Carlyle Group Fundraising Slows as the Firm Faces a String of Key Staff Departures

While the abrupt departure of Carlyle CEO Kewsong Lee in August has drawn significant attention, the company has also struggled in recent months to raise its flagship buyout fund and has seen a significant number of other departures of key staff.

Carlyle’s flagship fundraising flop

The Carlyle Group formed its flagship Carlyle Partners VIII and Carlyle Partners Growth, a growth-focused private equity fund that Carlyle is raising alongside the flagship, in February 2021.[i] In July 2021, Bloomberg reported that Carlyle was seeking to raise as much as $27 billion.[ii] The fundraising was to be the centerpiece of a multi-year plan to supercharge Carlyle’s growth and raise more than $130 billion by 2024.[iii]

“We are thinking bigger, performing better and moving faster to position Carlyle to deliver higher returns for our shareholders,” said then-CEO Kewsong Lee, adding “We have tremendous confidence in this strategic plan.”[iv]

Carlyle formally launched fundraising for Carlyle Partners VIII and Carlyle Partners Growth in September 2021.[v] By the end of that month, Carlyle Partners VIII had raised $10.5 billion.[vi]

In late January 2022, Private Equity Insights reported that Carlyle executives anticipated collecting roughly $5 billion more by the end of the second quarter, bringing the fund to almost $17 billion.[vii]

Yet Carlyle Partners VIII reported that it had raised just $13.6 billion as of June 30, 2022, around $3.1 billion more than it had raised nine months earlier.[viii]

In early September, Carlyle filed Form Ds (here and here) showing that it had raised $12.9 billion for Carlyle Partners VIII.[ix]

Carlyle Growth Partners had raised $1.1 billion as of September 31, 2021.[x] As of June 30, 2022, it had still raised the same amount, $1.1 billion. [xi]

On Carlyle’s July 28 analyst conference call, then-CEO Kewsong Lee noted “No doubt, the fundraising market is challenging right now, and this could persist for a bit as LPs adjust to market dynamics, and it’s most challenging in the corporate private equity segment of the market.” Carlyle CFO Curtis Buser added of the fundraising environment, “That’s fundamentally going to result in some of those raises taking longer in general and maybe not raising the same amounts as they would have otherwise in a different environment.”[xii]

Carlyle’s slowdown in fundraising and CEO departure come as the firm is due to start fundraising for its Europe and Asia-focused buyout funds.  Carlyle recently launched fundraising for Carlyle Asia Partners VI, seeking as much as $10 billion for the fund.[xiii] Meanwhile, Carlyle is preparing to launch fundraising for its Carlyle Europe Partners VI buyout fund, seeking 7.5 billion euros ($8.5 billion).[xiv]

Heading for the exits

Carlyle CEO Kewsong Lee drew headlines in August when he abruptly resigned from the firm following a reported dispute with the firm’s founders, who continue to serve on the board and own about 35 percent of Carlyle’s stock. Carlyle is conducting a search for Lee’s replacement.[xv]

Yet Kewsong Lee is hardly the only Carlyle executive to leave the firm in recent years.  In the last two years, more than a dozen executives with a combined total of over 200 years of experience with Carlyle and more than 350 years of investment industry experience have departed the firm or retired.

[i] Carlyle Partners VIII and Carlyle Partners Growth Delaware Corporation Filings, Feb 8, 2021.

[ii] “Carlyle Pushes for Industry’s Largest Buyout Fund at $27 Billion,” Bloomberg, Jul 22, 2021. https://www.bloomberg.com/news/articles/2021-07-22/carlyle-pushes-for-industry-s-largest-buyout-fund-at-27-billion

[iii] “Carlyle’s Lee Aims to Raise $130 Billion While ‘Thinking Bigger’,” Bloomberg, Feb 23, 2021. https://www.bloomberg.com/news/articles/2021-02-23/carlyle-s-lee-aims-to-raise-130-billion-while-thinking-bigger

[iv] “Carlyle’s Lee Aims to Raise $130 Billion While ‘Thinking Bigger’,” Bloomberg, Feb 23, 2021. https://www.bloomberg.com/news/articles/2021-02-23/carlyle-s-lee-aims-to-raise-130-billion-while-thinking-bigger

[v] Carlyle Partners VIII SEC Form D, Sept 9, 2021. https://www.sec.gov/Archives/edgar/data/1873442/000187344221000001/xslFormDX01/primary_doc.xml, Carlyle Partners Growth SEC Form D, Sept 9, 2021, https://www.sec.gov/Archives/edgar/data/1873422/000187342221000001/xslFormDX01/primary_doc.xml.

[vi] Form 10Q, 3Q21,, https://www.sec.gov/ix?doc=/Archives/edgar/data/1527166/000152716621000055/cg-20210930.htm

[vii]https://pe-insights.com/news/2022/01/21/carlyle-flagship-fund-expected-to-reach-17bn-by-midyear/

[viii] Form 10Q, 2Q22, https://www.sec.gov/ix?doc=/Archives/edgar/data/1527166/000152716622000036/cg-20220630.htm.

[ix] Carlyle Partners VIII SEC Form D/A, Sept 1, 2022. https://www.sec.gov/Archives/edgar/data/1873442/000187344222000001/xslFormDX01/primary_doc.xml Carlyle Partners VIII – EU, S.C.Sp. SEC Form D/A, Sept 2, 2022. https://www.sec.gov/Archives/edgar/data/1871122/000187112222000001/xslFormDX01/primary_doc.xml

[x] Form 10K, 2021, https://www.sec.gov/ix?doc=/Archives/edgar/data/1527166/000152716622000007/cg-20211231.htm

[xi] Form 10Q, 2Q22, https://www.sec.gov/ix?doc=/Archives/edgar/data/1527166/000152716622000036/cg-20220630.htm.

[xii] Carlyle 2Q22 analyst conference call, Jul 28, 2022. https://ir.carlyle.com/static-files/0195da0c-64a9-47c0-b4ac-1136d7f8286d

[xiii] “Carlyle to return next year with latest Asia mega-fund,” Private Equity International, Nov 15, 2021. https://www.privateequityinternational.com/carlyle-to-return-next-year-with-latest-asia-mega-fund/ “US pension commits up to $65m to Carlyle, IDG Capital’s new funds,” Deal Street Asia, May 23, 2022. https://www.dealstreetasia.com/stories/us-pension-carlyle-idg-capital-293524

[xiv] “Carlyle Prepares to Raise Its Biggest-Ever European Buyout Fund,” Bloomberg, Jan 19, 2022. https://www.bloomberg.com/news/articles/2022-01-20/carlyle-prepares-to-raise-its-biggest-ever-european-buyout-fund

[xv] “Revenge of the Founders: A Generational Struggle on Wall Street,” NY Times, Aug 29, 2022. https://www.nytimes.com/2022/08/29/business/carlyle-group-kewsong-lee.html