Carlyle forms strategic account with PA SERS

PA SERS board recently approved up to $100 million for Carlyle for a custom investment vehicle for primary and co-investments across the firm’s global platform. The capital will be directed to Carlyle’s buyout funds focused on the U.S., Europe and Asia, according to a statement from PA SERS.

Carlyle has quietly gone about forming separate accounts with big institutional investors. Unlike some of the huge headline-grabbing, billion dollar-level partnerships of the past, such as those formed by Blackstone and New Jersey’s state pension system, or Apollo and KKR and the Teacher Retirement System of Texas, Carlyle has formed relatively small accounts with investors.

For example, Carlyle formed a custom account with the Alaska Permanent Fund Corporation earlier this year, committing $375 million in primary commitments to two funds – Carlyle International Energy Partners and NGP Natural Resources XI – and a yet-to-be formed agribusiness or metals/mining fund.

An additional $375 million was allocated to direct investments with a focus on the natural resource, metals and energy sectors, according to a statement from Alaska Permanent Fund from July.

The firm also formed a roughly $305 million separately-managed account with Indiana’s state retirement system to run in-state investment funds. In 2011, Carlyle formed a $750 million partnership with the Municipal Employees’ Retirement System of Michigan, with $500 million going to Carlyle-backed fund of funds AlpInvest Partners for primary, secondary and co-investments, and $250 million pledged to Carlyle to be distributed in traditional fund commitments.

These LP relationships come out of Carlyle’s “solutions” business, which is headed by former Morgan Stanley Alternative Investment Partners executive Jacques Chappuis, who was hired earlier this year. Carlyle managing director Mike Arpey, who joined in 2010, also spent many years building separate accounts as co-head of Credit Suisse’s Customized Fund Investment Group.

Carlyle and other big firms are tapping into appetite from big institutional investors for tailored investment service that allows for flexible uses of capital that occasionally comes with more control for the investor and sometimes even lower fees (depending on the structure of the account).

It’s likely there will be more of these types of partnerships as investors seek not only traditional exposure to private equity, but also more direct participation in deals, but lack the resources to engage in this activity by themselves.

Chris Witkowsky is editor of peHUB