Buyout Firms Morphing Into Asset Managers as Deals Dwindle

After making their founders billionaires, buyout specialists such as Carlyle Group and KKR & Co. are turning into asset managers that run hedge funds and strip malls as fresh capital and takeover targets become scarce.

Stephen Schwarzman’s Blackstone Group LP, the biggest private-equity firm, is earning twice as much from owning property, including office buildings in India and senior communities, as from buyouts. New York-based KKR, whose co-founders Henry R. Kravis and George R. Roberts helped pioneer leveraged buyouts in the 1980s, now owns a stake in a 5,500-mile U.S. pipeline and lends to distressed companies.