Financial News: Carlyle Chief 'Bullish' On Africa

Source - The Wall Street Journal
7/1/2010

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The head of one of the world's largest buyout firms expects economic growth in Africa to outpace every other region over the next decade, but warned Russia might prove "more complicated" for private equity firms.

Speaking at a conference in Geneva, David Rubenstein, co-founder and managing director of The Carlyle Group, said Africa stood alone in terms of growth potential. He said: "I am very bullish on the prospects for Africa. Nothing compares with Africa in terms of economic growth as a percentage over the next decade, [partly because] it is starting from a low base."

However, private equity firms will make more money in Asia than in any other region, partly because it can absorb the most capital of emerging markets, Rubenstein added. He said: "In terms of the total amount of money to be made [by private equity firms], China is overwhelming."

Investment in Russia will prove "more complicated" for private equity firms, according to Rubenstein. He said: "We opened an operation in Russia twice and didn't make it work. Western firms have not yet extracted as much in profits from Russia as from other large emerging markets."

Josh Lerner, professor of investment banking at Harvard Business School, added: "It is not clear that private equity firms will make money in Russia."

But the size of Russia's economy and the government's desire to attract private equity firms are likely to make it more appealing in the future, Rubenstein added. He said: "It will be very appealing, but a little more complicated."

According to a poll of delegates at the conference, China offers the best prospects for private equity, with 26% of respondents expecting investments in the country to produce the best returns over the next decade. 23% of delegates said India would produce the highest returns, with 22% voting for Brazil and 11% for Russia.

Brazil has "all of a sudden been recognized" by investors, and may produce enticing returns, according to Rubenstein. He said: "Brazil has the world's fifth-biggest population, and may have the fifth biggest economy within a decade. Inflation and the currency are under control, and it has spectacular natural resources."

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