The Carlyle Group aggressively markets its investment offerings to underfunded pension funds. Carlyle co-founder David Rubenstein frequently cites 30% annual returns from its various funds. Rubinstein recently attended an open house for a Korean pension fund, the fourth largest in the world. The Korean fund expressly wants the advice of private equity underwriters (PEU's).
However, Carlyle Group affiliate pension funds can be a different story. Take Carlyle's $1.6 billion deal for RAC, a British roadside emergency service. Reuters reported:
Carlyle sees the possibility of growing the RAC's roadside rescue business, Britain's number two behind the AA with more than 7 million members, and running it more efficiently, the first person said.The Carlyle Group loves products the government needs or forces citizens to buy, like motor insurance.
"There is also strong longer term potential to grow the business by investing in new and innovative financial services offerings such as motor and household insurance," said Andrew Burgess, a managing director at Carlyle.
Carlyle's buyout comes with the usual debt load (62%) and management fees. But RAC's pension didn't make the move.
Aviva will retain RAC's underfunded pension scheme, seen as a potential sticking point for any deal. The scheme had a deficit of 160 million pounds at end-December and, on completion, Aviva will make a one-off contribution of 67 million.Will Aviva invest RAC pension money in a Carlyle fund? Could it invest in the fund conducting the RAC deal? That would be twisted for RAC employees with frozen pensions, having their retirement dependent on their pension freezer?
Twisted to benefit greed addicts, it's the PEU way. Carlyle plans to raise over $1 billion from a September IPO. That money will help Carlyle's co-founders rise up the billionaires list. Thank heaven, their retirement is set.
Update 6-27-11: Rubenstein spoke on pensions to Pensions & Investments.
Update 7-18-11: Carlyle can lever RAC more without lender approval according to Private Equity News.
Update 12-5-11: Aviva will sell pension assets to improve the insurer's capital position. No word on how RAC's pension, not taken by Carlyle, will fare in the move.