“We are not pleased with our first-quarter results,” said Harvey Schwartz on a call accompanying Carlyle Group’s earnings on Thursday – his first call as the firm’s new chief executive.
“Our activity levels in investments, realisations and fundraising were more muted to our prior expectations.”
Schwartz noted there is “substantial and very attractive white space for Carlyle” to continue to grow its platform. Among strategies singled out by Schwartz were global credit, private wealth and investment solutions.
While Carlyle’s new CEO underscored “the power of an amazing brand” and his enthusiasm and energy for the business, it did little to reassure the firm’s investors and shareholders who were tuned in and waiting for concrete initiatives on how he would reshape the firm amid a tougher macro environment.
When asked by an analyst about the top two things he would be focused on as CEO, Schwartz said he “doesn’t have any favourite children” and highlighted mobilising Carlyle’s team and resources in areas where there’s investor appetite.
“If there’s demand for our solutions business, we’ll respond to that. If there’s demand for growing the private wealth footprint… there’s a lot of people in the world that want access to Carlyle and Carlyle investing capability. Some things will take longer. Some things will be more immediate. But I don’t think it’s a question of prioritising one or two things.”
He added: “We are not going to rush. I am certainly not in a rush. It’s really going to be about excellence of execution, however long that takes.”
He also noted the firm will be “disciplined about utilising its capital” and plans to invest in growth.
Carlyle’s shares slipped nearly 12 percent to $26.19 following the earnings call on Thursday morning.
Schwartz was named CEO in February following the sudden departure of Kewsong Lee in August last year. Bill Conway, interim CEO at Carlyle, said on the firm’s fourth quarter and full-year 2022 results in February that Schwartz’s appointment will “have a positive impact on fundraising”.
First-quarter results
Carlyle reported bleak results for the quarter, with inflows and deployment volume down year on year. The Washington, DC-headquartered firm collected $6.8 billion of fresh commitments across strategies from January to March, down from $9.2 billion in the first quarter of 2022. Capital raising was driven by first closings of its sixth Asia buyout fund, NGP’s latest energy fund and its ninth AlpInvest co-investment fund, according to a statement.
Fundraising in the 12 months to March nearly halved to $27.6 billion from the prior period.
In fact, the buyout giant expects fundraising dollars for its buyout vehicles to be lower than their predecessors. “While we believe that we will attract a significant amount of capital for our next vintage of buyout funds, we no longer expect these funds in the aggregate to be the same size as their predecessors,” CFO Curt Buser said on the earnings call.
Buser noted that the firm expects this decline across geographies amid a tougher fundraising environment, in which M&A volumes, realisations and performance revenues are all depressed.
Capital raised for Carlyle’s eighth flagship fund stood at $14.4 billion as of the end of Q1, according to the firm’s earnings statement – nowhere near the $22 billion target reported when it began raising capital in October 2021. The firm had gathered $14.2 billion for the vehicle as of end-December.
It held a $950 million final close for Carlyle Asia Partners Growth II last month, below its $1 billion target, Private Equity International reported.
New investments across strategies in the first quarter slid to $3.8 billion, compared with $10.9 billion in Q1 2022. Total capital deployed in corporate PE in the first three months of the year fell to $800 million, from $4.7 billion in the previous year.
Total assets stood at $381 billion as of end-March, up 17 percent year-over-year. Dry powder stood at $73 billion.
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