Report: Carlyle plans new credit fund with $8.5bn target

Fund would be the latest step in Carlyle’s expansion in the credit space, Bloomberg says.

Carlyle has held talks with investors about the launch early in 2023 of a new credit fund, to be called Carlyle Credit Opportunities Fund III, according to a Bloomberg report.  Carlyle has declined to comment.

Bloomberg said Carlyle expects to launch the vehicle under the name Carlyle Credit Opportunities Fund III, and that it is targeting $8.5 billion. The new fund is described as part of the illiquid credit platform, with a broad mandate and the expectation that it will invest in distressed private debt as well as special situations. Such a launch would continue a scaling-up of Carlyle’s Global Credit programme, which has been underway for years.

Early this year, for example, Carlyle reached a new advisory agreement with Fortitude Re, bought a portfolio of assets from CBAM Partners and acquired a net lease real estate portfolio from iStar. According to an April news release from Carlyle, these three moves together increased its global credit fee earning AUM by $65 billion.

The new fund will be part of a series. According to PDI data, Carlyle launched the first CCOF in June 2017, with a target size of $2 billion. By final close 25 months later, the fund beat that target, raising $2.4 billion. As of 31 December 2021, the debut CCOF was generating an approximate 15 percent net IRR for its investors.

The follow-up, Carlyle Credit Opportunities Fund II, opened in April 2020, with a target of $3.5 billion. CCOF II had a first close in October 2021 and a final close in spring this year, at $4.6 billion, with a subordinated/mezzanine strategy and a focus on North America and Western European corporates.

Carlyle manages $369 billion in assets (according to its website), and its Global Credit sector represents $141 billion, or nearly 40 percent, of this. It divides its Global Credit sector into three parts: liquid, illiquid and real estate credit.