Carlyle raises over $3B for Warren Buffett-style long-term investments

Private equity firm Carlyle Group LP has raised over $3 billion in commitments for a new PE fund that will have a lifespan of up to 20 years, or twice the usual PE fund life cycle, Bloomberg reported citing people familiar with the matter it didn't name.

This would provide it flexibility to stay invested far longer than the typical three to seven years from a fund that has a lifespan of 10 years. To be sure, in rare cases PE funds tend to roll over old investments from one fund to another if they intend to hold on it for better returns.

The new fund vehicle would allow Carlyle to try and do what other long-term investors like Warren Buffett's Berkshire Hathaway, which doesn’t have a fixed fund structure with a conventional lifespan. Carlyle would not be able to truly replicate that strategy as unlike its own new fund, Berkshire Hathaway invests out of its balance sheet and can remain invested in perpetuity.

Carlyle's new fund will pick up minority and majority equity interest in companies in the US as well as internationally. With co-investors, it will be able to lead equity investments of $1 billion or more.

Carlyle has also built a 14-member investment team for the fund, Tyler Zachem, who joined the firm last year to co-head the group with Carlyle veteran Eliot Merrill, said in the report.

“There are businesses that need capital longer, to build themselves over an extended period, and family-owned companies that don’t want to go public in years three to five,” Merrill had told Bloomberg in a separate interaction.

However, neither of the two confirmed the amount raised by the new investment vehicle.

It couldn’t be immediately ascertained whether the firm will also invest in companies based out of Asia and, in particular, India from this new fund. An emailed query to the company's spokesperson seeking further information didn’t elicit any response immediately.

Carlyle currently invests in India from its Asian fund.

The new fund, named Carlyle Global Partners LP, has already invested nearly $500 million in two unnamed companies in aerospace and media and communications sectors, Zachem told Bloomberg.

The fund will charge a lower incentive fee, or 'carry', than the 20 per cent standard levied by the PE firm’s main buyout fund.

With $188 billion assets under management, Carlyle Group is the second-largest global alternative asset manager behind Blackstone as of September 30, 2015. It employs more than 1,700 people in 35 offices across six continents.

The firm has been actively investing in India. Its recent investments include diagnostics chain Metropolis, Edelweiss Financial Services Ltd, Allsec Technologies Ltd, Global Health Pvt Ltd, Newgen Knowledge Works Pvt Ltd, PNB Housing Finance Ltd and South Indian Bank.

The firm’s Asia Buyout fund made a blockbuster exit from Housing Development Finance Corporation with two times returns at $840 million in 2012.

In 2015, Carlyle made three profitable exits from its Indian portfolio by selling its stake in financial services firm IIFL Holdings Ltd, Claris Lifesciences and Elitecore Technologies.

Last month, it promoted Neeraj Bharadwaj, a managing director at its Mumbai office, as partner at the firm.

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