Steven Schwartzman's concerns and the future of Private Equity.

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"Stephen Schwartzman is without a doubt a brilliant man. However his frustration with the valuation of his Blackstone Group is well founded.
   Gone are the days of low hanging fruit in the Private Equity space. The combination of more stringent regulations, increased competition and a burgeoning stricter tax code creates a situation where previous profits are almost impossible to match.
More profoundly, the advent of the exchange traded fund is an absolute nightmare for the hedge fund and private equity industry. How can a Fiduciary justify plowing capital at a 20%+ fee when the same risk reward parameters are available for pennies on the dollar and instant liquidity. It would be unconscionable to place your investor and any other scenario.
   So where is the future for companies like Blackstone and large hedge funds? To be perfectly honest it would behoove these successful giants to fold their assets into more tradeable, homogenized funds. This would also monetize the branding that they have created. Their considerable, and clever marketing muscle can then pay renewed dividends. In this way they can preserve their current asset base and protect it from future erosion. Moving forward they could use their talent base in designing more retail oriented offerings.in effect they would be embracing today’s technologically oriented atmosphere. This will appeal to future generations of investors.
 The situation facing Wall Street is not unlike what the retail industry went through back in the 1940s. Supermarkets and large chains pushed out mom-and-pop stores. The ability to evolve and respond to that challenge created the retail giants that exist today. The future of Wall Street is low margin and liquidity. Only those willing to risk their own capital and innovate will succeed. The market is telling Mr. Schwartzman that, and has an astute businessman he should be able to see that for himself.:

The SmartGuy

Link to article below:

http://www.nytimes.com/2015/09/06/business/dealbook/stephen-schwarzman-of-blackstone-feels-the-agony-of-victory.html?hpw&rref=business&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well&_r=0

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