Tuesday, June 30, 2009

Carlyle Group's New $1 Billion Asia Fund

The Carlyle Group's new $1.04 billion Asia fund will target Chinese and Indian companies with potential for rapid growth. WSJ reported:

"Asia remains a core focus of our global business, and Carlyle continues to devote more resources to China and India," said Carlyle founder David Rubenstein in a statement.

What is Carlyle's track record in Asia? In addition to some big winners:

Carlyle saw its $25 million investment in China's Credit Orienwise Group Ltd. sour as the overleveraged credit guarantee firm struggled with losses and the company admitted to fraud taking place at a unit.

This isn't the first Carlyle affiliate to get a bloody nose. Vought gummed up the Boeing 787 Dreamliner production. SemGroup imploded overnight from forward looking contracts. Synagro Technologies bribed Rep. John Conyers wife. LifeCare Hospitals lost 24 patients post Hurricane Katrina, a fact omitted from the Bush league Lessons Learned report. But back to Carlyle's latest investment opportunity. FT reported:

New investors accounted for 40 per cent of the fourth fund, with half of all money provided by government pension funds and financial institutions – which traditionally have allocated more capital to buy-out opportunities. There was also rising commitment from investors within Asia and from Latin America.

Pension funds need to earn back lost principal. Double down! A decoupling is coming.

Update: The Carlyle Group invested in a Chinese infant formula maker. Recall tainted formula sickened tens of thousands of Chinese babies. Carlyle will use its considerable knowledge of quality to optimize investment returns and executive pay. The product? Not so much. At least LifeCare, Vought and Synagro point to major quality problems.