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For all his success, Mr. Schwarzman’s book highlights the lessons learned from deals that went wrong.SHANNON STAPLETON/Reuters

Don’t tell Stephen Schwarzman there is too much money chasing too few deals.

The co-founder, chairman and chief executive of alternative asset manager Blackstone Group Inc. has US$148-billion of client capital he needs to put to use – an almost unimaginable amount of what’s known in the industry as dry powder. Mr. Schwarzman is confident the New York-based company can invest it all, and earn handsome profits.

However, the 72-year-old financier is far less certain that smaller fund managers can continue to earn attractive returns from increasingly competitive sectors such as private equity, real estate and hedge funds.

In Toronto on Wednesday as part of a book tour – his biography is called What It Takes: Lessons in the Pursuit of Excellence and is an honest take on a remarkable career – the Philadelphia-born Mr. Schwarzman framed the current state of the alternative-asset industry in distinctly Canadian terms. He compared it to hockey.

Blackstone takes care of US$554-billion for clients, giving the company financial scale that only a handful of global rivals can match. Mr. Schwarzman said that capital “lets us do things that almost no one else can do.”

“If we were a hockey team, then in the past, with less competition, we used to get 30 shots at the net," Mr. Schwarzman said in an interview. "Today, we might only get five shots. But most of the time, we are shooting at an open net. We still score, we still win.”

In contrast, Mr. Schwarzman predicted thousands of smaller private equity and real estate funds are facing declining returns on their investments, partly because of increased competition for deals. Data providers such as Preqin estimate that globally there is somewhere in the neighbourhood of 8,000 fund managers attempting to invest more than US$4-trillion. Blackstone was a pioneer when it opened its doors in 1985 and the CEO said: “I’ve heard people warning that there’s too much dry powder since 1991.”

For Blackstone, scoring means having the cash and the nerve to spend US$18.7-billion on a portfolio of U.S. warehouse properties last June. The acquisition from Singapore-based logistics company GLP is billed as the largest real estate transaction in history. Over the past 12 months, Blackstone committed a record US$62-billion to new investments.

For all his success, Mr. Schwarzman’s book highlights the lessons learned from deals that went wrong. In one passage, he confesses to holding back tears while being berated by one angry investor. He writes: “Failures can be enormous gifts, catalysts that change the course of any organization and make it successful in the future.”

The push for scale that drives Blackstone is also playing out at Canadian private and public asset managers. Pension funds such as Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec and Toronto-based Brookfield Asset Management Inc. are in the same league as Blackstone.

As a veteran of numerous market cycles, Blackstone’s CEO is optimistic on the overall prospects for the economy, and for alternative assets in particular. Mr. Schwarzman said debt levels in private equity and real estate remain manageable on historic level, so excess leverage will not be to blame for the next economic downturn, as it was in the global financial crisis that started in 2007.

After more than three decades at the helm of Blackstone, Mr. Schwarzman and the board took steps last year to clarify succession plans by promoting head of real estate Jonathan Gray, 49, to president and chief operating officer.

In the interview, Mr. Schwarzman said he and Mr. Gray make maintaining the firm’s culture of accountability a priority, by trying to instill a sense of partnership among all employees. The co-founder spends at least one morning or afternoon lecturing at the three-week training program that is mandatory for every new employee.

Blackstone stock has been a top performer over the past year, rising by 97 per cent, in part because of the company’s decision to switch its structure from a limited partnership to a traditional corporation. The move made Blackstone more attractive to index funds and other passive investors.

Mr. Schwarzman’s net worth is estimated to be more than US$13-billion, and his book focuses in part on the role that philanthropy, including his commitments to education and other causes, can play in a life well-lived.

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