Carlyle touts energy, geographic funds

The Washington, D.C., megafirm closed its latest flagship fund, Carlyle Partners VI, in November at its hard cap of $13 billion, including $12 billion from outside investors.

But the firm continues to raise capital for three other buyout funds as well as three energy-focused funds and one for real assets, Rubenstein said. The firm is raising a new European buyout fund, which has a target of 3 billion euros ($4.1 billion), an Asia fund targeting $3.5 billion and a Japan fund targeting $1 billion. “Those funds are doing pretty well in the market and I would expect this year they will close at or around their target area,” he said.

In addition, Carlyle is promoting two of its own energy funds, one an inaugural international energy fund targeting $2 billion, the other an electric power fund, which Rubenstein described as “in effect” a second in its series. Carlyle has invested more than $1.2 billion in power asset transactions since the firm bought Cogentrix, an independent power producer, from Goldman Sachs Group Inc in 2012. Carlyle has been investing in the power sector through its $1.2 billion Carlyle Infrastructure Partners LP, as well as a managed account called Carlyle Power Opportunities Capital Partners LP, as Buyouts previously reported.

In addition, the firm is backing NGP Energy Capital Management as it raises its 11th fund. Carlyle acquired a 47 percent stake in NGP in December 2012. NGP is currently investing out of NGP Natural Resources X LP, which closed in July 2012 at $3.6 billion, short of its $4.3 billion target, according to a regulatory filing. NGP Natural Resource XI LP will target $4 billion, Buyouts has reported.

The firm also has its seventh flagship U.S. real estate fund in the market. Carlyle has said it plans to raise $3.5 billion for the realty fund, up from $2.3 billion for its predecessor.

“We also have some other funds that will probably be initiating during the year but those would be among the biggest ones that I’ve mentioned,” Rubenstein said. One candidate might be Carlyle Europe Technology Partners III, Buyouts has reported; Carlyle Europe Technology Partners II was over 90 percent drawn down as of March 31 2013, according to the investor California Public Employees’ Retirement System.

Overall, the firm expects to raise between $15 billion to $20 billion in new capital during 2014, he said.

Rubenstein also suggested that Carlyle could get into the “outsourced CIO” business as it continues to diversify its asset management services for clients. “Whether we build that or buy that we have not finally decided, but that’s an area we expect to have some potential growth,” Rubenstein said. “It probably will be more of a fee business than a carry business, but we think that’s not a bad thing for us to do as well.”

Firms as diverse as TIAA-CREF, the retirement fund, and Cambridge Associates, the private-equity consultant, have begun offering third-party services such as managing diversified portfolios for smaller institutions that lack the staff to handle such tasks.

In the fourth quarter, Carlyle’s economic net income more than tripled to $576 million from $182 million a year earlier; seven of its funds, including the current Asia and Europe funds, moved into an “accrued carry” position during the quarter, meaning they are no longer catching up on carried interest after meeting investors’ preferred return hurdles, the firm reported. Distributable earnings more than doubled to $401 million, or $1.18 per common unit, in the quarter, from $188 million in the comparable 2012 period, and the firm declared a dividend of $1.40 per common unit.

Total assets under management climbed 11 percent in 2013 to end the year at $188.8 billion, the firm reported.