Private equity firm Carlyle Group , which has been considering an initial public offering for years, may file papers to go public late next year, a source familiar with the situation said on Monday.

The company would be following rival Blackstone Group LP , which went public in 2007, and KKR Co LP , which listed on the New York Stock Exchange earlier this year. While an IPO filing could come late next year, it is unlikely Carlyle's stock would trade until 2012, the source said.

Carlyle announced on Monday that it has agreed to buy a majority stake in hedge fund Claren Road Asset Management, which has $4.5 billion in assets under management.

Bloomberg earlier quoted Carlyle's William Conway as saying the company is gearing up for a public share sale and cited a source saying it would file IPO papers next year.

There will be significant advantages to having a lot more capital, it reported Conway as saying.

Chris Ullman, a spokesman for Carlyle told Reuters: We have not made any decisions regarding if or when we might go public.

Carlyle has been weighing going public for some time, sources familiar with the matter told Reuters earlier this year.

The firm has been active in 2010, putting together deals to buy companies such as telecommunications company Syniverse Technologies and communications cable maker CommScope Inc .

Going public can help private equity firms retain and hire staff, potentially give an exit route for retiring founders and boost the ability to raise money to make acquisitions.

Still, investors in private equity funds are concerned that, if a company decides to go public, management will become consumed with generating fees, quarterly earnings and the company's daily stock price.

The market has not necessarily rewarded the IPOs either. Blackstone, which went public at $31 a share in 2007, is now trading at $13.89 a share. But KKR shares are up more than 26 percent since their July IPO.

Carlyle has a great name, but I think mutual funds and institutions will treat the IPO with great caution, said Josef Schuster, founder of Chicago-based IPO research house IPOX Schuster LLC and principal portfolio manager of the Direxion Global Long/Short IPO fund.

I don't think there is a lot of enthusiasm right now for this type of deal, given the experience of Blackstone, Fortress, even KKR if you were in from the beginning, Schuster added.

Carlyle said it would buy 55 percent of Claren Road, a credit-focused hedge fund that employs a long-short strategy.

The firm did not disclose the exact value of the deal, but said it would exchange cash, an ownership interest in Carlyle, and performance-based contingent payments for the stake.

Claren Road's founders plan to reinvest nearly all of their proceeds from the deal in the fund, Carlyle said.

Claren Road investors Citigroup and Goldman Sachs' Petershill Fund will both sell their holdings, according to Carlyle.

The fund's current leadership will continue to run Claren Road's day-to-day operations.

(Additional reporting by Clare Baldwin; Editing by Dave Zimmerman, Andre Grenon and Tim Dobbyn)