By Chibuike Oguh
NEW YORK (Reuters) -Carlyle Group Inc said on Tuesday that its fourth-quarter distributable earnings tumbled 52% year-on-year, as the private equity firm cashed out on fewer investments as dealmaking slowed.
The decline was steeper than the 41% decline reported last month by peer Blackstone Group (NYSE:BX) Inc and sets a challenging backdrop for former Goldman Sachs (NYSE:GS) Inc president Harvey Schwartz, who Carlyle unveiled as its new chief executive officer on Monday.
Schwartz, who starts the job on Feb. 15, is tasked with revitalizing Carlyle's stock price, which has underperformed Blackstone and other rivals such as Apollo Global Management (NYSE:APO) Inc and KKR & Co (NYSE:KKR) Inc.
Schwartz, 58, was the first choice of Carlyle's board and won unanimous support from its members to take the top job, interim CEO Bill Conway said during an earnings call with analysts on Tuesday. "Following a thorough and competitive process, Harvey was unanimously chosen by the board as the right leader to move Carlyle Board in its next phase of growth," Conway said.
Schwartz will set about to increase Carlyle's stock price when he takes over as CEO, Conway added. "We want to first of all, increase the stock price, even though we've got a great investment track record that doesn't show up in our stock price," he said.
Carlyle's shares were down 1.8% at $35.63 per share, underperforming the S&P 500 , which was up in late morning.
EARNINGS DECLINE
Carlyle's distributable earnings, which represents the cash available to pay dividends to shareholders, fell to $433 million in the fourth quarter from $903 million a year ago.
That translated to after-tax distributable earnings per share of $1.01, which according to financial data provider Refinitiv was slightly above the average analyst estimate of 97 cents.
Carlyle's revenue from asset sales fell 65% to $460 million from a year ago, as financial market volatility, geopolitical tensions, inflation and worries about a potential recession prevented the firm from divesting investments for top dollar.
Its fund management fees generated $512 million in income, 10% more than a year ago, as recent acquisitions, including those of credit manager CBAM and reinsurer Fortitude Re, started to pay off. That helped fee-related earnings rise 16% to $202 million.
"We see potential fee-related earnings upside driven by accretive mergers and acquisitions and tighter expense control," BMO analysts said in a note to investors.
Carlyle said its total investment portfolio was flat in the fourth quarter, as private equity funds gained 1%, real estate funds fell 1%, global credit funds rose 2%, and secondary funds dropped 3%. Blackstone's corporate private equity funds rose 3.8%, while its Secondary funds fell 1.8%.
Carlyle said it raised just $4.9 billion from fund investors in the fourth quarter, spent $6.8 billion on new acquisitions, retained $72 billion in unspent capital, and had $373 billion of total assets under management. It declared a quarterly dividend of $0.325 per common share.