Fifty finest..Continue

Fifty finest..Continue 2007-06-01 Staff Writer <strong>STEPHEN SCHWARZMAN, BLACKSTONE GROUP</strong><br> Always bet on Blackstone. The firm has moved from success to success largely because its chairman and chief executive Stephen Schwarzman demands nothing less. The strong, early track re

Always bet on Blackstone. The firm has moved from success to success largely because its chairman and chief executive Stephen Schwarzman demands nothing less. The strong, early track record of Blackstone's private equity business allowed Schwarzman to attract a steady stream of extremely talented people to his firm. The lasting institution that Schwarzman built has meant that it continued to thrive even as some of these talented people struck out on their own. It's the kind of place Schwarzman says he wished Lehman Brothers were more like shortly before he quit to form Blackstone with Peter Peterson in 1985. With an IPO in the works, now the public will get a chance to share in a firm that is seen as the financial services franchise of the future. Of the several men identified as leaders of the private equity industry, Schwarzman seems to be the one having the most fun. Schwarzman sightings have become a staple of Wall Street a nd society news coverage. There's Schwarzman at the Kennedy Center seated next to Steven Spielberg; Schwarzman at a charity gala; Schwarzman on the Charlie Rose Show; Schwarzman getting $3billion from the Chinese government; Schwarzman at his 60th birthday party dancing to Rod Stewart. Who wouldn't want to work with, own shares in, or be acquired by a guy who boogies to “Do Ya Think I'm Sexy” one night and then extracts value from history's biggest LBO the next morning?

French empress

With €10 billion under management and counting, Paris-based AXA Private Equity is one of Europe's leading providers of alternative capital. As part of French insurance giant AXA, it sits right at the heart of corporate France, and as private equity steps up its involvement in the modernisation of French business, the group's domestic influence is bound to increase even more – both as an LP and a GP. At the same time, expect the group's global activities to accelerate as well. Dominique Senequier, chief executive, has spent the past 11 years building the platform. “I know of no other insurance company that has come this far in private equity,” says a former employee. With Senequier firmly in control of her business, AXA Private Equity is bound to go even further.

Go-to guy

Given the size of its private equity programme, when the California Public Employees' Retirement System shifts, the global private equity boat bobs dramatically. Overseeing some $35 billion in active commitments is Leon Shahinian, a native of Sacramento, where CalPERS is based, and a man at the centre of many of the most vexing issues in mega private equity. Among these – how best to remain exposed to smaller managers despite CalPERS' need to deploy gigantic cheques? How best to leverage private equity expertise in targeting infrastructure investments? How best to be a great LP while remaining transparent? How best to optimise a sprawling portfolio? Shahinian and team have thought hard about these and many more issues. And did we mention the gigantic cheques?

Five years after it was first released, David Swensen's popular book, Pioneering Portfolio Management, is about to be re-released in an updated version. Clearly, Swensen has sold a lot of books, but more importantly for the private equity and venture capital industries, he has by example sold the concept of having a large allocation to alternatives. That said, many of the institutions attempting to recreate the magic that Swensen has wrought as head of the Yale University endowment will end up disappointed when they find their own GPs haven't performed as well as Swensen's GPs. The groups would do well to read p. 226 of Swensen's book, which dashes the notion that private equity GPs tend to outperform the public markets. “Although both [public and private] companies react in identical fashion to fundamental drivers of corporate value, the less volatile private entity boasts superior risk characteristics, based solely on mismeasurement of the company's true underlying volatility.” He notes his own study of buyout deals concludes: “[T]he pool of more than 540 completed transactions failed to generate returns even close to sufficient to compensate for risk.” This isn't what LPs new to the asset class want to hear. But it's likely what they'll discover one or two decades from now.

Pan-Asian empire builder

As it seeks to become the pre-eminent homegrown pan-Asian private equity fund, Hong Kong-based Affinity Equity Partners is making impressive strides. It recently raised a new $2.8 billion fund – fully four times bigger than its previous $700 million fund that closed in October 2004. At the helm is the charismatic Tang, previously chairman of UBS Capital Asia, who co-founded the UBS spin-out in 2002. Affinity has $4 billion under management and offices in Hong Kong, Seoul, Singapore and Sydney. The firm recently bought Jaya, a Singapore-listed oil and gas services company, for $385 million, and is currently attempting a $350 million hostile takeover of Australia-listed retailer Colorado Group.

China's growth guru

A hiking enthusiast, SAIF Partners managing partner Andy Yan might have viewed the Chinese growth capital investor's most recent fundraising as a mere stroll in the park. Launched in November 2006, the fund was more than halfway to its target in January this year, before eventually closing on $1.1 billion in April. The fund drew commitments from a host of blue-chip institutions including AlpInvest Partners and Harvard University. Thanks to a string of lucrative exits from prior funds, SAIF is viewed as being in the Chinese mid-market vanguard – arguably rivalled only by the lower-profile CDH China. A former managing director at Emerging Markets Partnership, Yan deserves to take much of the credit for his firm's rapid ascension.

Fund of funds pioneer

Over the years, Zug has eked out a reputation as one of the most versatile and perceptive investors in the market. He cofounded Hancock Venture Partners in 1982 and is now senior managing director of the subsequently re-named HarbourVest Partners. HarbourVest is one of the world's biggest private equity investors, with fund of funds, secondary and direct investment activities. It is currently investing a $4.4 billion fund for investments inside the US and a $2.8 billion fund for investments outside. Zug is an advisory committee member of funds managed by Advent International, Doughty Hanson, Permira and numerous other funds. One Paris-based GP comments: “Zug is one of the sharpest investors out there – he is decisive, intuitive and frighteningly intelligent.”