Re: What is private equity?

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.

The private market is more efficient, says Rubinstein.

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