Carlyle: Fundraising resilient, but need for virtual meetings has implications

Posted on 4th Aug 2020

Author: Madeleine Farman

The alternatives fundraising environment has been resilient, but virtual raises have had implications, Carlyle Group Inc. Co-CEO Kewsong Lee said on the firm's second-quarter earnings call.

Carlyle has not experienced or seen "any dramatic changes" in appetite from its largest limited partners, or LPs, Lee said, adding that "the largest LPs are very sophisticated. They have a plan, they are fine-tuning it." In certain asset classes, such as credit and secondaries, where managers can take advantage of dislocation, LPs have shown "a real appetite."

The firm has raised approximately $12.4 billion in 2020, with "particular strength" in its investment solutions and credit businesses. Carlyle indicated in February that it intended to raise $20 billion in 2020, which is "still possible," CFO Curtis Buser said, although it expects fundraising in the second half of 2020 to be lighter.

Sealing commitments from existing investors has been easier than meeting and winning over new LPs via conference calls, and raising for existing strategies is easier than trying to raise a first-time fund, Lee said.

The firm's brand and platform is a "particular appeal" for investors given the uncertainty. "LPs are comforted by the fact that we have enormous resources — our global platform being what it is — that we can really engage with our portfolio companies and bring full force to bear to help these companies navigate through turbulent times," Lee said.

Over the longer term, Lee believes the low-interest-rate environment, which "could be low for a very long period of time," will continue to attract LP interest in alternative asset management strategies. "There is no better way for our LPs to meet the needs of their investment objectives than have to allocate and continue their investment into alternatives."

The current environment and outlook "further supports and reinforces the tailwinds that our asset class has," Lee said, adding that the firm is "extremely well positioned."

Its next multiyear fundraising campaign however - which was expected to "begin to ramp up" in late 2021, Co-CEO Glenn Youngkin said on the firm's Q4 2019 earnings call – could be pushed back.

Raising capital is interrelated with the firm's pace of deployment and exits. "To the extent that that gets pushed out a little bit, it shouldn't be a surprise that fundraising would similarly get pushed out a little bit," Lee said, adding what is mission critical right now is making sure the firm's existing portfolio is in "good shape" and adapting to the current environment to find new opportunities.