China will become the single biggest investor in private equity as the US dominance recedes, Carlyle Group’s co-founder David Rubenstein said in Stockholm.

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David Rubenstein, co-founder of global private equity firm The Carlyle Group, expects the US dominance in the "bootstrapping" market to ebb, as wealth and investment opportunities move towards emerging markets, especially China.

“The US dominance will recede during the next five years or so. Right now all the largest priviate equity firms are American. That shouldn’t necessarily be the case”, he said during the Swedish Private Equity & Venture Capital Association’s congress in Stockholm.

Emerging markets will receive proportionally more capital the coming years, he pointed out. China will be a massive factor, both as an area for investments and as location for the new powerful private equity firms.

"China will become the single biggest investor in private equity", David Rubenstein said.

Sovereign wealth funds will also continue to increase its presence at the global financial markets, he said, and play a bigger role in private equity activities. At the same time regulations will become much tougher in the US and Europe.

“Europe’s role will be dependent on the nature of EU regulations”, he said, warned against the creation of a separate European private equity universe.

David Rubenstein predictions echoed the findings of the “Nordic PE/VC anno 2035 report”, conducted by trade magazine Nordic unquote and the private equity association. Asia will emerge as the most important source of capital for private equity funds, Nordic fund managers said in the survey.

“The wealth accumulated in Asia over recent years must be channelled somewhere, so it is only logical that the majority of LPs (investors) in the longer term will come from this region,” Berdnt Schalin of KPMG commented in the report.

The study indicated a general sense of optimism. The respondent had few doubts that they private equity industry would outperform listed assets on delivering returns. They also said that the firms would continue to do exciting deals and keep securing capital from investors.

However, deals and firms are likely to be smaller with a more specific niche.

“Smaller is gonna be better", David Rubenstein concluded.