Carlyle sees Asian SWFs play bigger role in its funds

Sovereign wealth funds in Asia and the Middle East are increasingly important investors for the Carlyle Group, co-founder David Rubenstein said during the firm’s third quarter 2015 earnings call in October.

While Carlyle has had a diverse range of investments from sovereign wealth funds in each region of the world, about two-thirds of the firm’s sovereign wealth money has come over the last three years from Asia and about a third comes from the Middle East, said Rubenstein.

He added they are receiving more commitments from sovereign wealth funds than historically they have done.

In August, Singapore’s sovereign wealth fund, Government of Singapore Investment Corporation (GIC), joined Carlyle to buy Veritas, a data storage provider, from Symantec Corp for $8 billion in cash, as reported by Private Equity International.

In 2014, GIC bought an unspecified stake in RAC, the second largest roadside assistance provider in the UK, from Carlyle. It now jointly owns a majority stake in RAC alongside the private equity firm, which acquired RAC through Carlyle Europe Partners III that launched in 2006.

In July of this year, Carlyle invested $87 million in Chinese vending machine operator Beijing Ubox Technology and Trade Company through the Carlyle Beijing Partners Fund, a Renminbi fund established with the support of the Beijing government.

Mubadala Development Company, wholly-owned by the Abu Dhabi government is also a major investor in Carlyle with its direct stake valued at about $20 billion, as reported by PEI.

Increasing numbers of sovereign wealth funds are using private markets to diversify their portfolios and achieve higher returns. SWFs are also increasing target allocations to private equity, with direct transactions for the 12 months up to the third quarter totalling $203.61 billion, according to the Sovereign Wealth Fund Institute.

In addition, about 15 of the top 25 SWFs ranked by assets under management have an allocation to private equity funds, of which up to $50 billion are in direct transactions for the first half of 2014, the institute reported.

In their Q3 215 earnings call, Carlyle reported strong fundraising activity for the quarter, with $4.6 billion raised in net new capital and about $1.6 billion of that amount invested in equity. A total of $18.6 billion was raised over the last 12 months.

Carlyle’s assets under management however declined from $193 billion in Q2 2015 to $188 billion in Q3 due to the short-term volatile movements in global markets and foreign exchange impact during the quarter. This decline produced an economic net income loss of $128 million for the quarter.

Despite the decline in assets during the period, the group invested close to $500 million in three companies in China focused on the logistics, technology and consumer sectors.

The firm also recently announced a number of new investments and exits which should close later this year and in early 2016, including semiconductor company Freescale and Texas-based Landmark Aviation, as well as a number exits in their Asian funds.