David Rubenstein, co-founder and co-chief executive of the Carlyle Group, said in an interview that the private equity industry is likely to see a drop in returns due to a large influx of capital.
“When you have a lot more money than you did before, generally you bid prices up a little more than you would if you did not have competition,” Mr. Rubenstein told Handelsblatt. “And higher prices probably produce lower rates of return.”
But Mr. Rubenstein believes returns will remain attractive enough to still attract capital. The Carlyle Group, one of the world’s largest private equity firms, plans to raise another $100 billion (€105 billion).
“If you have more capital, you can do more deals,” Mr. Rubenstein said. “It is obviously more efficient to go out and raise money once every five years for a fund than every year. Deals are getting a little bigger so it does not seem inappropriate to me.”
Mr. Rubenstein said the Carlyle Group remains interested in Germany. The private equity giant recently bought the Berlin-based chemical company Atotech from France’s Total for €2.9 billion.
“The reason we invest so much in Germany is because you get highly-skilled workers who are very disciplined,” Mr. Rubenstein said. “You get very good quality products that appeal to people all over the world.”
With shares a record highs in the United States, Mr. Rubenstein also said he believes investors generally get a bigger bang for their buck in Europe.
“We think Europe is relatively speaking underpriced and there is more value for money here than in the United States,” he said. “So we have been very active here and we will continue to be.”
Read the full interview.