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The best place for private equity? Healthcare

Tuesday, 25 Feb 2014 | 6:16 AM ET
Buy energy, healthcare: Carlyle's Rubenstein
David Rubenstein, co-CEO of Carlyle Group, tells CNBC that energy, healthcare and financial services are the sectors with the best investment opportunities.

Healthcare, energy and financial services are growth areas for the private equity industry while Europe is better value than the U.S., executives told CNBC at the SuperReturn International conference in Berlin on Tuesday.

(CNBC explains: Private equity)

Carlyle Group's David Rubenstein and New Mountain Capital's Steve Klinsky both highlighted opportunities in the healthcare sector and financial services, such as executive recruitment and regulatory advice.

"We believe healthcare, because of what is going on in the United States and the aging of the population in Europe, the United States and Japan, is a pretty good investment," said Rubenstein, who co-founded private equity giant Carlyle Group, which manages $185 billion.

Private equity in EMs outperformed DMs: Pro
Miriam Schmitter, managing director of Cambridge Associates, says private equity in the emerging markets has outperformed the developed markets in recent times, but the picture "shifts over time."

Private equity consists of investments in companies in the hope of selling that stake – or exiting – at a profit. As well as investing in private companies, buyout companies can buy a publicly-traded company's shareholders out. Last year saw global private equity firms raise a total of $454 billion – the highest in five years, according to alternative asset research firm Preqin.

(View more: Is the IPO frenzy for real?)

Private equity buyouts this month include Cinven's purchase of U.S. pharmaceutical research company Medpace for $915 million.

Klinsky, who set up New Mountain in 1999 after co-founding the leveraged buyout group at Goldman Sachs, said he had purchased three companies recently – one in the medical space and two in business services.

"One of them is actually a London-based business that is revolutionizing the way global companies hire people around the world and is a kind of alternative to head hunters," Klinsky said at the annual private equity conference.

"One of them is in medical, especially distribution for home healthcare, and the third is helping firms like ours and hedge funds stay in line with compliance and all the SEC (Securities and Exchange Commission) rules," he continued.

(Read more: Private equity's new play: Sex toys)

What are tomorrow's growth sectors?
Steve Klinsky, managing partner at New Mountain Capital, says that as a "growth capital firm" they pick sectors years in advance, and names some of its growth sectors.

With shale oil an increasingly important source of cheap energy, particularly in the U.S., Rubenstein also recommended looking for investments in carbon energy.

"I think carbon-related energy is a great opportunity, because of what is going on in the United States, the energy revolution and the enormous demand for energy in the emerging markets," he said.

In terms of regions, Rubenstein said that Europe was at its most attractive in half a decade. He added that Carlyle had done around nine deals in Europe in the last 12 months, spending roughly 1 billion euros ($1.4 billion).

"We think Europe has been overlooked; Europe is cheaper than the U.S. in terms of comparable assets. People abandoned Europe as a place to invest because of the recession, but now we think it is a more attractive place to invest than at any time in the last five years," he said.

(Read more: Bubble watch: Blackstone exec on housing health)

Despite the recent turmoil in emerging markets, Cambridge Associates Director Miriam Schmitter said that opportunities existed in the sector, although no country was a "screaming value buy".

She highlighted sub-Saharan Africa. "I think that's a very exciting market. South Africa is almost a contrarian value play; I like that market," Schmitter said.

"Other places like Latin America or China have been moderating; prices have been cooling off, so they could be interesting as a position for the next 10 years," she added.

—By CNBC's Katy Barnato. Follow her on Twitter: @KatyBarnato

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