Rubenstein: Carlyle ‘still bullish’ on Asia

Carlyle co-CEO David Rubenstein is optimistic about investment opportunities in the region despite slowing GDP growth, as the firm raises Asia and Japan-focused buyout funds.

Although Asian markets are growing at slower rates than just a couple years ago, David Rubenstein, the Carlyle Group’s co-chief executive officer, said the firm remains committed to Asia. 

“We’re still bullish on Asia and China,” Rubenstein said at the Dow Jones Private Equity Analyst conference in New York Thursday.

Carlyle is raising its fourth Asia buyout fund targeting $3.5 billion and in July this year reportedly launched its latest Japan-focused buyout vehicle with a target of JPY 100 billion (€769 million; $1.02 billion), according to PEI’s Research & Analytics division. 

Rubenstein acknowledged that emerging markets are growing at slower rates than they used to but he underscored the fact that emerging markets continue to outpace US growth.

“We would love to have 6 percent growth here,” he said, referring to China’s slowing annual GDP growth which has come down from 10 percent and by some estimates could eventually go as low as 6 percent.

GDP growth in China is slowing as the country re-orients from an export-led economy to one based on domestic consumption. 

The value of private equity deals in China has remained flat year-on-year, with about $9 billion invested during the first half of 2013, according to figures from PricewaterhouseCoopers. The volume of exits in China was down to 62 during the first half of 2013 from 115 during the same period the year before. 

However, John Zhao, co-founder and chief executive of Beijing-focused Hony Capital, recently told Private Equity International he remains optimistic about the country’s big and broad trends, despite the negative macro headlines.
A “great age of consumption” is coming, he said, with China’s household spending set to increase by $5 trillion over the next decade. China’s service industry is opening up, while an “environmental revolution” is also creating investment opportunities.

Part of Rubenstein’s confidence in Asian markets comes from personal meetings in Beijing with government officials who value the role of private equity more than politicians in the US, he said. He added, however, that the US remains the most attractive overall region for private equity investing.

Turning to Japan, Rubenstein said: “Japan is more complicated, though growth is better than it was. It’s not like it’s a tiny little economy.” However, he noted issues such as the country’s aging population – the average age in the Japan is 45.