Saturday, November 25, 2017

D.C. based Carlyle Group Celebrates 30 Years

The Carlyle Group issued a video celebrating its teamwork and innovation after 30 years operating in Washington, D. C..  The video views more like a handoff from Carlyle's DBD co-founders to its next generation of leaders.

Not mentioned are Carlyle's stumbles, bankrupt investments (detailed above) or numerous failed ventures in the hedge fund and mutual fund space.

The video failed to mention core drivers of Carlyle's success as a private equity underwriter (PEU).  One of those is preferred carried interest taxation:

At a Credit Suisse forum in Miami, in 2013, Rubenstein said of private equity, “Carried interest is really what the business has historically been about—producing distributions for your investors from good sales and I.P.O.s . . . and getting twenty per cent of the profits for yourself.” He went on, “That’s how we’ve really grown our business.
At the end of the puff piece are several humorous bits.  Rubenstein closes the video exhorting rowers to "get into private equity, the highest calling of mankind."

Consider the above example of integrity:

"H.J. Heinz determined to pay all creditors back, although it would not be required legally.  His reputation and moral obligations had priority in his life.  He started a ledger of what was owed and to whom."  
Contrast Heinz's behavior with that of The Carlyle Group in its many failed ventures, where it simply walked away, refusing to put good money (which it had plenty of) after bad.  Integrity, one of Carlyle's espoused values did not get one mention in their video.

A different calling saved PEU core driver carried interest according to the New Yorker:

On June 8th, Rubenstein’s cell phone rang as he was speaking to supporters of the Economic Club, at the Phillips Collection. He left the stage to take the call. Among those in the audience was Gary Shapiro, the consumer-electronics lobbyist who was Rubenstein’s travel companion to Japan in the eighties. After a few minutes, Shapiro recalls, Rubenstein returned and said, “That was a senator. That one call just saved us on carried interest.”
And saved Carlyle's business.  The greed and leverage boys live on.  They know how much they are owed by politicians Red and Blue (who both love PEU). 

Update 12-3-17:  Tony Blair's wife launched a private equity fund, which later went belly up, like Carlyle Capital Corporation.