Side Letter: Carlyle’s new co-heads; Investcorp’s $1.2bn; Maryland’s allocation restraint

Just happened

Peter Clare: steps down from board of DC-headquartered Carlyle immediately (Source: Getty)

All change for Carlyle’s Clare
When Kewsong Lee abruptly left as Carlyle Group‘s chief executive last August, the alternatives giant formed an “office of the CEO” in his stead. Six months on and with a new chief exec in the form of former Goldman Sachs top exec Harvey Schwartz, a key member of that office is set to leave the firm. Peter Clare, Carlyle’s chief investment officer of corporate private equity, is retiring from the firm, according to a Monday statement. A three-decade veteran of the Washington, DC-headquartered manager, Clare will leave on 30 April and will step down from his role as a board director member immediately. In his stead, Carlyle has appointed Sandra Horbach and Brian Bernasek to jointly lead Americas PE in addition to their current roles as co-heads of buyout and growth.

Clare is not a key person on Carlyle Partners VIII, the firm’s latest global flagship, a spokesperson told Side Letter. CP VIII, which has a $22 billion target, is taking longer to raise than expected, with $14.2 billion raised as of end-December (compared with $14 billion as of end-September), according to earnings materials.

Investcorp’s latest raise
Yesterday we noted that Investcorp had opened an office in Japan, its 14th globally and fifth in Asia. As Side Letter was going to press today, the Bahrain-listed firm disclosed that it had also raised at least $1.2 billion for its debut North American-focused PE fund focusing on the mid-market. North American Private Equity Fund I has already invested in seven companies and focuses mainly on acquisitions from family and founder-owned businesses, according to a statement. Investcorp was one of the three firms we profiled in 2019 for our feature looking at stealth firms (Neuberger Berman and Eurazeo were the other two). In 2017, the firm set an AUM target of $50 billion by 2024 – a figure it has already reached.

Maryland’s restraint
Another LP is rethinking its PE budget to bring their allocation under control. Last week, Side Letter noted that Santa Barbara County Employees’ Retirement System planned to cut its PE exposure by 4 percentage points over the next four years with a strict pacing plan. Now, Maryland State Retirement and Pension System is going one step further. The $61.3 billion system will reduce the size and number of its annual commitments, starting this year, to $1.5 billion to $2 billion across 14 to 18 managers, per its 21 February board meeting, covered by our colleagues at Buyouts (registration required). Maryland backed 30 managers last year and committed $2.4 billion to funds with a 2022 vintage.

Maryland has a more than 21 percent exposure to PE against a 16 percent target. The system will implement this updated annual commitment pace over the next several years to incrementally reach its target.

This latest development, from a much larger institution, suggests PE’s fundraising woes are likely to extend into 2023. GPs will be competing for smaller tickets from fewer investors, meaning funds will likely take longer to close and may struggle to reach their targets. In such an environment, the ability to source, and tap, new pools of LP capital may prove critical.


Mercury move
Mercury Capital Advisors, the advisory and placement firm owned by Investcorp, has lost its secondaries advisory head, our colleagues at Secondaries Investor report (registration required). Partner Sabina Sammartino, who helped build the practice, will depart today. It is unclear where she is headed.

In addition to its secondaries business, Mercury has been a regular placement agent for GPs such as Coller Capital and Asia-focused growth investor Anchor Equity Partners.

Secondaries talent is in high demand. For senior staff, the relative recency of GP-led secondaries means there are only a few veteran dealmakers, and aggressive competition for talent comes from GPs, LPs and M&A itself, as James Ellis, a lead consultant at recruitment firm PER, noted in this guest commentary last year.

A different kind of DPI
Massachusetts Mutual Life Insurance Company has unveiled plans to transfer its fund finance business, Direct Private Investments, to Barings, per a statement. The tie-up, which also includes MassMutual Asset Finance, will occur in Q2 2023. DPI provides customised proprietary secured loans to private capital managers and funds backed by a range of private capital assets. It has originated more than $35 billion in private direct investments since inception. “We are excited to welcome DPI and MMAF to Barings as we continue to expand our multi-strategy capabilities across public and private asset classes to meet the unique needs of insurance companies and other institutional investors,” said Barings chairman Mike Freno.

Today’s letter was prepared by Alex Lynn with Adam Le and Carmela Mendoza.