Carlyle Group (CG), the private equity firm planning to go public this year, has lowered fees for big investors as it seeks $10 billion for its next flagship buyout fund, according to two people with knowledge of the matter.
Backers who put up $500 million or more for Carlyle Partners VI will pay a discounted management fee of 1.1 percent on committed capital, while smaller investors will be charged as much as 1.5 percent, depending on the size of their commitment, said the people, who asked not to identified because the Washington-based company is private. Carlyle will keep 20 percent of profits as a performance fee.
Competitors such as Blackstone Group LP (BX) and KKR & Co. have also lowered fees or cut special deals to entice larger clients as buyout firms vie for a shrinking pool of investor dollars. The success of CP VI is important to Carlyle as it seeks to convince prospective investors in its initial public offering that it can continue to increase fee-generating assets.
The firm, whose assets have increased ninefold from $16 billion in 2003 to $148 billion at the end of the third quarter, will begin marketing shares to investors as soon as April. The amount of management fees Carlyle collects will be closely watched by potential investors as they offer a more reliable stream of revenue than fees tied to investment performance.
Carlyle reported $683.2 million in fund management fees for the nine months ended September 2011 and performance fees of $736.5 million, according to its registration statement.
Randall Whitestone, a spokesman for Carlyle, declined to comment on the new fund.
Big private equity investors are turning to separately managed accounts to obtain cheaper fees and more control in exchange for locking up their money for a decade or more. In December, New Jersey said it will put as much as $1.5 billion into four custom funds to be managed by Blackstone, which the state said will save about $120 million in fees. A month earlier, the Teacher Retirement System of Texas committed $3 billion apiece to KKR and Apollo Global Management LLC. Carlyle in July struck a deal with the Municipal Employees’ Retirement System of Michigan to manage as much as $250 million in a separate account.
Co-founded by David Rubenstein, William Conway and Daniel D’Aniello, Carlyle would be at least the fifth buyout firm to go public since Fortress Investment Group LLC held an IPO in February 2007, followed by Blackstone, KKR and Apollo Global Management.
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