IRR lags in Carlyle’s Asia funds

As of Q3, Carlyle’s Asia funds on average have a lower IRR than its funds in other geographies, and co-founder Bill Conway has expressed concerns about the economies of Japan and China.

The Carlyle Group’s Asia-focused funds have averaged an IRR of 8.5 percent compared to the 18 percent overall average of all the firm’s funds, according to Carlyle’s third quarter earnings release.

In addition, returns from three Asia-focused funds – which are not yet fully invested – had a negative net IRR, whereas all other funds outside of Asia that are not yet fully invested had a positive IRR.

Carlyle Japan Partners I had the best performance, with a net IRR of 37 percent, the firm reported.

In an investor conference call, co-founder Bill Conway expressed concerns about Asian markets. In particular, he said Japan’s decline in industrial output was worrying and China’s economy was volatile. 

The PRC is going through two significant shifts, moving from an export-driven to a domestic demand-driven economy and adjusting to prolonged slower GDP growth, he said.

Nonetheless, Carlyle has been busy in Asia this year. It completed two transactions and two take-private deals in China, and — Conway confirmed — made its first investment in Southeast Asia.

Exits included the $721 million sale of stock in China Pacific Insurance in July; selling cash-counting equipment provider Talaris to Japanese money-handling machine maker Glory in February; and selling its stake in AMC Entertainment to China’s Dalian Wanda in September.

Although not included in the quarterly report, Carlyle also sponsored a $377 million buyout of sanitation business Diversey Japan, PE Asia reported earlier.

Carlyle has $157 billion in assets under management. The firm opened its first office in Asia in 1998, and now has nine offices in the Asia Pacific region, including Japan.