Schwarzman Talks About Blackstone Succession And Tony James

Blackstone’s first investor day has ended and everyone has left to have cocktails. Here are some interesting tidbits:

No one asked about management succession but Stephen Schwarzman, at the end of the last session, talked about it anyway. The Blackstone CEO addressed fears that if one person left it would have a catastrophic effect on the buyout shop.

Schwarzman singled out Tony James, Blackstone’s president, who was seated next to him and is his named successor. James is a “remarkable investor, and manager, and he inspires enormous loyalty. He does a great job and a is great recruiter. We are very fortunate at the firm,” Schwarzman says. However, the Blackstone CEO also noted that there are lots of people at the firm who are very talented and have run other organizations. “In that area…we are in very good shape in that regard,” he said.

James, during the Q&A, said that there was “no pressure to give capital back nor in my view any reason to.” Blackstone has tried to point out to some LPs that some of what they are asking for isn’t internally consistent, James said. “We offered our LPs an 80/20 split. I believe we will find that most of them don’t choose that…they will have to pay a slightly greater management fee.”

James didn’t address what Blackstone would do with the $400 million the firm raised selling debt last week. However, James said it was unlikely the PE shop would blow it on a “big acquisition.” “We do have potential uses for it,” he said. “Generally speaking, there are several things we might do that would take $100 to $200 million of cash.”

James was also asked about changes to carried interest and, if I heard right, if he would object to it. “I think all employees in the private equity industry are overpaid. So, no.”