Firms & Funds

Carlyle Group’s David Rubenstein hints at initiative for retail investors

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    • Predicts investors will gain exposure to private equity through 401(k) plans
    • Supports democratization of private equity
    • Says to expect more from Carlyle Group on this topic “shortly”

Speaking at the PartnerConnect East conference March 26 in New York City, Rubenstein predicted that over time money management firms like T. Rowe Price and Fidelity would offer everyday investors exposure to private equity through 401(k) plans. 

“We are putting more and more emphasis” on seeing retail investors gain access to private equity, said Rubenstein. “We will have more and more to say about it shortly. But we are making a large push to get more and more retail investors.” 

Rubenstein pointed out the “anomaly” that results from limiting access to the asset class to wealthy investors that meet the U.S. Securities and Exchange Commission’s definition of “accredited.”      

“If you are an idiot and you inherit $10 million you can (invest in) anything you want,” said Rubenstein. On the other hand, “if you are brilliant, you went to the best college in the United States, you majored in economics, you minored in finance, but you decide to go to Teach for America and make $30,000 a year, and you need higher income, you’re not allowed” to invest in private equity.

Asked about the high fees Carlyle Group would presumably charge retail investors, Rubenstein pointed out it can cost more for Carlyle Group to develop and market a retail product. But he thought investors would focus on the net rate of return. “How many investors who are not extremely wealthy would be upset at getting a 14 percent or 15 percent net rate of return, which is what you might get even after fees are taken into account?”

About a year ago, partnering with Central Park Advisers LLC, Carlyle Group introduced a fund, CPG Carlyle Private Equity Fund LLC, that required a minimum commitment of $50,000, far less than that of a typical Carlyle Group limited partnership. Although designed to appeal to a broader population of investors, the fund is open only to accredited investors.

As of year-end the fund reported net assets of about $180 million, according to a Form N-Q filed with the SEC. That sum does not necessarily indicate how much money the fund had raised or invested as of that date.

Early last year London-based funds-of-funds manager Pantheon Ventures said it planned to offer to sponsors of 401(k) plans a private equity option.