Carlyle To Liquidate A Pair Of Mutual Funds In Liquid Alt Setback

Carlyle will shut a pair of mutual funds it launched just a year ago, in the latest setback to private equity firms’ efforts to garner money from individual investors.

The move comes as KKR shuttered two funds last year that invested in high-yield debt and distressed companies, after they only attracted $33 million from outside investors in about a year.

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Carlyle to shutter two funds

In regulatory filings made on April 17 with the U.S. Securities and Exchange Commission, the Washington-based Carlyle Group LP disclosed that the private equity firm will close Carlyle Global Core Allocation Fund, which has $50 million in net assets with a mandate to invest across equities, debt, real estate, commodities and currencies using exchange-traded funds.

The private equity firm will also wind down Carlyle Enhanced Commodity Real Return Fund, which has a mandate to invest in asset classes such as energy and metals. The commodity fund, however, hadn’t started accepted money.

The latest move leaves Carlyle with Diversified Global Asset Management Corp (DGAM), a funds-of-hedge funds manager it acquired in February 2014, as its main platform for launching liquid alternative products. DGAM has developed a number of liquid alternative funds aimed primarily at institutional investors, rather than retail investors who invest in mutual funds.

Citing a person familiar with the developments, Reuters reports some of these DGAM alternative funds could be marketed soon, as these products perform better in the current low-volatility market environment, rather than the high-volatility environment that the other mutual funds would have thrived on. He indicated that Carlyle could decide to launch another mutual fund in the future.

Developing mutual funds a challenge for PE firms

As reported by ValueWalk, retail alternatives have been considered a rapidly emerging sector of the asset management industry. Sensing the opportunity, many private fund managers such as Carlyle Group, Blackstone Group have already launched or filed documents for launching alternative products.

As detailed by ValueWalk, Carlyle Group LP planned to launch two new mutual funds. In its regulatory filing, Carlyle revealed that getting into mutual funds has historically been difficult for private equity companies due to the illiquid nature of the average buyout fund which typically has a life span of 10 years.

However, with their diversification into credit and hedge funds, which are considered more liquid alternative assets, they have started to grow their investor base instead of focusing only on institutional investors.

KKR, Carlyle and Blackstone Group LP have indicated they will continue to create offerings for individuals as they seek to eventually access the market for 401(k) retirement plans.