Saturday, April 25, 2015

"Private Equity Courts The Well-to-Do"

In our little corner of the investing universe there is too much money chasing too few energy deals.
In everything from solar yieldcos to oil & gas to midstream, there's an awful lot of money sloshing around.
From Barron's Penta:
Blackstone Group, the giant private-equity fund manager, is increasingly targeting wealthy individuals to invest in its ­offerings. Big institutional investors still provide the vast ­majority of capital for these alternative investments, but their commitments haven’t kept pace with fund-raising needs. That has prompted firms like Blackstone to go after well-heeled ­investors and their financial advisors to help fill the gap.

The shortfall has opened an opportunity for wealthy investors interested in diversifying their portfolios to include buyout, ­venture-capital, real estate, and various hedge funds. Account minimums have come down considerably to accommodate individuals, though the fees still make the funds pricey investments.

Blackstone’s (ticker: BX) efforts already are bearing fruit. The company says that roughly 12% of its $310 billion in assets under management comes from high-net worth investors, more than twice the 5% they provided in 2008. Carlyle Group (CG) and KKR & Co. (KKR) also are hunting for individuals’ money.

Overall, high-net-worth investors made up 10% of the money raised for private-equity funds closed between 2012 and 2014, versus 3% in 2009 to 2011, according to private-equity tracker Preqin. In contrast, public pension funds’ total contributions dropped from 28% to 22%. “I ­expect you’ll see a lot more coming in from individual investors,” said David Rubenstein, co-founder of Carlyle Group, on a recent conference call.

Blackstone reportedly raised a hefty $14.5 billion from institutional investors in less than four months for a popular real estate fund. But it also wants to sell an additional $1.3 billion of the fund to high-net-worth investors. It’s just the latest example of Blackstone’s efforts. Last year, it raised a total of $57 billion, with $11 billion coming from high-net-worth investors.

The strategy of reaching out to the wealthy began during the financial crisis when private equity stumbled, losing an estimated 30% to 40% in certain categories. Money raised for private-equity funds industrywide fell 57% between 2008 and 2010, according to Preqin. Even last year’s $539 billion in funds raised fell well short of the precrisis high of $688 billion....MORE