Carlyle raises $22bn in 2013

The firm had its strongest year of fundraising since 2007.

The Carlyle Group raised a total of $22 billion in new capital in 2013, the firm’s best year of fundraising since 2007, Carlyle co-chief executive officer David Rubenstein said during an earnings call Wednesday. The firm’s carry funds raised more than $14 billion during the year.

“Along with market appreciation, this helped drive our total assets under management to $189 billion, up 11 percent over the prior year, and that is after distributing more than $17 billion during the year to our investors,” Rubenstein said.

Of the total funds raised last year, 45 percent came from the Americas, 28 percent came from Europe and the Middle East and 27 percent came from Asia. The firm expects to raise between $15 billion and $20 billion in 2014 and anticipates holding final closes for its Asia, Europe and Japan buyout funds before end of year.

In addition to closing its latest US buyout fund on $13 billion, above its $10 billion target, Carlyle exceeded the target for its sub-Saharan Africa fund and is making “good progress” in its Asia, Japan and Europe buyout funds, Rubenstein said, adding that several of the firm’s large buyout funds, including Carlyle Asia Partners III and Carlyle Europe Partners III, have moved into a full accrued carry position.

Carlyle also expanded its natural resources investment capabilities in 2013 through partnerships with a number energy-focused groups.

“Carlyle now offers a broad range of global energy investment opportunities, with over $13 billion under active management within Carlyle and within our partner [Natural Gas Partners], but excluding our legacy relationship with Riverstone,” Rubenstein said.

Retail investors accounted for $2 billion of capital commitments through Carlyle’s feeder fund partners in 2013.

“We continue to add ways for retail investors to access Carlyle funds, including creating new products and adding new feeder partners,” Rubenstein said.

The firm also recently submitted filings to the US Securities Exchange Commission for its first two mutual fund products, which it plans to launch later this year pending regulatory approval.

Carlyle’s distributable earnings for the quarter were $401 million, more than double the $188 million from the fourth quarter of 2012.

“Our 2013 performance was better than we had anticipated earlier in the year because of the growing strength during the year of our portfolio, especially that part of our portfolio that included the 11 carry funds and hedge funds,” Rubenstein said. “Our performance also exceeded our prior outlook because some of the exit activities that we earlier expected would occur in future periods in fact occurred in 2013.”

 Carlyle’s corporate private equity division generated economic net income – a measure of earnings that includes realised and unrealised investments – of $549 million for the fourth quarter, compared to $122 million for the same period last year, and generated $1.1 billion of ENI during the year, compared to $479 million in 2012.

AlpInvest Partners performed “very well” in 2013, Rubenstein said, appreciating by 17 percent and generating “strong distribution activity”.

INVESTMENT PACE

Last year proved to be a challenging year to invest for Carlyle, particularly in the United States, co-CEO Bill Conway said during the call.

Still, the firm invested $8.2 billion across its carry funds in 2013, slightly more than 2012, and invested more than $1 billion in China, a record amount invested in the country for the firm.

In Europe, Carlyle closed seven new transactions totaling more than $1 billion, and in the US, the firm completed seven new corporate private equity transactions totaling $2.5 billion.

“In corporate private equity, we invested more than $900 million in the fourth quarter in three new and 15 follow on investments,” Conway said. “Already in 2014, we’ve agreed to invest $2.3 billion of equity in five businesses.”

Carlyle took eight portfolio companies public in the fourth quarter and 15 during the year.

The carry funds in Carlyle’s corporate private equity portfolio appreciated 9 percent in the fourth quarter and 30 percent in 2013. Its corporate private equity segment generated realised proceeds of $5.3 billion during the quarter and $12.2 billion for the year.

Carlyle’s Global Market Strategies segment, which includes its distressed, mezzanine and energy mezzanine funds, appreciated 10 percent during the fourth quarter and 28 percent for the year.

“For 2014 the market has started with falling interest rates in the developed markets, falling stock prices and increased volatility, particularly in emerging markets,” Conway said. “Despite these factors, or maybe because of them, our global investment pipeline is stronger than it has been in over a year.”

“Many large institutional investors are now significantly below their stated allocation targets for alternative investments,” Rubenstein said.

“Allocations to private equity are also increasing across the spectrum of investors who participate in this area. This trend can reasonably be expected at some level to continue.”