Nov. 11 (Bloomberg) -- BlackRock Inc. Chief Executive Officer Laurence Fink said he's seeing signs of ``capitulation'' in financial markets, a broad selloff that usually precedes the end of a bear market.

``A year ago, I said we won't see a bottom until we see a capitulation,'' he said at an investment conference in New York today. ``We are seeing a capitulation,'' and financial markets may begin to recover by mid-2009, said Fink, 56, whose company is the largest publicly traded asset manager in the U.S.

Blackstone Group LP Chairman Stephen Schwarzman, speaking at the same event sponsored by Merrill Lynch & Co., said a global recession isn't necessarily bad news for leveraged buyouts.

``We're quite optimistic about our new prospects,'' said Schwarzman, whose company is the world's largest private-equity investor.

Schwarzman said the biggest profits for private-equity investors have come during the worst economic times, pointing to recessions in the early 1990s and 2001, when investors earned average annual returns of around 30 percent. The global credit crisis that took hold almost 18 months ago has stalled large- scale acquisitions, forcing Blackstone to focus on smaller deals that require less debt.

``When you get all that debt, the prices go up,'' Schwarzman, 61, said. ``When the prices are low, you can make a tremendous amount of money.''

Financial Tumult

The financial crisis that began last year with a spike in subprime-mortgage defaults has wiped out more than $28 trillion in global stock-market value.

The Standard & Poor's 500 Index has declined 38 percent in the past year, while the MSCI AC World Index of developed- and emerging-market stocks has fallen 45 percent. Financial institutions have had credit losses and writedowns of $920 billion.

Ronald Logue, chief executive officer of Boston-based State Street Corp., said the world's largest money manager for institutions is sticking to its forecast for rising profits this year and next, even as financial markets tumble.

State Street expects operating-earnings growth in 2008 at the high end of the 10 percent to 15 percent range, Logue, 63, said at the Merrill conference. The increase in 2009 will be at the low end of the same range.

Legg Mason Inc.'s CEO Mark Fetting today said the Baltimore-based company has enough capital to support its money funds, and that he doesn't anticipate raising additional cash.

Legg Mason raised capital twice this year to cushion money funds that bought debt issued by structured investment vehicles, or SIVs. The company lined up $1.25 billion in January from Kohlberg Kravis Roberts & Co., the New York-based private-equity firm, and $1.15 billion from the sale of convertible equity in the second quarter.

Legg Mason is continuing to ``methodically'' reduce SIV debt in its portfolios, Fetting said.

To contact the reporters on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net

Last Updated: November 11, 2008 16:25 EST