Steve Schwarzman, chief executive of private-equity industry giant Blackstone, isn’t worried about the prospect of interest rates rising.
Schwarzman knows the conventional narrative is that rising interest rates will hurt private equity firms that borrow heavily to make acquisitions. In an interview, he said this concern overlooks the reason the Federal Reserve is choosing to raise rates in the first place.
“If interest rates are going up because you have terrific economic growth, then what happens is our companies and most of our assets do very well,” he said.
“It’s just the opposite of what most people would think.”
Of course there are scenarios in which rising interest rates would cause some pain.
“Companies that employ high levels of labour end up sometimes getting pinched, in terms of their margins,” he said.
But real estate, one of Blackstone’s fastest-growing businesses, should perform well. Blackstone was founded in 1985 but didn’t start putting money into real estate until the early 1990s.
“If it’s a scenario where there’s not much economic growth, but it’s just inflation, real estate tends to do well, because it reprices its assets very regularly,” he said.
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