Carlyle’s David Rubenstein presented his lessons from 25 years in private equity and offered some thoughts on the future of the asset class to delegates at SVCA’s congress in Stockholm yesterday. His predictions echoed the findings of the Nordic PE/VC anno 2035 report.

"The basic private equity model works," he announced. "Generating superior returns has increasingly required post-investment value-added techniques," he noted. Indeed, in the years to come Nordic fund managers expect to spend more time on each investment with longer holding periods. Like Rubenstein, they also expect lower debt levels, realising you cannot rely on pricing discipline and leverage alone.

Yet, returns will continue to be favourable, and the asset class will continue to be an attractive option for LPs. Like his Nordic colleagues, the Carlyle co-founder expects LPs to increase their allocations in the future, with Asia emerging as the most important source of capital for private equity funds.  "China will become the biggest investor in private equity," he said, and believes US dominance in the market is likely to recede.

But where will that leave Europe? According to Rubenstein, this will depend on regulation. He warned against creating a separate European private equity universe, referring to the third country provisions in the draft AIFM Directive. Private equity is a global industry, and fending off European private equity markets will be to the detriment of European companies, funds and employees.

To secure an environment where private equity players can operate without undue constraints, Rubenstein called for the industry to better explain its activities. "Over the next one to two years more time will be spent on improving the industry's image," he professed.  Rubenstein believes PR efforts will pay off in the next five years, improving the image of private equity. This will require fund managers to take a proactive stand in making their work more transparent and improving external communications.

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