<ul class="summary-list"><li>As the coronavirus hit New York City in March, <a href="https://www.businessinsider.com/where-wealthy-nyc-residents-went-during-coronavirus-outbreak-nyt-report-2020-5">wealthy city-dwellers fled to the Hamptons.</a></li><li>Luxury businesses followed them out to the East End — as did a wave of social backlash.</li><li><a href="https://www.businessinsider.com/hamptons-protesters-with-pitchforks-demand-billionaire-tax-2020-7">Pitchforks-wielding protesters</a> have descended on <keyword id="6393637" type="UNKNOWN" weightage="60" keywordseo="Billionaires">billionaires</keyword>' <keyword id="1737276" type="ORGANIZATION" weightage="60" keywordseo="Hamptons">Hamptons</keyword> mansions, demanding a <keyword id="46812" type="COMPANY" weightage="60" keywordseo="Wealth-Tax">wealth tax</keyword>.</li><li>The pandemic is magnifying the <keyword id="6411412" type="UNKNOWN" weightage="60" keywordseo="inequality">inequality</keyword> that has always existed in the Hamptons. </li></ul><p>Former mayor Mike Bloomberg, Martha Stewart, "The Tonight Show's" Jimmy Fallon — name a high-profile New Yorker with money, and chances are they have a vacation home in the Hamptons. A narrow beachfront street in the Long Island enclave has even been nicknamed <a href="https://www.businessinsider.com/hamptons-mansions-billionaire-lane-photos-celebrities-ceos-executives-2020-7">"Billionaire Lane"</a> for its bevy of ultra-wealthy residents, and one Hamptons ZIP code has been ranked the <a href="https://www.businessinsider.com/most-expensive-zip-in-the-hamptons-tour-sagaponack-2018-8">most expensive ZIP code on the East Coast</a> for the last two years.</p><p>Every summer, the Hamptons are set abuzz as these city dwellers flock to their summer homes or vacation rentals. Parties at private estates and ritzy <a href="https://www.businessinsider.com/stephen-ross-hamptons-fundraiser-trump-campaign-raises-millions-2019-8">political fundraisers at billionaires' homes</a> are a staple of the social scene.</p><p>But this year, as the ultrawealthy came for the Hamptons, so did new levels of social backlash.</p><p>Nelson Schwartz, author of "<a href="https://www.penguinrandomhouse.com/books/561374/the-velvet-rope-economy-by-nelson-d-schwartz/">The Velvet Rope Economy</a>" and an economics reporter for The New York Times, said the pandemic has made the ever-expanding divide in the Hamptons even more apparent. </p><p>"The Hamptons, to me, are ground zero for class differences playing out in the pandemic," Schwartz told Business Insider.</p><h2><strong>The Hamptons have been getting bougier in summer 2020</strong></h2><p>While the Hamptons have long been the preferred vacation spot for wealthy New Yorkers, summer of 2020 saw it <a href="https://www.businessinsider.in/thelife/news/how-the-hamptons-got-even-bougier-in-summer-2020/articleshow/77209973.cms">become even bougier,</a> as Business Insider's Dominic Madori-Davis first reported.</p><p>The moneyed scene typically arrives over Memorial Day weekend in May, but this year it showed up in March as affluent New Yorkers fled the city because of the coronavirus. At least 420,000 <a href="https://www.businessinsider.com/where-wealthy-nyc-residents-went-during-coronavirus-outbreak-nyt-report-2020-5">New Yorkers left the city</a> between March 1 and May 1, primarily from wealthy Manhattan neighborhoods. Many of them went to the Hamptons, <a href="https://www.businessinsider.com/wealthy-pay-hundreds-for-mail-to-be-delivered-to-hamptons-2020-4">paying limo drivers to deliver mail</a> to their second homes.</p><p>It didn't take long for the businesses that serve this wealthy clientele to follow them out to the East End, Madori-Davis wrote.</p><p>Luxury brands Bergdorf Goodman and Saks started same-day delivery service to the Hamptons. Carbone, the exclusive Michelin-starred Manhattan restaurant known for its $32 spicy rigatoni, launched both a Hamptons pickup service and a pop-up restaurant. Major New York City art galleries opened up Hamptons outposts.</p><p><div type="image" title="hamptons art exhibition event party" height="1814" width="2419" msid="77447860" hostid="261"></div></p><p>To cater to the affluent <a href="https://www.wsj.com/articles/new-yorkers-who-fled-to-hamptons-amid-coronavirus-look-at-enrolling-11589972255">families who were considering staying</a> in the Hamptons past the summer season, Avenues, an ultra-exclusive Manhattan private school, <a href="https://www.businessinsider.com/nyc-private-school-opening-hamptons-avenues-2020-5">opened a location</a> in East Hampton — with $48,000 a year tuition.</p><h2><strong>As the Hamptons' exclusivity factor surged, so did the backlash</strong></h2><p>While the wealthy may have fled to the Hamptons to escape a virus, they found an unexpected obstacle to their quiet isolation: social revolt.</p><p>It didn't happen right away. In April and May, as the coronavirus ravaged New York City, wealthy Hamptonites stayed sequestered in their mansions, ordering takeout from Nick &amp; Toni's and picking up seafood at Citarella's.</p><p>But a wave of social backlash eventually made its way to the Hamptons. <a href="https://www.middletownpress.com/middletown/article/Demonstration-in-East-Hampton-draws-hundreds-of-15339063.php">Black Lives Matter protests in June</a> were followed by anti-billionaire protests in July. On July 1, <a href="https://pagesix.com/2020/07/01/hamptons-billionaires-car-caravan-protest-targets-east-end-vacation-homes/">more than 300 people showed up</a> outside <a href="https://www.businessinsider.com/bloomberg-hamptons-house-photos-2011-7">Mike Bloomberg's $20 million Southampton mansion</a> to demand a <keyword id="6383453" type="UNKNOWN" weightage="60" keywordseo="wealth">wealth</keyword> tax for New York's richest residents. They carried plastic pitchforks and chanted "tax the rich, not the poor."</p><p>The protesters also stopped by the homes of real-estate developer Stephen Ross and Steven Schwarzman, CEO of private equity firm Blackstone. Some Hamptons homeowners <a href="https://www.businessinsider.com/rich-hamptonites-hiring-guards-to-protect-them-from-protesters-2020-7">hired armed guards</a> in fear of the protesters. </p><p><div type="image" title="hamptons protest mike bloomberg" height="1661" width="2214" msid="77447862" hostid="261"></div></p><p>Alicé Nascimento is the director of policy and research for New York Communities for Change (NYCC), one of the non-profits involved in organizing the protests. She told Business Insider that activists want to pressure New York Governor <keyword id="196530" type="PERSON" weightage="60" keywordseo="Andrew-Cuomo">Andrew Cuomo</keyword> to raise taxes on New York's richest residents, many of whom — including Ross —<a href="https://public-accountability.org/report/billionaires-have-fueled-andrew-cuomos-political-career/"> have donated to his campaign</a>. Cuomo recently <a href="https://buffalonews.com/news/state-and-regional/govt-and-politics/cuomo-dismisses-calls-to-raise-taxes-on-new-yorks-wealthiest-residents/article_f813df9c-d1cd-11ea-aaaa-3f9f69697d43.html">shot down the idea</a> and has been warning of <a href="https://www.silive.com/coronavirus/2020/07/cuomo-warns-of-increased-mta-fares-tolls-without-federal-aid.html">transit fare hikes</a> and <a href="https://brooklyneagle.com/articles/2020/08/03/opposing-tax-hikes-for-ultra-wealthy-cuomo-eyes-cuts-to-schools-hospitals/">cutting funding to public schools and hospitals</a>.</p><p>Nascimento says the first protest in July was mainly people coming from New York City, but then local Hamptons community groups and residents started showing up.</p><p>"It's really local folks who aren't what we traditionally think of [as] people who live in the Hamptons, Nascimento said. "The Hamptons has this stratosphere of extremely wealthy people — like the richest people in the world — and also the ones that are middle class that serve them.</p><p>At one of the recent protests, Nascimento said, demonstrators had trouble finding the home of billionaire investor and Cuomo donor Daniel Loeb because Hamptons estates are so secluded.</p><p>"Billionaires are experts in social distancing," Nascimento told The New York Post last month. She told Business Insider: "There's a reason why they choose to live out there ... It's hard to find, but that's intentional. It's not an accident."</p><h2><strong>The Hamptons have long been a tale of economic disparity</strong></h2><p>While a pandemic and recession may have brought it to the forefront, economic disparity in the Hamptons is nothing new.</p><p>"There's long been a divide between the people who come out to the Hamptons for the summer and those who are out there year round, who live there and work there as teachers, as cops, and work in the restaurants," Schwartz said.</p><p>This divide traces back to the early days of British colonization of the Hamptons. The early settlers in East Hampton, one of the two main townships on the East End, <a href="https://www.easthamptonvillage.org/DocumentCenter/View/131/History-of-the-Village-of-East-Hampton-PDF?bidId=">divided up the land</a> and allotted themselves each large parcels, East Hampton's historic services director, Bob Hefner, wrote on the town's official website. They shared the resources of the undivided land and created the laws that governed the village.</p><p>New residents of the town were given small plots of land and couldn't share the resources of the undivided land, according to Hefner. </p><p>That left, as Hefner wrote, a small group of owners with the prime land within East Hampton, while "the tradesmen, laborers, subsistence farmers, fishermen, and at a later date freed slaves and Montauk Indians, lived on small lots on less desirable land outside the [village]."</p><p>In more recent years, similar patterns have played out. The lifestyles of Hamptons billionaires are supported by an "<a href="https://www.theguardian.com/us-news/2015/aug/14/hamptons-super-rich-inequality">army of local people and recent immigrants</a>" who can't afford to live "south of the highway" like their ultra-wealthy clientele, as Rupert Neate reported for the Guardian in 2015.</p><p>"South of the highway" refers to an area <a href="https://outeast.com/stories/south-of-the-highway-hamptons-what-does-it-mean/">south of the Montauk Highway</a> — which runs from Queens through the Hamptons all the way out to Montauk — where you'll find the most prestigious villages and multimillion-dollar beachfront homes.</p><h2><strong>A microcosm of the tensions playing out in the US during the pandemic</strong></h2><p>Inequality has always existed in the Hamptons, but it's never been more plainly evident than during the pandemic. </p><p>"I think it kind of lays bare the class divisions in our society," Schwartz told Business Insider. "A lot of people have withdrawn from the city and from society and gone to their house and pulled up the drawbridge and are kind of isolated in their house. They're going to wait this thing out, which is a privilege the rest of us don't have."</p><p>To be sure, the Hamptons are not the only wealthy enclave across the US seeing wealth disparities playing out. A similar story is unfolding in areas like <a href="https://www.businessinsider.com/billionaire-wilderness-author-inequality-teton-county-wyoming-2020-8">Teton County</a>, the scene of the greatest wealth disparity in the US, and San Francisco, where service-industry workers are losing their jobs while Silicon Valley tech workers get cash bonuses to upgrade their home offices. The pandemic led to a burgeoning backlash against the wealthy all over the world as people stuck at home during lockdown got sick of seeing <a href="https://www.businessinsider.com/david-geffen-deletes-instagram-after-self-isolating-yacht-post-2020-3">billionaires self-isolating on their superyachts</a> and <a href="https://www.insider.com/gal-gadot-imagine-celebrities-singing-coronavirus-negative-reactions-video-2020-3">singing "Imagine" instead of donating</a> to coronavirus relief. </p><p>In fact, in many ways, the conflict playing out in the Hamptons mirrors what's happening on a national scale. </p><p>"I think it's a microcosm with what happens in our societies where people take private planes, they go to private schools, they have food delivered to their house instead of going to the supermarket — if you can afford to do those things," Schwartz said.</p><p>Between the start of the pandemic and early June, more than 42 million people lost their jobs, yet <a href="https://www.businessinsider.com/billionaires-got-565-billion-richer-during-the-coronavirus-pandemic-2020-6">America's billionaires got 20% richer</a>, growing their cumulative wealth by $565 billion, according to a recent <a href="https://ips-dc.org/billionaire-bonanza-2020/">report from the Institute for Policy Studies.</a></p><p>Nascimento said the <a href="https://makebillionairespay.info/">campaign to raise taxes on the ultra-wealthy</a> will continue "as long as billionaires are gouging public resources and subsidies without paying what they owe to the people."</p><p>Next week, activists are heading to Albany to protest outside Gov. Cuomo's mansion. And while a date isn't yet set for the next protest in the Hamptons, the billionaire playground likely hasn't seen the last of the protesters.</p><p>"They should be expecting to see more of us," Nascimento said.</p>

Now more than ever, a tale of 2 Hamptons

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5cc7cbc0b14bf40d686a3c52-2048/3385749514802ea02225fk.jpg" border="0" alt="milken 2019 panel" data-mce-source="Milken Institute / Flickr" data-link="https://www.flickr.com/photos/milkeninstitute/with/33857495148/" /><p class="source"><span><a href="https://www.flickr.com/photos/milkeninstitute/with/33857495148/">Milken Institute / Flickr</a></span></p></div><p></p></div></div></p><ul class="summary-list"><li><strong>The 22nd annual Milken Institute Global Conference was held this week in Beverly Hills, California.</strong></li><li><strong>More than 4,000 people attended, from finance and investing, to agriculture, government, Hollywood and the tech industries. </strong></li><li><strong>Even with stock markets at record highs and US economic growth for the first quarter that blew past most expectations, the conference goers assembled in Beverly Hills privately fretted that the good times may soon end. </strong></li></ul><p>One West Coast banker is telling business owners to sell their company in the next 12 months or prepare to navigate through the next recession. An Orange County money manager is advising his high net worth clients about pushing more money into alternative investments to weather a downturn. An investment manager at a sovereign wealth fund is looking to sell whatever he can. </p><p>The three execs, who spoke on the sidelines of this week's Milken Institute Global Conference and asked for anonymity to discuss their situations, captured one of the moods at this year's conference: successful, but bracing for the worst. </p><p>Even with stock markets at record highs and <span style="font-weight: 400;">US economic growth for the first quarter that blew past most expectations, the conference-goers assembled in Beverly Hills privately fretted that the good times may soon end. This was the 22nd global conference hosted by junk bond king Michael Milken, who brings together t</span>he Masters of the Universe of the finance and investing worlds for an annual celebration of capitalism, and panels on changing the world. </p><p><em><strong>Read more:</strong><a href="https://www.businessinsider.com/debt-crisis-christine-lagarde-explains-why-she-is-double-concerned-2019-4"><strong> </strong>IMF chief Christine Lagarde outlines her 2 major worries around the global economy - and explains why they're sowing the seeds of a new crisis</a></em></p><p><span style="font-weight: 400;">Over the course of three days, one topic of conversation that frequently arose among a subset of attendees: the tepid M&amp;A market and what it means for the broader economy. The lack of deal activity - while credited by some for making this year's conference so well attended with over 4,000 - may be a harbinger of trouble ahead, according to Jason Greenberg, head of tech M&amp;A at Jefferies. </span><span style="font-weight: 400;">In his view, corporate c-suites and boardrooms tend to look at the next six months and use that to develop sentiment around M&amp;A. If they're not doing deals it means that something they see has them worried, he said. </span></p><p><span style="font-weight: 400;">"I tend to think of M&amp;A as the canary in the coal mine," Greenberg said on a Tuesday afternoon panel. </span><span style="font-weight: 400;">"By the middle to the end of this year, it's either going to do what it did in 2015 - which was that businesses started to feel better again and things started taking off - or it'll end up being a precursor to a recession."</span></p><p>Layer on top concerns about the rising populism and calls from people like Alexandria Ocasio-Cortez for higher taxes on the wealthy, or New York City's recently proposed pied-a-terre tax, and the attendees at this year's conference were at times uneasy and at times searching for answers. </p><p><span style="font-weight: 400;">"What's really coming is class warfare," said Alan Schwartz, the CEO of Guggenheim Partners, in another panel discussion. "</span><span style="font-weight: 400;">Throughout the centuries, when the masses think the elites have too much, one of the two things happens: legislation to redistribute the wealth, or revolution to distribute poverty."</span></p><p><span style="font-weight: 400;"><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/softbank-vision-fund-investment-process-rajeev-misra-milken-conference-comments-2019-4">The CEO of SoftBank Investment Advisers, who runs the world's biggest venture fund, offers an inside look at how he picks which companies to lavish with billions of capital</a></em></span></p><p>Despite those worries and the panel discussions, the conference remains an unabashed celebration of the world's wealthy. Expensive luxury cars made by companies like Maserati, Porsche and Tesla routinely circled the Beverly Hilton's driveway, the roar of powerful engines echoing off the hotel's portico. Off the lobby, Bombardier set up a booth to display its new Global 7500 private jet. State Street's Fearless Girl statute stood in the same spot last year. </p><p><span style="font-weight: 400;">Blackstone's Steven Schwarzman came in on Sunday wearing a baseball cap pulled low over his eyes. Apollo's </span><span style="font-weight: 400;">Leon Black made an appearance, as did real estate titan Thomas Barrack, seen Monday outside of the Peninsula hotel, one of several nearby hotels that served as satellite meeting spaces. On Monday, </span><span style="font-weight: 400;">Wells Fargo executives John Shrewsberry and Mary Mack held court in the center of the Waldorf Astoria's lobby. Billionaire hedge fund manager </span>Ray Dalio was seen holding down a corner table Tuesday afternoon at Circa 55. </p><p><span style="font-weight: 400;">Goldman Sachs CEO David Solomon was seen on Wilshire Blvd at one point, leaning against a building on a phone call, reading from a piece of paper. </span><span style="font-weight: 400;">Tim O'Hara, the former CEO of Credit Suisse and now BlackRock exec walked through the crowd, saying hi to old colleagues.</span></p><div data-sticky="subnav" data-ad-subnav=""><div><div data-bi-ad="" id="gpt-post-clusterstock-subnav-desktop-5cc9e865ccf360.70767686" data-force="" data-type="ad" data-adunit="business-insider/finance/post" data-secvert="prime,sai" data-pagetype="post" data-tag="bi-prime,goldman-sachs,milken,milken-2019,milken-institute" data-authors="dakin-campbell" data-views="1861" data-region="Subnav" data-responsive="[{" browserLimit:00slotSize:300250browserLimit:7280slotSize:72890browserLimit:9700slotSize:9702509709072890location:window="" data-tile-order="false" data-url="goldman-sachs-ceo-warns-evolutionary-change-in-tech-transformation-will-take-longer-than-many-think-2019-4" data-amazontamsizes="[[300,250],[728,90],[970,250],[970,90]]" data-google-query-id="CJzQv_T9-uECFYolgQodznsJaQ"><div id="google_ads_iframe_/4442842/business-insider/finance/post_0__container__"><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/goldman-sachs-ceo-warns-evolutionary-change-in-tech-transformation-will-take-longer-than-many-think-2019-4">Goldman Sachs' CEO just warned that the bank's big tech bets might not pay off as quickly as people hope</a></em></div></div></div></div><p><span style="font-weight: 400;">With thousands swarming the hotel, lines snaked around corners and space was at a premium. Longtime sponsors like State Street hosted clients from cabana rooms just off the pool, while others, like Dalio or the Canada Pension Plan Investment Corp., chose to reserve tables in the hotel's restaurants. Others like Barings and Canyon Partners settled for space upstairs in hotel suites converted into meeting spaces by removing the beds. Those without space tussled over seats in the lobby bar. </span></p><p><span style="font-weight: 400;">And of course there were after parties. An official reception held Monday night at Ron Burkle's Soho House included appearances from former Detroit Pistons power forward John Salley and music from Limp Bizkit front man, Fred Durst. Even </span><span style="font-weight: 400;">Milken made an appearance, </span><span style="font-weight: 400;">mingling in a backroom where wicker lanterns hung from olive trees below a retractable roof. As he surveyed the scene, it was just another year at his eponymous conference. </span></p>     <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/what-happens-when-hold-in-your-pee-too-long-2018-6">If you're going to see the 3-hour-long 'Avengers: Endgame,' plan your bathroom break wisely. Here's what can happen if you hold your pee too long.</a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/AOencceW-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

Inside Milken 2019, where Masters of the Universe fret over the economy even as their wealth grows

<p class="p1"><span style="line-height: 1.5em;"><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5529407d6da8118e6b27d548-1200-924/stephen-schwarzman-blackstone-2.jpg" alt="Stephen Schwarzman Blackstone" border="0"><p class="source"><span>REUTERS/Shannon Stapleton</span></p><p class="caption">Stephen A. Schwarzman, Chairman, CEO and Co-Founder of the Blackstone Group</p></img></div><p></p></div></div>In its heyday, private equity dominated headlines as financiers with billions of dollars in debt financing would takeover massive companies, replace managements, layoff tons of workers, and then put it right back on the market for a massive profit.</span></p><p class="p1"><span style="line-height: 1.5em;">Of course, there were also the billion dollar private equity flops. After going from famous to infamous for high-priced debt-laden deals like <a href="http://www.wsj.com/articles/caesars-unit-files-for-chapter-11-bankruptcy-1421306807">Caesars Entertainment Corp.</a> and <a href="http://www.wsj.com/articles/SB10001424052702304163604579531283352498074">TXU</a>, the biggest firms in the private equity space were forced to switch their approach to investing. Now, a deal in excess of $10 billion is rare for a private equity firm. <br /></span></p><p class="p1"><span style="line-height: 1.5em;">But make no mistake: private equity <a href="http://www.businessinsider.com/lets-not-go-carving-out-private-equitys-tombstone-just-yet-2015-3">is here to stay.</a>  However, they are ramping up investments in another asset class: <strong>real estate</strong>. </span></p><p class="p3">The industry has more cash than ever now, and is lining up increasing amounts of capital for real estate deals.</p><p class="p3">No private equity firm has bet more on a big real estate rebound than the Blackstone Group, and Friday, Steven Schwarzman's investment firm once again flexed its considerable muscle in the asset class it has come to dominate, as it<span style="line-height: 1.5em;"> took on more than $26 billion in real estate holdings from General Electric. </span></p><p class="p3"><span style="line-height: 1.5em;">Ultimately, this is all about private equity firms inflating their own books with something called "permanent capital," or a class of assets that can generate returns for a very long time.<br /></span></p><h3 class="p3">Assets under management is a key factor, especially for publicly-listed firms</h3><p class="p3">At a time when private equity firms find themselves holding onto their portfolio companies for longer than ever before, some of the biggest funds in the industry are also turning to real estate investments to inflate the all-important 'assets under management' stat-line in annual reports that are closely tracked by investors and analysts. </p><p class="p3"><span>The AUM game plays into the private equity industry's obsession with "</span><span></span><a href="http://www.reuters.com/article/2014/11/18/us-blackstone-fund-exclusive-idUSKCN0J22EA20141118">permanent capital</a><span>," that is, private equity's push to buy and hold (and hold, even longer) an investment to maximize its potential for returns. Raising, and running, real estate funds often provides private equity firms with a longer horizon on which to return capital to their investors, as well. </span></p><p class="p3"><div class="KonaFilter image-container display-table float_left"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/552816e5ecad04a139d03746-461-386/screen shot 2015-04-10 at 2.15.47 pm.png" alt="Preqin data" border="0"><p class="source"><span><a href="https://www.preqin.com/docs/newsletters/pe/Preqin_PESL_May_14_PE_Holding_Periods.pdf">Preqin</a></span></p><p class="caption">On average, hold times before exit for private equity investments are rising</p></img></div><p></p></div></div>"It's the holy grail. They all want permanent capital," said one banker who has advised on several multi-billion dollar deals. </p><p class="p3">And they're doing more deals, post-crisis.</p><p class="p3">In 2007, the real estate assets under Blackstone's management totaled about $26 billion; at the end of last year, it ballooned to $81 billion, according to its reports. Factoring in Friday's $26.5 deal for GE's real estate assets, when the investment firm announces earnings next week, it is likely it will also be accompanied by the news that Blackstone's real estate portion of its PE portfolio will have surpassed $100 billion.</p><p class="p3">Blackstone declined to comment on the size of its new real estate portfolio, or which fund it used to strike Friday's big deal. However, it has been previously reported that Blackstone <a href="http://www.bloomberg.com/news/articles/2015-03-31/blackstone-is-said-to-raise-14-5-billion-for-real-estate-fund">is close to completing a fund </a>for nearly $15 billion to make real estate investments.</p><h3 class="p3">No private equity firm has inflated AUM through real estate like Blackstone</h3><p class="p3">To be certain, Steve Schwarzman's firm stands head and shoulders over any other private equity competitor in the real estate space.</p><p class="p3">One of Schwarzman's biggest competitors, David Rubenstein's Carlyle Group, began real estate investing in the late 1990s. In 2011, when it <a href="http://ir.carlyle.com/secfiling.cfm?filingID=950123-11-82561&amp;CIK=1527166">filed an S-1 for an IPO</a>, had assets under management totaling about $12 billion. That figure increased, to about $13 billion by the end of 2014, and that doesn't factor in yet an anticipated $3 billion to $4 billion haul coming into <a href="http://www.psers.state.pa.us/content/board/resolutions/2014/tab16_res12.pdf">the fund it is currently raising</a> (this is all separate from Carlyle's PE investments). </p><p class="p3">Still, the growth in the size of Carlyle's AUM is minuscule next to Blackstone's purchases, and, in some cases, <a href="http://www.bloomberg.com/bw/articles/2014-12-11/carlyle-can-t-get-out-of-the-private-equity-box">so is performance</a>. While Carlyle has stuck to its private equity roots more than some of its other publicly-listed counterparts, another Blackstone competitor - Apollo Global Management - built out <a href="http://www.agm.com/Libraries/Home_Page_Recent_News/Apollo_Reports_Fourth_Quarter_and_Full_Year_2014_Results.sflb.ashx">its credit portfolio in recent years</a> (growing more than 68% from 2012 until the end of 2014) far more than real estate investments (up only 8.4% over the identical time frame). Oaktree Capital Group, which has been investing in real estate since 1994, according to its website, has less than 10% of its total AUM parked in property. </p><p class="p3">Now, according to a report issued earlier this year, private equity has been raising more capital for real estate investments, coming at a time when their compounded annual growth rate is outpacing (for one year) every other kind of investment they made.</p><p class="p3"><div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Bain &amp; Co. report, using Preqin data" title_caption="Real estate funds have attracted more cash, post-crisis." class="zoomin" href="https://static-ssl.businessinsider.com/image/5528194f6bb3f7d07828a776-960/real estate-2.png"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span><img src="https://static-ssl.businessinsider.com/image/5528194f6bb3f7d07828a776-835-526/real estate-2.png" alt="Real Estate" border="0" /></a><p class="source"><span><a href="http://www.bain.com/bainweb/PDFs/Bain_and_Company_Global_Private_Equity_Report_2015.pdf">Bain &amp; Co. report, using Preqin data</a></span></p><p class="caption">Real estate funds have attracted more cash, post-crisis.</p></div><p></p></div></div></p><h3 class="p3">Big investors want to back less 'private equity' firms, and more real estate</h3><p class="p3">This comes as the investors that have traditionally supported many of the private equity industry's biggest funds are now looking to <a href="http://www.ai-cio.com/channel/Manager_Selection/After_Hedge_Funds,_CalPERS_Eyes_Private_Equity_Cuts.html">substantially scale back the number of firms they invest in</a>. </p><p class="p3">But an expanding real estate portfolio provides private equity firm leaders with a new marketing point for investor capital.  The giants of the PE industry have already inspired copycats among the lower-tier players.</p><p class="p3">California-based GI Partners, which, for a time, billed itself as a traditional private equity investor, is now <a href="http://www.calpers.ca.gov/eip-docs/about/committee-meetings/agendas/invest/201408/item07a-05.pdf">classified by CalPERS only as a real estate fund</a> (see Ex. 5 on page 26 of 54), in part thanks to GI assuming the mandate for a real estate portfolio worth <a href="http://www.costar.com/News/Article/CalPERS-Transitions-$19-Bil-US-Industrial-Real-Estate-Portfolio-to-GI-Partners/124742">nearly $2 billion in 2010</a>. Now re-classified by CalPERS, GI Partners has since successfully <a href="http://www.pionline.com/article/20140915/ONLINE/140919915/calpers-adds-13-billion-to-3-real-estate-partnerships">secured</a> <a href="http://www.calpers.ca.gov/index.jsp?bc=/about/newsroom/news/2012/buy-tech-real-estate.xml">several</a> new funding mandates from the investor, and as of March 2014, had grown to represent CalPERS' single biggest capital commitment to any firm in its real estate portfolio.</p><p class="p3">While Blackstone came away from the GE Capital deal with a massive haul of assets, one industry banker cautions against the expectation that these buyout shops will dominate upcoming real estate auctions: "You're going to see … every financial institution looking to expand their business strategically." </p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/tony-robbins-advice-motivation-inspiration-presidents-2015-3">Why billionaires and power players go to Tony Robbins for advice</a></h3>        <div>            <div>    <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script>    <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="hia3IwdDrdqyD04O2dCPmAHfukEOsxU4" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>    <script>    if (typeof RunFunctions === 'undefined') { var RunFunctions = []; }     RunFunctions.push(function()    {         var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'hia3IwdDrdqyD04O2dCPmAHfukEOsxU4',{ autoplay: 'false' });     });    </script>    <noscript><div>Please enable Javascript to watch this video</div></noscript></div>        </div>        <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script>    </div>

The private equity game is changing

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5dcf25923afd377b1365c144-1200/blackstone 2x1.png" border="0" alt="blackstone 2x1" data-mce-source="Blackstone; Ruobing Su/Business Insider" /><p class="source"><span>Blackstone; Ruobing Su/Business Insider</span></p><p class="caption">Jon Korngold has been busy building out a division within Blackstone dedicated to investing in fast-growing companies.</p></div><p></p></div></div></p><ul class="summary-list"><li>Jon Korngold has been busy building out a division within Blackstone dedicated to investing in fast-growing companies. </li><li>Business Insider spoke with more than a dozen people who know Korngold to learn more about the 45-year-old investor behind Blackstone Growth, or "BXG" for short.</li><li>Fresh off purchasing a $3 billion controlling stake in the owner of dating app Bumble, Korngold, who joined Blackstone in January, says he'd like to do four to five deals a year, writing checks between $200 million and $500 million.</li><li>People close to him say his ability to connect with founders and entrepreneurs suits him well in tracking down future opportunities. </li><li><a href="https://www.businessinsider.com/prime">Click here to read more BI Prime stories</a>.</li></ul><p>Jon Korngold has long perplexed colleagues with his ability to cram his calendar.</p><p>He spent 18 years at General Atlantic, a firm known as the "gold standard" for growth equity, where he was personally involved in deals with Adyen, the Amsterdam-based payment company; Qualicorp, the Brazilian healthcare insurance group; and ControlExpert, the German auto insurance service provider.</p><p>Then, in January, he joined asset management giant Blackstone to lead an ambitious new growth equity push, charged with finding fast-growing companies to write big checks to. He's fresh off his first investment at his new firm, co-leading a deal earlier this month to acquire a $3 billion controlling stake in MagicLab, the owner of dating app Bumble. </p><p>He is also on the board of trustees of the 92nd Street Y, an Upper East Side institution known for its star-studded line-up of community events.</p><p>Plus, he's on the board of trustees at The Dalton School, the New York City prep school that graduated Chevy Chase and Anderson Cooper, as well as the Central Park Conservancy, a non-profit that maintains the most-visited park in the United States. </p><p>"I would challenge you to find a guy who is involved in more things, who has as big of a job as Jon," said Sarah-Marie Martin, a managing director at Goldman Sachs who has advised Korngold as a client. "I always wonder if the guy sleeps."</p><p>We talked to more than a dozen people who have worked with Korngold, and Korngold himself, to learn more about the man who is meeting with investors all over the world and <a href="https://www.ft.com/content/35df8336-05a4-11ea-9afa-d9e2401fa7ca">seeking as much as $4 billion</a> to kickstart the division of Blackstone Growth. </p><p>In leading the division, Korngold has become a new entrant to an elite club atop billionaire Stephen Schwarzman's house of financiers overseeing more than $554 billion assets under management.</p><p>Many said his past successes have stemmed from his ability to network and connect with founders and entrepreneurs -  letting them down easy when he has less than optimal news about a company's valuation, while also appealing to their human side with an earnestness rare for Wall Street.</p><p>"I find it really entertaining, everyone is like 'Whoa, how do you know Jon Korngold?'" says Steven Zuckerman, a childhood friend who has gotten some help from Korngold in building his healthcare technology company Vatica Health. "He's the same guy I've known for 30-plus years."</p><p>Now, Korngold will have to put that Rolodex to use at Blackstone, in an area where the firm has traditionally only been an occasional player.</p><p>Going from General Atlantic, with 340 employees in 14 offices focused purely on growth equity, he will have to adapt to a larger pond, with 2,500 employees in 24 offices worldwide, and business lines spanning infrastructure, credit, real estate, hedge fund solutions and private equity. </p><p>Still, Blackstone has fewer people dedicated to growth equity than General Atlantic, so Korngold has a full plate booking international travel to reach investors and hitting up colleagues to build out a bigger team. </p><h2>An 'impossible to get' hire</h2><p>It was Korngold's work leading General Atlantic's financial services and healthcare investments that landed him on the short-list of executives sought by Blackstone president Jon Gray, who had envisioned Blackstone's own dedicated growth equity team.</p><p>"We thought Jon would be amazing, but it would probably be impossible to get him," says Gray.</p><p>Gray, a real estate billionaire and chair of Hilton Worldwide, had just been appointed president at Blackstone in February 2018. One of his first orders of business was executing an idea that the firm's executive ranks had long been contemplating. </p><p>Technology looked to be disrupting many industries, Gray observed - including retail, media, and energy. The only problem was that Blackstone didn't have a dedicated platform to invest in these companies, Gray said. </p><p>Over four to five months, Gray and other Blackstone execs convinced Korngold to make the leap - a move observers expected would draw investors to fork over funding for BXG. </p><p>Korngold had a hard time with the decision, given his tenure at General Atlantic, people close to him said. Friends characterize him as a family man who makes time for his two kids despite a busy travel schedule, throwing Halloween costume parties and coaching his son and daughter's sports teams.</p><p>"He struggled with the idea of leaving a place that was good for him and where he grew up," said one friend who he spoke with about his departure. </p><p>In addition, while working at General Atlantic, Korngold had marketed the advantages of a pure growth equity platform over one that operates within traditional private equity. </p><p>One reason was the way GA raised capital - from high-net worth individuals, their foundations and endowments, as opposed to institutional investors - a difference <a href="https://www.privcap.com/general-atlantic-philanthropic-start/">he told finance publication Privcap</a>, translated to a "softer culture in terms of no sharp elbows or masters of the universe."</p><p>GA also funded its investments from a single pool of capital, rather than a series of separate funds. This, he said, meant fewer time constraints when investing.</p><p>He<a href="https://www.youtube.com/watch?v=gIWNHziaIBY"> told The Deal, in 2016</a>: "Best idea wins, as opposed to having the pressure to deploy capital, potentially in an unnatural time in the cycle, because that's when your fund's mandate or regional mandate requires that you invest it." </p><p>Asked about the comments, Korngold said he stood by them. He said Blackstone differentiated itself from other large private equity firms in that the firm is dedicating a whole team to growth equity, rather than treating it as a side-project, with investors moonlighting from other divisions.</p><h2>Taking Fewer Bets</h2><p>Ultimately, Korngold was drawn in because he liked the idea of a "blank sheet of paper" to re-imagine growth equity investing.</p><p>The opportunity arrived at a time when the investment strategy fell from fashion, with industry observers saying the late cycle is not generally considered the best time to invest in fast-growing companies. The number of funds raised for growth equity in 2019 was the smallest since 2012, according to Preqin data.  </p><p>As it had traditionally been done, Korngold said, growth-equity firms generally would take small stakes in a variety of companies - maybe 20 in a given year, he says - but offered little more than their own financing, with few resources such as industry specialists to actively improve the businesses they invested in. </p><p>At Blackstone, he said, he could take fewer bets. Korngold told us that he'd like to execute between four and five deals a year, finding just the right companies worthy of a $200 million or $500 million check, the sweet spot for BXG investments.</p><p>He also plans to utilize the firm's more than 100 so-called operating executives - former CEOs and other execs - who can help companies grow into what he calls the "end state" of maturity, from start-up to blue-chip corporation.</p><p>"If it's just capital you need, go to a bank, get a revolver. It should be something else," he said. "If you're looking for a partner, who acts like an invited guest alongside the founders, that's what we do."</p><p>He has a broad mandate at Blackstone to work with Blackstone's other divisions in scoping out opportunities, including a unit called Tactical Opportunities, which sometimes takes minority stakes in companies, as well as the firm's traditional private equity business. </p><p>That's how things worked when Blackstone's $3 billion deal for a controlling stake in MagicLab, the owner of dating app Bumble. The deal, which Korngold says will help Bumble expand into new geographies and user demographics, and create new product features, was funded not only by capital raised for BXG, but also Tactical Opportunities and Private Equity, according to a person with direct knowledge of the matter. </p><p>Whitney Wolfe Herd, Bumble's chief executive, says a late July meeting in the company's Austin, Texas, headquarters is where she first met Korngold.</p><p>"It just felt like when you get to know Jon, he is thoughtful, he is purposeful, he is motivated by impact," says Wolfe Herd. "He cares about things we truly care about inside Bumble as well."</p><p>Alongside striking deals, Korngold is building his team. He's been on a recruiting spree to hire executives in New York, San Francisco, and London, forming a team of 20 to staff up BXG alongside some of Blackstone's existing dealmakers.</p><p>More hires are expected to follow. And he'll need do more work to ramp up to his desired four to five deals per year.</p><p>It will all be done with a slightly different pitch than he used to have.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/where-run-hide-earthquake-occurs-2017-6">Here's where you should really go to stay safe during an earthquake</a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/Rr4VQxvT-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

Jon Korngold is the face of Blackstone's big push into backing fast-growing companies like Bumble. We talked to a dozen insiders to learn what made him a must-have hire.

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