Carlyle holds first close on latest European buyout fund above $4bn

The Carlyle Group held a first close on its fifth European buyout fund last week, bringing in more than $4 billion.

On the firm’s latest earnings call it announced it had raised $7.7 billion across all platforms in the first quarter, with $3.9 billion of that committed to corporate private equity funds.

In addition to the more than $4 billion raised for European buyout-focused Fund V, Carlyle has raised a combined $22 billion for its latest US and Asia flagship buyout funds, which are targeting $15 billion and $5 billion respectively. Carlyle Europe Partners V is reportedly targeting €5 billion.

Co-chief executive Glenn Youngkin said the firm anticipates additional commitments to all three funds.

“We see continued fundraising momentum and feel very good about raising our targeted $25 billion in new capital this year,” Youngkin said, adding the momentum is broad-based.

“The global LP community ranging from sovereign wealth funds to retirement systems to high net worth investors continues to demonstrate its strong interest in our funds. Over 60 percent of our capital commitments come from investors in six or more funds, and yet in the last 12 months more than 150 new institutional investors to Carlyle committed over $3 billion to our funds.”

In 2016 David Rubenstein, then co-chief executive, announced Carlyle intended to raise $100 billion over the course of the following four years. Youngkin said Carlyle should have raised about $80 billion toward that target by the end of this year, leaving approximately $20 billion left to raise in 2019.

“Of course, fundraising year to year is driven by the products that are in the market,” he said. “Many of our big private equity funds will hopefully have been fully raised by then, but we have a great slate of products also coming to market in the back half of this year and into 2019.”

These include a long-dated corporate private equity fund, an international energy fund, a European real estate fund and “lots of offerings in credit”.

Carlyle paid $19 million in fundraising expenses in the first quarter, $13 million higher than in the first quarter of 2017, which, said chief financial officer Kurt Buser, is to be expected given the firm’s “robust fundraising pace”.

In its private equity segment, Carlyle closed $700 million in new investments in the first quarter and announced more than $4 billion in new investments scheduled to close later this year.

Co-chief executive Kewsong Lee said the firm has a large amount of dry powder, but activity levels across the platform and globally are “quite robust”.

“It is a high priced environment, but if you think about our returns – and we’ve looked at this – two-thirds to 70 percent of returns in private equity are generated not by financial engineering or multiple expansion but by fundamental revenue growth and EBITDA growth, and that helps to offset some of the prices that need to be paid for the great companies that we’re buying.”

On the exit front, the segment generated $2.7 billion in realized proceeds in the quarter. Fully exited corporate private equity transactions in the last year generated a weighted average multiple of 2.9x and a gross IRR of 27 percent.

Carlyle’s assets under management increased 24 percent year-on-year to $201 billion, of which $73 billion is available for investment.