With $554 billion in AUM, Blackstone seeks fewer opportunities.

Blackstone CEO Steve Schwarzman confirmed our concerns about dry powder and higher valuations during an interview at the World Economic Forum. Schwarzman discussed the lack of opportunities with CNBC.

The alternative assets executive cited higher asset prices, expectations for global growth, and lower interest rates for there being “much fewer things” to buy.

Blackstone CEO Steve Schwarzman at Davos

“All markets have gone up pretty dramatically,” Schwarzman said in an interview with Squawk Box.

He continued: “Everything is up. You have to see something reasonably remarkable in terms of your ability to improve the operations of a company.”

Blackstone has about $554 billion in AUM. The firm was very active in 2019 with its strategic purchases. The firm bought logistics giant GLP; took a big stake in TallGrass Energy; and bought the real state assets from MGM Resorts International (which included the Bellagio casino).

This year, Schwarzman said the firm will have to be more strategic with its pursuits of deals.  “I wouldn’t say [we will be] stepping back [from deal],” he said. “This is like a hockey game where you used to have 35 shots on goal, of things you could buy. Now, it’s like five.”

Private equity has outperformed every other asset class over the past few decades. But the inflows of capital combined with lofty valuations has created a challenge. We now have a case of too much money chasing too few good deals.

Buyout funds now have $775 billion of Dry Powder to spend and very few opportunities available at attractive prices.

As our PE analyst Tim Melvin said last month, fund managers have a choice to make.

They can sit and wait until multiples correct-which would be the right thing to do in most cases- or they can pay up and hope it works out well. Many fund managers are doing exactly that and using additional leverage to juice returns. The credit rating agency Moody’s recently expressed concern as private equity-owned companies have issued debt that weaker than those of non-PE owned similar companies.