Private equity titans open cloistered world to smaller investors 

Seeing individual investors as untapped sources of capital, private equity firms are seeking to attract checks in the tens of thousands of dollars rather than in the hundreds of millions.

For decades, David M. Rubenstein has persuaded big institutions like pension funds and university endowments to invest billions of dollars with his private equity firm, the Carlyle Group, promising them better returns than the general market.
Carlyle, the Washington-based giant that Mr. Rubenstein co-founded in 1987, is at the forefront of an effort to open the cloistered and risky world of private equity to doctors, lawyers, well-heeled entrepreneurs and others with a brokerage account or, one day, a robust 401(k).

The arrangement of private equity funds tends to limit access to them. Wall Street’s private equity firms raise vast pools of capital to buy entire companies. Often, those companies are loaded up with debt in the process, a tactic that adds risks and has generated criticism.

Carlyle’s new vehicle, called Carlyle Private Equity Access 2014, whose existence has not previously been disclosed, is just one of several efforts by the industry to attract checks in the tens of thousands of dollars rather than in the hundreds of millions.

Gathering more capital allows the already-giant private equity firms to collect more in management fees, a revenue stream prized by Wall Street analysts for its predictability.
Private equity firms are responding to a broad shift in how Americans save for retirement. Public pension funds — a traditional source of private equity capital — are growing more slowly than 401(k)’s and other self-directed retirement accounts.

“The question is, Is it a game for amateurs?” said Josh Lerner, a professor of investment banking and entrepreneurship at Harvard Business School. “The historical record has not really been an inspiring one.”

Source: NYT- Private equity titans open cloistered world to smaller investors

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