Carlyle Group co-founder David Rubenstein has said family offices are looking at emerging markets more aggressively because of high valuations in developed markets.
Speaking at the African Private Equity and Venture Capital Association’s annual conference on Wednesday, Rubenstein said that his own family office, Declaration Partners, intends to do more in emerging markets.
“I expect to be able to do things in Africa through my family office and through vehicles that are established in Africa,” Rubenstein, who is co-chairman of the alternatives giant, said.
“It’s difficult to say that if you can buy things at half the EBITDA multiples in some African countries and in good businesses, that that’s not a good risk-reward trade-off,” Rubenstein said.
“But I’m not running round the world telling people to invest in Africa, because I want my money invested before prices go up,” he added.
Declaration was focused initially on investments in the US and is shifting to international markets, Rubenstein said during the keynote address.
The family office makes private equity and real estate investments, providing growth equity capital, seeding early-stage private funds and venture studios, and partnering with family-owned businesses, according to its LinkedIn page. It has backed the Series B round of Houston-based space infrastructure developer Axiom Space and invested in consumer platform Branded Group. Declaration manages more than $600 million of assets, according to a report from The Wall Street Journal.
“Emerging markets are still quite attractive – high growth rates, young populations, less government regulation and less competition,” Rubenstein said.
He noted, however, that currency in Africa remains an issue. “I wish obviously some of the currencies were stronger than they had been. Clearly, when the currencies go down dramatically, [that] makes the returns more difficult.”
Rubenstein added that the potential in Africa is not one that has lived up to expectations yet. “Returns have not been generally as attractive as some people thought.”
Carlyle’s Africa team spun out last year to form Alterra Capital Partners. The firm launched a 2013-vintage, $698 million Sub Saharan Africa Fund. Curt Buser, CFO of Carlyle, said during an investor day presentation in February that the firm has been “methodical over the past few years”, pruning funds that it cannot scale such as those in Africa, MENA and Mexico.
That said, Rubenstein said he expects “a lot of large commitments coming into Africa in the not too distant future”, with a number of government or government-related agencies that are interested in moving back into the region.
As a parting note to Africa-focused GPs, Rubenstein called for more persistence.
“Do not give up because I do think as the rates of return in the US have turned out to be very good, people have a lot of money and they’re going to look to new places to invest.” He added that some of these places would include emerging markets, “which have been bypassed over the last two years or so”.