Buyout Firms Boom as Bonds Bubble

Carlyle Group LP, the second-largest U.S. private-equity company, fell close to eight percent yesterday as earnings missed estimates. That makes for only a slight dent in a performance over the last year that has markedly outrun the S&P 500 index. Look at the chart below; Carlyle is the orange line, the index is the green. Even after today’s decline, Carlyle’s shares are still up 54% since its May 2012 IPO.

Carlyle vs. the S&P 500. Carlyle is up more than 50 percent.

The run for other private equity firms has been similar. Blackstone Group LP is up 40 percent in the same period, and Apollo Global Management LLC is up 40 percent. One factor in their stock market success: private equity companies have indirectly given equity investors exposure to the frothy corporate debt market. Carlyle’s biggest category of assets is its $12-billion loan portfolio. The question here for investors is whether Carlyle will continue to be as good an investment as the markets for bonds and CLOs cools down.


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