Hedge Funds

How this billionaire investor is playing China volatility

China's rocky stock market ride can benefit private equity players, industry veteran David Rubenstein told CNBC.

The co-founder and co-CEO of The Carlyle Group, which specializes in private equity and has $193 billion of assets under management, said market instability was deterring Chinese companies from listing, pushing them to seek funding from other sources.

David Rubenstein, The Carlyle Group Co-Founder & Managing Director.
Adam Jeffery | CNBC

"They can't go public now because of the choppiness of the stock market or the inability to take these companies public. (So) they will have to get additional capital from sources like us, so that's very attractive," Rubenstein told CNBC.

The benchmark Shanghai composite is down around 27 percent since a peak in June, but remains up 16 percent on the year, due to a steep run-up over the preceding 12 months.

China's stock markets have been hit by consistently disappointing economic data from the world's second-biggest economy, coupled by fears that Chinese stocks had overheated. Beijing has weighed in with a number of market interventions to try to quell the rout, including a crackdown on short-selling of shares.

Rubenstein said The Carlyle Group had invested around $6 billion of equity in China "over the years," across 80 investments. He added that 13-14 percent of the company's employees were based in China and were Chinese natives.

Investors look at computer screens showing stock information at a brokerage house in Shanghai, China.
Aly Song | Reuters

Lately, the Carlyle Beijing Partners fund invested 350 million renminbi ($56 million) in Beijing Ubox Technology & Trade Co., a vending machine operator.

"Obviously there have been some concerns about the stock market of late, and we do take that into account in pricing decisions. But given the size of the Chinese economy—and it will be the largest in our lifetime—I don't think you can afford to avoid it if you want to be a global investor," said Rubenstein.

He added that Chinese stocks were likely to fall further.

"Clearly there are still some problems, I have to say, in certain economies around the world, and probably prices will come down a bit further in some areas. But when prices fall, that does make good opportunities for people like us to invest at lower prices. So we like that. Obviously we own some existing assets and so they're going down as well," Rubenstein said.

See high growth in sub-Saharan Africa: Carlyle Group

'Very careful' in Africa

Rubenstein spoke to CNBC from Johannesburg, the financial capital of South Africa. The Carlyle Group has an office in the city and in Lagos in Nigeria.

He said that companies in sub-Saharan Africa were "very attractive" for private equity, but that international investors needed to be wary of corruption.

"There's no doubt that those are issues that American investors in particular have to focus on because of the Foreign Corrupt Practices Act, so we are very careful when we look at companies here," Rubenstein told CNBC.

"But every company in sub-Saharan Africa doesn't have these problems. Ones that deal with governments might to some extent have these issues, but generally it hasn't been the biggest problem we face here."

Other concerns about the region include slowing economic growth, with commodity-exporting countries struggling due to the collapse in oil and metal prices.

David Rubenstein, The Carlyle Group Co-Founder & Managing Director.
This'll be 'best investment in the world': Rubenstein

However, sub-Saharan Africa remains in vogue with private equity investors and fund managers raised $1.9 billion to invest in companies in the region in the first three months of 2015, according to EMPEA. The industry association for private capital in emerging markets noted that this was the second-highest emerging market fundraising total behind emerging Asia.

"I do think you're going to see a high growth rate here in sub-Saharan African and therefore I do think you're going to see more and more opportunities. Corruption is something you have to deal with, but generally it is not going to be this (bar) that keeps us from doing deals here," Rubenstein said.

Other than Rubenstein, well-known investors in sub-Saharan Africa include George Soros, Madeline Albright and Jacob Rothschild, who joined forces last year to back infrastructure company Helios Towers Africa, which buys mobile phone masts in the region.

Employees of a cocoa export company pile up sacks in a packaging factory in the Ivory Coast.
Has the sun set on Africa’s growth story?

"We do think that there aren't be as many opportunities as you might find in the United States or Europe, and the size of the opportunities are smaller but still there isn't that much competition, relatively speaking," Rubenstein told CNBC.

"Of the global private equity firms, we are the only one with a dedicated fund for sub-Saharan Africa. That gives us opportunities to do things with scale here."

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