Top Blackstone Group executives are trying to mend relationships with some of their most stalwart investors — public pension funds — just when the company is trying to complete a two-year effort to raise $22 billion for two funds.
The Blackstone executives have been called on the carpet by some clients who are fuming at comments made by Byron R. Wien, vice chairman, Blackstone Advisory Partners LP, Blackstone's global advisory business.
During a Jan. 5 webcast with Blackstone clients, Mr. Wien answered a question about government deficits by saying, in part: “The retirement benefits for state workers, really not only in New York, California and New Jersey, but throughout the country, are very generous. Too generous. And it is very hard to change that. ... But I think we have to be more realistic. We literally can't afford the benefits we have given our retirees in state and local governments. And we have to change that.”
Mr. Wien, a well-known, veteran investment strategist, announced his annual predictions, called “Ten surprises of 2010,” on the webcast.
About a month later, Pensions & Investments published a letter to the editor from Steve Cochrane, who at the time was executive director and chief investment officer of the $3 billion North Dakota State Investment Board, Bismarck. In his letter, Mr. Cochrane recounted Mr. Wien's comments and said that if North Dakota were a Blackstone client, “I would choke on my next fee payment to The Blackstone Group.” (Mr. Cochrane died in April.)
It took a few months for the backlash to hit; Blackstone spokesman Peter Rose said executives there began receiving inquiries from a few public pension fund clients in late April or early May about Mr. Wien's comments.
Keith Bozarth, executive director at the $78.1 billion State of Wisconsin Investment Board, Madison, said SWIB officials contacted Blackstone executives ahead of a board meeting last week at which Mr. Wien spoke on broad economic and investment issues.
“Because there had been some coverage of a comment Byron made about public employee benefit levels, we did take the opportunity to let Blackstone know in advance that Wisconsin's plan is designed somewhat differently than most plans and that it is better positioned than most to weather the current market travails,” Mr. Bozarth said in an e-mail in response to questions.
“We thought it important for Byron to understand the variation among plans and the specifics of the (Wisconsin system) before he spoke.”
SWIB has committed $100 million to Blackstone's GSO Capital Opportunities Fund LP.