Carlyle eyes $100 bln of fresh capital by about 2020

Carlyle Group said it expected to pick up its fundraising pace to about $25 billion a year, building about $100 billion in fresh capital by roughly 2020, as it eyes larger versions of its bigger funds.

“Beginning this year and accelerating into 2017 and 2018, we will enter a four-year period where we expect to raise the next generation of our funds, many of which will be larger in size than the current generation,” Co-CEO David Rubenstein said on an Oct. 26 conference call with Wall Street analysts.

“We reasonably expect to raise approximately $100 billion in new capital during this period, starting what we hope will be an even larger investment and value-creation cycle.”

For 2016, Carlyle expects to raise about $15 billion because it has a smaller number of funds in the market compared with past peak periods. In 2015, Carlyle raised about $22.5 billion in gross new capital, excluding redemptions.

He said the firm expects to hit the fundraising market with three “very large” private equity funds by the end of next year: Carlyle Partners VII, the successor to the vintage 2012 Carlyle Partners VI, which drew in $13 billion; Carlyle Europe Partners V, which would follow the vintage 2013 CEP IV, which raised about $4 billion and Carlyle Asia Partners V, the successor to the vintage 2012 CAP IV, which weighed in at $3.9 billion.

It’s also taking aim at Carlyle Japan Partners IV, coming after CJP III drew in about $1.1 billion in 2013.

“We have thought it might not be ideal to have them in the market at the same time,” Rubenstein said. “On the other hand, when they are out of capital, it’s necessary to raise new funds. We have found that some investors are interested just in U.S. buyouts or just in Asian buyouts. And so it’s not necessarily that they’re cannibalizing each other.”

Rubenstein said the funds “have a reservoir of investors who are pretty interested in going back to them.”

Looking out past next year, Rubenstein said the firm has many other funds that in 2018 and beyond will be coming into the market.

On the real estate front, Carlyle’s new U.S. real estate opportunistic fund is pre-marketing now.

During the quarter, Carlyle closed its new long-dated PE fund, Carlyle Global Partners, with $3.6 billion. It’s designed to invest limited-partner capital over a longer time horizon, frequently eight to 10 years, than a typical private equity fund. It’s already invested or committed $1.1 billion in equity across four transactions, the firm said.

Carlyle also launched its global infrastructure and its new middle-market credit funds at its September investor conference. It continues to attract capital for its fourth-generation distressed-investing fund. Carlyle expects to hit the pool’s $2.5 billion hard cap shortly. It’s also scaling its Core Plus real estate and AlpInvest secondaries program in managed accounts.

The comments came as Carlyle reported third-quarter economic net income of $54 million, compared with a loss of $128 million in the year-ago period. Distributable earnings to its public unit holders dipped 6.6 percent to $228 million from $244 million.

Action Item: Carlyle Group’s third-quarter earnings: http://files.shareholder.com/downloads/AMDA-UYH8V/3100827843x0x913610/24A06086-29D6-4F1A-90DA-37DCFA5DACC3/CG_2016.9.30_combined_earnings_release.pdf

David Rubenstein, co-founder and co-CEO of Carlyle Group, speaks at the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2016. Photo courtesy REUTERS/Lucy Nicholson