Thursday, June 17, 2010

China: Carlyle Group's Place to Be

Forbes reported China's private equity growth:

105 RMB-denominated funds accounted for 65 percent or $12.3 billion of the amount raised for China private equity investing in 2009, according to Zero2IPO research in Beijing. The trend continued to gain momentum in the first quarter of 2010, with 14 RMB funds among a total of 17 new private equity funds in China.

The Carlyle Group's David Rubenstein can't say enough good things about China, predicting its rise as a dominant global private equity player. One of his employees echoed the sentiment:

Jonathan Colby, managing director of the Carlyle Group, describes the private equity firm’s new RMB fund initiatives as “the place to be.” Carlyle recently launched a RMB fund of $100 million with China’s large conglomerate the Fosun Group to make high growth investments, and it’s also signed an agreement with a Beijing municipal group to form a RMB-denominated fund in Beijing. The Blackstone Group also has a RMB private equity fund in the works, with the Pudong government and earmarked to make investments in this Shanghai financial and shipping center.

Colby figures that having yuan funds that can invest alongside dollar funds will open up avenues for Carlyle: fewer restrictions on industries, less regulatory oversight and access to listing a portfolio company in China.

Private equity underwriters (PEU's) count on less regulatory oversight and fewer restrictions. They also pit countries against one another, dangling billions in dry powder. How can China and Carlyle scratch one another's back?