Carlyle’s Rubenstein touts EM investment, explains launch of FO

  • Rubenstein says he’s putting his personal money in emerging markets
  • Likes to invest when others are getting out
  • Formed his family office after stepping back from daily leadership at Carlyle

David Rubenstein, co-executive chairman of Carlyle Group, said the time is right for investors to put their money in emerging markets.

“The bloom is off the rose” for emerging markets, which means the segment is right for contrarian bets, he said in a keynote speech this week at the EMPEA/IFC Global Private Equity conference in Washington.

“I am putting my personal money into emerging markets; that’s where the greater reward is likely to be,” Rubenstein said. “If everyone was rushing into emerging markets now, I would be nervous.”

Investment potential

Buyouts’s sister publication, PEI, reported that Rubenstein said the worst is probably behind these markets regarding drops in commodity prices, concern about corruption, accounting matters, finding good deals and financing challenges.

He said that only about a sixth of all PE capital raised is invested in emerging markets, and given that 55 percent of the world’s GDP is in these markets, it’s only a matter of time before investors put more money down there, PEI reported.

Carlyle is raising its second Africa fund after deploying around 90 percent of the capital from its debut pool, which closed on around $700 million in 2014, a person with knowledge of the fund told Buyouts. How much Carlyle will target for Fund II is unclear.

Carlyle’s debut pool was raised during a period of much hype for investment in Africa. That enthusiasm has eased in the past few years amid slowing growth and a recession last year in South Africa, sources have said. LPs also have found enough opportunities in developed markets, so they’re less inclined to risk money in emerging economies, sources said.

Carlyle has invested around $400 million in nine companies in the past three years, according to Eric Kump, head of Carlyle’s Sub-Saharan Africa fund, who spoke on a panel at the IFC EMPEA PE conference. Overall, Fund I has invested in 13 companies, Carlyle’s website shows.

Prices on those investments were about 30 percent below their international comparables, Kump said. Carlyle is doing control investments in the middle-market companies, targeting deals from $30 million to $50 million, Kump said.

One thing that needs improvement in Africa is the development of capital markets, Kump said. “I’d like to see the exit options develop further,” he said.

The group has invested in several different strategies, including pharmaceutical products company AbacusTraxys Group, which provides financial and logistical services for the metal and mining industries, and credit ratings firm Global Credit Ratings.

Explaining Declaration

Rubenstein also explained why he launched his family office, Declaration Capital, which he founded after stepping back from day-to-day leadership at Carlyle in 2017.

“I set it up because everyone was asking me for many years, ‘do you have a family office?’ I began to get family office envy. I felt naked walking into parties saying, ‘I don’t have a family office, sorry.’”

“My family office only invests in things I know, which is private equity,” he said. Declaration doesn’t make deals that conflict with Carlyle, he said.

In January, Declaration, Donaldson Group and DRA Advisors partnered to buy a residential community in Maryland for $86.7 million.

Other deals include aXiomatic, an esports and videogame startup that Declaration invested in along with Michael Jordan, Curtis Polk and others; WeWork competitor Convene’s $152 million Series D funding; and it led a $50 million Series D in WorkFusion, a robotic process automation company.

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