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US private equity group Carlyle is focused on trimming its expenses by cutting headcount amid lacklustre fundraising efforts, according to chief executive Harvey Schwartz.
“There is a lot of work to do,” said Schwartz of his planned cuts to Carlyle’s costs, on a conference call with analysts on Tuesday. His comments came after the New York and Washington-based investment group disclosed third-quarter financial results, including fundraising efforts he characterised as a “disappointment”.
In September Carlyle shuttered its consumer, media and retail investment group and laid off some investment staff, choosing to focus on areas with better investment opportunities.
Carlyle has cut further jobs across its US buyouts investment team, according to sources familiar with the matter, including some people in its fundraising unit. Those lay-offs have affected staff in Europe and Asia, though the size of overall cuts could not be learned. Carlyle declined to comment.
The company reported a $40mn drop in expenses on an annualised basis during the quarter, about 85 per cent of which came from pay. He said the cuts would allow the firm to invest in areas where it sees future growth.
“Every single expense is on the table,” chief financial officer John Redett told analysts. “There is no such thing as a sacred expense.” He and Schwartz characterised the cost review as in its “early innings”.
Their comments came as Carlyle’s earnings beat analyst expectations, mostly due to falling expenses. Shares in Carlyle were little changed in early trading.
Over the past year Carlyle has struggled to raise new money from investors for corporate buyouts, after a sharp rise in interest rates made investors more hesitant to make new commitments. A spell of leadership turmoil has also troubled many investors.
“Overall we have not been pleased with fundraising in 2023,” said Schwartz, a former Goldman Sachs executive who was hired in February to revive the buyouts pioneer which manages nearly $400bn in overall assets.
During the third quarter, Carlyle 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.
The group raised $6.3bn in the third quarter across its funds including private equity and credit-related investment funds, an 11 per cent decline from the second quarter.
However, Schwartz expressed optimism that Carlyle’s fundraising efforts would improve in the fourth quarter as it targeted buyouts in Japan and real estate, among other strategies.
Since taking the helm of Carlyle earlier this year, Schwartz has met extensively with the firm’s top executives and steered a focus 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’s long-term growth.
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 Mohammed bin Salman.
When pressed by an analyst to outline new financial targets for Carlyle, Schwartz demurred, stating his review of the group was ongoing.
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