Memorandum to: State Investment Council
From: Christopher McDonough, Director
Subject: Proposed Investment in Carlyle Partners VI, L.P. Fund
The New Jersey Division of Investment (“Division”) is proposing an investment of $300 million in Carlyle Partners VI, L.P. Fund (the “Fund”). This memorandum is presented to the State Investment Council (the “Council”) pursuant to N.J.A.C. 17:16-69.9.
The Division is recommending this investment based on the following factors:
- Consistent Top Quartile Performance: Over the last 23 years Carlyle’s U.S. buyout funds have performed in the top or second quartile of their respective vintage years on an Internal Rate of Return (“IRR”) and Total Value to Paid In (“TVPI”) basis, and all are considered top quartile within their respective vintage years on a Distributions to Paid In (“DPI”) basis, with the exception of Carlyle Partners V. As of September 30, 2013, the five funds, in the aggregate, have earned an IRR of 18.0% and a TVPI of 1.7x on a net basis.
- Experienced Team: The Co-Heads of Carlyle’s U.S. Buyout group, Allan Holt and Peter Clare, have been at Carlyle for 21 years and have an average of 24 years of Private Equity experience. Mr. Holt and Mr. Clare are supplemented by a team of 69 investment professionals, including 24 Managing Directors and Principals who span industry verticals. The broader senior leadership team has an average tenure at Carlyle of 16 years and 20 years of private equity experience. In addition, the firm is led by its three founders, David Rubenstein, Daniel D’Aniello and William Conway, who all sit on the Fund’s investment committee and are still very active in the firm’s day-to-day operations.
- Focused Investment Strategy: Carlyle targets investments in its core industries where their industry teams provide an advantage to effectively acquire, create value and successfully exit portfolio companies. The focus is on long term value creation where the investment teams can work with Carlyle’s 24 person network of Operating Executives to improve operational and management strategies, help portfolio companies recruit and mentor management and assist with customer introductions.
- Global Network: The U.S. Buyout group leverages the expertise and network of the One Carlyle platform, a term meant to describe the interconnected nature of the multiple and global lines of business which fall under the Carlyle Group umbrella, in their sourcing and portfolio management efforts. This global network affords advantages in deal sourcing, growth initiatives and exits as well as providing global industry insights, views on debt structuring and operational expertise. Carlyle has more than 650 investment professionals in 34 offices in 21 countries in Africa, Asia, Australia, Europe, Latin America, the Middle East and North America.
- GP Commitment: The GP will commit at least $905 million in or alongside the Fund. This commitment will include investment by Carlyle’s professionals.
A report of the Investment Policy Committee (“IPC”) summarizing the details of the proposed investment is attached.
Division Staff and its private equity consultant, Strategic Investment Solutions, undertook extensive due diligence on the proposed investment in accordance with the Division’s Alternative Investment Due Diligence Procedures.
As part of its due diligence process, staff determined that the fund has not engaged a third-party solicitor (a “placement agent”) in connection with New Jersey’s potential investment.
We will work with representatives of the Division of Law and outside counsel to review and negotiate specific terms of the legal documents to govern the investment. In addition, the proposed investment must comply with the Council’s regulation governing political contributions (N.J.A.C. 17:16-4).
Please note that the investment is authorized pursuant to Articles 69 and 90 of the Council’s regulations. The Carlyle Partners VI, L.P. Fund will be considered a private equity buyout investment, as defined under N.J.A.C. 17:16-90.1.
A formal written due diligence report for the proposed investment was sent to each member of the IPC and a meeting of the Committee was held on November 8, 2013. In addition to the formal written due diligence report, all other information obtained by the Division on the investment was made available to the IPC.
We look forward to discussing the proposed investment at the Council’s November 21, 2013 meeting.
Source: State of New Jersey State Investment Council