In conversation with David Rubenstein

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This article is intended for readers with a solid understanding of investments. Investing in private markets is often complex, illiquid and brings higher idiosyncratic risks than public markets, and so is only suitable for experienced investors. This communication is also general in nature and provided for information/educational purposes only. It does not take into account any specific investment objectives, the financial situation or particular needs of any particular person. The value of investments can fall as well as rise and you may get back less than you invested.

Shenal Kakad, our Head of Private Markets, spoke to David Rubenstein, Co-Founder and Co-Chairman of the Carlyle Group, about investor opportunities at a time of global friction and flux. He also reflected on his career, offering his unique insights to any investors at the start of their career.

Shenal Kakad (SK): How do you assess the current state of the global economy, given recent events and longer-term trends? 

David Rubenstein (DR): The global economy seems to be in reasonable shape, despite the challenges of inflation, high interest rates, and several ongoing wars. At the moment, the United States seems likely to avoid a recession in the near term. Some European countries are not that fortunate, and China’s economic growth is clearly lagging, though the word “recession” is probably not appropriate right now. 

(SK): What’s your investment perspective of the looming elections in the UK and US? Do you envisage significant market reactions to either? 

(DR): Both the US and UK elections are more than six months away, and therefore it is probably unwise to say right now what the impact will be, in large part because the likely winners and their policies are not known. As a general rule, there is a tendency for new governments – that is to say, a different party running the government – to make, or at least announce, changes that markets tend to overreact to a bit, for the new policies rarely get implemented as proposed. 

(SK): In light of the US Federal Reserve’s (Fed) efforts to tame inflation in 2023, what do you make of the higher-for-longer climate? Both from a risk and opportunity perspective?   

(DR): Of course, higher interest rates tend to produce lower returns in equity-kinds of investments, particularly in real estate, but debt investments tend to do better, in part because the higher yields attract a good deal of investor interest. The industry is already seeing enhanced investor interest in public and private credit instruments.  

(SK): How does the Private Markets landscape look for investors right now? 

(DR): The best investors generally recognise that the best investments tend to occur during times when investment outlooks appear riskier, so the lower prices in many kinds of equity investments might well yield attractive returns over time. 

(SK): Are there regional, and/or sector trends, that excite you more than others? 

(DR): Absolutely, there are exciting – but not risk-free – opportunities in new technology areas such as artificial intelligence, fintech, biotech, quantum computing, cyber, and space. Less risky opportunities might be in the growing healthcare and wellness areas, and the somewhat-related industries of healthy food and drinks as well. Investments in sports teams, travel and tourism, and entertainment-related areas should also do well as consumers increasingly seem interested in living longer and healthier, and with entertaining themselves in ways that were harder to do in the COVID-period. 

(SK): And conversely, where do you envisage the headwinds coming from in 2024?  

(DR): Headwinds always seem to emerge at times and in places not anticipated by experts. Thus, the most likely headwinds over the next year or so may not be foreseeable today. Who would have foreseen a Russian invasion of Ukraine, or the breakout of war in the Middle East? With that caveat, the areas that investors should at least think about over the next year or so are: a possible recession in the West or China, pressure on the US dollar due to continued, and more expensive, US government borrowing, tensions that go beyond words in some parts of Asia, the continued effects of climate change on corporate spending and earnings, and the effects of prolonged gridlock in the operations of the US government. 

(SK): What are some of the experiences and decisions that helped you succeed in a volatile and uncertain environment? 

(DR): Doing as much research as possible, knowing the details of what you are pursuing as investments, having realistic return objectives, not getting over leveraged, not panicking if an adverse occurrence appears, remembering that the world is never as troubled as a few days of bad headlines might suggest, and not engaging in practices which will cause nights of sleeplessness. 

(SK): What lesson learned would you share with any investors about to start their career today?  

(DR): Those starting a career in investing should do so because they believe smart investing will yield results that are beneficial for society, not just to enrich oneself. If you do not enjoy the challenges and vicissitudes of investing, or in being in parts of the financial world, find something you do enjoy. No one ever accomplished anything great or enduring if he or she did not enjoy what they were doing day-to-day. Life is too short to hate what you do for a living, if you have any realistic choice in the matter. But investing can be quite enjoyable and rewarding if one puts in the time and effort into really learning the skills and practices needed in the profession.