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Carlyle Group chief executive Harvey Schwartz laid out new targets for the private equity firm’s growth and profitability on Wednesday, as the former Goldman Sachs executive seeks to persuade shareholders he can revive the buyout pioneer.
Carlyle said it expected to increase fee-based earnings by almost 30 per cent this year to $1.1bn and attract more than $40bn in new investor capital. It said it would also increase profit margins and share buybacks substantially.
The new financial benchmarks signal rising optimism at the investment group after a period of stagnation and management turmoil.
Schwartz, who became chief executive a year ago, is working to reverse years of poor share price performance compared with peers such as Blackstone Group, KKR and Apollo Global. The targets signal his belief that he has identified ways to accelerate activity within the group, particularly in its fast-growing credit and insurance-based investment units.
“I want to underscore that Carlyle is investing in growth first while remaining disciplined about expenses,” Schwartz said. “It is all about focus, execution excellence and teamwork. If we do all of that the share price will follow.”
Nonetheless, the targets are still modest compared with rivals, which are forecast to earn more than double the $1.1bn Carlyle is aiming for.
Schwartz has had to contend with a slowdown in large corporate deals due to sharply rising interest rates, and reluctance by institutional investors to back its new funds after a bungled succession from the firm’s three billionaire founders.
But on Wednesday Carlyle disclosed better than expected fourth-quarter earnings. Carlyle generated $254mn in fee-based earnings, beating estimates of $207mn from analysts polled by Bloomberg, as a fundraising push lifted assets under management to a record $426bn.
Carlyle also set out plans to appease shareholders by changing the way it pays dealmakers, mirroring steps taken by Apollo, Blackstone and KKR.
It intends to increase the percentage of earnings its shareholders receive from base management fees, creating a highly predictable earnings stream for public shareholders to value. As a trade-off, Carlyle is transferring more of its lucrative but episodic performance fees — carried interest — to its dealmakers. Carlyle took a $1.1bn non-cash charge in the fourth quarter linked to the change.
The firm also increased its share repurchase authorisation from $400mn to $1.4bn, a move designed to boost its share price. “We intend to actively deploy this capital and our board and management team see compelling value in our shares,” chief financial officer John Redett said.
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