David Rubenstein: Carlyle will try to be at forefront of retail capital push

The private equity industry should work to increase access to the asset class for those with lower incomes, according to Carlyle‘s co-founder.

Speaking at PEI Group’s NEXUS 2024 event in Orlando on Thursday, David Rubenstein said non-institutional capital, as well as the private wealth capital pool, present “gigantic” opportunities and that the industry’s push shouldn’t be restricted to the very wealthiest individual investors.

“We should allow people who need to invest in things that get a higher rate of return because they don’t have much income,” Rubenstein said. Individual non-professional investors could be allowed to invest 4 or 5 percent of their 401(k) accounts or individual retirement accounts to the asset class, he added.

This could be in some type of private equity vehicle with varying levels of liquidity and transparency, he said. This will open up trillions of dollars of additional capital for private equity firms to invest.

“That’s a big source of additional capital. [Carlyle] is going to try to be at the forefront with other large private equity firms trying to make opportunities to invest in the kind of funds we have available to… individual investors.”

“Even if we don’t make a change in the IRA [individual retirement account], there’s still an enormous amount of money out there [from] individual investors – not only in [the US], but around the world.”

The investing veteran admitted that Carlyle could have done a better job developing its non-institutional products in the past.

“Some of the other firms that we compete with did a better job. It’s not something where you can just have a switch turn on and all of a sudden you’re going to do it,” Rubenstein said. He added that Carlyle has since brought in people to develop its non-institutional offerings.

Listed private equity firms are increasingly getting a bigger share of their money from high-net-worth individuals, something that Rubenstein says is a “gigantic business”.

The Washington DC-headquartered alternatives firm is set to roll out a private equity-focused offering dedicated to the wealth channel in the coming quarters, chief executive Harvey Schwartz said on the firm’s fourth quarter and full-year 2023 results last month.

Schwartz did not provide further details on the product, noting only that the firm has gathered $50 billion of inflows from the wealth channel since inception and has “made progress growing the strategy” over the years.

The offering follows the launch of the firm’s PE secondaries vehicle, Carlyle AlpInvest Private Markets Fund, which was set up in January last year and is available to individual high-net-worth investors. CAPM has access to the same core investment strategies offered to institutional investors and allows individuals to participate in all investments that Carlyle subsidiary AlpInvest makes, with a minimum investment of $50,000, according to materials on the firm’s website.

Asked onstage about his assessment of how Carlyle is faring today, Rubenstein described chief executive Schwartz as “terrific”.

“He’s done a spectacular job of refocusing us on some of the things that I think we should be doing. I’m trying to help him as much as I can. I think we’re in very good shape, but we can always do better… Everybody in life can always do better.”

– Carmela Mendoza contributed to this report