One of the pioneers of private equity is The Carlyle Group. The firm has minted billions and is a major force in finance, managing about $76 billion.
But lately things have cooled off. For example, Carlyle's Blue Wave hedge fund is down 9.3% for the year (this is according to a piece on Bloomberg.com). The problem was exposure to pesky mortgage investments.
So it should be no surprise that Carlyle's co-founder, David Rubenstein, is kind of glum. He recently commiserated for the folks at the American Enterprise Institute (there was also coverage in TheDeal.com, which is a paid publication).
Rubenstein thinks that private equity may be facing some tough times, and looks at the parallels of the conglomerates of the 1960s.
It's a pretty apt analogy. After all, as private equity firms get bigger and bigger, they look like bloated entities of disparate business units. In other words, might there be lots of complications in managing all this?
I think so.
Besides, the other big issue is finding liquidity for these private companies. Keep in mind that the IPO market has yet to recover from its boom days of the 1990s. And, M&A appears to be tailing off. Oh, and with the credit crunch, how will private equity funds get financing for deals?
So far, there aren't many clear answers. Or, at least Rubenstein isn't giving us any ideas so far.
Tom Taulli is the author of various books, including The Complete M&A Handbook
