Friday, November 11, 2011

Carlyle Cuts Fees to Sell New Fund

Carlyle Group, the large private-equity firm that is preparing for a public share listing, has had to cut fees and offer other unusual incentives to lure investors to a new $2.3 billion real-estate fund.

The fund, which is about to close, is one of the largest since the property bubble burst in 2008. But Carlyle's aggressive sales tactics reflect the reluctance of big pension funds to put new money into higher-return, higher-risk real-estate funds after suffering sharp losses during the financial crisis.

Carlyle has been offering large investors annual management fees of as little as 0.75% of assets, half the 1.5% industry standard, say people familiar with the matter. Carlyle also has raised the bar that must be cleared before the firm can share in the fund's profits, known in the industry as a hurdle rate or preferred return.

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