By Kane Wu and M. Sriram
HONG KONG/MUMBAI (Reuters) – U.S investment giant Carlyle Group has lowered the target for its latest pan-Asia private equity fund by at least 30% from its original $8.5 billion, three people with knowledge of the matter said, as a slowing global economy and geopolitical tensions dull investors’ appetite.
Carlyle, which started raising its sixth Asia-focused fund in mid-2022, has bagged less than $3 billion so far, two of the sources said.
Carlyle did not disclose to investors why it had lowered the target, the sources said, with one of the people adding that the recent poor performance of funds could be a factor.
Carlyle is now targeting up to $6 billion in total, the sources said. The company is aiming for a final close of the fundraising in the third quarter next year, one of the people said.
All the sources declined to be named as they were not authorised to speak to the media.
A Carlyle spokesperson declined to comment.
Carlyle’s downsizing comes as private equity firms struggle to cash out on their assets amid volatility caused by conflicts in the Middle East and Europe, rising inflation and higher interest rates, all factors that are expected to crimp global economic growth next year.
It is not immediately clear if Carlyle has already reached first close, which refers to the stage when a private equity firm has secured the bulk of its targeted fundraising amount and can start investing in companies.
Investors in private equity companies, known as limited partners, typically reinvest after having booked returns from their previous investments.
Asia-focused fundraising has fallen nearly three-fourths this year from 2021, Preqin data shows. While funds raised $299 billion in 2021, that amount fell to $154 billion in 2022 and $73 billion so far this year.
Private equity firms have made a total of $15.6 billion in exits in Asia, down 82% year-on-year, Dealogic data showed.
No China-focused buyout fund denominated in U.S. dollars has been raised this year, Preqin data showed, as China’s economic slowdown and Sino-U.S. tensions weighed on investors’ appetite for the world’s second largest economy.
Sources told Reuters last year Carlyle was aiming to raise $8.5 billion in the pan-Asia fund.
FUND ALLOCATION
If Carlyle hits the downsized $6 billion target, the latest fund would be smaller than its $6.55 billion fifth pan-Asia fund in 2018, which has invested in companies including Jack Ma’s Ant Group and India’s Yes Bank.
The new pan-Asia fund will allocate about 30% to 35% of its capital to India, making it Carlyle’s largest market in Asia, one of the sources said, adding that 15%-20% will be allocated to China, which is the same allocation range for South Korea.
Capital allocation to China had been bigger in Carlyle’s previous Asia funds, different sources with knowledge of the matter have said.
Carlyle earlier this month reported a smaller-than-expected 43% year-on-year drop in third-quarter distributable earnings, with its realized performance revenues, mostly driven by asset sales from its private equity unit, plummeting 76%.
Its chief executive Harvey Schwartz, a former Goldman Sachs banker who took charge in February after the previous CEO abruptly left, said at the earnings call that he was not pleased with fundraising in 2023.
The firm, across funds globally, raised $6.3 billion from investors during the second quarter. Total assets under management stood at $382 billion, down 1% from the prior quarter.
Carlyle is planning to pull back from investing in U.S.-based consumer, media and retail companies as it looks to focus on other key sectors such as technology and financial services, Reuters reported last month.
Carlyle has also faced senior management changes in Asia in recent months.
Patrick Siewert, one of Carlyle’s most senior dealmakers in Asia, stepped down as partner and head of consumer, media and retail to become a senior adviser, a Carlyle spokesperson said
Beijing-based Nina Gong and Hong Kong-based Herman Chang, both managing directors, have also retired, the firm said. Both were with Carlyle for more than a decade cutting deals in Greater China.
Carlyle’s Hong Kong-based private credit team, which was focused on looking into a potential Greater China joint venture, has also “left to pursue other opportunities”, the spokesperson said, adding that its Asian private credit business would continue to be managed as part of the global credit team.
(This story has been refiled to add dropped word ‘one’ in paragraph 3)
(Reporting by Kane Wu in Hong Kong and M. Sriram in Mumbai; Additional reporting by Xie Yu in Hong Kong; Editing by Sumeet Chatterjee and Miral Fahmy)
