Three weeks after taking the reins of Carlyle Group, Harvey Schwartz was holding court on the unfolding banking turmoil during an appearance in front of the private equity firm’s top dealmakers.
It was four days after Silicon Valley Bank had collapsed and the former Goldman Sachs president predicted the financial system was nowhere near a 2008-style crisis, according to people who attended the meeting. But he also warned his audience against complacency, urging them to be on the lookout for a sudden evaporation of confidence.
For Schwartz, a Goldman veteran who led the bank’s trading division through the great financial crisis, it was a chance to show Carlyle’s top brass how his Wall Street experience was relevant to an altogether different challenge: reviving a storied private equity group with $400bn in assets that has been twisting in the wind since the abrupt and acrimonious exit of his predecessor Kewsong Lee in August last year.
As Carlyle prepares to unveil its quarterly earnings on Thursday, its first results since Schwartz took over, insiders say the exchange of ideas via long talking and learning sessions has become the hallmark of his leadership style so far.
Analysts are not expecting Schwartz to announce a major restructuring this week or to unveil any big ideas on how to restore Carlyle to its former glory. Blackstone, Carlyle’s main rival in corporate buyouts when it went public in 2012, has since seen its market value eclipse $100bn. That makes it worth about 10 times as much as a company once seen as its equal.
“[We] expect early thoughts from new CEO Harvey Schwartz but no substantive commentary at this time,” said Michael Brown, an analyst who covers Carlyle at Keefe, Bruyette & Woods.
Schwartz has spent his first two-and-a-half months at the firm presenting himself as a keen listener, an image that runs somewhat counter to the reputation as a corporate bruiser he earned while at Goldman.
In addition to hosting roughly a dozen town halls, he has led forensic reviews of each of Carlyle’s businesses that have stretched on for two hours or more, during which he has peppered leaders with questions on strategy and performance.
“His message has very much been ‘help me help you’,” said one person involved in the meetings. Schwartz has also promised not to second guess the firm’s dealmakers on investments. Several insiders said the phrase “I’m not an investor” had become a common refrain. He was not on the investment committee of Carlyle’s flagship buyout funds, sources said.
Yet few think the listening sessions will last for much longer, with many insiders believing Schwartz is gathering the information he needs before embarking on a significant restructuring of the group.
The business reviews “are being received as interviewing for your job”, said one person briefed on the meetings. “He is direct and it is candid . . . He is asking a lot of questions. But he is not patronising everyone and being derogatory,” said another.
Multiple people familiar with Carlyle said they expected Schwartz to make dramatic changes that would integrate units that had long been run like independent fiefdoms, and to name a core leadership group responsible for the entire firm.
Schwartz must also decide which businesses, from credit to sustainable investments, can be expanded against a more challenging financial backdrop and which ones should be jettisoned.
He will also have to prevent the firm from bleeding talent, particularly dealmakers close to Lee and Peter Clare, another recently departed executive.
Externally, Schwartz has been trying to reassure the firm’s largest investors, including pension funds and sovereign wealth funds.
Meanwhile, Carlyle is still struggling to find the cash it needs to do new deals. Its latest buyout fund has raised just $14bn versus an initial target of $22bn set in 2021.
Some investors in its funds, known as limited partners, said they were becoming frustrated by how long the fundraising had dragged on and suggested that Carlyle should admit defeat by closing the fund early. “Write it off as a bad job and get on with investing it,” said one.
Not that spending the money will be particularly easy either. “In the investing environment broadly, I think this is one of the most complex times we’ve had,” Schwartz said at the Milken conference in Beverly Hills this week.
“Many of the trends that we lived with are slowing if not reversing . . . I think that sets up an incredibly interesting backdrop, both economically, globally and in terms of the opportunity set.”
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