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Carlyle Group Lowers Minimum to 50k for some investors in its Buyout Funds
Anyone with the funds tempted to bite? Gives access to a new asset class - private equity (a key component of the Swensen/Yale model). But the expenses seem pretty steep.
"Carlyle's standard fees of 1.5% for managing money and 20% of profits will apply to the fund, as will a fee of about 1.8% that will pay Central Park Group to manage the fund and brokers to sell it to investors."
Some exposure to private equity is possible to get in other ways, so this is not of particular interest (to me, at least.) Oaktree has some exposure to private equity and I would be more comfortable investing in Oaktree (OAK) than Blackstone or Carlyle.
I don't own any, but the London market has a number of private equity funds (such as Princess Private Equity), some of which are seen in the ALPS/Red Rocks Listed Private Equity mutual fund (LPFCX).
Additionally, I just have little interest in devoting that much to private equity, given the often highly volatile nature of private equity investments.
Carlyle dropping their minimums to $50K in order to "widen their customer base" makes me curious if that was more out of need than anything else.
Additionally, you have things like GSV Capital, which was the hottest thing when everyone wanted to invest in Twitter, Facebook (pre-IPO) and other private equity. That didn't turn out that well:
Reply to @TSP_Transfer: Yeah, and the illiquid and volatile nature of private equity is concerning.
Blackstone shareholders have gotten some back after the stock cratered in 2008, but the principals certainly didn't see any effects from that - or doing things like buying Hilton at the top of the real estate market.
Oaktree's focus on distressed situations I think offers a more disciplined and focused take on private equity that I think is much more attractive - Oaktree has a number of other focuses, but their focus on distressed leads them to do better than 2008-style situations and stay away from top-ticking, Hilton-ish situations.
The H & Q healthcare funds offer healthcare private equity, which I think is pretty compelling. If someone actually wanted to invest in Twitter, GSVC has been creamed and has little interest now now that the pre-Facebook IPO hot money is long gone.
Sprott Resource Corp (SCPZF) is potentially (and I emphasize potentially, because I like it in theory but it's not a long-term investment due to some issues) one of the more compelling private equity investments. That is a fund of public and private natural resource companies, as well as farmland (both leased and owned in Canada and South America) and gold. However, the company did an unnecessary dividend policy to try and attract investors and the volatility is too high to consider it as a long-term investment.
A number of the telecom companies are looking into various private equity, although it's a small part of their businesses at this point. They are clearly trying to find apps and other companies that allow them to deliver a fuller experience than just providing data. Singtel: "“Telcos have to do something drastic to make sure we do not lose our engagement with customers. The fixed-line world of telcos are increasingly big, fat, dumb pipes. These implications were looked at seriously by SingTel and we decided we had to transform ourselves. We see the changes happening in the internet space as an opportunity for companies like ours, with the unique assets we have accumulated over the years." (http://blogs.jpost.com/content/allen-lew-ceo-group-digital-life-singtel-“let-someone-else-be-dumb-fat-pipe”)
As for the Carlyle fund, investors still have to be accredited, they're not yet offering to the small investor, really. It still feels "toppy".
Thanks all for your comments and suggestions. Appreciate learning about other ways to get exposure to private equity/buyouts. I agree that Oaktree seems to be a better stock play than some of the others. I would put Carlyle below them but a bit above the other players (e.g., Blackstone). One of the concerns here is the potential for self dealing. At the same time, some of the private equity players are well positioned to grow (potentially getting into the 401k market). I like Blackstone's strategy of getting into single family home ownership but have stayed away because of potential governance problems. I have small long positions in CG and GSVC and have been waiting for some time for a better entry point into OAK.
Scott..
re: GSVC -- they are trading a a big discount to NAV (about 13 right now). Same for SVVC. The caveat here is how did these companies come up with the NAV for privately held holdings. They are dead money until Twitter announces its IPO -- Twitter is GSVC's biggest holding.
re: OAK..have you seen the posts by the Brooklyn Investor on OAK?
I would pass on this and similar issues. There is this fascination of some people with these stuff which are more illiquid, fee-laden and more black box in nature but at the same time they avoid investing in stocks of even the stable blue chips.
David Swensen himself excluded Private Equity and Hedge Funds from individual investor portfolios as the game is rigged against the individual investor. Yale can negotiate favorable deals, individual investors typically do not.
In Private Equity deals the general partners have all the advantage and limited partners are basically at the mercy of the general partners.
Reply to @BWG: I think there's a concern regarding Blackstone where the insiders continue to do well while shareholders are only now really starting to recover from the company's subpar 2008. I like Blackstone's real assets as well, but feel as if shareholders are not really going to fully participate in the company's successes. It's not a specific thing, but I just feel more comfortable investing with a Howard Marks than a Steven Schwartzman (as for the latter: http://www.slate.com/articles/business/moneybox/2007/06/the_golden_ass.html)
GSVC is something I'd have to explore more, but I've just never gotten into social media (GSVC is other things too, but its biggest holdings are social media and that's what it's largely known for - the manager was on CNBC talking about Facebook on the IPO day.) I don't doubt that it's trading at some level of discount after hot money headed for zee hills.
Like you said, it's now a matter of some sort of catalyst. I've never understood the appeal of social media (given my age, I apparently should), but I think as an investment it got ahead of itself. Can Groupon and Zynga (which GSVC continues to hold) regain investor confidence?
It really becomes a question of the sustainability of the business model in some of these cases, or in others the "what's hot now" mentality ("Oh, Facebook is so last year, now I'm using Tumblr...." - oy vey.) I give all the credit in the world to people who invest in such things successfully, but I just think the short-term nature is ultimately frustrating.
The other thing too with Private Equity is the illiquid and highly volatile nature of it - I mean, look at LPFCX in 2008. I think it's not something I would recommend for much of a portfolio at all and those who do should be aware of the risks. I like something structured like the H & Q healthcare funds, where it has the flexibility to invest in private equity, but is not purely a private equity vehicle.
As for private equity, I actually agree with investor to some degree regarding larger entities being able to work out better deals than what is accessible to retail. As for investing directly in private equity companies, I just don't believe one is going to participate as much as insiders do if there are successes, especially in the case of Blackstone. I'm more comfortable with Oaktree, and I'd have to look at Carlyle.
Hopefully GSVC and CG will do well for you. I'll have to look at Brooklyn investor's articles - I know he's written on things like GLRE and L in the past.
STWD (Starwood Property Trust) also has some exposure to single family homes. SBY (Silver Bay) is a more pure play, but it looks like it's still finding its way and remains volatile.
People who invested in Facebook the day of the IPO learned that if you, an ordinary person, can get into an IPO you should not. While I know little about this as an investment I think the Groucho Marx advice that I wouldn't want to be a member of any club that would want me as a member is applicable.
Comments
I don't own any, but the London market has a number of private equity funds (such as Princess Private Equity), some of which are seen in the ALPS/Red Rocks Listed Private Equity mutual fund (LPFCX).
Additionally, I just have little interest in devoting that much to private equity, given the often highly volatile nature of private equity investments.
Carlyle dropping their minimums to $50K in order to "widen their customer base" makes me curious if that was more out of need than anything else.
Additionally, you have things like GSV Capital, which was the hottest thing when everyone wanted to invest in Twitter, Facebook (pre-IPO) and other private equity. That didn't turn out that well:
http://finance.yahoo.com/echarts?s=GSVC+Interactive#symbol=GSVC;range=2y
http://seekingalpha.com/article/212463-timeless-investment-classics-part-iv-where-are-the-customers-yachts
Blackstone shareholders have gotten some back after the stock cratered in 2008, but the principals certainly didn't see any effects from that - or doing things like buying Hilton at the top of the real estate market.
Oaktree's focus on distressed situations I think offers a more disciplined and focused take on private equity that I think is much more attractive - Oaktree has a number of other focuses, but their focus on distressed leads them to do better than 2008-style situations and stay away from top-ticking, Hilton-ish situations.
The H & Q healthcare funds offer healthcare private equity, which I think is pretty compelling. If someone actually wanted to invest in Twitter, GSVC has been creamed and has little interest now now that the pre-Facebook IPO hot money is long gone.
Sprott Resource Corp (SCPZF) is potentially (and I emphasize potentially, because I like it in theory but it's not a long-term investment due to some issues) one of the more compelling private equity investments. That is a fund of public and private natural resource companies, as well as farmland (both leased and owned in Canada and South America) and gold. However, the company did an unnecessary dividend policy to try and attract investors and the volatility is too high to consider it as a long-term investment.
A number of the telecom companies are looking into various private equity, although it's a small part of their businesses at this point. They are clearly trying to find apps and other companies that allow them to deliver a fuller experience than just providing data. Singtel: "“Telcos have to do something drastic to make sure we do not lose our engagement with customers. The fixed-line world of telcos are increasingly big, fat, dumb pipes. These implications were looked at seriously by SingTel and we decided we had to transform ourselves. We see the changes happening in the internet space as an opportunity for companies like ours, with the unique assets we have accumulated over the years." (http://blogs.jpost.com/content/allen-lew-ceo-group-digital-life-singtel-“let-someone-else-be-dumb-fat-pipe”)
As for the Carlyle fund, investors still have to be accredited, they're not yet offering to the small investor, really. It still feels "toppy".
Scott..
re: GSVC -- they are trading a a big discount to NAV (about 13 right now). Same for SVVC. The caveat here is how did these companies come up with the NAV for privately held holdings. They are dead money until Twitter announces its IPO -- Twitter is GSVC's biggest holding.
re: OAK..have you seen the posts by the Brooklyn Investor on OAK?
BWG
David Swensen himself excluded Private Equity and Hedge Funds from individual investor portfolios as the game is rigged against the individual investor. Yale can negotiate favorable deals, individual investors typically do not.
In Private Equity deals the general partners have all the advantage and limited partners are basically at the mercy of the general partners.
GSVC is something I'd have to explore more, but I've just never gotten into social media (GSVC is other things too, but its biggest holdings are social media and that's what it's largely known for - the manager was on CNBC talking about Facebook on the IPO day.) I don't doubt that it's trading at some level of discount after hot money headed for zee hills.
Like you said, it's now a matter of some sort of catalyst. I've never understood the appeal of social media (given my age, I apparently should), but I think as an investment it got ahead of itself. Can Groupon and Zynga (which GSVC continues to hold) regain investor confidence?
It really becomes a question of the sustainability of the business model in some of these cases, or in others the "what's hot now" mentality ("Oh, Facebook is so last year, now I'm using Tumblr...." - oy vey.) I give all the credit in the world to people who invest in such things successfully, but I just think the short-term nature is ultimately frustrating.
The other thing too with Private Equity is the illiquid and highly volatile nature of it - I mean, look at LPFCX in 2008. I think it's not something I would recommend for much of a portfolio at all and those who do should be aware of the risks. I like something structured like the H & Q healthcare funds, where it has the flexibility to invest in private equity, but is not purely a private equity vehicle.
As for private equity, I actually agree with investor to some degree regarding larger entities being able to work out better deals than what is accessible to retail. As for investing directly in private equity companies, I just don't believe one is going to participate as much as insiders do if there are successes, especially in the case of Blackstone. I'm more comfortable with Oaktree, and I'd have to look at Carlyle.
Hopefully GSVC and CG will do well for you. I'll have to look at Brooklyn investor's articles - I know he's written on things like GLRE and L in the past.
STWD (Starwood Property Trust) also has some exposure to single family homes. SBY (Silver Bay) is a more pure play, but it looks like it's still finding its way and remains volatile.