Sovereign‑wealth funds poised to outpace pension funds in private‑equity allocations, says David Rubenstein

J.S. Private-Equity Tax Change Doubtful This Year, Says Carlyle Co... http://online.wsj.com/news/articles/SB 100014240527023038013045... for services private-equity managers render when working on companies they take private. The carried interest debate bubbled up in the wake of the recession and financial overhaul law later taken up on Capitol Hill. But the issue so far hasn't been addressed in any legislation passed by Congress and for the most part hasn't gained traction amid other issues lawmakers are tackling. Still, many leading private-equity managers expect at some point to receive the more stringent tax treatment. Meanwhile, Mr. Rubenstein said sovereign-wealth funds will soon become the largest contributors of investment capital to private-equity firms, surpassing giant pension funds. Sovereign-wealth funds currently manage about $5.4 trillion, a number that will exceed $8 trillion by 2020, he said. Mr. Rubenstein said he expected investment allocations to private-equity firms will continue increasing as investors seek higher returns and buyout firms focus more on operational improvements to companies to drive profits. "It's not a financial engineering game as people thought in the early days," he said. "Operational improvements are where the bulk of returns are coming from." Write to Mike Spector at mike.spector@wsj.com Copyright 2013 Dow Jones & Company, Inc. All Rights Reserved This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com 'of2 2/27/2014 9:16 AM HOUSE_OVERSIGHT_026546