Aging directors, diversification needs, fund-raising fatigue, and a current lull in the buyout market are prompting large private equity firms to take a serious look at launching publicly traded funds.

Such a move would give the firms quick access to permanent capital and allow more individual investors access to the booming private equity industry, which grew 18 percent last year to $493.8 billion in deal volume -- the biggest growth in five years, according to research firm Dealogic.

Private equity firms have a spotty history of launching public funds, and some directors are turning away the investment bankers banging on their doors with public plans.

I'm very leery about such plans, said Glenn Hutchins, a managing partner at buyout firm Silver Lake Partners, speaking at an event in New York on Thursday produced by The Conference Board, a business network and research firm, and news magazine The Week.

Private equity firms typically buy struggling or undervalued companies, restructure the businesses, and sell them later, keeping a slice of the sale's profit. The firms pride themselves on the merits of operating a business privately, and are not beholden to short-term investors and quarterly reporting requirements.

Hutchins underscored this concept on Thursday, saying he had concerns about publicly disclosing aspects of running a private company, including executive compensation.

I also think the constraint on operations will be greater than they realize, Hutchins added, referring to private equity firms pursuing public vehicles.

Despite potential drawbacks, more and more private equity firms are entertaining the idea, bankers and buyout executives say.

The Blackstone Group and the Carlyle Group, two of the largest private equity firms, are looking closely at their public market options, bankers say. Blackstone and Carlyle declined comment.

The trend is more toward taking part of the firm public, not the firm itself, though some believe a wave of large, public buyout companies is ahead.

The globalization and institutionalization of private equity, retirement among top fund leaders, and a current slowdown in the buyout market are fueling the industry's heightened focus on public vehicles to raise cash.

News on Wednesday that buyout firm Kohlberg Kravis Roberts & Co. plans to launch a publicly traded fund in Europe shined an even brighter light on the issue. The firm declined to comment.

And the trend is not limited to private equity firms, as hedge funds, private funds that buy and sell securities and stock positions, are also entertaining the notion.

I think it's coming, said Barry Rosenstein, managing partner at hedge fund Jana Partners LLC, speaking at The Conference Board and The Week event on Thursday. Rosenstein said that historically, when a hedge fund manager wanted to retire, the fund basically shut down. But a public fund would allow the name and fund to stick around, he said.

Aside from taking the conventional initial public offering route, public options for these funds include the formation of foreign investment corporations, special purpose acquisition companies (SPACS), real estate investment trusts (REITS), and business development companies (BDCs).

PUTTING 'THE PUBLIC' IN 'PRIVATE'

The private equity firms most associated with public floats are KKR, Apollo Management and Ripplewood Holdings. And their results have been mixed.

Last March, RHJ International , a holding company for New York-based Ripplewood, debuted on the Brussels stock exchange. The stock priced at 19.25 euros and is since up only 2.5 percent.

Shares of KKR Financial Corp. , a real estate investment trust affiliated with the buyout firm, have slid 8 percent to around $22 per share since opening last year.

In 2004, Apollo launched Apollo Investment Corp. , a business development company, that raised $930 million in its IPO. That BDC prompted a string of copycats, but its own shares dropped 10 percent in the opening month and dampened the craze. Apollo shares have since rallied, and are trading more than 23 percent above their $15 IPO price.

Other BDCs have not fared as well. NGP Capital Resources is down 11.5 percent since its November 2004 debut, while Gladstone Investment Corp. has slipped 2.7 percent since hitting the market in June 2005.

Even so, the advantages to permanent capital are alluring for private equity funds, allowing them to lighten the periodic fund-raising burden their executives dread, and to diversify their fund portfolio, should the private market hit a snag.

If funds can find a way to raise permanent capital, they will do it, said Jeffrey Tabak, a lawyer at Weil, Gotshal & Manges LLP, who specializes in private equity fund raising. And right now, they are looking at various vehicles and structures to accomplish this.

Investment