one of our largest and best performing businesses,” Schwarzman said in a statement at the time. “His deep knowledge of markets and critical thinking about companies, institutions and economies has been invaluable to the management committee as the firm has expanded into new geographies and businesses and set a strategic direction.”

Or could it be Joan Solotar, who heads the firm’s private wealth solutions business, which develops and distributes products and services aimed at institutional and high net worth clients? Perhaps less well-known than some of the other contenders, Solotar’s division is a key part of the firm’s future plans.

In the firm’s third-quarter earnings call last week, Schwarzman said Blackstone has been working with family offices, wire houses, private banks, broker-dealers and independent registered advisors to reach individual investors with net worth of $5 million and under.

“These channel investors by and large have been under-allocated to alternatives in their portfolios, some dramatically,” he said. “We’re helping them access institutional-quality products, in many cases for the first time.”

The retail platform represented 18 percent of the firm’s total $387.4 billion assets under management at the end of the third quarter.

Another Blackstone long-timer is David Blitzer, senior managing director and head of the tactical opportunities group, the firm’s most flexible and nimble investment platform. Blitzer has been with the firm since 1991 and established its corporate private equity efforts in Europe.

A relative newcomer to the firm, David Calhoun, senior managing director and head of private equity portfolio operations, could also be in the running. Calhoun – who first became involved with Blackstone through his role as CEO of portfolio company Nielsen Holdings – joined the firm in 2014 and oversees a team focused on creating and driving added value initiatives at portfolio companies. He’s also a member of the firm’s management committee.

And what of Joe Baratta, global head of private equity? A near-two decade veteran of the firm who helped established its European private equity business alongside then-head of Europe Blitzer before returning to New York to head the firm’s buyout business, overseeing $102.5 billion in assets under management in the firm’s founding business line. Baratta was behind the firm’s successful investment in Merlin Entertainments Group, which effectively established the firm’s buy-and-build credentials.