{"id":10826,"date":"2023-11-07T23:16:50","date_gmt":"2023-11-07T23:16:50","guid":{"rendered":"https:\/\/infundpros.com\/business\/private-equity-fortunes-diverge-as-kkr-prospers-while-carlyle-cuts-jobs\/"},"modified":"2023-11-07T23:16:50","modified_gmt":"2023-11-07T23:16:50","slug":"private-equity-fortunes-diverge-as-kkr-prospers-while-carlyle-cuts-jobs","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=10826","title":{"rendered":"Private equity fortunes diverge as KKR prospers while Carlyle cuts jobs"},"content":{"rendered":"
\n

Two of the world\u2019s biggest private equity groups have reported starkly diverging fortunes as KKR boosted its fundraising expectations while Carlyle axed jobs as part of a cost-cutting drive.<\/p>\n

The results on Tuesday underscored how the two investment groups, which were roughly the same size a decade ago, have since moved apart, with KKR boasting of a \u201cnoticeable uptick\u201d in fundraising and Carlyle warning staff that \u201cevery single expense is on the table\u201d.<\/p>\n

KKR is building its investment operations in infrastructure and property and is preparing to launch new flagship corporate buyout funds in the US and Asia. It is also doing more deals after a sharp rise in interest rates over the past 18 months curbed activity across the industry.<\/p>\n

Carlyle, meanwhile, said its fundraising this year had underwhelmed while it expected a prolonged slump in broad financial markets. It is focused on reducing costs, according to chief executive Harvey Schwartz. \u201cOverall, we have not been pleased with fundraising in 2023,\u201d he told analysts.<\/p>\n

In third-quarter results, Carlyle said it raised $6.3bn across its funds, an 11 per cent decline from the second quarter.<\/p>\n

Carlyle also closed its most recent flagship buyout fund with $14.8bn in overall assets, 20 per cent less than a predecessor fund and far smaller than the $27bn former chief executive Kewsong Lee had targeted before his sudden exit last year.<\/p>\n

By contrast, KKR increased its fundraising in the quarter, raising more than $14bn, with \u201ca noticeable uptick in our pipelines around fundraising, deployment and monetisations\u201d, according to Robert Lewin, chief financial officer.<\/p>\n

KKR said it would begin fundraising for new buyout funds in the US and Asia, which people familiar with the matter expect to be larger than predecessor funds. KKR completed fundraising for a $18.4bn US buyout fund in 2021 and a $14.7bn Asian buyout fund the prior year, according to filings. It declined to comment on its fundraising targets. <\/p>\n

KKR shares ended the day 5 per cent higher while Carlyle shares closed up 1.6 per cent.<\/p>\n

<\/source>\"Montage<\/picture>
Left to right: Carlyle Group co-founders David Rubenstein, William Conway and Daniel D\u2019Aniello<\/span> \u00a9 FT montage\/Bloomberg\/The Washington Post via Getty Images<\/span><\/figcaption><\/figure>\n

Much of the diverging fortunes stem from Carlyle\u2019s fumbled succession from its three billionaire founders, David Rubenstein, William Conway and Daniel D\u2019Aniello, who founded the New York and Washington-based investment group in 1987. The trio named two dealmakers, Glenn Youngkin and Kewsong Lee, as co-heads in 2017, but Youngkin departed three years later amid conflict with Lee.<\/p>\n

Lee resigned last August amid a power struggle, leaving Carlyle without a permanent leader until it hired Schwartz, a former Goldman Sachs executive in February.<\/p>\n

<\/source>\"KKR<\/picture>
KKR founders Henry Kravis and George Roberts in the 1960s<\/span> <\/span><\/figcaption><\/figure>\n

KKR, by contrast, has had no internal turmoil since elevating Joseph Bae and Scott Nuttall as co-chief executives in October 2021, cementing a succession from founders Henry Kravis and George Roberts.<\/p>\n

Since taking Carlyle\u2019s reins, Schwartz has been trying to build a turnaround plan amid the challenging market backdrop of fast-rising interest rates.<\/p>\n

\u201cThere is a lot of work to do,\u201d Schwartz said on Tuesday as he offered a pessimistic outlook for dealmaking activity. \u201c[My] own opinion is that lower activity levels and reduced confidence will likely persist for a bit longer.\u201d <\/p>\n

Carlyle has cut expenses primarily by cutting investment jobs in areas where it has struggled with fundraising, or sees unexciting growth prospects.<\/p>\n

In September it shut its US consumer, media and retail private equity investment group and dismissed some investment staff, choosing to focus on areas with better investment opportunities.<\/p>\n

Carlyle has cut further jobs across its US buyout investment team, according to people familiar with the matter. Those lay-offs have affected staff in Europe and Asia. Carlyle declined to comment.<\/p>\n

The company reported a $40mn drop in expenses on an annualised basis during the quarter, about 85 per cent of which came from pay. Schwartz said the cuts would allow the group to invest in areas where it sees future growth.<\/p>\n

\u201cEvery single expense is on the table,\u201d chief financial officer John Redett told analysts. \u201cThere is no such thing as a sacred expense.\u201d<\/p>\n

Carlyle\u2019s earnings beat analysts\u2019 expectations, mostly because of falling expenses.<\/p>\n

Schwartz expressed optimism that Carlyle\u2019s fundraising efforts would improve in the fourth quarter as it targeted buyouts in Japan and real estate, among other strategies.<\/p>\n

Since taking the helm at Carlyle earlier this year, Schwartz has focused on growing its credit and insurance-related investment assets, debt and equity underwriting operations, and funds designed for wealthy individuals. He said cost-cutting would not come at the expense of the group\u2019s long-term growth. <\/p>\n

He has also travelled the world to meet more than 200 large institutional investors such as sovereign wealth funds and pensions, including to Saudi Arabia last month for the Future Investment Initiative hosted by Crown Prince Mohammed bin Salman, the kingdom\u2019s de facto ruler.<\/p>\n

When pressed by an analyst to outline new financial targets for Carlyle, Schwartz declined to give a specific timeframe, stating his review of the group was ongoing.<\/p>\n

Additional reporting by Eric Platt in New York<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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