Question: What is private equity?
Transcript:My job at Carlyle has been to largely raise the money; make sure the investors are pleased with what we . . . what we do; to help recruit people to run our various funds; and to try to think of how the firm can be positioned and grow; and how we can make the firm a leading organization in the world in which we operate. One of my other partners spends time overseeing the investment. Another one takes care of a lot of the administrative issues and problems that we inevitably have as an organization gets growing. The three of us have worked together quite well. And when you have three people working together for 20 years, that’s very unusual but also very good when you can get it to be done that way. Private equity is essentially this: It’s the effort by individuals to take a company where you might control it or you might have a stake in it; put capital into it and help improve it; make it more efficient; make it more productive; help it grow; make it more profitable; and ultimately sell your stake so that on behalf of the investors you have, you can realize a return of 25 percent to 30 percent a year. Investors who give us money recognize that what we do is a bit risky. And therefore they want very good rates of return for taking that risk. Historically 25 percent to 30 percent a year return are what investors that we have are seeking. And that’s the kind of thing we do. But in the end private equity is all about creating new jobs, making companies better, making companies more productive, and making our economy more efficient.
Discuss
Jacoline Loewen on February 11, 2008, 5:12 PM
What I particularly like about the definition of private equity given here is that it reflects the energy and pride brought to a company by investment partners. CEOs want to do the hard things that are for the benefit of the company over the long run and it is true that the private equity world can give time and money to do so.
Of course private equity funds wish to make a profit to match this energy and knowledge that they bring – not to mention the cash. I think David Rubenstein is exactly right when he identifies the emerging challenge for private equity over the next five years as building public relations around the fact that the CEOs, owners and managers enjoy this style of investment, that many people across the economy benefit from this privately held money not – as many would have you believe – only the private equity investors.
Jacoline Loewen on February 11, 2008, 10:12 PM
What I particularly like about the definition of private equity given here is that it reflects the energy and pride brought to a company by investment partners. CEOs want to do the hard things that are for the benefit of the company over the long run and it is true that the private equity world can give time and money to do so.
Of course private equity funds wish to make a profit to match this energy and knowledge that they bring – not to mention the cash. I think David Rubenstein is exactly right when he identifies the emerging challenge for private equity over the next five years as building public relations around the fact that the CEOs, owners and managers enjoy this style of investment, that many people across the economy benefit from this privately held money not – as many would have you believe – only the private equity investors.
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