Why the Mutual Fund Market Is Attracting PE

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Jan. 7 (Bloomberg) -- Bloomberg's Jason Kelly reports on Carlyle's plans to launch mutual funds. He speaks on Bloomberg Television's "Money Moves." (Source: Bloomberg)

This is a larger picture of more private equity firms going in after the institutional money but now after individual investor's money, right?


This is just a play for a huge market which really has been hereto for untapped.

Rich families, college endowments.

What this gives them access to is $13 trillion, by one estimate, or mutual funds, and they see just a massive opportunity to sell to retail investors like you and me who are investing our 401(k) in a broad variety of funds.

They are not going to be messing with the administration.

They are not going to take my $10 and your $10 and figure it out.

There is going to be another firm in their working out the managing details, right?

These are massive companies with lots of know-how and administrative prowess to do these types of things.

One of the interesting things you hear a lot about, you and i know about the fee is on our 401(k), and they are clearly much lower than what they pay for private equity, where they paid two percent management fees and 20% profit.

We pay a fraction for mutual funds, so what these guys are seeing is the volume that we talked about before, and also this idea that those fees are very predictable, they do not have the volatility, and that is making their own investors feel better about what lacks down and kkr and in this case carlyle are doing in terms of diversifying into the new asset classes.

The fees that you payroll been a mutual fund are a lot less significant than what is to shall investors pay.

Much lower, and you are talking about fractions.

And that is why private equity has been so lucrative.

For the kkr possible the world.

They were able to command big fees for the types of returns that they had delivered for big pensions.

Taking a look at the stock for carlyle group, it is up today, marginally higher.

It seems that we are closer to eight percent for public investors of carlisle.

They are not against the outreach to the so-called reach out consumer.

Very much in favor of it.

This is something -- over the last year we have seen private equity, publicly traded private equity trade up significantly.

Blackstone went public in 2007 at $31 per share and in the past few weeks it has eclipsed that figure for the first time.

And that is by virtue of almost doubling over the past year.

The big story behind that is their ability to get into businesses that are not private equity, that are a bit more predictable and are therefore drawing more and more investors into their stocks themselves.

The stocks that are traded on the stock exchange, and in carlisle's case, on the nasdaq.

More and more investors are piling in to get a piece of whatever magic they seem to be working, not just in private equity, but in areas like hedge funds, real estate, and soon mutual funds.

Worth paying attention to, after all.

Jason kelly there, managing

This text has been automatically generated. It may not be 100% accurate.


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