A Public Defense of Private Equity
- by Matthew Brodsky
David S. Blitzer, W’91, continued where his boss left off in defending the private-equity industry against the attacks it has faced during the Republican presidential primaries. He feels it is “quite dangerous” to allow people to continue to say things that are “completely incorrect,” he said during his keynote presentation at the Wharton Private Equity and Venture Capital Conference 2012.
Six to eight months ago, the Blackstone Group, according to Blitzer, who serves as its senior managing director, held a meeting with investors to warn them that 2012 would be a difficult year for the public relations of private equity. With presidential hopeful Mitt Romney leading the pack of Republicans, the alternative asset management firm expected that Democrats would attack Romney’s past experience as chief executive at Bain Capital.
The surprising thing, Blitzer said, is that the first salvos haven’t come from the incumbent’s camp but from Romney’s fellow Republicans, who have harped on the supposed job destruction that occurs when private equity buys companies as well as Romney’s tax-paying record.
Blackstone President Tony James came out publicly on Thursday, Feb. 2, decrying the industry’s treatment at the hands of Republicans. (See this article in the Financial Times.)
In downtown Philadelphia at the Wharton conference on the following Friday, Blitzer touched upon many reasons why private equity should be lauded, rather than criticized.
He mentioned the three oil refineries that Blackstone has invested in, including one in Delaware where a $670 million injection of capital will save thousands of jobs and tens of millions in tax revenue.
“Most people would not go after U.S. refineries with their enemy’s money,” he said.
The list of benefits includes growth capital for young companies and the capital to develop alternative energy sources around the world. More Americans have a stake in private equity than are probably aware, Blitzer added, citing how 23 million pensioners (nearly half of those in the United States) are invested in Blackrock. And companies bought by private-equity firms tend to generate higher profits, productivity and job growth than the overall market.
“We feel that private equity has an incredible role in the economy,” Blitzer told the audience of MBA students, faculty and practitioners.
The18th annual conference was organized by Wharton MBAs and featured sessions on distressed investing, emerging markets, leveraged buyouts, and investing in Europe and Asia. Visit the Wharton Flickr photostream to view images from the event.