Pricy Stocks—Not PE Bubble—Causing Record Dry Power, Rubenstein Says

The private equity sector has a war chest of capital and the patience to wait out expensive markets, industry luminary David Rubenstein said on interview program “Wall Street Week.”

Liz Ann Sonders—Charles Schwab’s chief investment strategist who was moonlighting as an interviewer—asked the Carlyle Group’s co-founder on Sunday if “the golden age” of private equity had ended, given the abundance of dry powder.

“We’ve had high stock prices for a long time now, and until there’s a market correction, it probably won’t be the case that you can buy many things,” Rubenstein replied. Private equity firms have made few acquisitions over the last year or so, he continued, in part because strategic buyers continually outbid them.

“I do think that when there’s a market correction—which will inevitably come along—you will see private equity taking some of this dry powder and deploying it in interesting ways,” Rubenstein told Sonders and co-host Anthony Scaramucci, whose hedge funds-of-funds business produces the show.

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“Investors are happy with somewhat lower returns which are somewhat easier to attain.”

Rubenstein also attributed the industry’s vast capital resources to its track record relative to other asset classes. Asset owners have also adjusted their performance outlook for private equity, making targets reachable for a larger number of firms.

“In the old days, 20 years ago, investors might want 25% annualized net internal rate of return,” he said. “Today, if you can get 16%, 17%, 18%, that’s great too… That has fueled more money coming in, because investors are happy with somewhat lower returns which are somewhat easier to attain.”

While private equity funds have been stockpiling wealth in anticipation of better deals, Rubenstein himself has been busy spending it.

The former White House staffer joined Bill Ackman, Warren Buffett, Seth Klarman, Carl Icahn, and many other investment billionaires in pledging to give away at least half of his money during his lifetime.

One of Rubenstein’s focuses has been on acquiring valuable historical documents for display in public.

In closing the interview, Scaramucci asked him to name his most treasured possession.

Rubenstein’s response: “The Magna Carta.”

The Abu Dhabi Investment Authority (ADIA) has appointed a former director of Japanese equities at BlackRock to develop a strategy for the country’s markets.

The institution has announced that Hisashi Kuroda has joined from Meiji Yasuda Asset Management, a leading Japanese investment management and trust services advisory, where he had spent the past five years.

Between March 2001 and February 2009, he had been a director at BlackRock—formerly Merrill Lynch Investment Management—in its large cap equities team.

“It gives us great pleasure to welcome Hisashi to lead our Japanese desk,” said Mohamed Alqamzi, executive director, Internal Equities Department at ADIA. “His deep knowledge and exceptional track record in managing Japanese equities will further enhance our internal capabilities in one of the world’s most important and dynamic equity markets.”

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Kuroda will report to Greg Eckersley, global head of internal equities, who joined ADIA in January 2013. He is among several recent senior hires to the internal equities team. In May, ADIA appointed John Pandtle from Eagle Asset Management to lead its US equites team.

In June, ADIA revealed it had taken around $70 billion out of the asset pool available to the world’s global investment firms in 2014. It said it had grown its staff by 150 to 1,650 over 2014 and moved a further 10 percentage points of its estimated $770 billion in assets to be managed internally.

In its latest investment disclosure, ADIA said it had a minimum 10% and maximum 20% allocation to developed Asian equities, which would include Japan.

Kuroda holds a BA in Economics from Keio University in Japan and an MBA from the Wharton School at the University of Pennsylvania in the US.