Carlyle says China top spot for Asian deals

25. Feb. 2010

HONG KONG - The Carlyle Group CYL.UL aims to invest most of its Asia-focused funds on deals in China, where the U.S. buyout group also expects to finance new funds as it gets tougher to raise money in the United States.

"There's no doubt that raising money is harder than it used to be," said David Rubenstein, Carlyle's co-founder and managing director.

"There's no doubt that some of the public pension funds in the United States are probably over-allocated to private equity," he told Reuters in a telephone interview on Wednesday.

Some private equity executives have complained about difficulties in fund-raising in the United States and Europe, where institutional investors, also known as limited partners, used to be big fans of private equity before the financial crisis.

More fund managers, such as George Soros, are rushing to raise new capital in Asia, which has a shorter history of private equity and hedge funds than the West.

Carlyle's most recent Asia buyout fund, launched in July 2006, raised $1.8 billion and has invested in various projects across Asia.

Carlyle was raising a new Asia buyout fund with a target size of up to $3 billion, Reuters reported in September.

"Clearly, China has a fair amount of money to invest, not only through the large sovereign wealth funds that are well known, but from so many other vehicles in China," he said.

"So I think China and other parts of Asia like Singapore and Korea are going to be very attractive places in which to raise money for organizations like ours generally."

MORE CHINA FUNDS

Rubenstein, who was ranked by Forbes magazine as the 123rd richest American in 2009 with a net worth of $2.5 billion, told Reuters investors continue to have a strong interest in investment opportunities in China despite the financial crisis.

"We do invest outside China as well, of course, but China will get a predominant share of the money that we have for Asia because it's so much larger and it's such an exciting place to invest," said Rubenstein.

In China, Carlyle has already made about 50 transactions worth a combined total of more than $2 billion.

One of its most successful investments in the region was its landmark deal with China Pacific Insurance (Group) Co (601601.SS) (2601.HK), China's No.3 life insurer, which went public in Hong Kong late last year, allowing Carlyle to sell part of its stake for a huge profit. However, Carlyle has a one-year lock-up period since China Pacific's listing in December.

"When we do try to raise money to invest in Asia, I would say 75 percent of the interest from our investors is here about China," said Rubenstein, who was a top domestic policy advisor to former U.S. President Jimmy Carter.

"China is the area (in Asia) that most of our investors are interested in ... and so that's what we do talk a lot about," he said.

Carlyle said also said on Wednesday it was teaming up with China's largest non-state-owned conglomerate Fosun Group to launch a $100 million yuan-denominated private equity fund to tap more China deals.

Carlyle said in January it plans to launch a China-dedicated, yuan-denominated private equity in Beijing.

"We may be able to finish the fund-raising for the yuan fund set up in Beijing by the end of this year, or may be faster, but we don't have a target for the fund size," said Rubenstein.

Carlyle's rival Blackstone Group (BX.N) aims to raise 5 billion yuan ($732.5 million) for its first local yuan fund in Shanghai. Chinese media reported Carlyle might raise a similar amount of money for its Beijing fund.

($1=6.826 Yuan)
[Reuters]