A lower bar

Central Park Group, an advisor for high net worth and family offices, has created a feeder fund that will funnel client capital directly into investment vehicles controlled by The Carlyle Group.

Significantly, the minimum investment into the Central Park fund is just $50,000, according to a filing with the US Securities and Exchange Commission.

Central Park believes the vehicle – called CPG Carlyle Private Equity Fund – will “offer a unique approach to private equity investing for ‘accredited investors’ who previously have not had access to high-quality private equity investment funds”, according to the filing.

The Central Park feeder fund will invest across a “broad spectrum” of Carlyle funds, including buyout, growth and special situations, diversified by geography and vintage year, the filing said. To provide investors with a “limited degree of liquidity”, the fund may offer to repurchase interests, possibly on a quarterly basis after two years of fund operations, it added.

The idea of giving individuals access to high-profile private equity funds is not unique in the industry; some private banks offer their wealthy clients access to brand-name shops. But it is the low minimum investment level that has raised eyebrows in the market.

Carlyle has come up with some other innovative structures for its flagship sixth fund, which is currently in the market targeting $10 billion. For instance, there will be a facility that allows LPs to periodically sell their stakes, with five secondary firms – Goldman Sachs’ secondary group, Partners Group, Landmark Partners, Coller Capital and Credit Suisse – lined up as buyers.

The top firms are already starting their search for new sources of capital, as concerns grow that US public pension systems – the biggest traditional source of money for private equity – may have to withdraw from typical structures as they move to more defined contribution models, because they’ll need clearer pricing, more portability, and easier routes to liquidity.

With the help of Central Park Group, Carlyle has made another innovative move – by effectively lowering the bar for access to its private equity funds, it will hope to broaden its potential investor base. Its rivals may soon follow suit.