Some Blackstone execs experienced the nasty effects of the new “clawback” trend last quarter, according to Bloomberg.
Blackstone and some of its managers returned $3 million in carried interest to investors in Blackstone Real Estate Partners International LP during the second quarter, said a person with knowledge of the payments.
They may pay back an estimated $15.7 million this quarter to another fund, Blackstone Real Estate Partners IV, according to the person and a regulatory filing.
Clawbacks haven’t happened much in the past – this marks the first time Blackstone has ever clawed back a bonus, according to Bloomberg, and it might be the first time it’s happened at any big Wall Street firm, too.
Goldman and Morgan Stanley, which Bloomberg reports both lost money on CRE last quarter, too, haven’t reported any clawbacks. Neither have KKR or Fortress, says Bloomberg.
Financial reform encourages clawbacks, because they align the shareholder’s interests with the firm’s employees’, and now more firms might embrace them and include provisions that allow them in their signing contracts.
In Blackstone’s case, execs in a commercial real estate group experienced the first clawback because one of their deals turned south.
Blackstone’s property buyout funds recorded performance fees totaling $1.74 billion, some of which was allocated to the firm’s partners, as the market for office towers, hotels and apartments soared from 2004 to 2007. Prices have slumped about 39 per cent since then.
The reason firms would dislike them is obvious, because employees must return part of their salary. (Firms might later clawback a bonus they had previously paid to an exec for a trade which performed well in the short term, but lost money in the long term.)
Bankers could fight a clawback depending on their contract with the firm – and some do – but if Blackstone’s execs had any issues with the clawback, they aren’t too apparent.
But a Blackstone rep says they don’t expect anymore clawbacks in the future, simply because they don’t expect any losses in the future.
“We anticipate that all of our funds will be profitable and any final clawbacks will be insignificant,” Peter Rose, a Blackstone spokesman, said in an e-mailed statement.
That’s the best response by a firm’s PR we’ve heard all morning.
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