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Blackstone's Schwarzman cautions against shift in taxes, rates

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Stephen Schwarzman, chief executive officer of Blackstone Group LP, said a dramatic change in tax policy under Democratic lawmakers or a rise in interest rates by the Federal Reserve could be a shock to the economy.

“If there’s dramatic change in the tax area, if the Democrats win, that would be a disincentive,” Schwarzman said on Bloomberg Television from the Milken Institute Global Conference in Los Angeles. Some policies that Democratic candidates for president are talking about could slow the economy, he said.

While he said higher rates would also be a drag on the economy, the CEO doesn’t see the Fed raising rates at the wrong time.

“I tend to think the people there are not in the business of making mistakes,” he said. “The Fed is the guardian of the system, they’re not the enemy of the system.”

Blackstone, the world’s biggest alternative asset manager, announced earlier this month that it plans to convert to a corporation from a publicly traded partnership. The firm is trying to reach a much broader investor based by opening the stock to inclusion in indexes.

Schwarzman said in the interview that his firm’s planned C-corp conversion has already benefited its stock price.

The New York-based firm has epitomized the industry’s fundraising muscle. Its assets under management crossed half a trillion, to $512 billion, for the first time last quarter.

The CEO also said investors are concerned about the high price of deals but are continuing to allocate to the asset class because of Blackstone’s track record.

“The alternative class, private equity, real estate and credit has done so well for these investors over very long periods of time they are content to increase their allocations," he said. “It’s a time you need a little more caution for investing than when prices are lower.”

In China, central bank stimulus has placed the economy on solid ground, Schwarzman said. The firm just bought a company in the country and is looking to invest in real estate there, he said.

“China has stimulated their economy like they said they would," he said. “China’s economy looks pretty solid in 6 percent growth.”

Bloomberg News
Private equity firms Blackstone