Carlyle sees more demand from Asian LPs

David Rubenstein says the firm's $1bn Japan fund has now raised about $600m domestically

Global private equity firm The Carlyle Group raised $6.5 billion of new capital in the third quarter of this year, seeing an increase in demand from Asia-based LPs, co-founder of the group David Rubenstein said on the firm’s Q3 earnings call yesterday.

Moreover, as well as closing its fourth pan-regional Asia fund during Q3 on $3.9 billion – over its target and 50 percent bigger than its predecessor vehicle – Rubenstein revealed the firm has raised $600 million toward its latest Japan-focused fund, which is targeting $1 billion.

“What we like to do in these kind of funds is to raise the money in the [host country] because that gives credibility when you go outside. So we're now in the process of raising money outside of Japan,” he explained.

“The fund will be probably smaller than our last-generation Japan fund just because the interest in Japan has probably been less than it was when we raised the last one, though we still are, I think, the dominant private equity player in Japan. We've been there longer and have a longer track record. But $1 billion is the target. I won't say whether we'll go over that target or not. It's still a little early.”

While the firm is seeing interest from all regions, Rubenstein notes an uptick in interest from Asia-based LPs.

“For the quarter, we did see an increase in demand from Asia, perhaps reflecting our strong presence there. Slightly more than a third of our new capital for the quarter came from Asia.”

William Conway, co-founder of Carlyle, also noted that valuations in Asia were good compared to the past decade. How high valuations today will impact the firm’s performance is one of the most frequent questions asked by its investors, he said.

“Current market multiples are, no doubt, high, particularly in the United States. However, in Europe and Japan, valuation multiples are much lower than in the US, and in Asia, multiples are below the average of the past decade.”

Third quarter investments in Asia include SBI Mortgage and Sunsho Pharmaceuticals in Japan, and Ganji, a classified advertising company in China.

The firm is also pleased with the performance of Carlyle Asia Partners II, which was fully invested by the end of 2007 and is tracking at a multiple of 1.7x – a “strong return” for its vintage.