Carlyle Group Plans Emerging Markets Refocus


April 24, 2014

While the overall trend relating to emerging markets has generally been to look away from them in recent weeks and months, a number of the leading players in the private equity (PE) sector are refocusing their efforts towards these destinations.


The main trend we’re seeing is that, instead of taking a blanket approach to emerging markets, which had largely been the case in the past, PE houses are looking to focus on specific destinations. Washington D.C. headquartered Carlyle Group is the latest PE firm to announce it plans to focus on a specific destination.


The Private Equity News website reported on Carlyle co-founder David Rubenstein, who spoke to investors in Rio de Janeiro earlier this week.


Carlyle are notable for their global presence, and are well established in Latin America with offices in Sao Paulo in Brazil and in the Peruvian capital, Lima. They have also established a presence in China, so it is no surprise these are the areas Carlyle is set to focus on over the coming year.


Although a number of highly respected and successful PE investors and commentators have spoken to numerous sources in recent months and warned of the dangers in the emerging markets, Rubenstein’s take on the struggles of these destinations was that they were not getting the PE investment they needed to enjoy sustained growth and success.


According to the website, Rubenstein told investors that, generally, emerging markets were still enjoying faster growth than other countries, while they also had younger populations and lacked the problems that well-established economies often face.


Rubenstein added that inflation rates in these countries had also reduced, and that having a lesser developed economy during the global downturn meant that they were able to build up reserves over the last five years, rather than having to spend inflated sums simply to keep the country running at a basic level.


Rubenstein did concede that Brazil, which currently still commands 50% of all PE investment made in Latin America, could begin to lose attractiveness as investors focus elsewhere in the continent. Further to the north, it is also expected that Mexico will emerge as an important hub location for businesses looking to export to North and South America, but that also want easier access to Pacific and Atlantic shipping routes via the Panama Canal.


Fernando Borges, who heads up Carlyle’s PE interests in Brazil, told Private Equity News, “We are seeking opportunities in Brazil.” The website reports that Carlyle are looking to focus on local companies rather than well-established Brazilian brands, with technology, consumer goods, and healthcare likely to be key areas they seek investment.


Falling asset prices in Brazil could still see investors viewing the country as the most attractive destination in Latin America, although it is likely that deals will consist of buyouts followed by sales as soon as a healthy profit can be made. The Brazil Private Equity and Venture Capital Association reports that $45.3 billion was raised in 2013 for Brazil focused funds, with much of that set to follow Carlyle’s lead and be invested in local business throughout the country.

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