Rubenstein's reach

The Carlyle Group boasts the largest in-house fundraising and investor-relations team in the industry. David Snow learns how the pieces of this global machine work together

Think of it as the Rubenstinian Empire. With a large, dedicated team of fundraising foot soldiers, multiple funds in the market and more than 500 current investors spread across North America, Asia, the Middle East and Europe, it could be said of the Washington DC-based private equity behemoth that the sun never sets on some form of Carlyle fundraising activity.

Carlyle's fundraising team is working to fulfill cofounder David Rubenstein's vision of building the firm into all-encompassing manager of private assets that leverages a worldwide network of investors for capital and deal flow. The in-house team also stands in contrast to the common private equity practice of hiring outside placement agents only when a fund is in the market. Of course, no firms juggle as many funds at the same time as Carlyle.

Since its founding in 1987, Carlyle has raised approximately $18 billion (€15 billion) for 23 funds, and counting (see chart). Led by the selfdescribed ‘workaholic’ Rubenstein, Carlyle raises capital on its own. Always has, always will. As such, the Carlyle's in-house placement team – now numbering nine professionals – is among the most active in the market.

The origins of Carlyle's inhouse placement strategy date to 1997, when Rubenstein hired Waël Bayazid and Harry Alverson to help the firm gain access to investors in the Middle East. Bayazid had worked in the Middle East private banking group for Chase Manhattan in New York, while Alverson came from the Middle East corporate finance group at Bankers Trust in London.

Up until these two professionals were hired, Rubenstein, working with various other Carlyle partners, did most of the fundraising legwork himself. In the late 1990s, private equity was booming, but Rubenstein declined to rely on the services of an outside group to place all the funds that his firm was planning. “David didn't have the patience to wait in the queue,” says Robert Brown, a Carlyle managing director charged with fundraising and investor relations in the US.

As Carlyle began diversifying into new strategies – venture, real estate, high yield, subordinated debt – the firm added placement professionals. Like many placement groups, Carlyle has a large contingent of former Merrill Lynch fundraisers. Brown, Lee Carson, Thomas Foussé, David Tung and Maki Mitsui all used to work at the firm that invented, and once dominated, the private equity fund placement industry.

Carlyle's most recent placement hire was Jim McGee, a Spanish-speaker who joined the firm last year to raise capital in North and South America.

European and Middle Eastern investors are covered by Bayazid, Alverson and Foussé; the Western Hemisphere by Brown, Carson and McGee; Asia by Tung and Mitsui; and John Colby is a ‘borderless’ fundraiser who covers various regions including Canada, Scandinavia and Japan.

But boss Rubenstein's looming presence over the Carlyle fundraising machine is as strong as ever. The Blackstone Group's equally indefatigable Steven Schwarzman once said of Rubenstein: “[He] is always there, no matter where ‘there’ is.”

Brown notes that Rubenstein “makes himself available for any meeting” anywhere in the world. The co-founder travels approximately 300 days a year on business, says Brown, adding “everything he does is for work. You read a lot about David being a workaholic, and I can tell you that none of it is an overstatement.”

The other members of the fundraising team certainly work hard – Brown estimates he spends two-and-a-half weeks per month on the road – but are not required to keep pace with Rubenstein. “David can get by on very little sleep and travel the earth,” says Brown. “He doesn't expect anyone to do what he does.”

Like all Carlyle employees, its fundraisers are paid a salary, receive bonuses based on performance, and share in the equity of the firm's deals. Carlyle fundraisers are paid enough to keep them from defecting to third-party placement firms, but the arrangement makes economic sense for Carlyle, which would otherwise have to pay hefty placement fees. For example, if Carlyle raised $2 billion in a year through an outside placement agent, fees could total roughly $40 million.

CARLYLE CRESCENDO

Starting in 1999, The Carlyle Group began raising branded funds at a rapid clip. Year launched Name Size
1990 Carlyle Partners I $100m
1996 Carlyle Partners II $1.3bn
The funds target differing strategies and geographies. 1998 Carlyle Europe Partners €1bn
1997 Carlyle Venture Partners $210m
Caryle Realty Partners $296m
The firm has never hired a placement agent, instead relying on a growing in-house team. 1999 Carlyle Asia Partners $750m
Carlyle High Yield Partners $1bn
Carlyle High Yield Partners II $550m
Carlyle Realty Partners II $252m
2000 Carlyle Partners III $3.9bn
Carlyle/Riverstone Energy $222m
Carlyle Europe Venture Partners I €553m
Carlyle High Yield Partners III $450m
Carlyle Asia Venture Partners $159m
2001 Carlyle Japan Partners ¥50bn ($470m)
Carlyle Europe Real Estate Partners € 436
Carlyle Realty Partners III $571m
Carlyle Venture Partners II $164m
2002 Carlyle/Riverstone Energy II $1bn target
Carlyle High Yield Partners IV $400m
Carlyle Asia Venture Partners II $164m
Carlyle Management Group $590m
2003 Carlyle Europe Partners II €2bn target
Carlyle Loan Opportunity Fund $300m
Source: The Carlyle Group

NUMBER OF PRIVATE EQUITY FUNDS CURRENTLY BEING RAISED

US Europe RoW Total
Venture 133 89 46 268
Buyout 55 45 13 113
Fund of Funds 39 32 0 71
Other 59 16 11 86
Total 286 182 70 538
VALUE OF FUNDS BEINGs RAISED ($)
US Europe RoW Total
Venture 20,061 9,056 4,420 33,537
Buyout 25,984 25,847 1,932 53,763
Fund of Funds 11,725 5,049 0 16,774
Other 17,834 3,052 4,103 24,450
Total 75,603 43,005 9,917 128,525
AVERAGE SIZE OF FUNDS BEING RAISED ($)
US Europe RoW Average
Venture 151 102 96 125
Buyout 472 574 149 476
Fund of Funds 301 158 0 236
Other 302 191 373 284
Average 264 236 142 239

WHAT THE GPs THINK
In 2003 the Private Equity Research Institute conducted an online survey of 127 private equity firms in Europe and the US, canvassing their views on placement agents. Here is an excerpt from that survey. For more details, please visit www.privateequityonline.com/par