• Background: the global value of assets was soaring in recent years
• PE, more generally, alternative assets, became the fastest growing segment of the industry.
• the future additional requirements for large scale PEs are:
• 1) Sustainability of the management team.• 2) Objectivity of the professional investment
decision.
Blackstone’s Model : MLP
• Advantages: • 1) The partners keep effective control of the
firm and the operating partnerships that ran the funds, so that their fund investment is not influenced by equity investors
• 2) Earnings were subject to only one level of income tax
• Thus, MLP’s good for future large PEs
LP’s Concerns
• 1) The LPs were not able to be diluted
• 2) The selling of the unit may bring a different view or treatment to LPs.
Unitholder or LP?
• LP is better• Second advantage of an MLP is that it enjoys a
tax benefit• the partnership does not pay taxes from the
profit • However, when unitholders receive
distributions, they are taxed.