US mega-firm The Carlyle Group has collected $1 billion on its way to $3 billion for its debut distressed financial services fund.
The firm started fundraising about nine months ago and has already made one investment. In July 2008, it invested $75 million in Boston Private Financial Holding, a wealth management company, which obtained preliminary approval in November to receive $150 million from the US Treasury’s Troubled Financial Assets Program.
“Carlyle believes that many financial services firms will need to raise equity capital to shore up their balance sheets and restore confidence in the marketplace,” the firm said on its website. “Given the scope and scale of the current distress, Carlyle believes that even established companies with proven business models and brands are likely to seek fresh capital at depressed prices, enhancing the likelihood for investors to earn attractive risk-adjusted returns.”
The government has thrown its support behind private sector-investment in banks through its TARP program, in which it has invested alongside private firms in several struggling banks. One such bank was National City, in which the government invested $7.7 billion alongside a $5.2 billion investment from PNC Financial Services Group. Private equity firm Corsair Capital had a $985 million stake in the bank prior to the sale.
US President Barack Obama’s Treasury Secretary Timothy Geithner said in a speech earlier this month that the government will seek help from private firms to inject needed capital into the ailing financial services sector.
Firms have been gearing up to move into the space, including JC Flowers, which raised $2.5 billion for its third private equity fund last year. J. Christopher Flowers, who heads up the firm, said in a recent speech that he is targeting troubled financial institutions that are candidates to receive money from the US government.
TPG raised a $6 billion financial services fund last year, but decided to trim the fund by about $1.5 billion in December in part because government involvement in the space will sap some opportunities, according to a source with knowledge of the situation.
Carlyle set up its Global Financial Services Group in June 2007. The team’s professionals include co-head Olivier Sarkozy, the half-brother of the French president and former joint global head of FIG Investment Banking at Swiss bank UBS. The team also includes James Burr, former treasurer at Wachovia Bank; Randal Quarles, former under secretary of the US Treasury for domestic finance and John Redett, former vice president, financial institutions group at Goldman Sachs.
The former co-head of the financial services group, David Zwiener, left Carlyle in September to become Wachovia's chief financial officer