Carlyle’s longer-hold fund reaches $3 bln

  • Carlyle Global Partners will hold companies for longer periods
  • Firm also plans to buy back $200 mln worth of shares
  • Q4 ENI drops to $72.7 million from $180.5 million in Q4 2014

Carlyle Group’s new Carlyle Global Partners fund raised $3 billion for its strategy of longer holding periods for portfolio companies.

That was one of many pieces of news the firm shared on a conference call with Wall Street analysts on February 9. It also unveiled a $200 million share buyback plan after posting disappointing Q4 earnings, Reuters reported.

Carlyle Co-CEO David Rubenstein said the firm has been working for the past year on a “creative, long-term investment fund” aimed at alternative investments to be owned beyond the usual three-to-five-year holding period.

“We think a number of investors with whom we’re in discussions with are likely to add to it,” he said. “It’ll get bigger at some point this year. This is a different type of investment product. It’s much longer term. As it gets better known over years, others will be interested.”

Rubenstein said Carlyle Global Partners has invested $400 million in two companies, which he did not name.

Bloomberg reported that the fund will have a 20-year life. A Carlyle spokesman said the fund will be “long-dated” but declined to provide a specific figure.

Blackstone Group, CVC Capital Partners and others have talked about offering funds with longer lives than the traditional 10- to 12-year term of a private equity fund. Meanwhile, other firms such as General Atlantic work with evergreen fund structures that periodically open for new fundraising.

Tyler Zachem, who co-leads Carlyle Global Partners with longtime Carlyle executive Eliot Merrill, told Bloomberg he is working on Carlyle Global Partners as part of a 14-member team.

A managing director based in New York, Zachem joined Carlyle last year after working as CEO and founding partner of Broad Sky Partners, a middle-market private equity firm.

On the fundraising front, Carlyle drew $2.7 billion in new capital in the fourth quarter as it continues to build up its private equity platform despite choppy credit and equity markets. The new capital was raised by several funds:

  • Carlyle U.S. Equity Opportunity Fund II, a middle-market fund, closed on its hard cap of $2.4 billion, more than twice the size of its predecessor.
  • Carlyle Mezzanine Opportunities II raised more than $2.7 billion.
  • Carlyle Power Partners II raised more than $1 billion.
  • Metropolitan Real Estate, Carlyle’s real estate fund of funds, closed on $500 million for a secondaries fund.

In addition, Carlyle said it plans to hold an initial close on AlpInvest Secondaries Fund VI, as well as another close on its Asian structured credit fund. It also said it is raising its fourth distressed debt fund, its fifth Asian growth fund and its first U.S. core-plus real estate fund.

Carlyle expects to raise about $15 billion in 2016, with none of its major flagship funds in the market. In 2015, it drew in $16.4 billion.

The firm’s fundraising update came after it said its fourth-quarter economic net income (ENI) dropped to $72.7 million from $180.5 million in the year-ago period in the face of lower fund appreciation and modestly lower fee-related earnings.

Carlyle also announced a $200 million share buyback just a few days after Apollo Global Management launched a $250 million share repurchase plan.

Carlyle said its business remains healthy, with $4 billion of new investments and $4 billion of realized proceeds in its pipeline for the first half of the year.

Action Item: See Carlyle Q4 earnings report here:

Photo: Carlyle Group Founder and CEO David Rubenstein speaks at the Washington Ideas Forum in Washington, September 30, 2015. REUTERS/Jonathan Ernst