THE CHAIRMAN of global private equity giant Blackstone says Irish investors have benefited from property but should consider diversifying into other asset classes such as hedge funds and managed fund-to-fund products.
Stephen Schwarzman, who received more than $4.77 billion in shares from Blackstone's flotation last year, said managed fund products and hedge funds were a way to "stay rich and not get rich".
Speaking to The Irish Timesduring a visit yesterday to Davy Private Clients, a long-time investor with Blackstone, Mr Schwarzman praised the Irish economic story.
"It has been an amazing run for Ireland generally over the last 20 years. It shows what happens when you have wise tax policies which attract industry and stimulate the local economy. Ireland is viewed as a triumph from a global perspective. A lot of tax incentives were geared to real estate and people took advantage of them."
He said the global financial crisis was creating investments with "very advantageous pricing" for private equity groups.
He pointed to Blackstone's interest in $12 billion worth of leveraged loans - which are used to finance private equity transactions - that Citigroup is planning to sell at a discount to private equity groups.
"We believe that that type of approach - to invest at this stage in the cycle - will give us very good returns. The leverage comes from the seller as opposed to us going to third parties and that is just the first of many different opportunities that will be available."
Blackstone acquired GSO, a hedge fund which specialises in debt and leveraged finance, last January for $930 million to identify potential investment opportunities as banks reduce lending and troubled companies seek finance.
Mr Schwarzman said the decision by the US Federal Reserve to protect Bear Stearns was "a first major step" in alleviating the financial crisis because it injected "a very large amount of confidence into the global financial system".
"There are more losses to come, but I think there will be less fear coming with more losses," Mr Schwarzman said.
"You have probably had the worst in financial markets with the optimism there, but there may be an unwanted and nasty surprise when the results from the real world start coming through with lower earnings for companies and higher unemployment."
Mr Schwarzman, who co-founded Blackstone with assets of only $400,000 in 1985, said the group was now the world's largest hotel owner and the largest owner of office buildings in the US.
Explaining how he had grown Blackstone into a business with managed assets of $100 billion, he said: "First, you don't sleep much. Second, you worry all the time. Third, you find businesses where there is enormous growth potential and you try to design very high-margin products."
He said Blackstone was very active in hedge funds - "a very rapidly growing class" - fund placements, and mergers and acquisitions of struggling companies.
