David Rubenstein
Private equity's 'potential crisis'
March 5, 2013: 12:33 PM ET
Do private equity firms need to make a structural change?
FORTUNE -- Private equity funds have long featured "hurdle rates," or preferred returns that funds must generate for investors before fund managers get to begin sharing in the profits (i.e., carried interest). But one senior private equity executive believes that current hurdle rates pose "a potential crisis" for the industry.
Jeremy Coller, founder and chief investment officer of Coller Capital, made the comments last week during the SuperReturns International conference in Berlin, Germany.
Coller's primary concern was that hurdle rates have become divorced from their original purpose -- compensation for extra investor risk inherent in a long-term, illiquid asset class like private equity. For example, hurdle rates originally were set at around 8%, because that is what investors would have been able to get were they to instead put their money in 10-year U.S. Treasuries.
The result, Coller argued, is a misalignment of interests that has artificially elongated the time fund managers must wait before receiving carried interest (if they receive it at all). Particularly given that nearly half of the conference attendees said they expect private equity returns to be between 5% and 10% during the next cycle.
This may not matter much at the senior levels, Coller said, but eventually could cause fewer young professionals to enter the industry. It also could cause some existing junior staffers to seek out other opportunities that are closer to the carry -- disruptions that ultimately could affect returns at the funds they leave behind.
To be clear, there is no indication that limited partners in private equity funds have any interest in lowering hurdle rates. And there certainly is a case to be made that if a PE fund manager can't generate in excess of 15% or 20%, then they really aren't doing their job. But it's worth noting that this is an issue that clearly is weighing on the industry's mind, particularly as rates remain low.
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Carlyle's Rubenstein: Private equity has recovered
What didn't kill private equity made it stronger.
FORTUNE -- David Rubeinstein, co-founder of The Carlyle Group (CG), believes that the private equity industry is stronger today than before the Great Recession.
Speaking at the SuperReturn International conference in Berlin, Rubenstein argued that private equity faced several serious threats in the wake of the Lehman Brothers collapse. Not only massive decreases in fundraising and deal-making, but also the possibilities of debilitating regulation, MORE
Dan Primack - Feb 27, 2013 3:48 AM ET -
Carlyle's Rubenstein: Where we're not investing
Where the global private equity firm fears to tread.
FORTUNE -- The Carlyle Group (CG) is bearish toward private equity investments in Russia and Mexico, according to comments made by firm co-founder David Rubenstein during a NY Times Dealbook conference.
"We think Russia may be attractive to visit as a tourist, but it's very difficult to make a lot of money there -- few private equity investors have... We think Mexico has MORE
Dan Primack - Dec 12, 2012 2:30 PM ET -
Carlyle Group: No mega-fund to see here
Carlyle's Rubenstein sets some private equity parameters.
FORTUNE -- Not too long ago, it seemed that every private equity firm was jockeying to raise the largest fund. Today, however, the official line is that small(er) is beautiful.
For example, check out this recent comment from The Carlyle Group's (CG) David Rubenstein, during the firm's third quarter earnings call.
"The biggest complication in the fundraising market for private equity has been the mega funds and, MORE
Dan Primack - Nov 13, 2012 11:55 AM ET -
Carlyle boss: Uncertainty is (hopefully) dead
David Rubenstein sounds optimistic.
FORTUNE -- Yesterday I wrote an obituary for "uncertainty," the catch-all excuse used by CEOs who have chosen to hoard cash rather than spend it on new employees, acquisitions or other expansion activities.
Since then, some folks have emailed to let me know that I'm "an idiot." And "stupid." And (my favorite) "someone who knows less about business than my son, who won't be born for another month."
But MORE
Dan Primack - Nov 8, 2012 4:24 PM ET -
Carlyle's Rubenstein: PE investors lower expectations
Private equity remains attractive, despite lower return expectations.
FORTUNE -- David Rubenstein, co-founder of The Carlyle Group (CG), said during an earnings call today that private equity investors have lower return expectations today than they have over the past three decades. Nonetheless, fundraising itself is on a mild upswing.
"People used to expect 20% net internal rates of return (IRRs) or higher," Rubenstein said, citing factors like better GDP growth and less MORE
Dan Primack - Aug 8, 2012 12:22 PM ET -
Rubenstein defends PE jobs record
Private equity big talks job creation.
Private equity must do a much better job tracking and conveying its job creation record, said Carlyle Group co-founder David Rubenstein during a keynote speech today at the SuperReturn International conference in Berlin.
Rubenstein's comments were made in the context of increased public scrutiny on private equity, due to the presidential ambitions of former Bain Capital chief executive Mitt Romney. Romney has regularly claimed to have MORE
Dan Primack - Feb 28, 2012 5:20 AM ET -
Carlyle's Rubenstein: Why China 'really' loves private equity
Carlyle Group boss David Rubenstein was on stage in New York yesterday, as part of the Buyouts New York event. As part of the (mostly softball) interview, Rubenstein noted that he feels more welcome in China as a private equity exec than he does in Washington. As Rubenstein put it:
"If Mao Zedong and Richard Nixon came back from the dead, they wouldn't recognize their respective capitals because one has become very MORE
Dan Primack - Apr 27, 2011 10:14 AM ET
