Carlyle overhauls European private equity team after poor performance

Carlyle has overhauled the team behind its flagship European private equity fund ahead of its expected return to fundraising, after the disastrous performance of its previous vintage put efforts to raise a new fund on pause.

The US firm hired nine people to the fund last year and expects to recruit two more senior people to complete the investment team, according to people familiar with the matter.

The hiring spree is regarded by people in the market as a sign that the firm, which has almost $480bn in assets globally, is likely to resume raising money for its European buyout fund after a two-year hiatus.

It also signals that the firm has recommitted to Europe as it emerges from a period of turbulence.

Carlyle Group has not deployed money from its European buyout strategy since the 2018 vintage fund, which has struggled to sell down most of its investments.

By December last year, the 2018 fund’s overall internal rate of return was negative, and the holdings it had succeeded in exiting were valued at just 1.1 times what Carlyle had paid.

Although Carlyle started tapping investors for commitments for the next vintage of its European private equity fund in 2023, the fund had only drawn in $1.2bn by its first close in 2024 — compared with the €6bn size of its predecessor.

Rather than start investing, Carlyle opted to halt fundraising efforts and overhaul the fund’s investment team, replacing co-heads Marco De Benedetti and Jonathan Zafrani with the group’s longtime European technology co-head, Michael Wand.

People familiar with the matter said that Carlyle had not deployed any of the $1.2bn while it focused on rebuilding the team. But they added that Wand, who has helmed some of Carlyle’s best-performing private equity vehicles, intended to start deploying it in the next few months.

Wand planned to move the fund away from consumer investments and focus on technology, healthcare, professional services and advanced industrials, one of the people said. He had also pushed the European buyout team to work more closely with portfolio companies and the firm’s capital markets and operating teams, another person said.

Consumer deals accounted for some of the 2018 fund’s most troubled investments. Carlyle ultimately handed over the keys to one investment — luxury streetwear retailer End Clothing — to Apollo as part of a restructuring in 2024, three years after buying it for about $1bn.

Carlyle has fallen behind larger rivals such as Blackstone, KKR and Apollo Global over the past decade, as a botched leadership succession and some private equity misfires worried investors. But the firm’s fortunes started recovering after it hired former top Goldman Sachs executive Harvey Schwartz as chief executive in 2023.

Carlyle’s shares have gained about 8 per cent over the past year. Blackstone, Apollo and KKR have all shed about a quarter of their market value.

Carlyle declined to comment.

Additional reporting by Ivan Levingston