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Funds News

Blackstone defends private equity role in business

LONDON (Reuters) - Stephen Schwarzman, founder of U.S. private equity firm Blackstone BX.N, defended on Monday his industry's often vilified role in the world, saying it built better companies and distributed wealth.

The Chief Executive of Blackstone, Stephen Schwarzman, attends the annual Confederation of British Industries (CBI) conference in Islington in central London, November 26, 2007. REUTERS/Toby Melville (BRITAIN)

Private equity firms have enjoyed exceptional growth over the past few years, thanks to abundant credit.

But they have drawn harsh criticism from unions, politicians and the public for stripping companies of their assets and burdening them with debt.

“We are viewed as a destructive force with a short-term perspective, levering companies and stripping their assets to enrich a few nasty people like me, who then don’t even pay taxes on all that they get in such an unsavory manner,” he told a conference.

“I suspect that private equity’s current image has been colored by myths and fears that have more to do with anxiety about changes in the global economy,” he told the annual event by the Confederation of British Industry.

Schwarzman said private equity firms were not open enough and had to communicate more to improve their public image.

Philip Yea, chief executive of British private equity firm 3i Group Plc III.L, echoed Schwarzman's views.

“There is an information gap that we need to fill, and fill positively,” Yea said.

Their defense came after a report commissioned by the industry said companies owned by private equity ought to provide a business review similar to that disclosed by listed companies.

The report said companies should disclose industry trends, information about employees, as well as details on risk management and uncertainties such as those relating to debt.

GIVING TO THE LITTLE GUY

Schwarzman said private equity was “giving the little guy -- via his or her pension fund -- 80 percent of the upside in wealth creation that has historically been the exclusive preserve of the Rockefellers and Mellons of the world”.

He said a net profit of more than $400 billion had been distributed from private equity funds raised since the early 1990s. “We are not greedy speculators out to make a quick buck.”

Schwarzman also said the industry was playing an important role in transferring the “Western style” of management and governance to companies in developing countries and equipping them to compete in the global market.

Editing by Jason Neely and Gilles Castonguay

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