Schwarzman: economic change driving fear of private equity(2)

Blackstone chairman and co-founder Stephen Schwarzman has spoken out in the industry’s defence, championing private equity as “a force for good”.

Stephen Schwarzman, chairman and co-founder of The Blackstone Group, has said he believes the demonisation of private equity is based on “myths and fears”, according to UK newspaper The Daily Telegraph.

I suspect that private equity’s current image amongst many people has been coloured by myths and fears that have more to do with anxiety about changes in the global economy and their own lives than with private equity itself

Stephen Schwarzman

“While there is a lot of attention now on private equity’s role, most of that attention has been unremittingly hostile, and, frankly, devoid of factual support,” Schwarzman said at a conference held by UK trade body the Confederation of British Industry. The speech was his first public appearance since Blackstone’s initial public offering in June.

“I suspect that private equity’s current image amongst many people has been coloured by myths and fears that have more to do with anxiety about changes in the global economy and their own lives than with private equity itself,” he said.

Schwarzman insisted private equity is “a force for good”.

He said two-thirds of growth in value at Blackstone’s portfolio companies has come from growing EBITDA and cited statistics indicating employment at private equity companies in the last five years had grown by 9 percent, against 1 to 2 percent at publicly held companies.

Schwarzman denied claims private equity was a short-term method of ownership. He said Blackstone typically holds investments for five-and-a-half years in contrast to the average holding period of FTSE shareholders of 10 months.

“We are not greedy speculators out to make a quick buck. Private equity does great things that benefit a great number of people,” Schwarzman said. “We take the tough unpopular decisions that other management teams dodge.”

Despite Schwarzman’s staunch defence of the industry, his public appearance was not universally applauded.

A senior UK mid-market buyout executive said at a separate event: “While it is great Schwarzman is making public appearances and singing the praises of the industry, you certainly wouldn’t have seen him at public events like these a year ago.”

The number of high-profile industry figures attending public events has swollen in response to public criticism of the asset class. The mid-market source said the PR offensive is desirable even if it had come “a little late”.

Schwarzman netted $419 million from Blackstone’s initial public offering in July, while also retaining a 24 percent stake in the company at the time of the float, according to an SEC filing.