March 26 (Bloomberg) -- Credit-market gridlock has trapped Stephen Schwarzman, who relies on lenders to fund acquisitions, while leaving Warren Buffett free to pursue the debt-free deals that have helped make him the world's richest person.
Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., has $59 billion in cost-free money from insurance premiums to invest. Schwarzman's New York-based Blackstone Group LP, manager of the biggest private-equity fund, is being forced to bypass Wall Street banks after they stopped financing most leveraged buyouts.
Buffett and Schwarzman each takes a different approach to the same goal: finding companies they consider undervalued. Investors are betting Buffett's model will prevail, at least for now. Berkshire climbed 5.4 percent since the subprime-lending crisis sent the Standard & Poor's 500 Index tumbling as much as 19.7 percent from its Oct. 9 peak. Blackstone dropped 43 percent in the same period.
``There's a massive, massive advantage for Buffett in this kind of market,'' said Guy Spier, chief investment officer of New York-based hedge fund Aquamarine Capital Management LLC. ``All the leveraged finance has dried up, so he's going to have a much better time finding things to buy.''
Disclosure I own both securities, Berkshire for many years Blackstone for a few days.
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