Carlyle Falls to a Loss as Revenue Drops

Carlyle Group fell to a loss in the second quarter and its revenue dropped by roughly half amid sluggish deal making activity.

The Washington-based private-equity firm posted a net loss of $98.4 million, or 27 cents a share, compared with net income of $245.4 million, or 67 cents a share, for the same period a year earlier.

Carlyle said the loss was driven by a $104 million investment loss tied to the dilution of the firm’s stake in reinsurer Fortitude. The reversal of unrealized performance allocations in the quarter also weighed on results.

Distributable earnings, or profit that can be returned to shareholders, fell more than 26% to $388.8 million from a year ago. Revenue fell to $462.1 million from $1.05 billion a year earlier.

Carlyle’s stock fell as much as 11.6% in early trading Wednesday following the earnings report and traded at $32.91 in late afternoon, down around 7.2%.

“We’re in one of the most complex periods in recent economic history,” Harvey Schwartz, Carlyle’s chief executive said during a conference call with analysts to discuss the results. He added that high inflation and rising interest rates have made capital more expensive, depressing both deal making and fundraising activity. 

Schwartz, who joined the firm in mid-February, pointed to five main areas of focus for Carlyle going forward, including the firm’s insurance business, its capital markets activity and its modest but growing private-wealth strategy. Last month, the firm appointed Shane Clifford, a former senior managing director at Franklin Templeton, as head of its private wealth strategy.

“While we only have three products in the market covering $5 billion of assets today, we view this as an important channel for growth,” Schwartz said of the private-wealth operation. “The Carlyle brand is a huge differentiator here.”

Despite the challenges facing the industry, Carlyle veteran John Redett

Redett, who will become Carlyle’s chief financial officer and head of corporate strategy in October, said the firm raised $14 billion in this year’s first half with additional fund closes expected in the second half, particularly in the fourth quarter. He cited fundraising momentum with the firm’s secondary and co-investment strategies and added that Carlyle expects to raise capital during the second half for several buyout and real-assets strategies.

Carlyle’s assets under management rose 1% from March 31 to $385 billion at the end of June.

Schwarz noted that he saw early indications that deal activity could pick up heading into the second half.

“We will be patient when we need to be, while at the same time capitalizing on opportunities to deploy capital where we see attractive risk, reward,” he said.

—Laura Cooper contributed to this article.

Write to Will Feuer at [email protected] and Laura Kreutzer at [email protected]