Carlyle's new boss will be virtuoso second fiddle
NEW YORK, Feb 6 (Reuters Breakingviews) - Carlyle (CG.O) needs a chief executive who will run things – not one who will radically change things. That’s the best way of interpreting the private equity firm’s appointment of former Goldman Sachs (GS.N) banker Harvey Schwartz on Monday.
Like all the firms that make up private equity’s old guard, Carlyle must navigate the shift from its founders to a new generation of leadership. Its last attempt did not go well. The firm tried handing off the reins to Kewsong Lee and Glenn Youngkin in 2018. But Youngkin stepped down in 2020 to pursue politics; Lee was ousted last summer, leaving co-founder Bill Conway temporarily in the CEO role.
Schwartz may seem an odd fit. He ran Goldman’s trading business, not its dealmaking arm, and has never headed up a public company. He never quite made it to the CEO job at Goldman, though served in a number of high-level roles like chief financial officer and chief operating officer. Still, the heft of his alma mater – and his up-close experience of the financial crisis – should offer reassurance, both to Carlyle’s investors and the clients who put money in its funds.
That reassurance comes at a pivotal time. Carlyle’s $369 billion in assets lags peers KKR (KKR.N), Blackstone (BX.N) and Apollo Global Management (APO.N). Unlike them, its total hoard shrank last quarter; its latest buyout fund is behind schedule. A 27% decline in Carlyle’s shares in the past year trails most of its peers. To top it off, Schwartz’s former employer Goldman is among the Wall Street firms muscling in on Carlyle’s turf by trying to grow their offerings of so-called alternative investments.
Running Carlyle comes with three unique challenges: the firm’s founders. Conway and David Rubenstein remain co-chairs, while Daniel D’Aniello holds the role of chairman emeritus. They collectively own 26% of the firm. They felt that the ousted Lee, who pushed hard to diversify Carlyle’s business, hadn’t adequately consulted them on big moves, according to Reuters.
On that score, Schwartz looks like a smart choice. His experience at Goldman, navigating a sprawling organization stacked with big personalities, should come in useful – even if he didn’t ultimately make to the top, losing out to lifelong dealmaker David Solomon. In any case, Carlyle doesn’t need a swashbuckler so much as someone who can follow the firm’s continuing diversification plan rather than trying to redraft it.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
CONTEXT NEWS
Private equity firm Carlyle said on Feb. 6 that it had appointed Harvey Schwartz as chief executive and a member of its board of directors.
Previous Carlyle CEO Kewsong Lee stepped down in August 2022. The firm’s co-founder Bill Conway, also one of Carlyle’s two co-chairmen, has been filling the role on an interim basis.
Schwartz previously held various senior roles including chief financial officer and chief operating officer at investment bank Goldman Sachs, which he left in 2018. He is also a board member at financial technology firm SoFi.
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