Carlyle’s big fee strain comes into sharper view

Carlyle second-quarter earnings: Private equity veteran Carlyle (CG.O) is behind the buyout times. Although its second-quarter finances imply more dealmaking resilience than at Blackstone (BX.N), they also make clearer the pressure newish boss Harvey Schwartz is under to reap more of the steady revenue that public-market investors covet.

Carlyle and Blackstone kicked off the latest results season at opposite ends of the valuation spectrum. Carlyle trades at about 10 times expected earnings for 2023, according to Refinitiv, the lowest among major peers. Its larger rival led by Steve Schwarzman, which is now managing more than $1 trillion, fetches twice that multiple.

And yet, Carlyle’s primary business of doing deals held up relatively better: Proceeds from asset sales declined 36%, versus an 82% slump at Blackstone. It wasn’t enough to prevent a 9% tumble for Carlyle’s shares on Wednesday.

At issue: coveted management fees. Carlyle’s are slipping, while Blackstone’s are growing. With fundraising down, Carlyle’s deal nous has yet to attract a deluge of fee-earning assets. The situation starkly informs the challenge ahead of Schwartz, who after six months on the job is due to unveil his strategic plan soon. Investors aren’t the only ones watching closely. With earnings derived from fees sagging, Schwartz already has vowed to scrutinize growing compensation expenses.

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