David Rubenstein knows how to make money. After all, it’s his job.

As co-founder and co-CEO of The Carlyle Group, a global alternative asset manager, Rubenstein helps clients invest more than $203 billion in total assets across 129 distinct funds, 11 industries and six continents.

Having a hand in so many finances and industries, Rubenstein can identify signals in his work that reflect trends in the overall state of the economy – and the U.S. comes on top.

“The U.S. economy is in reasonably good shape, with three percent growth this year,” Rubenstein said at SIFMA’s Annual Meeting. “Compared to Europe, we’re in excellent shape. Inflation is under control and I don’t think we’ll see increases in interest rates.”

The world’s most promising emerging markets 

“The U.S. is generally the best place to invest in the world thus far,” Rubenstein declared.

The country isn’t without its problems: Americans still feel the residue of recession and struggle with underfunded state pensions, a large annual deficit, an inherent unemployment problem, and a deterioration in the idea of the American dream.

“Today, many people in our society do not believe any longer that you can get to the top,” Rubenstein said. “The idea that social mobility is gone, that’s a big problem.”

Looking beyond America, Rubenstein named China as a hospitable financial environment, but noted that the country’s current trend of 10 percent annual growth in the last 30 years as difficult to sustain. He also identified the difficult transition period China faces by trying to convert an export economy to one of domestic consumption, on top of fighting corruption and pollution. In light of all these balancing all these issues, China is doing reasonably well, Rubenstein said.

Great value can also be found in Western Europe, although growth rates are slower, Rubenstein said.

Learn how to smartly invest from a self-made billionaire 

“The most important thing about money is not losing it,” Rubenstein said.

In order to grow your funds strategically in the long-term, Rubenstein shared several key pieces of advice with the room.

“Invest with people that have been around for awhile and have a track record investing in good and bad times,” Rubenstein advised. “[Ensure] it’s a stable organization and the [investors] have their own money alongside you.”

Additionally, Rubenstein said, don’t get spooked and pull your money after a year; keep your funds in the firm for five to eight years. Rubenstein also believes diversification is key – don’t give all your money to one person or invest in any one place, he said.

Most importantly, Rubenstein explained, have realistic expectations for your rates of return – otherwise, you’ll take on undue risk. Rubenstein estimated that a 15 to 17 percent net after expenses is a solid rate to target.

Private equity faces an image problem

When questioned on the biggest challenges facing private equity right now, Rubenstein pointed to an image problem among asset managers.

“The public image is not as great as I think it should be,” Rubenstein said. “While we made progress, we can always do more. The biggest overall challenge is the industry’s need to convince people that we can – over good and bad times – get reasonably good rates of return if we’re allowed to do what we know how to do.”

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Matt Nevins
Managing Director and Associate General Counsel
SIFMA AMG