If you want to get paid in finance, like really paid, you don't want to waste your time in an investment bank. You want to get yourself to the firm run by Steven Schwarzman. Blackstone released its third quarter results this week and for anyone who happened to miss them, they were a reminder that Schwarzman is a truly massive payer.
In the first nine months of this year, Blackstone set aside $2.2bn for compensating its staff. Blackstone didn't say how many people it employed at this point, but at the end of 2018 it had 2,615 employees. Presuming headcount is roughly similar, that works out at an average of $844k a head for nine months. Annualized, that's $1.1m, each.
Clearly banks pay these sorts of sums too, but they pay them to their top performers and their key managers, not to the average employee. The implication is that no one is average at Blackstone.
This may actually be true. Schwarzman, who has just written a book about what it takes to be excellent, said recently that Blackstone only accepts 1% of people who apply. A minority of them might be flexible thinkers with good but not excellent grades, said Schwarzman, who likes hiring athletes because “they can handle the pain”.
Blackstone's people may actually have to handle a small amount of pain this year. Although they are still being paid inordinately well, the company's accounts shows they're having a pay cut compared with last year when average pay was more like $1m by the third quarter - a drop of 16%.
Much of this year's reduction comes from 'performance allocations compensation', both 'realized' and 'unrealized'. This refers to the carried interest private equity professionals receive, both as investments are exited (realized), and to the carried interest accrued in anticipation of an exit (unrealized). For carried interest to increase, Blackstone employees need to hope for a healthier environment for IPOs in 2020.
Photo by Pepi Stojanovski on Unsplash
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