After making their founders billionaires, buyout specialistssuch as Carlyle Group and KKR & Co. are turning into assetmanagers that run hedge funds and strip malls as fresh capital andtakeover targets become scarce.

Stephen Schwarzman's Blackstone Group LP, the biggestprivate-equity firm, is earning twice as much from owning property,including office buildings in India and senior communities, as frombuyouts. New York-based KKR, whose co- founders Henry R. Kravis andGeorge R. Roberts helped pioneer leveraged buyouts in the 1980s,now owns a stake in a 5,500-mile U.S. pipeline and lends todistressed companies.

The firms have little choice if they want to grow. Takeovercandidates are expensive after a two-year, 95 percent rally instocks, and commitments from backers such as pension funds havewaned amid the weakest fundraising environment since 2003.

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