Carlyle Group LP (CG:US), the world’s second- largest private equity firm, plans to raise 11 funds this year to seize on a reviving deal-making market, the firm’s co-chief executive officer said.
Carlyle raised $2 billion during the first quarter, David Rubenstein said today in a conference call to discuss first- quarter earnings. Carlyle, based in Washington, had $39.9 billion in dry powder, or committed funds that haven’t been invested, as of March 31.
“This is a fantastic time to make investments,” William Conway, the firm’s other co-CEO, said on the call. “It is precisely in times like this, when economic data and markets are sending confusing signals, that the best investments can be made.”
Larger competitor Blackstone Group LP (BX:US) is in the market with its latest real estate fund and KKR & Co. (KKR:US), led by Henry Kravis and George Roberts, is gathering its next North American private-equity fund. Carlyle is targeting $10 billion for its own flagship North American fund and is pursuing its fourth Asian buyout fund, adding to the 89 funds it already manages.
Rubenstein and Conway, who created Carlyle in 1987 with Daniel D’Aniello, are betting those funds will presage a rebound in deal-making. Announced private-equity transactions in the first quarter dropped 41 percent from a year earlier to $53.9 billion, according to data compiled by Bloomberg.
Carlyle’s earnings rely on its ability to buy and sell companies, a process that generates income from both managing money and so-called performance fees tied to the profits of successful sales.
Profit Falls 26%
In its first quarterly earnings report, Carlyle said profit in the first three months fell 26 percent as performance fees declined from a year earlier. Economic net income, a measure of profit excluding some costs, declined to $392 million from $533 million a year ago, according to the statement.
Performance fees fell 27 percent to about $632 million from a year earlier, when Carlyle sold $1.8 billion of shares of China Pacific Insurance Group Co.
Fee-earning assets rose 5 percent since Dec. 31 to $117 billion as total assets under management climbed 8 percent to about $159 billion. Blackstone, the largest private-equity firm, oversees about $190 billion.
The value of Carlyle’s fund portfolio gained 9 percent in the quarter, compared with 4.9 percent at Blackstone. New York- based Blackstone last month said profit fell 24 percent to $432 million as the slower gain in the value of its holdings hurt performance fees.
Carlyle joined the ranks of publicly traded private-equity firms this month, raising $671 million in its initial share sale, pricing below the marketed range to win investors wary of the track record of publicly traded buyout firms.
The stock has declined 4 percent from the $22 offering price, rising 0.4 percent to $21.12 at the close of trading today in New York.
All publicly traded U.S. buyout firms have fallen below their IPO prices, with Blackstone down 61 percent from its 2007 debut, Fortress Investment Group LLC (FIG:US) losing 82 percent and Apollo Global Management LLC (APO:US) declining 39 percent.
“We firmly believe Carlyle’s status as a public company will strengthen our capabilities,” Rubenstein said today. “No doubt as a public company there will be times when we face challenges, just as there will be times when we see considerable opportunities.”
Distributions to Clients
Carlyle said it returned $2.3 billion to fund investors in the quarter and is set to return $1.5 billion more. Distributable earnings were $179 million, down 37 percent from a record $284 million a year earlier, while earnings for the 12 months ended March 31 were $759 million, up 36 percent from the previous 12 months. Taking into account changes related to the IPO, after-tax distributable earnings were 57 cents a share.
Private-equity firms pool investor money to buy companies, using mostly debt, with the intention of selling them or taking them public later for a profit. They typically charge an annual management fee of 1.5 percent to 2 percent of committed funds and keep 15 to 20 percent of profit from investments.
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