Blackstone CEO Explains Challenges and Opportunities of Investing During the Pandemic

It’s important for investors to recognize that some things have “temporarily changed” while others are now probably “permanently damaged,” in order to profit in the post-pandemic economic recovery, said Stephen Schwarzman, CEO of private equity behemoth The Blackstone Group Inc.

In a recent interview with Caixin, Schwarzman also noted the change in trade relations between China and the U.S., which had been “extremely unbalanced,” as well as the strained tension between the two countries due to the Covid-19 pandemic.

As the global economy had to be shut down for months during the unprecedented pandemic, the American investor said he mobilized all of his company’s resources to make it through the crisis.

“I’m always prepared for things to go wrong,” said the 73-year-old, who has led Blackstone for more than 30 years. “We try to construct each of our investments to survive a very bad environment for quite a long time.”

With the economic interruption from Covid-19, Schwarzman thinks that there will be a restart of the economy. “The interesting thing is what’s going to come out first, (and) what’s going to come out last,” he said.

During the dialogue, Schwarzman gave examples of companies that provide home shopping and entertainment services for people sitting at home. The companies have experienced solid growth.

On the other hand, there will probably be a smaller high fashion industry because people have gotten used to wearing casual clothes at home, he explained. It is also unwise to invest in things that require people to travel by air, as people will be more cautious about taking an airplane before there is a vaccine for the virus, he said.

“The world has accelerated trends that would have taken five or 10 years. (They have now) happened in three months. It’s amazing,” he said. “The business model coming out of Covid is going to be somewhat changed.”

Schwarzman also sees some incoming changes in supply chains, partly because China hosts so much of the world’s production that producers worldwide couldn’t get the supplies they needed when China closed its borders. “There will be some rebalancing (of supply chains), (but) not dramatic,” he said, “particularly for certain types of what are viewed as essential things like pharmaceuticals.”

When asked about China-U.S. relations, Schwarzman said “the U.S. really wanted to have a lot of these relationships economically changed and China opened up” as the two economies grew closer in size.

In January, the world’s two largest economies reached a truce in their trade war with a phase one trade agreement. The coronavirus pandemic, however, has created much anxiety in the U.S., and “that kind of frustration and nowhere to direct it is what’s led to intensification,” Schwarzman said.

While admitting there would inevitably be geopolitical friction as China’s wealth and power grows, Schwarzman thinks it is valuable to learn in depth about China as an important rising power.

In 2013, he founded international scholarship program Schwarzman Scholars at China’s elite Tsinghua University. The program aims to prepare young leaders to help foster greater understanding between China and the rest of the world.

As a scholarship to address the geopolitical landscape of the 21st Century, Schwarzman Scholars is designed to take extraordinary people from around the world to China and spend a year educating them so they can interpret China in their own countries as well as give frank feedback to China, according to Schwarzman. “It’s good for China. It’s good for the rest of the world. It’s good for peace. It’s good for communication,” he said.

Contact editor Michael Bellart (michaelbellart@caixin.com)

Caixin Global has launched Caixin CEIC Mobile, the mobile-only version of its world-class macroeconomic data platform.

If you’re using the Caixin app, please click here. If you haven’t downloaded the app, please click here.