Schwarzman: This is Why Blackstone is Successful

The alternative investment giant's 2014 report is long on records, achievement and dry powder... if short on modesty.

Stephen Schwarzman, Blackstone’s co-founder and CEO, credits having a long-term perspective with propelling his firm to become the most profitable asset manager in the world.

The private equity tycoon outlined Blackstone’s 2014 performance and his expectations for the future in his annual chairman’s letter, seen by CIO.

“Practicing the art of the long view has enabled us to outperform across the broad spectrum of alternative asset classes for three decades.” —Stephen Schwarzman

The New York-based firm enjoyed strong inflows and investment appreciation, pushing its total assets to a new high of $290 billion.

Its private equity and real estate funds were up 21.6% and 20.9% respectively for 2014. The hedge fund business had a 7% gross return, Schwarzman wrote, with only a third of the volatility of public equity markets.

“Practicing the art of the long view has enabled us to outperform across the broad spectrum of alternative asset classes for three decades,” the CEO said. “This approach has distanced Blackstone from competitors that cannot match our scale, depth of talent, or record.”

Blackstone deployed a record capital of $26 billion last year, nearly half of which was invested outside North America, Schwarzman said. The firm also raised $57 billion in 2014, he boasted, and had one of the largest pools of dry powder among private equity firms “allowing us to move quickly and decisively to take advantage of the investment opportunities around the world on a large scale.”

Data firm Preqin has taken a different view of high levels of dry powder in the industry, warning that it may hinder the sector’s performance this year.

The firm announced on Monday it had purchased Chicago’s Willis Tower—formerly known as Sears Tower—for $1.3 billion. The price was a record for a Chicago office building and Blackstone said it planned to upgrade the 110-story skyscraper “to really make this more of a comprehensive tourist attraction.”

Schwarzman also emphasized Blackstone’s long-term view in developing its in-house talent and said its ability to deploy its best people to lead the success of new programs provided “a great career path for exceptionally talented younger professionals.”

According to a 2014 survey conducted by career research firm Vault, Blackstone topped the overall ranking of North America banks as the “most prestigious program for budding investment bankers.”

The firm also scored in the top five in quality of life, firm leadership, and business outlook, by nearly 3,600 banking professionals.

Schwarzman benefited from the firm’s success in 2014 and took home about $690 million—a jump from his $450 million pay in 2013. According to regulatory filings, the amount largely consisted of dividends and profit from personal investments in Blackstone funds.

Related Content: On Schwarzman, Blackstone Tops Wall St. Peer Rankings, Private Equity’s Most Consistent Performers

By Sage Um