Private Equity Firms – The Kings of Capitalism

This Economist article declares that private equity firms are the new kings of capitalism, and takes an interesting look at the industry.

"IF YOU made 'Private Equity: the Movie', then Michael Douglas would have to play Schwarzman." The head of one multi-billion-dollar private-equity firm is talking about the head of another, the Blackstone Group's Steve Schwarzman. "I'm joking," he adds quickly, "Steve and I are good friends." Perhaps he realises that comparisons with the fictional Wall Street banker famously portrayed by Mr Douglas, Gordon "greed is good" Gekko, are not what his industry needs just now. In fact, Hollywood has already set its sights on the men who run this enormous, relatively unaccountable pool of capital. This year, the Carlyle Group, a huge private-equity firm, has been vilified in Michael Moore's film "Fahrenheit 9/11", as well as being named as the inspiration for a fictional private-equity firm that tries to install its brainwashed candidate as American president in the remake of "The Manchurian Candidate".

Yet to study firms such as Blackstone is as good a way as any to find out what is going on at the sharp end of capitalism today. Hedge funds may be sexier, at least for now, but it is surely Mr Schwarzman and his peers in the private-equity industry who control the really smart money and wield the lasting influence. This survey will explain what they do, what challenges they face and what effect they have on the world of business at large.