Play The Rise Of The Private Equity Managers With Carlyle Group
Mon, Feb. 22, 8:47 AM
- In another blow to Carlyle Group's (NASDAQ:CG) efforts at expanding its asset management powers beyond private-equity, the company is shutting its Diversified Global Asset Management operation just two years after buying it.
- The business has less than $2B in fee-paying client AUM.
- "A challenging market made the business difficult to grow,” Carlyle COO Glenn Youngkin tells Bloomberg. “We are refocusing our investment solutions segment on areas where we see real momentum.”
- This closing comes on top of other hedge fund hiccups for Carlyle, including poor returns at Claren Road Asset Management, where assets have now dropped to just more than $1B from $8.5B in 2014.
- The closing of DGAM leaves Carlyle with two fund-of-funds managers - AlpInvest and Metropolitan Real Estate Equity Management. Youngkin notes AlpInvest's active funds gained 18% last year and 24% in 2014, and that's the kind of thing Carlyle wants to focus its attention on.
Wed, Feb. 17, 9:52 AM
- While both stock's are lower by about 45% since mid-April, The Carlyle Group (CG +6.2%) offers compelling long-term value, says analyst Michael Cyprys, while KKR's (KKR -0.2%) balance sheet could be a near-term risk to earnings.
- He upgrades Carlyle to Overweight with $20 price target (49% upside) and downgrades KKR to Equalweight with $14 price target (marginal upside).
- Positive catalysts for Carlyle include a $4B exit portfolio pipeline, a $4B investment deployment pipeline, the just-announced $200M buyback, and management's increased focus on cost control. The market is likely to give more value to the company's future earnings potential as deployment speeds up, says Cyprys.
- "We think the Street is mis-modeling KKR's balance sheet earnings, and we expect 1Q to be far more challenging than 4Q,” he says, expecting the company to report a loss of $1.51 per share vs. consensus of a $0.10 loss. He notes KKR's large public equity position (42% of funds vs. peers in the 11-27% range), along with negative credit and energy marks.
Wed, Feb. 10, 3:15 PM
- These MOUs are paid to take their capital and reap big returns doing deals, not try and support the stock price with share repurchases. “It doesn’t make much sense, obviously,” says UMass economics professor William Lazonick.
- Yet The Carlyle Group (CG +3.3%) today joined Apollo Global (APO -0.9%), KKR (KKR -5.2%), and Fortress Investment (FIG -1.7%) in launching sizable share repurchase programs, with Carlyle CEO David Rubenstein saying (earnings call transcript) none of his company's owners finds the current stock price "satisfactory or acceptable."
- Don't look for Blackstone (BX +1.9%) to join the crowd. “Limited partners believe that if you don’t invest in your own funds, you don’t show confidence or alignment,” said Stephen Schwarzman on his recent earnings call (transcript). "We always want to have a lot of money around." Just to be clear, Schwarzman has also been very vocal about how cheap he believes Blackstone shares are.
- The last word goes to Lazonick: “At least they’re not buying high, but that’s not relevant ... They should be trying to figure out how to invest better.”
- ETFs: PSP, PEX
Wed, Feb. 10, 7:20 AM
- The Carlyle Group (NASDAQ:CG) joins Apollo Investment and Fortress Investment in beginning to buy back their thoroughly roughed-up stock. In Carlyle's case, it will repurchase up to $200M in company shares.
- CG is lower by about 60% since peaking in May of 2015.
- Co-CEO David Rubenstein: "Despite our history of strong results and significant future growth opportunities, the equity market currently ascribes little value to our diversified investment platform."
- Previously: Carlyle misses by $0.07, misses on revenue (Feb. 10)
Wed, Feb. 10, 6:36 AM
Tue, Feb. 9, 5:30 PM
Tue, Feb. 9, 10:33 AM
- Carlyle Group (CG -1.1%) has put together more than $3B for a fund for long-term investments by private equity, Bloomberg reports.
- It's part of a trend by private-equity firms to break out of a 10-year horizon and put money to work for still longer. Carlyle has recruited a 14-member team and the fund has already invested nearly $500M in two companies, according to Tyler Zachem, a relative newcomer who will co-lead the group with Carlyle vet Eliot Merrill.
- “We used to have to have pass" on deals where capital was needed longer, or family-owned firms that didn't want to go public in five years. "Now, we can lean in.”
- The fund, called Carlyle Global Partners, will share the main buyout fund's mandate of at least doubling its investment over time, but will target lower annual returns and charge a lower fee than 20% of gains.
Wed, Jan. 27, 9:46 PM
- Last month, Carlyle Group (NASDAQ:CG) co-founder David Rubenstein was licking his chops over "maybe the greatest energy investing opportunities we've ever seen," and Avenue Capital's Marc Lasry called the energy bust a "once-in-a-lifetime opportunity."
- Source: WSJ
- Oil, however, has continued to plunge, and along with it the finances of already-struggling oil-and-gas companies. Avenue has been burned. It quickly put to work $600M from $1.3B raised about ten months ago, and has lost about $200M. Blackstone's (NYSE:BX) GSO Capital, on the other hand, is treading carefully, having only invested about $100M of $3.5B raised for an energy fund last year.
- "The only way we get hurt is if oil goes to $20 a barrel and stays there for a year or two,” says Lasry. "I'll make that bet, because if oil goes to $20 and stays there, that means the whole industry is in bankruptcy.” His fund is buying up debt of industry players yielding more than 10%. If the companies survive, it pockets those yields, and if not, Avenue's debt holdings will be turned into equity and there's a chance to profit that way.
Tue, Jan. 26, 9:51 AM
- Two German government sources have denied a Handelsblatt report that Berlin had given its consent to sell Airbus's (OTCPK:EADSY -0.1%) defense electronics unit to buyout groups KKR and Carlyle (NASDAQ:CG).
- The sale is part of a plan by Airbus to dispose of assets with combined revenues of around €2B, following a strategic decision to focus on civil and military aeronautical and space assets in the face of low European defense spending.
- Previously: Airbus defense asset sale 'progressing well' (Jan. 07 2016)
- Previously: Airbus close to choosing final electronics bidder (Dec. 15 2015)
Thu, Jan. 21, 10:28 AM
- Fans of P-E and contrarian headline indicators may be sniffing a bottom for the sector as Bloomberg pronounces Henry Kravis' (KKR +3.5%) golden age for private equity claim a bust.
- Kravis was referring to the years prior to the financial crisis, but a check of the scoreboard finds those mega-deals have mostly produced mediocre results. The endowments and pension plans which invested in those most of those deals would have done better calling up Vanguard.
- “The big deals were done more out of ego than economic sense," says an advisor to pension plans. "People paid steep prices and put on too much debt.”
- The question going forward is if the P-E giants have learned their lesson. According to Bloomberg's sources, TPG Capital has sworn off the huge deals, and other players have vowed to focus on price, not size.
- Interested parties: Blackstone (BX +3.5%), Apollo Global (APO +2.8%), Carlyle Group (CG +4.2%)
Wed, Jan. 20, 4:48 PM
- The first export of U.S. crude oil in four decades arrived in Europe early today, reaching the French port of Marseille before sunrise after leaving from Texas nearly three weeks ago, Financial Times reports.
- Oil trader Vitol is expected to unload the shipment - a mix of ultralight oil from the Texas Eagle Ford shale formation produced by ConocoPhillips (NYSE:COP) - which will then travel by pipeline to one of two refineries the company operates in Europe under a joint venture with the Carlyle Group (NASDAQ:CG).
- Energy analysts say it could take a while before the volume of U.S. oil exports expands beyond today’s trickle, as U.S. crude output is expected to fall later this year as producers face shrinking revenues and soaring debt due to plunging oil prices.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
Wed, Jan. 20, 8:07 AM
- Citing "uncertainties developed regarding the transaction," Symantec (NASDAQ:SYMC) and Carlyle (NASDAQ:CG) have amended the terms of Carlyle's purchase of Symantec's Veritas storage software unit to cut the purchase price from $8B to $7.4B, and double Veritas' offshore cash balance to $400M.
- Symantec will now be paid $6.6B in cash and left with a $400M equity interest in Veritas. After-tax cash proceeds are expected to total $5.3B, down from an original $6.3B.
- The deal is still expected to close on Jan. 29. The sale price cut follows a Nasdaq selloff, as well as November reports indicating banks had postponed marketing the debt Carlyle planned to use to finance the Veritas deal.
- Separately, Symantec now expects FQ3 revenue, op. margin, and EPS to be above the midpoints of the guidance ranges provided in its Nov. 5 FQ2 report. FQ3 results are due on Feb. 4.
- Symantec has dropped to $18.05 premarket, making new 52-week lows in the process.
Tue, Jan. 5, 10:22 AM
- The roughed-up stock of Carlyle Group (NASDAQ:CG) - down about 50% since last May - has found a friend in Okumus Fund Management which purchased a near-9% stake in the P-E player in December.
- The $110M investment represents 20% of AUM at Okumus.
- "It's a no-brainer," says Ahmet Okumus. "It's a good business that generates a lot of free cash flow."
- It's been a rough ride for private equity in general, but Carlyle has been especially punished amid losses at its hedge fund unit and lack of investor interest in buying up the loans for its purchase of Veritas.
- Okumus reminds it's the banks - not Carlyle - which are on the hook for any unsold Veritas paper. "If you look at Carlyle's returns, they've been around for 30 years. They've invested in much more difficult markets than this, and they've done well."
Mon, Jan. 4, 9:56 AM
- "Given the aging vintage of the current economic cycle, we continue to become more selective/defensive across the asset manager vertical," says analyst Craig Siegenthaler, downgrading The Carlyle Group (CG -3.1%) to Neutral from Outperform with price target of $18.
- Siegenthaler views Carlyle as one of the most "offensive" alternative asset manager names thanks to its 1) large accrued carry balance, 2) high profit composition from performance fees, 3) a business weighing toward P-E and real assets.
- See also: Credit Suisse downgrades more asset managers (Jan. 4)
Dec. 22, 2015, 3:53 PM
- Claren Road Asset Management suffered another $950M in withdrawal requests this quarter, according to Bloomberg, and the fund will start the year with just $1.25B in AUM vs. $8.5B at the peak in Sept. 2014.
- At issue for the hedge fund - majority owned by Carlyle Group (NASDAQ:CG) - is a 10.1% decline in 2014, and another 5.2% fall in this year's first three quarters.
- Claren Road received redemption requests of roughly $2B in Q3, forcing the fund to delay paying money back in order to minimize the damage to those investors hanging on.
Dec. 16, 2015, 7:33 AM
- "The main driver of our downgrade is our view of a lack of a near-to intermediate term positive catalyst for the shares," says analyst Brian Bedell, cutting Carlyle (NASDAQ:CG) to Hold from Buy, with price target reduced to $16 from $21.
- He notes risk of lower realizations into 2016 and risk of continued subdued performance of three of the company's four business units.
- Since topping out for the year at the start of May, CG is down about 50%.
The Carlyle Group LP is a diversified multi-product global alternative asset management firm. It advises investment funds and other investment vehicles that invest across a range of industries, geographies, asset classes and investment strategies and seek to deliver attractive returns for its... More
Industry: Asset Management
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