How Big Promises And Fat Fees Turned Private Equity Into A Lousy Investment

How Big Promises And Fat Fees Turned Private Equity Into A Lousy Investment

Broker Confessor: Financial advisor and Talmudic scholar Kurt Stein is not just looking to right industry wrongs He hopes for a whistleblower award from the SEC. Former Merrill Lynch broker Kurt Stein vividly remembers the day in the spring of 2011 when the doors to the exclusive world of private equity seemed to swing wide open. Inside an ornate ballroom at Manhattan's Waldorf Astoria hotel, Stein and hundreds of his Merrill colleagues were wined and dined by Blackstone, the world's preeminent buyout firm. The pitch: Blackstone's vaunted deal machine was invincible, producing net returns north of 15% per year with an uncanny ability to avoid losses. Here's how Blackstone's billionaire cofounder and CEO, Steven Schwarzman, explained his proposition to brokers in 2013: "We are a pair of safe hands. . . . Why would you invest in the products you normally do if you can make two to three times your money and have happier customers if you put them into our products?" Now Stein, who has since resigned from Merrill and submitted documents to the SEC as a whistleblower, wishes those doors had remained firmly closed. Fast-forward ten years, and most of the clients Stein placed into private equity