Carlyle's (CG) David Rubenstein envisions a world where the retail investor can stand alongside...

Carlyle's (CG) David Rubenstein envisions a world where the retail investor can stand alongside institutions and wealthy individuals in putting money into LBO firms and other alternative investments. As P-E managers seek additional capital some are considering funds for the small guy, but one wonders how he will feel about locking up money for 10 years.
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  • Cash Flow is King
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    The slow deer (ala retail investor and dopey small institutional investsor) will pay 2/20 while the large, smart investors (at least those firms that are big, smart, and have balls) are all moving to SMAs (Separately Managed Accounts) and pay a flat fee of 35 to 45 bps with no carried interest. The historical 2/20 & 1.5/15 fee structures (which also by the way permitted transaction success fees) are going the way of the dinosaur and anyone investing real money in size is negotiating SMA fee "style" fee structures. Of course the equity analysts covering the public PE firms have not figured this out (yet) and of course the PE firms are not disclosing this fact in their 33' and 34' Act SEC filings (in fact if you listen to their earnings call or read the transcripts they intimate that the fees are "comparable" -- hey SEC why don't you verify those oral assertions that, of course, they won't put in a 33' or 34' Act filing). Of course, don't take my word for it, ask your equity analyst that covers Apollo or KKR what Texas Teachers is paying on their $3 Billion SMAs that were announced last fall....yikes....the truth hurts. All of the public PE firms trade on historical fee structures and AUMs .... that are based on fund raises and fee structures that no longer exist and won't exist in the future....yet investors and equity analysts refuse to spend 5 minutes to ponder / investigate the truth. Caveat Emptor.
    1 Oct 2012, 09:04 AM Reply Like
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