Blackstone COO sees gradual capital shift away from the U.S.

The Blackstone Group COO Tony James said last week that he foresees a gradual shift in the coming years of capital pools away from the United States to Asia, the Middle East and other regions worldwide.

Speaking at a Financial Times conference in New York, he noted the dollar’s decline and said the United States may have to deal with a “much more level playing field where the dollar’s supremacy … is not taken for granted.”

“I think we’re on a verge of a shift, which will be gradual—not overnight or two years from now—where the big capital pools shift away from America, to Asia, the Middle East, Australia and even Latin America,” James said.

He is also concerned that the U.S. response to the financial crisis could harm America’s competitiveness and limit business.

“I personally think we’re on track to do a lot of things, which won’t stop a recurrence any more than Sarbanes-Oxley stopped this crisis, but will impose a lot of cost and limitations on our global competitiveness,” he said.

Blackstone has invested in such companies as Hilton hotels and casino firm Harrah’s Entertainment.

“America has had its issues in the last 18 months, but it also has had one hell of a 10-year run in productivity,” said James. “We’re a little bit in danger of throwing the baby out with the bathwater and damaging our long-term competitiveness in reaction to a short-term crisis.”

James defended the role of private equity during the financial crisis, saying “no one can point to it as a cause” of the meltdown.

However, the Obama administration and the U.S. Congress are cracking down on banks and Wall Street, aiming to prevent a repeat of the 2008-2009 financial crisis.

James added that he thinks asset prices are too high, but still sees a lot of investment opportunities for Blackstone.

Speaking at the same conference, Laurence Fink, CEO of BlackRock, a publicly traded investment management firm, said U.S. financial markets are still healing.

“We’re not seeing any increase in leverage,” said Fink. He added that asset prices like equities and fixed-income securities are rising on factors other than the use of leverage.

Fink was alluding to the stimulus packages of the Treasury Department and Federal Reserve aimed at jump-starting financial markets and economic growth. —Megan Davies and Jennifer Ablan, Reuters