(Bloomberg) — Carlyle Group Inc. is rolling out new funds for individuals that will buy and sell secondhand private equity fund stakes.
The bet it’s wagering: Mini-millionaires, rather than billionaires, will fuel the next wave of expansion in a growing corner of finance known as the secondaries market.
A Luxembourg version of the firm’s new retail fund, Carlyle AlpInvest Private Markets Secondaries Fund, launched in recent months. Another proposed version in the US, pending regulatory approval, will be open to accredited investors, a category that includes individuals who earn over $200,000 in annual income, according to a draft prospectus.
UBS Group Inc. is the distribution platform for Carlyle’s initiative, according to an emailed statement. This gives the Swiss bank’s network of wealthy individuals and financial advisers a piece of Carlyle’s bets while the private equity firm ramps up its effort to become a larger household name.
Carlyle declined to comment on the funds.
The money manager has been planning the new vehicles as a wave of pension funds are offloading their stakes for cash because yields from buyout funds have dried up during a prolonged deal freeze. President Donald Trump’s threat to cut federal funding for elite schools is also pushing endowments to weigh sales.
Read More: Yale’s $2.5 Billion Private Equity Sale Tests Vaunted Model
“When uncertainty and volatility in the market limit exits and liquidity, secondaries are stepping in to fill the gap,” said Carlyle’s head of secondaries, Chris Perriello.
Private equity will always be more illiquid, costly and complex than stocks and bonds. But the growing clout of secondhand buyers are challenging conventional wisdom that fund positions are always difficult to sell.
The new Carlyle funds are designed to give investors the option to collectively redeem as much as 5% each quarter, and will also raise new money each month, according to a draft prospectus.
Across the industry, evergreen secondaries funds for retail investors have yet to be tested by prolonged market volatility. Funds are being scrutinized over whether they’re buying less-than-stellar assets that institutions are offloading at discounts — and whether they’re aggressively marking up valuations.
“Secondaries investors take different approaches, with some prioritizing discounted pricing and others focusing on assets with solid value creation theses,” said Perriello.
Carlyle Chief Executive Officer Harvey Schwartz has ambitions to make Carlyle a bigger player in the retail space. Since his appointment, the firm has launched a fund known as CAPM that invests across secondaries and other private markets investments. More recently, the firm renamed the secondaries business “Carlyle AlpInvest” in a signal of the $89 billion unit’s growing importance to the company and its push to reach more individuals.
The firm’s global wealth head, Shane Clifford, who was hired to boost growth in an area that Carlyle had historically under-invested in, has now expanded the group’s headcount to more than 100 in two years.
He expects money from bank channels to rise to more than a fifth of flows from around 15% in the next 18 months.
#Carlyle #Launches #Retail #Funds #Secondhand #Private #Equity #Stakes