Carlyle’s entry into the economic-data fray is notable for another reason. Private-equity portfolios were once too disconnected from the broader economy to offer a read-through; common stock in highly leveraged companies can only say so much about the economy as a whole, which depends more on credit than stock prices, no matter what headlines you read.
But private capital’s growth into new sectors and credit give a wider window that’s now worth peeking through.
“The size of the portfolio, that’s number one,” Carlyle’s chief economist, Jason Thomas, tells me. “And second, when you have control positions or significant influence in companies, you get access to a lot more information — order books, backlogs, prices paid, prices received, headcount.”
That’s data that public-company shareholders, to say nothing of bondholders, could only dream of. It’s also more detailed than anything the government has.
The chunk of the economy in private hands has raised some concerns for policymakers, who worry they can’t tell what’s happening. One solution is to nudge companies back into the public markets by reducing the burden. Another would be forcing more disclosure at private companies; Washington has tried this a bit in the context of combatting money-laundering and terrorist financing, though not yet for financial bills of health.
A third, though, is to embrace that huge swaths of the economy are, and will be, private, and for more firms like Carlyle to realize it’s in their interest — and ours — to know what’s going on there. What has lived as a secret sauce inside Carlyle for more than a decade might now inform policymakers flying blind.
“You look back over the past five years, and [our data] is mapping right on top of actual GDP,” with some statistical fixes to correct for sectors, like consumer goods, where Carlyle is smaller, Thomas said.