Romney made Schwarzman 16x his money in first Blackstone deal


Bloomberg Television Exclusive: Blackstone’s Steve Schwarzman spoke to Bloomberg TV’s Cristina Alesci about his endorsement of Mitt Romney, the European debt crisis and investment opportunities.

Play Quizzes 4

Schwarzman told Bloomberg that Blackstone’s first investment in 1985 was a joint deal with Romney, which helped the firm earn “16 times profit” and “in finance, that’s a way to make friends.”

Video and Transcript below:

Growing Up In The Fund Management Business: This PM’s First Stock Was A Value Stock

Invest ESG Leon CoopermanWhen portfolio managers get started in the business, their investing style often changes over the years. However, when Will Nasgovitz bought his first stock when he was 12, he was already zeroing in on value investing, and he didn't even know it. Nasgovitz has been with mutual fund manager Heartland Advisors for almost 20 years, Read More

Schwarzman on hosting a Romney fundraiser:


“First of all, this is a personal choice. From a corporate perspective, we have a lot of Democrats at the firm and my partner, Tony James, has been a supporter of the president. This is my choice, not a Blackstone choice.”


“When we started Blackstone in 1985, the first investment we made in private equity was a joint deal with Mitt Romney at Bain. This turned out to be a marvelously successful deal with a profit of a company making aluminum wheels which expanded very rapidly. We made about 16 times profit. The second deal we did, Mitt led that one – we did that deal at Blackstone and we invited him to be the minority partner and we made 24 times our money. In finance, that’s a way to make friends.”


On what makes Mitt Romney a good presidential candidate:


“In terms of being good for the country, he is very smart. He’s great in a crisis. He’s direct. He can deal with problems as they actually occur. He is a natural leader and he is accessible. He listens to what you say.”


On what he’s telling Romney about what needs to be done in Washington:


“We had a nice meeting about three weeks ago for an hour. What I tell him stays with me. But I am not shy.”


On whether Schwarzman is willing to pay higher taxes:


“I think almost everyone would be willing to do something if everybody is doing something. Part of our responsibility, whether we are successful or somewhat less successful in the country, is to get the country moving.”


“We have a system today in the United States were 45% of Americans don’t pay any income tax…You have to have skin in the game. The issue isn’t the amount, it’s the concept that we are all in this together, solving problems together. I can’t micromanage what anybody pays or doesn’t pay. But the concept that half of the public isn’t involved with the income-tax system is somewhat odd and I’m not saying how much people should do, but we should all be part of the system.”


On central banks efforts to lower the cost of dollar funding for European banks:


“I think something needed to be done. The European banks actually contribute about 25% of lending in the United States. They were having great difficulty with U.S. money funds not lending money to European banks and people basically pulling away from these European banks. They just weren’t getting dollars to recycle back. Generally, there has been a real constriction of credit within the European community and the banking system. That has to be addressed because if you grind lending to a halt, a variety of predictable and bad things happen throughout not just the euro zone but around the world.”


On whether the Fed should buy European bonds:


“I don’t know that the Fed is prepared for that, but they already set up the swap line…I think that is probably more of a role for the European Central Bank than for the Fed. Probably not going to happen.”


“I think it is clear there needs to be some type of European solution. I think the rest of the world is prepared to be supportive if it looks like a European solution is actually going to work and the Europeans will put up a lot of money to make it happen. There are a variety of different approaches to that. They all end up leading back to Germany, they lead back to some type of some type of fiscal union. A stronger amount of capital for their rescue fund than they currently have. You have to do that with 17 countries coming to the table to agree.  In the United States, we have trouble getting one country to do difficult things and the bar is that much higher in Europe. This is a game being played out very actively. As credit has been restricted in Europe, this presents very difficult choices for the Europeans.”


On where Blackstone is investing in Europe:


“There are a variety of different places in Europe where you can invest. We have been putting good-sized money into the U.K. through purchases of distressed real estate. We are also looking on the continent. We have bought companies of for the first time in many years at much lower valuations. We look at Europe as fundamentally an opportunity for us, particularly as the Europeans themselves become more and more concerned about the future there. But it’s not investing that is free from doubt. Europe has been around for a thousand years. Not the European Union, the euro, but buying really good assets at cheap prices that have fundamental values when others are scared tends to have worked out for us in the long term….We will be putting more money into Europe.”


On the industries Blackstone is focused on:


“We have that $33 billion spread in private equity, in real estate and in our credit businesses, as well as in the hedge fund area to start new hedge funds. We are rapidly putting this to work in real estate, and in credit and in that hedge fund area. A little slower in private equity, but each of these areas is pushing ahead pretty rapidly…[Private equity is slower for]

no particular reason other than there is a little less for sale.  What happens when prices go down is that sellers don’t like to sell.”


On whether financing in private equity right now given the European crisis:


“Because the markets are so volatile, the answer is it depends on the day. There are certain days of the week where financing for a $5 billion equity deal at good pricing is very achievable. The next week, that $5 billion may be reduced to $3 billion….it doesn’t make it that hard, but part of it is access to credit. Who gets access to credit. Whenever credit is more constrained, it is extended to someone. The key is to be that someone. We’re not speaking for the whole system. If we can get money for our activities in the U.S. and Europe where money is much tighter, then we can buy things when many other people cannot get to that table. It’s a real competitive advantage for our investors.”

Updated on

No posts to display