Steven Schwarzman sold Blackstone’s $23bn mortgage-securities unit in 1994 to PNC Bank for $240m following a disagreement with group head Laurence Fink over compensation methods, according to Bloomberg.
That unit has since become the $3.86tn-managing BlackRock Financial Management, which dwarfs Blackstone’s own impressive $230bn under management.
Schwarzman told Bloomberg Radio, “That was certainly a heroic mistake.
“We all stumble on and have some success. But it’s a humbling experience to see what you don’t do right.”
BlackRock currently has a market value of about $46bn, almost double Blackstone’s own $28bn value.
But it is not all bad news for Schwarzman, who held a personal stake of more than nine per cent in the business when it was sold.
That stake would be worth more than $4bn at today’s market capitalisation.
Asked what worries him most in the current environment, Schwarzman told Bloomberg that is was dysfunction in the US government, such as disagreements between and within the White House and Congress regarding debt, health care and taxes, hinders all businesses.
He said, “It’s now become almost structural uncertainty.
“The biggest issue that worries me is just overall effective functioning of the US government. The periodic crises and dysfunction in Washington creates problems for all of us.”
In July BlackRock managing director Nathalie von Niederhaeusern told AltAssets that it was currently a seller’s market in private equity, with firms finding it easier to exit investments than make new deals and raise funds.
Exits have been at the highest level in four years, von Niederhaeusern said, with IPOs becoming “more and more popular” in the US and well as in Europe.
She added that the flip side was that “a seller’s market was not a buyer’s market”, and there had been a decline in investment in the first half of the year.
She said, “Deals take longer (to make), the public market has driven up valuations and that’s holding back transactions.”
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