Carlyle aims to raise $100bn over next 4 years
Private equity group hopes to build firepower in case of market downturn
Carlyle said it aimed to raise $100bn over the next four years, drawing on investor demand for returns after assets overseen by the US private equity group have shrunk for four straight quarters.
The ambitious target, disclosed on Wednesday on the company's earnings call with analysts and investors, compares with the $169bn Carlyle oversees now, down from $188bn last year. The Washington DC-based group hopes to capitalise on investors turning to alternative investments that may help them generate returns that outstrip stocks and bonds.
Carlyle will seek to invest the new money across financial services, energy and natural resources, US real estate, global infrastructure and private equity fund-of-funds, among other things.
Amassing such firepower indicates that the company may be preparing for a market downturn that could then create buying opportunities. The company already has $54bn of dry powder, and has been putting new money to work cautiously at a time of volatility but still high valuations. It invested $1.6bn in equity in the three months that ended in September, the same amount as in 2015.
Carlyle “is doing the right thing being patient, but with just $1.6bn of capital invested in the quarter, dry powder builds, and [assets under management] and fees [falling] for the time being — it’ll be interesting to see if they can keep up this pace of realisations,” said Glenn Schorr, an analyst at Evercore ISI.
Carlyle’s co-chief executive David Rubenstein said that investors would not be “unduly surprised or upset” if returns fell from historic levels.
Carlyle said last week it closed a $3.6bn fund with a longer-term horizon than its traditional funds, which will also target a lower return than usual. The company is moving away from offerings that operate in liquid markets and actively trade, such as its hedge funds. That decision entails “some costs in the short-run”, said Bill Conway, co-chief executive.
Revenues jumped to $540m in the third quarter, from $94m in the same quarter last year, but distributable earnings — the share of profits which it returns to shareholders — fell to $228m, from $244m.
Economic net income, a measure of profit which includes unrealised gains on investments, increased to $54m, or 21 cents per share, compared with a loss of $128m in the same period a year ago. The latest ENI figure came after a $100m reserve for litigation and contingencies.
The improvement in ENI followed a 3 per cent increase in value in its carry fund portfolio, its buyout and real estate funds on which it earns carried interest, a share of future profits with investors.
Carlyle had realised proceeds of $6.6bn, compared with $3.7bn in the same period last year, and more than $19bn over the last twelve months.
Over the past year, the company’s shares have fallen more than 17 per cent. But year to date, the stock has barely moved.
Other private equity groups are also clawing their way out of losses earlier this year: KKR on Tuesday beat analysts’ expectations and posted a second straight quarter of positive earnings.