By Andy Serwer
Will the last old-school banker please turn out the lights?
This past Monday night in a packed Times Square ballroom, some 2,000 attendees rose out of their seats to salute the latest lion of Wall Street, Marc Rowan, CEO of Apollo Global Management. It was the 50th UJA-Federation Wall Street Dinner, a signature fund-raising event in New York, which this year reaped some $57 million, and where Rowan was lauded for his "visionary leadership" in philanthropy and business.
Dozens of boldfaced-name financiers were in attendance, including Lloyd Blankfein, former CEO of Goldman Sachs Group, along with leading lights from JPMorgan Chase, Morgan Stanley, and Bank of America, but the crowd leaned more heavily toward the new side of Wall Street, including Blackstone Chief Operating Officer Jon Gray, Marc Lipschultz, co-CEO of Blue Owl Capital, and Michael Arougheti, CEO of Ares Management, as well as hedge fund CEOs Dan Loeb of Third Point and Paul Singer of Elliot Investment Management.
To a degree, the dinner manifested yet another step in the changing of the guard on Wall Street, from the old-line legacy banks to the new private-market institutions. (The other executive honored that night was Julie Solomon, co-head of real estate at Ares.) It's an ongoing shift of power and influence well understood by major charities, which have leaned into the trend, at least in part because, as Willie Sutton might have observed, that's where the money is.
For many decades, the ultimate brass ring on Wall Street was grabbing a top position at one of the nation's largest commercial or investment banks -- the management committee at JPMorgan or a partnership at Goldman Sachs. It was the sign of ultimate achievement, a passkey to the upper echelons of New York society (and beyond), and a path to great wealth.
This was the case even after two massive shifts in the business. First, the firms went public, mostly in the 1970s and 1980s; Bank of America and JPMorgan on the commercial side, and investment banks Merrill Lynch, Morgan Stanley, and finally Goldman Sachs in 1999. And second, the two businesses began to converge, beginning with the Reagan administration's deregulation and culminating in the tumult of 2008, when Lehman Brothers collapsed and others were either bought (Bear Stearns by JPMorgan and Merrill Lynch by Bank of America) or forced to become bank holding companies (Goldman and Morgan Stanley).
At the same time, entrepreneurs were creating a financial parallel universe: in venture capital with firms such as Greylock, Sequoia Capital, and Kleiner Perkins formed in the late 1960s and early 1970s; hedge funds including Bridgewater Associates, Elliot, and Tudor Investment; and private-equity firms KKR, Blackstone, and Carlyle Group, all established in the mid-1970s through the mid-1980s. Though these companies started small, many of the founders -- a number of whom still hold leadership positions -- had massive ambition and grew their companies into global giants that rival Wall Street's legacy firms.
In particular, private equity and its later incarnation, alternative asset firms -- which are much less encumbered by regulatory oversight than banks -- have become fixtures of what we now call the shadow banking system, as predicted in a prescient and influential paper, "The Remaking of Wall Street" by Andrew Tuch, a law professor at Washington University. He wrote that while private-equity firms might be less financially vulnerable than the former investment banks, their credit funds and broker-dealer operations could "pose systemic risk concerns."
"Private-equity firms have been able to expand into the broker-dealer business, into credit, into insurance, simply because they can. No one is stopping them," says Arthur E. Wilmarth Jr., a professor emeritus of law at George Washington University and an expert in banking law and financial regulation. "They have replaced the old investment banks."
Yes, the big four -- JPMorgan Chase, Goldman, Morgan Stanley, and Bank of America -- are still formidable, but in many cases they've been eclipsed, particularly as compensation-making machines, by their private-market brethren and their multigenerational wealth-creating fee structures.
These great fortunes are being garnered not just by private-market firms' founders -- familiar names like hedge fund CEOs Ken Griffin and Steve Cohen; Peter Thiel and Marc Andreessen in venture capital; and Steve Schwarzman and Henry Kravis in private equity -- but also for a whole new crop of executives, many of whom have accumulated over $500 million or even several billion in compensation.
To help quantify this changing of the guard, Barron's asked pay consultant Equilar to compare the total compensation of old Wall Street to new Wall Street. Equilar measured the amount of money made by named executive officers, or NEOs (senior executives of a publicly traded company, usually the CEO, chief financial officer, and three or four others, whose compensation must be disclosed in regulatory filings) at the big four Wall Street banks, as well as at eight publicly traded private-equity/alternative-asset firms (Apollo, Ares, Blackstone, Blue Owl, Carlyle, Hamilton Lane, KKR, and TPG). Unlike almost all venture and hedge funds, most big PE firms are publicly traded, which makes for easier apples-to-apples comparisons.
The data reflect each executive's accumulated compensation from 2006 onward (when the Securities and Exchange Commission changed reporting rules) and the value of shares sold from 2003 onward (when the SEC mandated electronic filings for this disclosure), plus the value of their current -- and in many cases, vastly appreciated -- stockholdings.
Here's the tale of the tape: The average NEO of the PE/alt group has been paid some $2.3 billion, while the average legacy bank NEO made $331 million. Even when you exclude three heavily compensated private-equity founders; Steve Schwarzman, CEO and co-founder of Blackstone ($35 billion), and Henry Kravis and George Roberts, co-founders of KKR (both $11 billion), the average PE NEO still made just over $1 billion.
Another take comes from looking at median total compensation of the two groups, which for execs from legacy firms is $133 million as opposed to $376 million for the PE/alt execs (or $324 million when excluding Schwarzman, Kravis, and Roberts). Still a big gap. Of the legacy bank executives on the list, only JPMorgan Chase CEO Jamie Dimon, the most successful of that cohort, has earned more than $1 billion.
Who are some of these kings of Wall Street? Atop the list after Schwarzman, Kravis, and Roberts are two increasingly familiar names, Blackstone COO Gray (and increasingly CEO in everything but title), who has taken home $7.6 billion, and Apollo's Rowan -- noted for spearheading the ouster of the president and the board chair, an old-school investment banker, of his alma mater, the University of Pennsylvania -- with $5 billion.
Beyond that are some billionaires who may be less familiar -- even as they helped build these companies into the forces they've become -- like Blackstone CFO Michael Chae, who previously headed up a number of operating businesses there and has made $1.2 billion. The co-CEOs of KKR, Scott Nuttall and Joseph Bae -- pals since they joined the company as junior analysts in 1996 -- have been paid some $3.7 billion each. There's Jim Coulter, executive chairman and a founding partner of TPG, who now helps lead the firm's impact and environmental investing practices.
TPG's CEO, Jon Winkelried, who toiled at Goldman for over three decades before joining TPG a decade ago, is also on the list. Michael Rees and Doug Ostrover from Blue Owl have each made a billion-plus, and so too has a duo from Ares, CEO Michael Arougheti and Bennett Rosenthal, as well Scott Kleinman, co-president of Apollo Asset Management, who once worked at Smith Barney (remember them?).
Equilar's data aren't measuring these individuals' net worth. They don't account, for instance, for Arougheti's investment in Major League Baseball's Baltimore Orioles, or Winkelried's Colorado ranches. The Equilar list also doesn't include a number of high-profile PE billionaires like David Rubenstein, co-chairman of Carlyle, and Tony Ressler, executive chairman of Ares, who are no longer NEOs.
The pay disparity between the old and new Wall Street is apparent as you move down the pay food chain, as well. Wealth-intelligence firm Alrata looked at some 2,000 Americans with a net worth of more than $30 million who identify as being in banking and finance. The average net worth of those from a group of old-line companies (JPMorgan, Bank of America, Morgan Stanley, Goldman Sachs, Wells Fargo, Citigroup, and Bank of New York Mellon) is $118 million, while those who identify as working in hedge funds is $142 million; venture capital, $151 million; and private equity, $161 million.
There are myriad ways to measure the impact of these private-market firms on the financial markets, starting with U.S. private-equity firms employing 13.3 million workers, who earned $1.1 trillion in wages and benefits. Firms like private-credit giant Apollo own hundreds of hospitals in the U.S. Blackstone and KKR have significant investments in data centers and own hundreds of thousands of residential units. Speaking of real estate, did you see the recent Wall Street Journal article "The Hamptons Market Is Making an Epic Comeback"? Well, guess who's buying? "There was a time when Goldman Sachs partners were buying everything; now it's the private-equity people," says Paul Brennan, a top real estate agent at Douglas Elliman in the Hamptons who has sold a couple of eight-figure properties this year.
Also consider these numbers: The combined market capitalization of the eight private-equity/alt firms in the Equilar study is some $492 billion. The total assets under management of those companies is $4.67 trillion. And the private-credit market, dominated by the alt firms, is now $1.5 trillion-plus. All of those dollars represent an opportunity cost, to a degree, to the legacy banks.
"The big banks still win in mergers and acquisitions, advisory, and underwriting. They really have no competition there," says John Arnholz, a securities lawyer now retired from Morgan Lewis. "But just look at the news -- all the stories are about things Blackstone, Apollo, and Ares are doing."
The implications of this reordering extend far beyond the workings of Wall Street and now stretch to our society writ large, be it politics, sports, or entertainment. In fact, the influence of the shadow bankers arguably matches or even exceeds that of traditional bankers.
Consider three implications of the power of private-market firms on higher education. First, university endowments, in particular those of the Ivy League, have loaded up on PE investments, which served them well until now, when it hasn't. Second, Marc Rowan, VCs like Peter Thiel, and hedge fund managers like Bill Ackman and Leon Cooperman have been sharply critical of these schools as they work to foist changes in leadership and curriculum. And third, the big money being made in private equity is increasingly allowing these firms to hire the best and brightest on university campuses.
Then there's politics. It used to be that so many executives from Goldman Sachs went to work in Washington that it was called "Government Sachs." No longer. Jerome Powell worked at the Carlyle Group and other private-equity firms before becoming Federal Reserve chair. Treasury Secretary Scott Bessent was a hedge fund manager, and Stephen Feinberg, co-founder of Cerberus Capital Management, i s now Deputy Secretary of War. As for VCs, David Sachs serves as Trump's artificial-intelligence and crypto czar -- and oh, lest we forget, the vice president of the U.S., JD Vance, was a VC.
Vance, you may remember, worked for Sachs' good friend, Thiel, who has become a key GOP funder, following in the footsteps of hedge fund honchos like George Soros on the left and Robert Mercer of Renaissance Capital on the right.
Meanwhile, at the state level, Glenn Youngkin was co-CEO of Carlyle before becoming Virginia governor, and David McCormick, former CEO of hedge fund Bridgewater, is a U.S. senator from Pennsylvania.
Forays by private equity into the world of sport, once a trickle, have become a flood, with PitchBook identifying 74 major North American sports teams, valued at $258.4 billion, with PE connections. The PitchBook numbers don't even include sports like lacrosse, bull riding, Formula One, Minor League Baseball, flag football, rugby, volleyball, water polo, or even youth sports where PE has bought in. PE investors including RedBird Capital Partners and Ares have also invested in or own marquee soccer teams in Spain, England, France, and Italy.
Wall Street bankers once made for perfect foils in popular culture. Now private-equity executives fill the roles of villains or antiheroes in shows like Billions and Succession, the latter providing this bit: "You know how, like, everyone hates you?" Kendall Roy asks. "Well, no, that's not something I'm aware of," Stewy Hosseini responds impishly. "Private equity," Kendall continues, "getting your meat hooks in, chiseling your profit like a vampire locust fuck."
That little tidbit is cited in Derivative Media: How Wall Street Devours Culture by Andrew deWaard, a professor of media and popular culture at the University of California, San Diego, who, as you might surmise (perhaps along with the writer of that dialogue) is none too pleased that the PE boys have come to Tinseltown. DeWaard's book has a table showing some two dozen examples of the likes of KKR (David Ellison's Skydance), Apollo ( Legendary Entertainment), and Blackstone ( Hello Sunshine) buying into the movie business. Meanwhile, all of the big talent agencies, critical to the workings of Hollywood -- William Morris Endeavor, Creative Artists Agency (which now owns ICM Partners), and United Talent Agency -- are either owned or have or have had large stakes in their businesses owned by PE.
What has drawn PE to Hollywood? "Maybe because there aren't a lot of places left to invest," deWaard says. "Film, TV, and popular music resisted financialization for a long time, in part because it's a complicated business. And there are people who make a lot of money in some other business and go to Hollywood because, what a great way to spend your money and go to parties." ( Shhhh. Don't tell the limited partners.)
Private-equity executives looking for a Hollywood ending to their investments in the entertainment business and indeed across their portfolios would have to acknowledge that all of this wealth creation comes at a time when the PE/alt model is being called into question. Critics like George Washington's Wilmarth say the current pace of dealmaking can't sustain the number of exits required to return capital to limited partners.
"PE funds have a huge slog of debt that they're trying to extend and pretend, with continuation funds, payment-in-kind interest deals, and net asset value loans to try to get some money back to the investors," Wilmarth says. "Now, they're trying to go retail investors because institutional investors are saying, 'Wait a minute, where are all these returns we were promised? We would have been better off with an S&P 500 fund.' "
Charley Ellis, longtime observer of the markets and author of The Partnership: The Story of Goldman Sachs, has seen this movie before.
"Either shadow banks will be obliged to accept greater regulation, or sooner or later, one or more of them will get caught in a mess that roils the markets," Ellis told Barron's in an email. "Sooner or later, one way or another, the odds increase and increase until serious problems develop that impact the markets roughly the way Lehman and Bear Stearns did. The timing, magnitude, and all the specifics won't be known in advance, but the odds are rising," he says.
Sounds like it might be time for Ellis to write a new book. Or at least some new chapters.
Write to Andy Serwer at andy.serwer@barrons.com
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December 05, 2025 01:00 ET (06:00 GMT)
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