AlpInvest

Carlyle Group makes big move, acquires €32 billion fund manager

January 26, 2011: 7:36 AM ET

Carlyle Group co-founder David Rubenstein

Private equity firm The Carlyle Group often likes to tamp down speculation over its plans to go public, but this morning it took a giant step in that direction.

The Carlyle Group this morning announced an agreement to acquire AlpInvest, a private equity manager with €32.3 billion in capital under management.

No, that was not a misprint. Billion with a "b."

AlpInvest is one of the world's largest private equity investors, mostly investing in third-party funds on behalf of Dutch pension systems APG and PGGM. Its strategies include funds-of-funds, direct investments and secondary investments, and had net returns last year of 28%.

AlpInvest officially went on the block last summer, with Carlyle mentioned as a possible buyer. One potential sticking point was whether or not the Dutch pensions would commit additional capital to AlpInvest post-sale -- otherwise, the buyer mostly would be getting just staff and legacy investments -- but Carlyle seems to have worked that out by securing €10 billion in additional investment mandates from APG and PGGM over the next four years.

No financial terms have been disclosed. A source close to the situation says that Carlyle and AlpInvet management will split control evenly, while Carlyle will hold 60% of the economics (AlpInvest management gets the remainder, compared to holding virtually no economics under its prior arrangement).

AlpInvest management will retain "complete discretion over all investment decisions," although the AlpInvest board will be comprised of both AlpInvest and Carlyle staffers. A firewall will be put in place, so that the two sides don't inappropriately share confidential information. For example, AlpInvest will have access to portfolio information for many of Carlyle's competitors in buyouts (AlpInvest is a Blackstone Group investor, for example), while Carlyle wouldn't want its new deal strategy shared with such competitors.

Credit Suisse and Catalyst Advisors served as exclusive financial advisors to APG and PGGM on the transaction.

This move is part of Carlyle's continuing push toward product expansion, which many take as a sign that the Washington, D.C. firm is planning to go public in the near future. It recently agreed to acquire hedge fund operator Claren Road Asset Management, is making a big push into the MENA region and is launching an energy-focused mezzanine practice.

The two large U.S. private equity firms that already have gone public -- Blackstone Group and KKR -- also have multiple product offerings beyond their core private equity groups.

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