Slideshow: AlpInvest Takes Punch From 2006 Vintage Funds: CORRECTED

AlpInvest Partners, the funds-of-funds business of The Carlyle Group, has taken a pretty big hit so far from its vintage-2006 investments, according to a regulatory document.

Carlyle acquired a 60 percent equity interest in AlpInvest last year as part of the build-up to its initial public offering in May. The unit, which manages more than €40 billion ($50.2 billion), mainly on behalf of two big Dutch pension funds, also picked up a $500 million program to manage last year on behalf of the Municipal Employees Retirement System of Michigan.

According to the 10-Q filed by Carlyle Group on May 22, AlpInvest as of March 31 had created and fully committed some 11 pools of capital, each of at least €500 million in size, spanning vintage years 2000 to 2010, along with other funds of “various” vintage years; together they represent €28.2 billion in cumulative invested capital.

Of the 11 pools of at least €500 million, three are earmarked for private equity funds, four for secondary investments, two for co-investments and two for direct mezzanine investments. AlpInvest also breaks out three pools of at least €1.5 billion each in size that are still in their commitment period stage. (In the 10-Q AlpInvest breaks out the results of the fund investments, secondary investments, co-investments and mezzanine investments for five main funds; for simplicity, this piece refers to these breakouts as separate pools.)

Close inspection of their performance suggests that the vintage-2006 pools have been a major drag to date on the AlpInvest portfolio. One reason is the sheer amount of capital the firm committed to that vintage year. The estimated €13.2 billion in cumulative invested capital from that vintage year represents nearly half (47 percent) of the €28.2 billion in cumulative invested capital for the estimated 11-vintage-year span for its fully committed pools.

At the same time, the performance of those 2006 pools are bringing up the rear. AlpInvest’s 2006 vintage-year fund investments, which through March 31 generated a 1.1x multiple of invested capital and 3 percent net IRR, is the worst-performing of the three fully committed pools earmarked for funds listed in the 10Q; the 2006 secondary pool, with a 1.2x multiple and 8 percent net IRR, is the worst-performing of the four fully committed pools earmarked for secondaries; and the 2006 co-investment pool, with a 1.0x multiple and negative 2 percent net IRR, is the worst-performing of the two fully committed pools earmarked for co-investments.

The 10-Q does not provide the underlying fund investments, but a list of general partners on the AlpInvest Web site suggest the firm has exposure to a broad array of pools, including both domestic and international buyout and venture capital funds. All told, the fully committed funds in the AlpInvest portfolio were generating a 1.3x multiple of invested capital and a 10 percent net IRR as of March 31, according to the Carlyle Group 10-Q. The best-performing of the bunch is the €519 million pool earmarked for secondaries, vintage 2002, with a 51 percent net IRR.

Needless to say, AlpInvest isn’t alone in registering soft returns to date from vintage-2006 funds, many of which got socked by the financial crisis and the Great Recession. According to an analysis of returns conducted by sister magazine Buyouts last fall, for example, the median domestic buyout fund from that vintage was generating a 1.16x multiple and a 5.62 percent IRR, with much of that data current through March 31 2011. By comparison, all domestic buyout funds in our database had generated a median 1.46x multiple and a median 9.93 percent IRR.

A spokesperson for Carlyle declined comment for this piece. Below is a slideshow to take you through the performance of the 11 fully committed AlpInvest pools, from best to worst performing.

This story first ran on the Web site of sister magazine Buyouts.


[slide title=”1. Main Fund I-Secondary Investments”]

Vintage Year: 2002

Fund Size:  €519.4M

Net IRR: 51%

[slide title=”2. Main Fund II-Co-Investments”]

Vintage Year: 2003

Fund Size: €1.1B

Net IRR: 43%

[slide title=”3. Main Fund II-Secondary Investments”]

Vintage Year: 2003

Fund Size: €998.4M

Net IRR: 27%

[slide title=”4. Main Fund IV-Secondary Investments”]

Vintage Year: 2010

Fund Size: €1.9B

Net IRR: 24%

[slide title=”5. Main Fund I-Fund Investments”]

Vintage Year: 2000

Fund Size: €5.2B

Net IRR: 12%

[slide title=”6. Main Fund II-Fund Investments”]

Vintage Year: 2003

Fund Size: €4.5B

Net IRR: 9%

[slide title=”7. Main Fund III-Secondary Investments”]

Vintage Year: 2006

Fund Size: €2.3B

Net IRR: 8%

[slide title=”7. Main Fund III-Mezzanine Investments”]

Vintage Year: 2007

Fund Size: €2 billion

Net IRR: 8%

[slide title=”9. Main Fund II-Mezzanine Investments”]

Vintage Year: 2005

Fund Size: €700M

Net IRR: 7%

[slide title=”10. Main Fund III-Secondary Fund Investments”]

Vintage Year: 2006

Fund Size: €11.5B

Net IRR: 3%

[slide title=”11. Main Fund III-Co-Investments”]

Vintage Year: 2006

Fund Size:€2.8B

Net IRR: -2%


(Correction: In the original version of this story, Slide 10 was incorrectly labeled Main Fund III-Secondary Investments)

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