Secondaries, credit boost Carlyle’s 2020 fundraising

CEO Kewsong Lee says there was a 'huge cross sell' between AlpInvest and the rest of Carlyle, with more than 40% of LPs invested in both.

Secondaries and private credit added significant inflows to Carlyle Group’s fundraising efforts last year.

The Washington, DC-headquartered firm raised $27.5 billion across strategies in 2020, a 42 percent increase on 2019’s $19.3 billion, according to a fourth-quarter earnings statement. More than a third of its inflows for the year, or $9.7 billion, came in the final quarter, driven by its global credit and investment solutions programmes.

Investment solutions encompass the primary, secondaries, co-investment and mezzanine funds managed by AlpInvest Partners.

Global credit beat its previous record by nearly 50 percent with $10.1 billion of capital raised for the year, and investment solutions raised twice as much as any previous year with $13.9 billion. AlpInvest raised $9 billion for AlpInvest Secondaries Program VII and an additional $1.2 billion for co-investments in December.

Private equity fundraising (not including AlpInvest) more than halved, from $7.4 billion in 2019 to $3.5 billion in 2020, since the firm did not have any of its flagship funds in the market.

Speaking on an earnings call accompanying the results last Thursday, chief executive Kewsong Lee said the firm is “increasingly seeing large carryover from its existing LP base into its investment solutions programme, as they [LPs] try to minimise or add to deployment and manage risk on co-investment strategies”.

About 40 percent of LPs in Carlyle investment solutions are also investors in its existing corporate private equity and global credit franchise, he added.

“There is a huge cross sell but also an introduction to all of Carlyle, which investment solutions offers us, to be able to introduce to our LP base,” Lee said.

The performance of AlpInvest’s underlying funds have been “terrific”, Lee noted. “That performance is the underlying driver for why we believe in these very focused strategies: secondaries, co-investments and primary fund of funds. We see real growth opportunities ahead of us in [investment] solutions.”

The firm also “accelerated its exit pace” last year, Lee noted, realising $7 billion for fund investors for the fourth quarter and $21 billion for the year. This included taking eight of its portfolio companies public, including drug developer Pharmaceutical Product Development.

Across all strategies Carlyle deployed $18.3 billion in FY 2020, $3 billion more than a year ago. Around 60 percent of that figure, or $11.1 billion, was invested in private equity, including in animal feed company Manna Pro Products and Piramal Pharma, the pharmaceutical business of Indian conglomerate Piramal Enterprise.

In line with peers Blackstone and Apollo Global Management, which have reported full-year 2020 results in the last week, the AUM of Carlyle’s PE portfolio increased in 2020 over the prior year. Corporate private equity assets stood at $91 billion at year-end, up 6 percent from 2019. The firm’s PE buyout funds appreciated 19 percent in aggregate in 2020.

Carlyle generated $520 million in fee-related earnings in 2020. Its overall AUM was up 10 percent to $246 billion at year-end.