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Carlyle fundraising slowed sharply during chief executive hunt

Carlyle Group’s fundraising slowed sharply last quarter as the absence of a new chief executive deterred some investors from committing capital to the private equity group.

The Wall Street group raised just $4.9bn in the quarter, far below the sums it achieved earlier in the year and just a fraction of the $43bn that rival Blackstone secured from investors during the period.

The slowdown underlines how much is riding on Harvey Schwartz, the former Goldman Sachs chief financial officer who Carlyle named as chief executive on Monday. The appointment ended a six-month hunt to replace Kewsong Lee, who left abruptly last summer after falling out with the group’s billionaire co-founders.

As well as investors’ unease over the absence of a chief executive, the downturn in global markets and an industry-wide overexposure of pensions and endowments to private equity hobbled Carlyle’s fundraising last quarter, according to people familiar with the matter.

Carlyle, which has almost $400bn in assets, raised just $600mn for a new, flagship buyout fund during the quarter. Results later this week from KKR and Apollo Global are expected to show the rival groups secured far more fresh capital despite the tougher conditions facing the industry.

“Now that Harvey is here, it has also taken away some uncertainty about our path forward for the firm, and we think that will also have a positive impact on fundraising,” William Conway, a Carlyle co-founder who has acted as interim chief executive since August, said on a call with analysts.

While Schwartz, who starts on February 15, inherits a group that has fallen behind peers in its overall asset growth, Carlyle’s investments performed strongly last year thanks to their exposure to natural resources.

In its fourth-quarter results on Tuesday, Carlyle said its funds spanning corporate buyouts, real estate, infrastructure and credit-based investments gained in value last year. The value of its $22bn portfolio of natural resources investments jumped 48 per cent last year.

The investment gains across its funds, most of which stemmed from a rise in the value of its holdings and the sale of nearly $34bn in assets, buoyed overall profits at the group last year.

Carlyle reported fee-related earnings of $202mn for the fourth quarter, a 15 per cent increase from the same quarter of 2021, bolstered by recent acquisitions.

The group’s so-called distributable earnings, which include investment profits and are a measure analysts regard as a proxy for cash flows, were $433mn in the fourth quarter, or $1.01 per share, slightly better than forecast.

Carlyle’s fast-growing credit business was a bright spot. The division, which was responsible for raising the majority of the $30bn of new investor money Carlyle brought in last year, saw its profit margins rise about 10 percentage points.

Carlyle raised its annual dividend to $1.4 per share, up just over 7 per cent from last year.

Conway said the appointment of Schwartz came at a time when there was “tremendous opportunity to grow and to continue to transform Carlyle and deliver sustainable results over the long term”.

Carlyle shares fell more than 1 per cent in early afternoon trading.

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