Carlyle nears $12.9bn close oversubscribed

The group's latest US buyout fund is expected to reach a final close in the coming weeks, bringing the firm its second best fundraising year in its history, said David Rubenstein, co-CEO.

The Carlyle Group is expected to close its $12.9 billion US buyout fund oversubscribed in the next few weeks, co-CEO David Rubenstein said on a recent earnings call. 

“This year will be by far our best fundraising year since the financial crisis and the second best in our firm's history,” he said. 

Sovereign wealth funds are increasing their allocations to private equity, Rubenstein noted. SWF’s now account for 13 percent of Carlyle’s capital. 

The preferred return has stayed very high, and that is, in effect, a hidden fee because it's a very high hurdle that you have to make in this environment

David Rubenstein, Co-CEO

“We also see another phenomenon, which is that people like to invest with somebody they're comfortable with. And so increasingly, people who are already investing with us are giving us more money. I think, today, roughly 62 percent of our capital is coming from investors in five or more of our funds.”

Carlyle has 14 funds in market, including Carlyle Asia Partners IV, which is targeting $3.5 billion. Rubenstein said the firm’s latest Asia fund continued to make progress. 

Earlier this month, The New York State Teachers’ Retirement System approved a $100 million commitment to the latest Asia vehicle, Private Equity International reported earlier.

The firm realised $3 billion in the third quarter, though only about half from its private equity business, added William Conway, Carlyle co-CEO, who was also on the call.

Asia exits included the sale of the Yashili, a Chinese infant formula company and the IPO of Kaiyuan Hotels, a China-based high-end hotel chain.

Carlyle has $31 billion in dry powder across its carry funds, officials said.

Management fees for the quarter were $40 million, up 52 percent compared to the previous quarter, the firm said. 

When Rubenstein was asked about pressure from LPs on management fees, he said that hasn’t been an issue. 

“The real hidden fees that are affecting private equity, but not as directly as you might think, are: one, the preferred return has stayed very high, and that is, in effect, a hidden fee because it's a very high hurdle that you have to make in this environment.”

“Second, a lot of investors want unpromoted co-investment, and if they take that unpromoted co-investment, that will effectively reduce their fee in carry.”