Steve Schwarzman said his decision 19 years ago to sell what would become the world’s largest money manager was a “heroic” mistake.
Mr. Schwarzman, who runs Blackstone Group LP, the largest manager of alternative investments such as private equity, in 1994 sold a mortgage-securities unit with $23 billion in assets to PNC Bank Corp. for $240 million.
Mr. Schwarzman, Blackstone’s co-founder, had disagreed with the group’s leader, Laurence Fink, over methods of compensation, and the men parted ways. The unit, which traded mortgages and other fixed-income assets, changed its name from Blackstone Financial Management to BlackRock (BLK) Financial Management.
“That was certainly a heroic mistake,” Mr. Schwarzman, chairman and chief executive officer of New York-based Blackstone, said in an interview. “We all stumble on and have some success. But it’s a humbling experience to see what you don’t do right.”
Today, BlackRock Inc. (BLK), which Mr. Fink leads as chairman and CEO, is the world’s largest money manager, overseeing $3.86 trillion in assets, dwarfing Blackstone’s $230 billion. It has a market value of $46 billion, compared with Blackstone’s $28 billion.
Mr. Schwarzman, who is ranked 137th on the Bloomberg Billionaires Index with a net worth of $8.8 billion, personally had a stake of more than 9% in the business when it was sold, which would be worth more than $4 billion at the New York-based company’s current market capitalization.