Carlyle raised $8.4 billion in the last quarter, a figure the firm has not seen since the global financial crisis, as low and negative interest rates continue to push institutional investors into the alternatives space.
The recorded sum was raised despite the firm’s largest buyout funds in the US, Asia and Europe not yet reaching a first close this year. The firm continued to build on what it sees as the “enormous opportunities” in private debt by attracting $500 million to its opportunistic credit strategies, while its private equity real estate strategy also collected a large pool of capital.
“Looking forward, we expect the pace of fundraising to accelerate in the second half of 2017,” Bill Conway, co-chief executive of Carlyle, said during the firm’s second-quarter earnings call.
Additionally, the firm raised $1.7 billion across three new issuances of collateralised loan obligation vehicles, two in the US and one in Europe.
Executives reiterated the firm’s priority of building a “world class” credit business. In February, the firm closed the fourth incarnation of its distressed and special situations platform after raising $2.5 billion. Last month, Alex Popov joined the firm from HPS Investment Partners to lead the credit opportunities platform.
Such is the current attraction of alternatives that executives on the call said they have informed investors to commit early to avoid missing out. The firm is aiming to amass $100 billion across its range of strategies by 2020, but on the call analysts raised the prospect of bringing in even more than the ambitious target.
Despite this, the firm said it only seeks to raise the amount to match the opportunities it sees, noting that only two transactions above $300 million were completed in the second quarter. The flagship US private equity fund is targeting $15 billion.
Investor interest at the top of the market illustrated what executives described as the “paradox of private equity”. Average net returns in the private equity space are 14-15 percent, down on what they were compared with a decade ago, but investors are more prepared to accept these figures in a low interest rate environment.
“Investors are pretty comfortable with these rates of returns. Prices are high and there is a lot of dry powder in the market, but people are giving money to us because they see that everything else is less attractive,” said David Rubenstein, Carlyle’s co-CEO.