Key Takeaways
- • David Rubenstein, Carlyle Group co-founder, predicts a significant rebalancing of private-equity capital allocation between developed and emerging markets, indicating a structural shift in where PE capital will be deployed globally.
- • Rubenstein anticipates consolidation among general partners (GPs), suggesting the competitive landscape for private-equity firms will intensify and smaller or underperforming managers may face pressure.
- • The private-equity industry is entering a phase of heightened capital competition, with a Preqin survey from August 2017 revealing that four in five PE fund managers report greater competition for investor capital than in previous periods.
- • Rubenstein identifies sovereign-wealth funds as an increasingly important capital source for private equity, reflecting the growing role of state-backed investors in alternative asset allocation.
- • The PE industry continues to attract institutional capital despite market pressures, as investors remain drawn to private-equity returns that exceed alternative investment opportunities, positioning the sector for continued growth despite cyclical challenges.
Summary
David Rubenstein, co-founder of the Carlyle Group, offered a forward-looking assessment of the private-equity industry on November 16, 2017, outlining five key predictions for the sector's evolution. Reflecting on three decades of industry transformation, Rubenstein observed that private equity has evolved from a niche Wall Street practice into a global industry commanding hundreds of billions in assets across multiple asset classes. He attributed the longevity of his generation of PE founders to favorable market conditions, though he acknowledged that the landscape continues to shift dramatically.
Among Rubenstein's central predictions is a fundamental rebalancing of private-equity investment flows between developed and emerging markets. He forecasted that this geographic distribution will change significantly, with emerging markets capturing a growing share of PE capital deployment. This shift reflects both the maturation of developed markets and the expanding institutional infrastructure in emerging economies to support private-equity operations.
Rubenstein also predicted consolidation among general partners, indicating that the competitive pressures facing the industry will likely result in a restructuring of the GP landscape. This forecast aligns with broader market dynamics: a Preqin survey published in August 2017 found that four in five private-equity fund managers reported greater competition for capital than in previous periods, suggesting a tightening of fundraising conditions and heightened pressure on manager performance and differentiation.
Additionally, Rubenstein identified sovereign-wealth funds as an increasingly significant source of capital for private equity. As state-backed investors expand their alternative-asset allocations, PE firms stand to benefit from a diversified capital base beyond traditional institutional investors such as pension funds and endowments.
Despite these competitive headwinds, Rubenstein emphasized that private equity will continue to attract capital because the asset class delivers returns superior to other investment alternatives. This fundamental appeal—the ability to generate alpha relative to public markets and fixed income—positions the sector for sustained investor interest, even as consolidation and geographic rebalancing reshape the competitive dynamics of the industry.
Among Rubenstein's central predictions is a fundamental rebalancing of private-equity investment flows between developed and emerging markets. He forecasted that this geographic distribution will change significantly, with emerging markets capturing a growing share of PE capital deployment. This shift reflects both the maturation of developed markets and the expanding institutional infrastructure in emerging economies to support private-equity operations.
Rubenstein also predicted consolidation among general partners, indicating that the competitive pressures facing the industry will likely result in a restructuring of the GP landscape. This forecast aligns with broader market dynamics: a Preqin survey published in August 2017 found that four in five private-equity fund managers reported greater competition for capital than in previous periods, suggesting a tightening of fundraising conditions and heightened pressure on manager performance and differentiation.
Additionally, Rubenstein identified sovereign-wealth funds as an increasingly significant source of capital for private equity. As state-backed investors expand their alternative-asset allocations, PE firms stand to benefit from a diversified capital base beyond traditional institutional investors such as pension funds and endowments.
Despite these competitive headwinds, Rubenstein emphasized that private equity will continue to attract capital because the asset class delivers returns superior to other investment alternatives. This fundamental appeal—the ability to generate alpha relative to public markets and fixed income—positions the sector for sustained investor interest, even as consolidation and geographic rebalancing reshape the competitive dynamics of the industry.
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