Wall Street's man of the moment

With a history-making deal and a headline-making birthday party, Steve Schwarzman has become the symbol of a new era in finance. And that's always a risky proposition.

By Nelson D. Schwartz, Fortune senior writer

(FORTUNE Magazine) -- In the 1980s, Wall Street Power brokers wore red suspenders, dined at Le Cirque, and made their money in junk bonds and arbitrage. A decade later they wore polo shirts and played Foosball at the venture capital firms that line Silicon Valley's Sand Hill Road, reaping billions from tech. Today Wall Street's newest titans can be found every Monday morning gathered around a long, slightly scuffed conference table in a windowless boardroom high above Park Avenue, the home of the Blackstone Group.

Wearing white shirts and pinstriped suits that underscore their Harvard Business School credentials, Blackstone's top dealmakers have learned well the techniques pioneered by previous masters. What makes them different is that they also happen to dominate the iconic business of this decade - private equity.

Stephen Schwarzman, Blackstone Group's CEO
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Presiding over this weekly gathering, which begins promptly at 8:30 A.M. and sometimes lasts till lunch, is Stephen Schwarzman, Blackstone's 60-year-old CEO. All of Blackstone's sprawling buyout empire is on the agenda, for the mindset here is that everyone at the top must know exactly what's going on, even though Blackstone has grown from two partners and two assistants in 1985 to 52 partners and 750 employees today. They control 47 companies, with more than $85 billion in revenue from wildly different businesses (within days of its takeover of Equity Office Properties, Blackstone also swallowed Pinnacle Foods, the maker of Vlasic pickles and Aunt Jemima pancake mix).

But the Monday meeting reinforces a close-knit style Schwarzman wants to preserve. "On a personal level we have the the feel of a small firm," he says. "It's a tight little place."

The meeting always starts with private equity before moving quickly to Blackstone's newer divisions - real estate at 10:30, followed by hedge funds at 2 P.M. in another conference room, and finishing up with Blackstone's debt business at 4. "We go over every client situation, every deal," says Schwarzman. And what about lunch? "You must be kidding. We don't have time for lunch," he jokes, echoing the fictional avatar of 1980s Wall Street, Gordon Gekko. In fact, thanks to a kitchen adjoining the boardroom, ample supplies of Perrier and coffee are an arm's reach away.

It was in this boardroom that Schwarzman and his team plotted to buy EOP, twice raising their bids before hitting the winning number of $39 billion. It's also here where the firm has often carved out niches in alternative investing, a nontraditional corner of Wall Street where newfangled investments, such as hedge funds specializing in distressed debt, can bring both greater risks and greater rewards.

"It's not just the transactions that differentiate the firm," says James Lee Jr., vice chairman of J.P. Morgan Chase and a banker to Blackstone since the firm's launch in 1985. "It's the brand extensions, such as real estate, hedge funds, country specific-funds such as India, and restructuring."

Indeed, with all the Wall Street exotica under Blackstone's roof, you could call Steve Schwarzman the Master of the Alternative Universe. "They've institutionalized Blackstone as an elite name in alternative assets," says Jeffrey Rosen, deputy chairman of Lazard and a friend of Schwarzman's for more than 40 years.

Schwarzman almost never misses the Monday meeting - even if it means dialing in from his vacation home in France - and executives from Mumbai to London appear via videoscreen. Partners typically sit in one of 20 beige leather chairs around the table; junior associates and latecomers stand against the wall. The tone is meritocratic, but participants quickly learn to cut to the heart of the matter, recalls Mark Gallogly, who ran Blackstone's private-equity group before leaving in 2005 to start his own firm, Centerbridge Partners. "Some people begin at the beginning. At this firm you start with the conclusions, because there's a lot of ground to cover."

And while managers of each division come and go, Schwarzman and his No. 2, Tony James, stay for the duration. Schwarzman doesn't raise his voice - he doesn't have to. With personal riches estimated at more than $3 billion and undisputed control over Wall Street's hottest firm, Schwarzman can afford to be soft-spoken, even charming, despite his rep as one of the Street's most aggressive, demanding bosses. "If I get angry, it's obvious," he says. "I don't have to say much."

The expectations are implicit. The hard part about working at Blackstone isn't that it's bare knuckles, like Bear Stearns, but that there's the relentless pressure to succeed. "Each time they suit up, they expect to win," says Gallogly. "That's what's Steve's been able to maintain."

J.P. Morgan's Lee is blunter. "You need to bring your A-game every day," he says. "It's not summer camp."

Schwarzman may not be a shouter, but he certainly hasn't sought the low profile favored by other private-equity types. If there were any doubts about that, they were cleared up Feb. 13, when Schwarzman celebrated his 60th birthday with several hundred of his closest friends, along with performances by Rod Stewart and Patti LaBelle, at a bash at the Park Avenue Armory. The multimillion-dollar party, orchestrated by his wife, Christine, an intellectual-property lawyer, took place just a few blocks from his $30 million apartment in a trophy building that has counted Rockefellers and Vanderbilts among its residents.

All the trappings have begun to raise questions about how much Schwarzman craves recognition as No. 1 in the world he helped create. "You wouldn't have a party for 500 people or buy trophy properties in Palm Beach or on Park Avenue if you didn't relish the notoriety," says one longtime Wall Streeter. What Schwarzman has always wanted, says a former colleague, is "to be Henry Kravis and Bruce Wasserstein rolled into one. But you've got to give him credit. There's always somebody who is the symbol of an era, and he hit this era right."