Private Equity Myth

From Myth-busting Blackstone by David Weidner:

The myth that private equity firms make their money from making portfolio companies leaner and meaner is in danger of getting busted.

Blackstone Group LP posted a net loss of $340.3 million, or $1.27 a share, compared with a net loss of $113.2 million, or 44 cents a share, a year earlier. Revenue was negative $160.3 million, compared with $526.7 million a year ago amid lower values for its portfolio holdings across its corporate private equity, real estate and alternative asset management businesses. See full story.

The losses suggest that despite the industry's claims to the contrary, private equity companies - especially firms as big as Blackstone - are as vulnerable as their corporate counterparts to the deep economic crisis. In essence these firms are little more than souped-up conglomerates that enjoy a tremendous tax break because their portfolio companies are considered investments.

Read the rest here.