Carlyle Group, the private equity firm planning to go public this year, reportedly 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% on committed capital, while smaller investors will be charged as much as 1.5%, depending on the size of their commitment, said the people, who asked not to be identified because the firm is private. Carlyle will keep 20% of profits as a performance fee.
Competitors such as Blackstone Group 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 Carlyle Partners VI is important to the firm as it seeks to convince prospective investors in its initial public offering that it can continue to increase fee-generating assets.
Carlyle, whose assets have increased ninefold to $148 billion at the end of the third quarter from $16 billion in 2003, 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.
The firm plans to list its shares on the Nasdaq under the symbol CG. It hasn’t set a price range or the number of shares it aims to sell.
Carlyle reported $683 million in fund management fees for the nine months ended Sept. 30and performance fees of $737 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 $109 billion Texas Teacher Retirement System, Austin, committed $3 billion each to KKR and Apollo Global Management. Carlyle in July struck a deal with the $6.5 billion Michigan Municipal Employees’ Retirement System, Lansing, to manage as much as $250 million in a separate account.