Monday, January 23, 2017

Carlyle Monetizing Affiliates

Carlyle Group co-founder David Rubenstein spoke in Singapore before going to Davos.  The Business Times reported:

"We're trying to sell a lot, and we have sold a lot. We're very judicious in what we buy.  People are paying earnings multiples for companies which are historically high."

"I think when interest rates go further up, as I suspect they will, and the stock market goes down a bit, I suspect valuations will come down, but right now they are not cheap."

"High valuations mean that future returns will be lower. But client expectations have come down."  He noted that a net internal rate of return (IRR) of 15 per cent a year is still achievable and acceptable to clients. This means about 20 per cent a year before fees.
 As private equity returns came down investors adjusted.   Not long ago Mr. Rubenstein dangled 30% return on equity as consistent Carlyle achievements.

Private equity as an asset class has gained favour in the last five to 15 years, and is no longer regarded by governments as harming the environment or harming employee interests.
That because many, if not most, former public servants join private equity firms in retirement.  PEUs populated the last two White Houses, Red and Blue, and Presidet Trump has shown much PEU love.  The Clintons received numerous $250,000 checks for speaking to private equity investors at their annual meeting.

Ex-President Obama populated his foundation with numerous PEUs.  They are ubiquitous and their rise correlates strongly with income stagnation and employee benefit deterioration.  The Carlyle Group jettisoned more than one pension fund, Brintons and RAC, in their drive to buy low and sell high.  I would think that would've harmed employee interests.

Update 1-28-17:  Wall Street and other corporate insiders are also raising cash by dumping stock.