Carlyle IPO docs show negative net IRR for infra fund

Carlyle’s debut $1.1bn infrastructure fund has posted a gross internal rate of return of 5% and a net internal rate of return of -2% as of June 30. But one of the fund’s LPs said IRR was not a valuable gauge of the fund’s ultimate performance.

Carlyle Infrastructure Partners (CIP) has posted a negative net annualized internal rate of return (IRR) since its inception and generated no performance fees, according to filings the fund’s parent organization, Washington DC-based private equity firm Carlyle Group, made in anticipation of its initial public offering.
 
Between CIP's inception in September 2006 and June 30 2011, the fund posted a gross annualized internal rate of return of 5 percent and a net internal rate of return after management fees and expenses of negative 2 percent, according to the filing. 

CIP, which closed on about $1.1 billion in 2007, had invested capital of $519.4 million as of June 30, according to the registration documents filed with the US Securities and Exchange Commission (SEC). Carlyle said the invested capital has a fair market value of $582.4 million as at June 30.

Investors in the fund include the Maine Public Employees Retirement System (MainePERS), the California Public Employees Retirement System (CalPERS), the Chicago Policemen's Annuity & Benefits Fund, the Abu Dhabi National Energy Company, the British Aerospace Pension Fund, the International Union of Operational Engineers, the Public Employees' Retirement Association of New Mexico and Scotia Bank, according to InfrastructureConnect.

Andrew Sawyer, chief investment officer for MainePERS, said the IRR is not valuable as a gauge of CIP’s performance to date, given how recently many of the fund’s investments were made.

 “I think it’s pretty early days to be posting IRRs,” Sawyer said. “We typically like to see at least several years of investing before we start thinking about it.”

MainePERS committed $50 million to the fund in 2008 and had contributed capital of $17.7 million as of March 31 2011, according to a private markets investment summary from the pension fund. The gain on the contributed capital since inception was about $2 million, according to the summary, while fees and expenses totalled about $4.8 million.

Sawyer said MainePERS was “not concerned” about the IRR or performance figures. “We’re very comfortable with the team and with the investment that we have at this point,” Sawyer said.

Carlyle declined to comment on any information about CIP in the registration statement.

CIP invested in Texas-based waste recycler Synagro Technologies in 2007 and in Illinois-based company ITS Technologies & Logistics in 2008, according to Carlyle’s website. CIP has also invested in Australia’s Qube Logistics, and in the Illinois Central School Bus company, as well as in a joint venture that holds a 35-year concession to redevelop, operate and maintain service stops in Connecticut. In December, the fund also agreed to acquire US family-owned utility Park Water. 

The fund has a term of 12 years with two one-year extensions, according to a 2010 investment policy manual from the Chicago Policemen's Annuity & Benefits Fund. Management fees for the fund are 1.5 percent of committed capital during the commitment period and 1 percent thereafter as well as a 20 percent carried interest over an 8 percent preferred return, according to the investment manual.

The infrastructure fund falls under the umbrella of Carlyle’s real assets segment, which advises on 18 active real estate, infrastructure and energy and renewable resources funds, according to the filing. The real assets segment had about $31 billion in assets under management as of June 30, 2011, according to the filing.