Private equity executives who rank among the richest men on Wall Street received hundreds of millions of dollars in payouts even as the US economy faltered last year, helped by central bank stimulus that wiped
Private equity chiefs get bumper payouts on back of Fed stimulus
KKR co-founders Henry Kravis and George Roberts took home roughly US$90m each.
The bumper payouts contrast with staggering paper losses that the private capital sector recorded early in the pandemic, as businesses were forced to close, unemployment hit record highs and credit markets seized up in anticipation of a wave of business failures.
As markets plummeted in late March last year, Apollo calculated that its partners and employees would have had to hand back US$390m in performance-related pay if its portfolio had been liquidated at pandemic-hit valuations.
That prospect receded within weeks, as the Federal Reserve announced an unprecedented programme of monetary stimulus. By the end of 2020, shares in Blackstone, Apollo and KKR roughly doubled from their March lows.
A leading advocate of aggressive Fed action was Marc Rowan, the Apollo co-founder who is due to take over from Black as chief executive this year.
In correspondence with President Donald Trump's son-in-law Jared Kushner, he urged an expansion of the Fed's purchases of securitised debt, which was buoying the price of assets similar to those held or managed by Apollo and its peers.
Rowan received dividends of at least US$89.5m.
Meanwhile, private equity firms have found new ways to profit from frenzied markets. Apollo provided rescue financing to the online travel agency Expedia and the stricken car rental company Hertz. Blackstone is set to earn billions of dollars in profits from the initial public offerings of the dating app Bumble and the milk substitute brand Oatly, fast-growing businesses that it backed over the past two years.
Jonathan Gray, Blackstone's chief operating officer and president, took home US$93m in dividends last year, in addition to US$86m in cash earnings and a US$37m stock award.
Blackstone said that pay for its executives was "directly tied to investor and shareholder performance. Our investment performance is driven by thoughtfully deploying capital in the right sectors and delivering for our clients over the long term."
Written by: Sujeet Indap and Mark Vandevelde
© Financial Times