(Bloomberg) -- Carlyle AlpInvest bundled up and sold private equity fund stakes in a $1.25 billion securitization, using a complex type of deal that's grown popular with insurance companies looking to gain access to private markets.
Portions of four of the Carlyle Group Inc. unit's funds, as well as a number of smaller stakes from other PE managers' buyout funds, are being bundled into a collateralized fund obligation — a deal that slices up sections of funds into bonds of varying size and risk. Carlyle AlpInvest is acquiring the collection of smaller stakes as part of the transaction, according to Mike Hacker, global head of portfolio finance at the unit.
Bloomberg reported about the firm's plans to sell a CFO in May, when work on the deal was still underway. The deal closed on Thursday.
Carlyle AlpInvest sold nearly all of the CFO's equity — the portion of the structure that would be first to incur any losses — to third party investors, including insurance companies and family offices, Hacker said.
"We combined our own existing funds with a range of outside middle-market funds, creating a more diversified mix of collateral," said Hacker in an interview. "That approach resonated with investors, who ultimately took up nearly all of the equity in the structure, alongside Carlyle."
Such transactions are happening with more frequency as large PE managers look to free up capital or raise money for underlying funds at relatively cheap borrowing costs. Insurance companies have emerged as eager buyers of such investment-grade alternative assets.
It's the third such deal that Carlyle AlpInvest has completed, after the private equity manager closed a $1 billion CFO last October.
Investment bank Evercore Inc. led the most recent transaction while TCG Securities and Wells Fargo & Co. were also involved, according to a company statement.
More stories like this are available on bloomberg.com
