June 4, 2010 / 9:26 PM / 9 years ago

SWFs likely to add private equity exposure-Carlyle

* SWFs likely to up capital to private equity - Rubenstein

* China biggest new player in fund-raising

By Megan Davies

BOSTON, June 4 (Reuters) - Carlyle Group [CYL.UL] co-founder David Rubenstein said on Friday that he expects a greater share of capital invested in private equity to come from sovereign wealth funds, particularly from China.

Rubenstein forecast that such investors will look back at the latest financial crisis and view private equity as one of the better performing alternative asset classes.

“They see that when you look across the alternative investment landscape, private equity probably did better during this period of time than many other alternative forms of investment,” Rubenstein said, speaking at the Super Return U.S. private equity conference.

He compared the asset class to hedge funds, adding that a lot of those went out of business, causing some people to lose all of their money.

“Private equity did scare people a bit as valuations went down for five consecutive quarters but in the end ... people are saying — private equity isn’t as risky as maybe other types of alternative investments.”

“The biggest new player in fund-raising in the last two years is China,” he said at the conference. “Most of the people trying to raise large sums of capital or from fresh sources are spending time in China now because that’s the biggest new source of capital.”

Apollo Management [APOLO.UL] co-founder Joshua Harris, also speaking at the conference, pointed to countries that have natural resources.

“The Middle East — which has not been as active in the last year or two — but also Canada, Australia, Norway ... and Brazil ... are going to gather significant wealth and ultimately need to invest that wealth in attractive risk-adjusted rate of returns,” Harris said.

Rubenstein said that sovereign wealth funds are increasing their wealth more than public pension funds are.

Public pension funds have large pension obligations and are often underfunded and have to pay money out, he said, whereas sovereign wealth funds by and large accumulate capital.

“As a result, they’re accumulating capital at a much greater rate than the pension funds and have to invest it,” he said.

Still, Rubenstein said that public pension funds will also increase their allocations as they try and recoup losses they may have made in other parts of their portfolios.

Reporting by Megan Davies; Editing by Richard Chang

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