The global private equity industry will focus more on emerging markets in coming years as Brazil and China become the leading global recipients of capital from the sector, a senior industry executive said on Monday.
There will also be more listed buyout firms in the years ahead and players will focus on "value creation," or active management of investments, rather than macroeconomic trends or debt to make acquisitions, said David Rubenstein, co-chief executive officer of Carlyle Group LP, one of the largest U.S. private-equity firms.
In a speech about the sector that he dubbed "Private Equity 4.0," Rubenstein said sovereign wealth funds will be the industry's main funding source and their coffers may keep rising in coming years thanks to stable sources of income. China and Brazil, the world's largest emerging market economies, will be the top recipients of private-equity capital in a few years, he said.
The executive, who co-founded Carlyle, said the push into emerging markets is even bigger than it was at prior industry phase between 2006 and the end of last year.
"Yes, emerging markets have problems from time to time, but they don't have the same problems that developed economies do," Rubenstein said at an event sponsored by ABVCAP, the group representing Brazilian private-equity and venture capital funds. "Five years from now the amount of money invested in emerging markets will be way bigger than today."
In recent months, private-equity bankers have shown their concern with Brazil's high taxes and the government's slowness to help strengthen capital markets. Currently, ABVCAP is urging the government and lawmakers to reduce the tax burden on venture capital funds to help the latter lure investment for entrepreneurial projects and deal better with bankruptcies.
As has been the rule for years, Brazil remains the largest recipient of private-equity investments in Latin America, accounting for more than two-thirds of the amount invested and over 70 percent of all the deals.
(Reporting by Guillermo Parra-Bernal; Additional reporting by Luciana Bruno; Editing by Andre Grenon and Andrew Hay)