Tuesday, January 7, 2014

Bloomberg Pushes Carlyle's Move into Mutual Funds

Bloomberg reported on private equity underwriters' starting mutual funds to garner access to big money.  The individual investor could already invest in Carlyle as a unit holder.  Soon they'll be able to park a chunk of their retirement in a PEUtual Fund.  Let's hope they do better than Carlyle Capital Corporation, which individual investors could purchase on the Amsterdam market.  Flashback to March 8, 2008:

Carlyle Capital Corp. Ltd. (CCC.AE), a listed investment company managed by a unit of private equity firm the Carlyle Group, said it "can and will do better" after losing 30% of net asset value between its July listing and Dec. 31.

Net asset value per share declined to $13.11 at Dec. 31 from $18.65 shortly before the listing, while the stock price has dropped 34% from its $19 offer price to $12.50 Friday. 

Chief Executive John Stomber said in the annual report the company did not fully anticipate the repricing of risk that took place in the second half of 2007, "but we make no excuses for our performance." 

He said the company has taken decisive action to reduce risk, enhance liquidity and preserve the long-term value of shareholder capital
One week later Carlyle declared their intention to put CCC into bankruptcy.  A March 15, 2008 press release stated:

As expected, the Company received default notices from its remaining two lenders and it believes that its lenders have now taken possession of substantially all of its U.S. government agency AAA-rated residential mortgage-backed securities (RMBS). As a result, the Company believes its liabilities exceed its assets.

The recommendation was made by the Board following extensive analysis of the Company’s prospects and careful consideration of other options for continuing the business. The Company will work with the court appointed liquidator to ensure an orderly realization of assets and their subsequent distribution.
What a difference a week can make in the PEU world.  As for Carlyle's sales claims public investors may wish to recall The Carlyle Group's admission of puffery in regard to another investment that imploded.  This news won't be found on Bloomberg.   They need to keep their PEU access.

Update 1-12-14:  InvestmentNews offered an editorial on new PEUtual funds.