Carlyle-Backed NGP Offering Fee Break to Early Investors in Fund

May 28, 2014 2:58 pm ET

(For more news and information from Bloomberg’s private- equity newsletter, see BRIEF <GO>.)

May 28 (Bloomberg) -- Natural Gas Partners, part of an investment firm backed by Carlyle Group LP that’s seeking as much as $5 billion for a new private-equity fund, is offering a break on management fees to encourage clients to commit money early.

The Irving, Texas-based company, managed by Kenneth Hersh and Tony Weber, will waive management fees on committed capital from whenever the 11th fund makes its first investment until Jan. 1, 2016, for early backers, according to excerpts of e- mails sent to prospective investors. Fees will instead be charged on invested capital during that period, so they will be levied on a smaller amount.

When fundraising dried up during the 2008 financial crisis, some private-equity firms sweetened terms to attract early and large investors. In 2010, BC Partners Ltd. gave a 5 percent fee break to those who committed money to its buyout fund before the initial closing. EQT Partners and CVC Capital Partners offered similar discounts on their latest funds. Even as capital raising has improved, managers face a competitive environment as investors concentrate bets with fewer firms.

John Foster, a managing director at NGP, declined to comment on the fund. Randall Whitestone, a spokesman at Carlyle, also declined to comment.

Natural Resources

Natural Gas Partners is an investment platform of NGP Energy Capital Management, the natural-resources investment firm in which Washington-based Carlyle bought a 47.5 percent stake in December 2012 to expand its energy platform. It manages more than $10.5 billion in private-equity funds that invest in oil and gas production, midstream, oilfield services and power companies, according to its website.

For the new fund, Natural Gas Partners will charge a 1.5 percent management fee and take a 20 percent cut of the profits after an 8 percent preferred return is met, according to the e- mail excerpts. The commitment to the fund from NGP and Carlyle is expected to be $325 million.

Executive Changes

Natural Gas Partners, which is targeting a minimum of $4.5 billion, plans to hold an initial close on its latest fund by June 30 and extend its “fee holiday” for investors that commit through the third quarter, according to the e-mails.

The firm is gathering capital after two executives scaled back their roles. David Albin, who co-founded the firm in 1988, became a senior partner in January and gave up his administrative duties to the firm along with the title of managing partner, a person familiar with the matter said in February. Last year, William Quinn, who was a managing partner, made a similar move. Both men will have a role in investment decisions for the firm’s 11th fund, while being less involved in deals than in the past.

As part of the leadership transition, Natural Gas Partners promoted Weber in November to managing partner and chief operating officer. Senior managing directors Craig Glick and Christopher Ray have also taken on more responsibilities.