It used to be the case that the more genteel private equity houses shunned all the other animals in the market zoo. The only time a private equity portfolio manager was likely to bump into someone from a bulge-bracket bank was when one of the firm's portfolio companies was filing for a public listing. Even then, the relationship was cordial at best.
Blackstone seems to be turning that convention on its head. As it tries to figure out ways to grow in a time when conglomerates are too strapped-for-cash to offer much in the way of trade sales, and the IPO market is hardly booming (although that might soon change), this private equity giant increasingly resembles a Wall Street investment bank.
Among its peers, Blackstone has always been the black swan of the pack. When the firm announced two years ago that it was raising $4 billion in an IPO, the financial community shuddered with shock and a tinge of fear. Never before had a private equity house of that size been so bold as to enter the same pit as the greedy banks.
Blackstone's latest unconventional move, the hiring of former Morgan Stanley investment strategist Byron Wien, illustrates just how much it wants a piece of the bigger pie.
At 76, Wien is one of those ultra-competitive, hyper-aggressive, in-it-for-the-pure-love-of-it types of investment bankers. Commenting on the move to Blackstone from his former employer Piquot Capital -- which is engaged in the throes of a scandal right now -- he said: "When you are my age if you are not right, people don't think you are merely wrong, they think you have lost it."
According to the Financial Times, in his new capacity as vice chairman, Wien will produce a newsletter and be around to brief clients. What's notable is how sales-like those duties sound. Anyone who has ever had the humbling experience of dealing with a large private equity house before will most likely tell you that client services are not high on the firm's agenda.
So far, Blackstone has reaped the rewards of building a strong advisory business. Fees generated by the firm's bankruptcy restructuring division accounted for $21.3 million of the $406.4 million second quarter revenue, which rose despite a net loss. It is also the client services components of the business that arguably led to an upgrade from Fitch Ratings on the firm's debt. "Additional support for the ratings are based on Blackstone's position as a leading diversified alternative investment manager," Fitch said in a statement.
By gearing much of its focus with a "close to the customer" approach, Fitch said that Blackstone's investor base was more redemption-proof than those of other private equity asset managers.
As if to prove that point, Blackstone subsidiary Blackstone Holdings Finance is soon to issue its first ever bond auction, according to The Wall Street Journal. The firm hopes to raise a minimum of $500 million for "general corporate purposes," which seems an alarmingly vague activity for such a sizeable sum.
Still, with gunslinger Wien on board, you can expect a flurry of these types of issues coming out of Blackstone in the near future.