David Rubenstein is best known for co-founding Washington, D.C.-based private equity giant the Carlyle Group. After a stint in law and politics, Rubenstein turned to leveraged buyouts and made a fortune. Today, the Carlyle Group manages billions of assetsfor a wide range of U.S. and international institutional investors, earning Rubenstein a reputation as a “master fundraiser."
Here's an overview of how David Rubenstein made his billions and built one of the world’s largest private equity firms.
Key Takeaways
- David Rubenstein grew up with little income and needed scholarships to attend college.
- He started out in law, then realized he wasn’t very good at it and got bored.
- He then worked in politics, serving President Jimmy Carter.
- Rubenstein’s move into finance was inspired by former U.S. Deputy Treasury Secretary William Simon’s story of striking it rich from a leveraged buyout.
- This led to Rubenstein and his two partners creating the private equity firm the Carlyle Group.
Early Life and Schooling
Born in 1949, Rubenstein wasan only child and lived in a small, low-income community in Baltimore, Md. His mother was a homemaker, while his father, who never made more than $7,000 a year, worked as a postman.
Rubenstein's mother wanted him to become a dentist, but hewanted to serve in public office after watching the inauguration of President John F. Kennedy when he was 12 years old. He said thatKennedy's famous statement during the historic event—‘‘Ask not what your country can do for you, ask what you can do for your country’’—instantly struck a chord with him.
As a result of his family's small income, Rubenstein had to depend on scholarships to go to college. He studied political science at Duke, getting by on scholarship, loans, and working part-time, then secured a full scholarship to study law at the University of Chicago Law School.
Career Before Carlyle
With a law degree under his belt, Rubenstein immediately joined a prominent New York–based law firm called Paul, Weiss, Rifkind, Wharton & Garrison. Not long after, he began to think about a new career path.
Rubenstein claimed whenever he thought about leaving and communicated this to the firms he was working for, none of his partners or clients pleaded with him not to leave. He took this as a sign that he wasn't a good lawyer."I wasn't going to be a Richard Posner; I wasn't any kind of legal genius," he said.
Between 1975 and 1976 Rubenstein changed paths, serving as chief counsel to Senator Birch Bayh on the U.S. Senate Judiciary Committee's Subcommittee on Constitutional Amendments. He subsequently got a position in the Jimmy Carter presidential campaign. After Carter took office in 1977, Rubenstein was appointed deputy assistant to the President for domestic policy. His term abruptly ended four years later when President Carter lost reelection.
A New Leveraged Buyout Firm Was Born
Following Carter's election defeat, Rubenstein initially had trouble finding a job. He was unemployed for six months but eventually returned to practicing law. However, he quickly became dissatisfied with his job.
One day, Rubenstein came across an article in the newspaper about former U.S. Deputy Treasury Secretary William Simon. After Simon's tenure with the government, he and his partner, Ray Chambers, purchased Gibson Greeting Cards with $1 million of their own money and $79 million worth of debt in what is knownas a leveraged buyout. They then made the company's operations more efficient and took it public for $290 million.
A light bulb went off in Rubenstein’s head when he read the story. It was the first time he had heard about leveraged buyouts. Originally, he planned to recruit a team of finance professionals interested in starting a private equity firm that could employ him as a legal consultant, but he couldn't find anyone interested in forming a new firm.
So, in 1987, Rubensteinandtwo other partners went about launching a private equity firm of their own. The company was called the Carlyle Group, named after the Carlyle Hotel in New York City, where some of the initial company meetings were held.
Rubenstein is also a best-selling author and generous philanthropist.
At that time, private equity firms were predominantly headquartered in New York City, but Carlyle was formed in Washington, D.C. Rubenstein thought that he could raise a lot more capital by telling investors that they were focusing on acquiring businesses heavily affected by the government—hence, their location.
Rubenstein and his team were able to raise $5 million to get Carlyle off the ground. Of that figure, $3 million was allocated to actual investments, while the remainder was used for operating expenses. One investor that backed Carlyle was the well-established investment house, T. Rowe Price (TROW).
Until 1990, Carlyle raised money on a deal-by-deal basis. Their first buyout fundraised $100 million from investors. The funds were used to acquire a number of businesses. Since then Carlyle has raised billions of dollars from investors in the United States and abroad for more than 100 different funds.
In 2012 Carlyle went public, raising $671 million in an initial public offering (IPO).
Today, Rubenstein works at the company as co-chairman. He shares that responsibility with his co-founder William E. Conway, Jr. Daniel A. D'Aniello, the other co-founder, stepped down as chairman in 2018 and now serves as chairman emeritus.
How Much Is David Rubenstein Worth?
David Rubenstein’s net worth, as of Dec. 28, 2023, is $3.8 billion, according to Forbes. His net worth has fluctuated over the past few years. He was said to be worth $4 billion in 2022 and $2.7 billion in 2019.
How Much Did David Rubenstein Pay for the Magna Carta?
Rubenstein paid $21.3 million for a rare 710-year-old copy of the Magna Carta at a Sotheby's auction in New York City in 2007. His actual bid was $19 million, but fees and commissions raised the final figure to $21.3 million. Rubenstein said he bid because he was determined to see the Magna Carta remain in the U.S. and the National Archives, where it has been on display since 1988.
How Did Rubinstein Get Rich?
Rubenstein became rich turning the Carlyle Group, a leveraged buyout shop he co-founded, into one of the largest private equity firms in the world.
The Bottom Line
David Rubensteinmade his fortune by collecting management fees from investors who gave him money to invest on their behalf. With a background in law and politics, Rubenstein co-founded the Carlyle Group, a private equity firm that invested in companies heavily affected by the government.
Today, Carlyle is one of the largest and most diverse private equity firms in the world. The company is responsible for allocating capital in a number of sectorsfor institutional investors around the world.
