Carlyle Group Inc. reported a 43% drop in third-quarter distributable earnings as the firm cashed out of fewer bets amid a dealmaking slump across Wall Street.
Profit available to shareholders totaled $367.4 million, or 87 cents a share, Washington-based Carlyle said Tuesday in a statement. That beat the 72-cent average estimate of analysts surveyed by Bloomberg.
The challenging market climate is making Chief Executive Harvey Schwartz’s job harder as he seeks to steady the firm for growth, cut costs and boost Carlyle’s slumping stock. The shares dropped 3.1% this year, compared with gains of about 30% for rivals Blackstone Inc., Apollo Global Management Inc. and KKR & Co.
Dealmakers are struggling to exit bets at favorable prices, which would allow them to return cash to investors. Buyers have been deterred by rising debt costs after the Federal Reserve aggressively hiked interest rates to combat surging inflation, sending the yield on the benchmark 10-year Treasury to about 5%. Higher rates have crimped asset values.
Carlyle’s third-quarter net income plunged 71% to $81.3 million from a year earlier, reflecting a decline the value of assets it still holds. Fee-related earnings fell 3.7%.
The firm cut general and administrative expenses by 19% in the period after it eliminated some fees paid for professional services and reduced spending on marketing. Some of the cost savings came from the private equity business, boosting fee-related earnings.
Key Client
Assets under management fell 1% from the end of the second quarter to $382 billion as Fortitude Re, a key Carlyle client, was squeezed as surging yields eroded the value of the insurer’s bond portfolio. Carlyle has used money from insurers and other big institutions to grow a credit division that provides financing to companies.
A business within the unit, which arranges financing for Carlyle’s portfolio companies, took in lower fees as deals slowed.
Meanwhile, a division that builds portfolios and buys fund stakes for investors reported higher fee earnings with new funds.
Across all strategies, Carlyle raised $6.3 billion from investors in the third quarter, on par with the $6 billion it raised in the same period a year earlier. That’s down sharply from the $21.7 billion Carlyle raised in the same quarter of 2021.
It’s a reminder of how the heady fundraising boom days in which pensions and endowments flocked to buyouts for the promise of higher yields are over.
Carlyle is working to “build on our momentum and take action to align the firm for growth,” Schwartz, 59, said in the statement.
