Carlyle closes second financial services fund on $1bn

The fund will target mid-market financial services companies in asset and wealth management as well as specialty finance firms.  

The Carlyle Group has closed its second fund targeting middle market financial services companies on $1 billion after a three year fundraising period, according to a statement. Carlyle Global Financial Services Partners II will rely on the same strategy as its predecessor Fund I.

Fund I, which raised $1.1 billion, has achieved a 1.6X gross multiple of invested capital and an IRR of 18% as of March 31.

Financials had a bumpy ride coming out of the crisis, but the sector is recovering, according to Milton Marcotte, lead transaction advisory practice manager at Charlotte, N.C. –based McGladrey. “We’ve seen a meaningful uptick in financial services transactions in 12 months. At the same time, companies in sectors like financial services technology, insurance and mortgage brokerage are performing better, so valuations are looking better.” 

Marcotte notes that although the financial services deal market is active, he’s not aware of new entrants buying up financial services firms. “In that sense, this fund is well timed,” said Marcotte. “There is probably a pent up demand for these types of transactions.”  Marcotte also believes there will be good opportunities in Asia and Europe.

As with Fund I, which was closed in 2010, the Carlyle Global Financial Services Partners II will make investments in asset and wealth management firms and insurance companies as well as specialty finance firms, tech providers, and providers in niche areas such as depositories and business services within capital markets. 

Notable Fund I investments included OzForex, an online provider of foreign exchange services based in Australia, Edgewood Partners Insurance Center, the brokerage firm Sandler O’Neill Partners, and asset manager Boston Private.