Carlyle blames market volatility as fundraising slows to $6bn

Carlyle Group has suffered a sharp slowdown in fundraising and a decline in assets under management as the private equity group searches for a new chief executive after the abrupt departure of Kewsong Lee in August.

The $6bn in new investor commitments received in the quarter was less than the $10bn it raised in the second quarter, New York and Washington-based Carlyle said on Tuesday.

The figure was far below the amounts gathered by US private equity rivals. Even though their fundraisings also slowed in the quarter, Blackstone raised $45bn, Apollo Global Management raised $34bn and KKR raised $13bn.

Carlyle’s weaker fundraising led to a decline in the firm’s overall assets and capital available to invest. Assets under management fell 2 per cent to $369bn from the second quarter, while available capital for investment fell nearly 9 per cent to $74bn.

Chief financial officer Curtis Buser told the Financial Times the trend was a symptom of rising stock market volatility and crowded fundraising, which has caused many investors to become overexposed to traditional private equity strategies. In the third quarter Carlyle raised just $1.9bn for its newest flagship buyout fund, compared with $3.2bn in the prior quarter.

The data reported along with Carlyle’s third-quarter financial results on Tuesday underscore the challenges it faces while it searches for a new chief executive.

Former chief executive Lee resigned in early August after co-founders William Conway, David Rubenstein and Daniel D’Aniello decided they would not renew his contract at the end of 2022.

The search for Lee’s replacement continues as Carlyle eyes internal and external candidates in a process led by an executive recruitment firm.

“We are operating well, and our experienced and highly capable investment teams have navigated all types of markets and economic cycles,” said Conway, who was made interim chief executive in August.

Though fundraising slowed markedly, Carlyle reported strong performance from its portfolio of investments, including strong realised gains from asset sales.

Distributable earnings, which count realised investment profits and is seen by analysts as a proxy for cash flows, were $644mn, or $1.42 per share, significantly beating estimates of analysts polled by Bloomberg. Carlyle generated $217mn in fee-related earnings, a proxy for the money it earns from base management fees, which were in line with estimates.

The results were buoyed by continued gains in its private equity funds, notably $22bn in infrastructure and natural resources investments Carlyle manages. Those investments gained 8 per cent during the quarter, bolstered by rising commodity prices amid the war in Ukraine, and have gained 45 per cent in the year to date.