By Ellen Kelleher and Deborah Brewster in New York
Financial Times of London

Friday 6th February 2004


The Carlyle Group sent a strong signal that the private equity business was reviving when it said yesterday it would return $2.1bn to investors because of a superb performance last year.

Glenn Youngkin, a partner at the US private equity house, said it was the first year in recent history in which the firm "actually saw tremendous activity".

Good valuations, ready financing, diminished competition and a reserve of "dry powder" drove momentum, Carlyle said.

The firm, which rarely publicises information about its performance, admitted it put $2.5bn worth of its portfolio towards buyouts, venture capital investments, property and high yielding securities last year. It raised $2bn for investment.

It was active in Europe, where deals included the purchase of Italy's Fiat Avio, Edscha, a German car parts manufacturer, Terreal, the French tile manufacturer, and Casema, the Dutch cable arm of France Telecom.

Carlyle, whose advisers include John Major, the former UK prime minister, and ex-president George Bush, was not the only firm to post gains last year.

After being burned by the dotcom boom, the private equity industry saw positive returns for the first time since 2000, according to data released yesterday by Thomson Venture Economics and the National Venture Capital Association. Private equity firms had a return of 1.3 per cent for the 12 months to September 2003.

Founded by an unassuming lawyer named David Rubenstein, Carlyle, which has more than $17bn in assets, is considered to be one of the best connected private equity firms in the world.

Its chairman is Lou Gerstner, former chairman of International Business Machines. In addition to Mr Major and Mr Bush, its senior advisers include James Baker, former US secretary of state, and Arthur Levitt, former chairman of the Securities and Exchange Commission.

After the dotcom crash, private equity firms have returned to using more traditional methods of investment criteria and are more reluctant to fund projects unless they see a clear return.

The industry has about $40bn on hand in cash and unused investor commitments, according to estimates from VentureOne, which tracks the sector. This is less than the $80bn estimated two years ago but is still high by historical standards.