Hedge Funds

Fed is stuck in a tight spot: Rubenstein

Philanthropist and billionaire private equity professional David Rubenstein has warned investors not to expect too much from the U.S. Federal Reserve this year as policymakers are not in a position to hike or cut interest rates.

The co-founder and co-chief executive of the $183 billlion Carlyle Group said that after the Fed's 25 basis point interest rate in December last year, its first rise since 2006 , it is unlikely to move rates higher anytime soon, as the economy now appears to be weakening.

"If it increases interest rates as it intended to do this year, that will probably slow the economy more," said Rubenstein, speaking at the SuperReturn private equity conference in Berlin.

David Rubenstein, The Carlyle Group co-founder and managing director
Adam Jeffery | CNBC

Meanwhile, a rate cut would be embarrassing for the central bank so soon after its historic rate rise.

"If it lowers interest rates, that is not much ground to lower it and the Fed would be admitting they probably made a mistake before. So the Fed is going to be stuck for a while and people are nervous about what the Fed is going to do and therefore monetary policy is not going to spur the U.S. economy," he said.

The worries about rates, the U.S. Presidential election, mounting emerging market corporate debt, the slowdown in China and weak oil prices mean investors around the world are feeling very uncertain about the future, according to Rubenstein.

"So all these things have added up and people are nervous about where the economy is going – we don't (know) whether we are heading into a slower growth period of time or recession or something even worse than that," he added.

Private equity bosses reveal the hotspots of 2016
David Rubenstein, The Carlyle Group Co-Founder & Managing Director.
Rubenstein: Why the Fed won't raise rates now
Investors look at computer screens showing stock information at a brokerage house in Shanghai, China.
How this billionaire investor is playing China volatility
David Rubenstein, The Carlyle Group Co-Founder & Managing Director.
This'll be 'best investment in the world': Rubenstein
David Rubenstein, The Carlyle Group Co-Founder & Managing Director.
Stocks are not cheap: Carlyle's Rubenstein

In light of the troubled macro-economic environment, Rubenstein added, that despite oil price weakness, he still believes energy will be the "greatest" place for investors to be over the long-term.

"Energy, and I have said it before, is the single greatest area to invest in the next couple of year," he said, reiterating he firmly bullish stance on oil.

Rubenstein predicted oil prices to bounce back towards $100 in the next two years, as this is how long oil has taken to return from its lows in the past.

"I suspect it will take two years to go from where we are today to the peak of $100-plus a barrel, if we get that high, but it is certainly going to come back and I think it is going to be one of the great areas to invest," he said.