Sovereign wealth funds complicating fund raising: Carlyle

The preference of sovereign wealth funds in the Middle East for direct investment has made fund-raising in the region complicated, according to private equity group Carlyle. Although private equity activity has been growing in the Middle East, fund raising appears to be a bit trickier because “a lot of the sovereign wealth funds which have money feel they are to some extent over-allocated in private equity,” said Carlyle managing director David Rubenstein.

(Reuters) – Private equity giant Carlyle Group expects fundraising in the Middle East to remain “complicated” for another year as the region’s sovereign wealth funds prefer to invest directly, its founder said on Tuesday.

Washington, D.C.-based Carlyle has nearly $90 billion under management and has been one of the few firms carrying out deals in the wider Middle East region, where private equity activity has grown scarce since the global financial crisis.

“Fundraising in the Middle East is complicated because a lot of the sovereign wealth funds which have money feel they are to some extent over-allocated in private equity,” David Rubenstein, who is also Carlyle’s managing director, told reporters on the sidelines of a private equity conference in Abu Dhabi.

“They want to get some money back before they start putting money out again.”

Sovereign wealth funds were looking increasingly to invest directly rather than going through funds, Rubenstein said.

Sovereign funds are developing in-house portfolio management techniques after the global crisis, a worrying trend for asset management companies, according to research firm Cerulli Associates.

Rubenstein also said that global private equity deals in the range of $3 billion to $7 billion would be “the upper end of the deal size for a while.”

Carlyle has been one of the most active international private equity firms in the wider Middle East region, concluding deals in Turkey’s healthcare sector and Saudi Arabia’s manufacturing industry and is working on further deals in the same region.

Carlyle was eyeing further deals in Turkey and the Gulf Arab region, Rubenstein said.

“We have one or two (deals)… we’re moving forward,” Rubenstein said.

Carlyle acquired a 40-percent stake in Medical Park, Turkey’s second-largest healthcare services company, at the end of 2009. In March, it bought a 30-percent stake in Saudi Arabia’s General Lighting Company, the kingdom’s largest lighting fixture manufacturer.

(Reporting by Nicolas Parasie and Stanley Carvalho; Editing by Hans Peters