March 13, 2013
Carlyle Group Opens its Doors to the Masses--the Wealthy Masses
Posted by Usha Rodrigues

Today's WSJ brings news that private equity giant Carlyle Group is "lowering the velvet rope" : letting some people buy into their funds "with as little as $50,000."  While this doesn't exactly open up private equity for your average Joe, it lowers the traditional private equity buy-in bar, which was $5 -20 million at Carlyle, at least.  The article characterized Carlyle's move as part of a trend among private equity to broaden their investment offerings.  KKR now offers mutual funds investing with a minimum of $2,500 ad Blackstone launched a fund "that for the first time lets affluent individuals invest in hedge funds."  

Do you have $50,000 lying around?  Think the acquisition market will be heating up and want to catch the next buy-out wave? Not so fast, buddy.  To qualify for Carlyle's new fund you also have to be an accredited investor, with $1 million in net worth or $200,000 in income ($300,000 if filing jointly).  

I've written recently about the fact that the rich get access to more investing opportunities than everyone else.  In Securities Law's Dirty Little Secret I speculate that this differential treatment might be getting harder to maintain.  I speculate that investors may not be content for much longer with being shut out of buyout funds and the like.  Indeed, I'm working on a short piece now that will argue that JOBS Act Section 201's elimination of the prohibition on general advertising will make the contrast between the investing opportunities available to haves and have-nots all the more stark. It used to be that we couldn't hear advertisements from hedge funds and other private investment opportunities.  No more. In the post-JOBS world the airwaves and Internet may tout investment after investment that only the wealthy can actually take advantage of.

Today's WSJ article suggests that there's pressure on the sell side as well as the buy side.  It observes that as pension funds-- "the cash cow that for decades has filled [private-equity firms'] coffers" --dry up, buyout shops need new sources of investing dollars.  One logical choice is the wealth of accredited individual investors.  But the WSJ suggests private equity hunger for still more riches: "Some private-equity executives long to offer their funds to typical workers through 401(k) savings plans, calling access to that pool of money their 'holy grail.'"

Yet more evidence that the old lines between accredited and nonaccredited investors may not hold.

Hedge Funds, JOBS Act, Securities | Bookmark

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