David Rubenstein Sees More Investors Interested in Private Equity
Summary
TLDRIn this engaging discussion, David Rubenstein explores key trends in private equity, business strategies, and major global events. He reflects on the rise of large-scale buyouts, the shifting landscape of private equity, and how returns and investor dynamics have evolved. Rubenstein also shares insights into tech giants like Apple and Microsoft, government regulation, and the impact of SoftBank’s Vision Fund. Additionally, he comments on President Trump's impeachment proceedings, business community sentiment, and his interactions with leaders like Boris Johnson, Tim Cook, and Ivanka Trump.
Takeaways
- 💼 There's interest in interviewing notable figures like Greta and British Prime Ministers such as Boris Johnson, Tony Blair, and David Cameron.
- 📈 Buyout sizes were significant before the Great Recession, but larger deals have become rarer, with recent ones being in the range of $5-10 billion.
- 🏢 The number of private equity firms has grown substantially, from 250 when Carlyle started to 8,500 today, with a handful dominating large transactions.
- 💰 Investors like sovereign wealth funds and public pension funds are more interested in private equity, seeing it as a hedge against recessions.
- 📉 Expected rates of return have decreased; private equity investors used to expect 20%, but today they are content with around 15%.
- 🧐 Raising capital has become easier, but deploying it effectively remains a challenge for private equity firms.
- 🚀 Tech companies have seen massive growth, with examples like Tim Cook and Satya Nadella leading companies to trillion-dollar market caps.
- 🏛️ Historically, the US government has intervened when companies grow too large, but that hasn't happened yet with today's tech giants.
- ⚠️ Lessons from the WeWork collapse highlight the dangers of overvaluation and poor corporate governance, particularly when large amounts of capital are deployed.
- 🇺🇸 Despite the impeachment of the President, the US economy and business community seem unaffected, with business leaders still supporting the administration.
Q & A
Who is David Rubenstein referring to when discussing notable figures at the event?
-David Rubenstein mentions several British Prime Ministers, including Boris Johnson, Tony Blair, and David Cameron, as well as other influential figures such as Michael Dell and Jeff Bezos.
What does Rubenstein mean by 'scale' in the context of private equity transactions?
-Rubenstein is referring to the size of buyouts and investment deals in private equity. He notes that while large buyouts have historically been significant, they have become more challenging post-recession, with current buyout sizes typically in the range of $5-10 billion.
What is one of the major changes in private equity that Rubenstein highlights?
-Rubenstein points out that private equity firms have become more diversified, engaging in private credit, infrastructure, and real estate in addition to traditional private equity. Additionally, large private equity firms are now publicly traded, adding a new dimension to their operations.
How has the expected rate of return in private equity changed, according to Rubenstein?
-Rubenstein notes that in the past, private equity investors sought net internal rates of return of 20%. Today, investors are content with a 15% return due to lower interest rates.
What is Rubenstein's perspective on raising and deploying capital in the current environment?
-While raising capital has become easier due to the acceptance of private equity as a mainstream asset class, Rubenstein acknowledges that deploying capital effectively is more challenging.
What lesson does Rubenstein take from the WeWork situation?
-Rubenstein highlights that overly large investments, like those made by Softbank's Vision Fund in WeWork, can result in overvaluations and governance issues. He sees this as a generational mistake, one that has been made before and will likely happen again.
What has been Rubenstein’s observation regarding the success of major tech companies?
-Rubenstein marvels at the immense growth of tech companies like Apple and Microsoft under leaders like Tim Cook and Satya Nadella, noting their rise to trillion-dollar market capitalizations. However, he cautions that such rapid growth may not be sustainable forever.
What insight does Rubenstein offer about the current political climate in the U.S., particularly regarding impeachment?
-Rubenstein finds it unusual that, despite the impeachment trial of the U.S. President, the economy and business community remain largely unaffected and supportive of the administration's policies.
Was impeachment discussed in the meeting Rubenstein attended with the U.S. President?
-No, there was no discussion of impeachment during the meeting. The focus was on topics like job creation, with speeches from the President and his daughter Ivanka Trump.
How does Rubenstein describe the current perception of private equity by institutional investors?
-He explains that institutional investors like sovereign wealth funds and public pension funds view private equity as a hedge against economic downturns and have increased their allocations to private equity as a result.
Outlines
🎤 David Rubenstein on Dream Interviews and Business Leaders
David Rubenstein discusses his desire to interview notable figures such as British Prime Ministers and highlights key CEOs and heads of state who are present at the event. He expresses interest in scaling business transactions and reflects on buyouts and their evolution since the Great Recession. He mentions the difficulties in executing large buyouts today compared to past decades, where the largest buyouts had a significant impact but were not always successful.
📈 The Evolution of Private Equity and the Challenges of Scaling
Rubenstein delves into the growth of the private equity industry, noting that when he started, there were only 250 firms globally, while today there are around 8,500. He observes that a handful of the largest firms dominate the market and explores how these firms have diversified their investments into private credit, infrastructure, and real estate. He also addresses the challenges of achieving high rates of return, with expectations shifting from 20% to 15% due to lower interest rates. Capital is easier to raise but harder to deploy in the current market environment.
💼 Tech Giants' Success and Future Challenges
Rubenstein praises the growth of tech giants such as Apple and Microsoft under leaders like Tim Cook and Satya Nadella, whose companies have seen their market caps soar into the trillions. He reflects on the unprecedented success of these firms and predicts that such rapid growth may eventually plateau. He warns that when companies reach such high levels of profitability, government scrutiny often follows, though it has not yet impacted these firms.
🚨 WeWork and Lessons from Failed IPOs
Rubenstein reviews the lessons learned from WeWork's failed IPO and Softbank's Vision Fund. He argues that deploying large amounts of capital into one deal, especially at inflated valuations, can lead to problems, citing governance and overvaluation concerns. However, he notes that mistakes are part of every generation of business, and the WeWork situation is unlikely to be the last of its kind.
🇺🇸 Impeachment and the Business Community's Reaction
Rubenstein comments on the unusual situation surrounding the impeachment of the President of the United States, noting that despite the political turmoil, the economy and business community remain strong. He describes a breakfast meeting with the President, where business leaders expressed support for his policies. Despite the ongoing impeachment trial, business leaders seem unbothered, and the President did not face any questions about impeachment during the meeting.
Mindmap
Keywords
💡Scale
💡Private Equity
💡Buyouts
💡Sovereign Wealth Funds
💡Recession
💡Corporate Governance
💡Tech Companies
💡Impeachment
💡Vision Fund
💡Public Pension Funds
Highlights
David Rubenstein expresses interest in interviewing prominent figures like Greta Thunberg, as well as potential interviews with British Prime Ministers, including Boris Johnson, Tony Blair, and David Cameron.
Rubenstein discusses the evolution of private equity buyouts, noting how the size of transactions has changed since the Great Recession, with fewer buyouts exceeding $15-20 billion in recent years.
Michael Dell's buyout, considered one of the largest and most successful ever, is highlighted as an example of large deals still working in certain cases.
Rubenstein reflects on the growth of private equity firms, from 250 firms globally when Carlyle was founded to over 8,500 firms today.
The increase in private equity investor interest, particularly from sovereign wealth funds and U.S. public pension funds, is a significant trend mentioned.
Rubenstein points out that private equity returns have decreased over time, with 15% net internal rates of return now considered strong, compared to the previous benchmark of 20%.
Rubenstein explains that raising capital has become easier for private equity firms, as the asset class is now considered mainstream, with major interest from sovereign wealth funds.
Tech companies like Apple and Microsoft have seen staggering growth in market capitalization, with Apple growing from $350 billion to $1.3 trillion under Tim Cook, and Microsoft experiencing similar growth under Satya Nadella.
Rubenstein references Herb Stein's famous economic adage: 'If something can't keep going on forever, it won't,' to caution that the massive growth of tech companies may not be sustainable long term.
Rubenstein touches on the increasing scrutiny tech companies might face from the U.S. government as they grow larger and more profitable.
The WeWork debacle is mentioned as a learning lesson from the past year, particularly regarding issues with high valuations and corporate governance.
Rubenstein emphasizes that mistakes like the WeWork situation are cyclical and occur in every generation, though they provide valuable lessons for future investments.
Rubenstein discusses the impact of the U.S. President's impeachment on the business community, noting that despite the impeachment, the economy is doing well and the business sector remains supportive of the President's policies.
Rubenstein shares insights from a breakfast meeting with the President, where discussions centered around job creation efforts, particularly led by Ivanka Trump, Tim Cook, and Ginni Rometty.
No questions about impeachment were raised during the President’s meeting, as the forum wasn’t intended for press-related inquiries.
Transcripts
this is an interesting Valley who in the
valley is on the Rubinstein wish list of
peer to peer and so I know you want to
talk to greta everybody else does well
but where's the dream interview for
Rubinstein and Happy Valley I've never
interviewed you I think that would that
would be right there dreaming it could
be a change and I'd like to interview
you so you know have some questions so
there are a lot of interesting CEOs and
heads of state here some of them do
interviews some don't do interviews so
you know we've had I think here there's
several British Prime Minister's Boris
Johnson's here I think three sameas here
Tony Blair is here David Cameron's here
so that'd be interesting to get all for
them on a panel wouldn't it I want to
talk about a panel I would have with you
right now maybe a few others within the
Carlyle world and that is this strange
word scale where is scale going within
our transactions and our combinations
well
scale has for a while before the Great
Recession buyout sizes were fairly big
and some of those didn't work out the
biggest ones then we went to the
recession and people have been nervous
about doing too large a pure buyout
though the biggest buyouts have ever
done some of them have worked out Mike
saw Michael Dell he's here and he did
maybe the biggest buyout maybe one of
the most successful ever but generally
buyouts have been recent years and the
big ones have been in the five to ten
billion dollar range they've been very
few 15 20 billion dollar ones some are
now reported to be being considered but
it's harder to do a 15 20 25 billion
dollar buyout it talked to me about how
much things have changed over the last
several decades and go back to when you
started and what it was like there's
more firms with more money doing more of
the things that you've always been doing
does that make it harder well if there's
a bifurcation there when I started
Carlile where 250 private equity firms
in the world now they're 8,500 but there
are three or four that are really at the
very largest size and there may be
another ten that can do very large deals
as well and so those are seeing the
biggest deals and getting the best
financing and so forth so it's different
alright the biggest changes since I
started Carlile with others is one
they're more investors interested in
this retail as well as sovereign wealth
funds which Fidan
they exist that much before secondly the
large private equity firms are now
publicly traded and so they have their
own public you know following you also
see the large project firm is doing more
than private equity private credit
infrastructure real estate so they're
diversified a fair a bit and those are
some of the biggest changes but also
rates of return have come down it used
to be in private equity people wanted
net internal rates return of 20% today
if you can get net internal rates of
return of 15% for annum people were
happy with that because interest rates
are so low I'm told now that raising
capital is the easy part
deploying it is a whole lot tougher is
that the right way of thinking about
things at the moment well the people
that have to raise the money don't say
it's easy
but it's not as hard as it has been
historically because private equity has
now been accepted as a real asset that's
not alternative it's mainstream in many
ways and also the sovereign wealth funds
and the u.s. public pension mods have so
much money and they've made so much
money on public equity returns and also
private equity returns they have to
deploy it and they're giving it to
private equity firms in part because
theythey seen as a hedge against the
recession if it ever happens people
think that private IP firms can work
through the recession the way they did
last night reasonably well what is your
counsel to the successful tech firms
your wonderful interview a few years ago
with Jeff Bezos and others they have an
immense challenge of ample free cash
flow above average revenue growth as a
general statement as well what is the
Rubenstein to-do list for them
strategically to get out ten years well
it's amazing what the tech companies
have done just take Tim Cook when he
took over it was about a 350 billion
dollar market cap it's now about 1.3
trillion more or less I was touting 100
billion a week right now Sachin adela
when he took over
maybe market cap of 350 to 400 billion
now about one point two or three
trillion these sizes are just staggering
and herb Stein the famous member of the
u.s. Council of Economic Advisers under
President Nixon once said if something
can't keep going on forever it won't so
at some point at some point I don't know
when it probably can't keep going on at
this size generally when you have
something this big and you have it this
profitable usually the US government
comes along and says hey you're having
too much fun
here we need to do something about that
but that doesn't seem to be happening
right now let's talk about what has
happened over the last year some red
flags coming out of private markets as
they look to come public and the biggest
one was we work lessons learned from
last year what are they well I think
when you have a fund that is very very
very big like the Softbank fund the
vision fund you have to deploy large
amounts of capital and you can probably
put too much money into one deal and I
think in that particular case it appears
that a lot of money was put in at
probably a higher valuation should be
the case and then there were other
consents concerns as well about
corporate governance and so forth but
you know there mistakes that are made in
every generation that this wasn't the
first time this kind of thing has ever
happened and won't be the last but I
think a lot of people learn something
that deal David Rubenstein you are a
great student of this nation's history
we had an extraordinary press conference
for the president United States today
you've contributed to Ford's Theater to
the wonderful Museum next to it you've
greatly contributed to our Library of
Congress as well
what is your study of how this nation
moves forward from the process of
impeachment well it's a very strange
situation if you were to come into this
planet from Mars and say or from England
or from England or anyplace and say you
have a President of the United States
who's being impeached only the third
president who's been impeached and a
trial is going on in the Senate yet the
economy is going along very well the
business community seems to be not
affected by the what's going on in the
Senate right now I was at the breakfast
with the president this morning
before the press conference and it was
clear that the business community is
pretty supportive of his policies you
know so I it's it's a hard thing to kind
of explain that Outsiders that the
economy is doing so well and the
president has a lot of support in the
business community for sure yet he's
being impeached and tried in the Senate
it's hard to understand it's fun a
question just quickly you were in that
meeting this morning with the president
United States did anyone ask him about
impeachment well no there was that
question was not a single question well
it wasn't there was no opportunity for
questions really because the president
came and made up talk and then his
daughter Ivanka made up talk about
what she's doing in the jobs job
creation area with Tim Cook and Ginni
Rometty so when they finish that there
was you know that was the all they kept
the microwave for rubes but I would say
that that's probably not the audience
that's gonna probably ask those
questions it'd be my guess yeah and so I
think the audience that would probably
ask those questions or you know probably
the press people and they weren't in not
in that room
Посмотреть больше похожих видео
Atul Suri Analyzes Markets Over 15 Years, Key Sectors & Themes To See Ahead For Short & Long Term
Introduction To Private Equity & Venture Capital #2: The Nuts And Bolts of PE & VC Funds
Unlock the Path to $10,000,000 Net Worth in 3-6 Years – Adam Coffey Reveals How!
Where are we in the Cycle? w/ Darryl Wang
Why Does Everyone Hate Private Equity?
CFA Level 1 Revision Series Alternative Investment
5.0 / 5 (0 votes)