The Carlyle Group has closed a $1.1 billion fund dedicated to investments in financial services, including banks, insurance companies, asset managers and service providers.
Carlyle has been raising the fund since May 2008 and made a $75 million investment at that time in Boston Private Financial, a wealth management company. Boston Financial had obtained approval in November 2008 to receive $150 million from the US Treasury’s Troubled Financial Assets Program.
Along with Boston Financial, Carlyle has made two other investments from the fund, representing about 30 percent of the capital.
Carlyle invested $550 million along with the Canadian Imperial Bank of Commerce and other institutional investors in Bank of NT Butterfield in March. The bank reported a net loss for 2009 of $213.4 million, resulting primarily from write-downs of mortgage-backed securities. The firm also joined an investment consortium that included The Blackstone Group in the $900 million buyout of Florida-based BankUnited.
Carlyle established its Global Financial Services Group, headed by Olivier Sarkozy, half brother of the French president, in 2007. The group has 12 professionals, including managing directors James Burr, former corporate treasurer of Wachovia Bank, and Randal Quarles, former under secretary of the US Treasury for domestic finance.
“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 says on its web site. “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 firm believes it can “well work within the parameters established” by the US Federal Deposit Insurance Corporation for private equity ownership of banks, a Carlyle spokesperson told PEO. The FDIC has created rules that require higher standards for private equity ownership of banks than other entities, including higher capitalisation levels.