Rubenstein: Transparency will not be enough

Carlyle Group co-founder David Rubenstein has warned that recent initiatives to improve transparency in private equity will never completely appease the industry’s critics, and suggested that a re-branding exercise may be necessary.

David Rubenstein, co-founder and managing director of The Carlyle Group, has warned the industry that greater transparency will never be enough in itself to placate private equity’s most vocal opponents.

In an exclusive interview with PEO, Rubenstein said objections to private equity were often rooted in a fear of change: “Even if every private equity firm agrees to disclose every single thing about everything we do, that isn’t going to dissipate all the objections – because they’re fuelled by the fear that change will occur, and this brings doubt and uncertainty.”

Rubenstein’s comments come as a UK working party led by City grandee Sir David Walker is preparing guidelines on greater transparency and disclosure for private equity firms, in an attempt to fend off recent criticisms from trade unions, politicians and the media.

Nonetheless, Rubenstein remains a firm believer that the industry needs to get better at explaining itself. “My own view is that private equity has made companies more efficient, but the industry has to do a better job of explaining what it does to make this happen. We need to explain why tax revenues and employment numbers go up, rather than just bragging about rates of return and multiples on investment.” Big buyout firms now need to operate more like public companies, he argued.

Rubenstein suggested the industry could benefit from a re-branding exercise. “Private equity seems to have become a bad phrase… So maybe it’s time to change the phrase to reflect what we really do. My suggestion is that we call this ‘change equity’, because that’s really what we’re trying to do – whether in a public or private setting.”

Rubenstein also argued that the asset class will remain attractive to investors even if returns come down in absolute terms, since it will continue to out-perform the public markets.


Click here to read the full interview, which includes Rubenstein’s views on transparency, performance, and the future of the industry.