US BUY-OUT REIGN UNDER THREAT

US private equity firms are likely to lose their dominant global position because of the growing power of local private equity firms, sovereign investment agencies and corporate investors, one of the industry's founding fathers forecast yesterday.

“It is not preordained that the US will dominate private equity globally,” David Rubenstein, co-founder and managing director of the Carlyle Group, told the Financial Times in an interview in Hong Kong.

Mr Rubenstein said non-US funds would attract enough investment over the next decade to challenge the predominance of US buy-out firms because of the explosion of wealth generated in Asia and the Middle East.

He said competition in Asia was becoming especially fierce, due in part to the arrival of sovereign wealth funds from within and outside the region.

The scale of reserves and domestic wealth being accumulated by China, Singapore and countries in the Middle East suggests such funds could attract sufficient investment to challenge the US titans.

In response to growing competition from investment firms with a local face, Mr Rubenstein is trying to make Carlyle less of an outsider in places such as China. This is a strategy that Carlyle has pioneered in Tokyo, where all Carlyle's investment professionals are Japanese. More than half of the money in Carlyle's Japan funds comes from local Japanese investors.

“We recognise the appeal of local currency funds in countries such as China and will try to be as local as we can,” Mr Rubenstein said. He said Carlyle was seeking to increase the number of Chinese investors in its funds.

The Chinese government has recently liberalised rules on offshore investments by institutional investors. At the same time, both local governments and local financiers are experimenting with establishing renminbi funds of significant scale for the first time.

Carlyle has had a presence in Asia for almost a decade and now has more than 100 investment professionals in the region.