Tried and tested formulas

Roxane McMeeken explains how Carlyle has developed a unique distribution partnership with Coutts. The E14bn global alternatives specialist Carlyle Group runs one of the largest private equity operations in the world. And yet the firm makes no pretence at being all things to all people. Carlyle recently sealed a partnership with British private bank Coutts, under which a fund of seven Carlyle private equity funds will be offered to the blue-blooded bank’s customers. Around E150m has been raised for the product since launch last year. Chris Finn, a managing director of Carlyle for Europe, says the timing is perfect because private investors are now willing to accept the illiquidity of private equity investments as a trade off for returns of up to 25 per cent, which far outstrip recent performance from more traditional investments. He believes the Coutts deal is the first ever where a private equity house has put together a fund of its own products for a third party distributor. He points out that most private equity managers only manage two or three funds. Carlyle sells its funds directly to high net worth individuals, family offices, banks, private banks, fund of funds managers, insurance companies and institutional investors throughout the world. Two strategies Carlyle runs around E10bn in 13 private equity funds globally, yet the funds are run in just two strategies – buyouts and venture capital. Mr Finn says there are no plans to try out new strategies. Most recently, the firm clinched a deal to buy out Fiat’s aerospace business in Italy. Within the two investment approaches particular sectors are targeted: aerospace and defence, consumer and industrial, energy, health care, IT, transportation, telecoms and media, and financial services. The firm’s philosophy, says Mr Finn, is to stick to what it does best and concentrate resources. So if a team of investment professionals spends time researching the automotive industry in Japan, they will use what they have learned to research the same sector elsewhere. Nonetheless, a local approach informs all operations. Carlyle originates in the US, but Mr Finn emphasises he is one of only three US nationals working for the European business. “The teams in Europe are overwhelmingly European,” he says. “They know the market and the players best.” Staff spread The European staff numbers around 70 investment professionals. They include nationals of Belgium, Canada, Egypt, France, Germany, Ireland, Italy, Spain and the UK. They are located in offices in Barcelona, London, Milan, Munich and Paris. The local approach is particularly critical to the buyout business because Carlyle tends not to find opportunities through auctions, says Mr Finn. “The hallmark of our buyout business is that we are very conservative. In an auction process we do not tend to win. We are very disciplined and have integrity in auctions. We do what we say we’ll do.” The venture capital business invests mainly in technology. As a result it is run with more of an eye on sectors. “We tend to be more focused on the technology itself rather than the region,” says Mr Finn. In addition to private equity investments, the Carlyle Group manages real estate, high yield and fund of hedge funds products.

Carlyle’s two funds In Europe, Carlyle manages a weighty private equity book of E1.7bn. This is run in two funds:

• Carlyle Europe Partners I Launched: June 1998 Fund size: E1bn Focus: leveraged buyouts Sectors: Automotive parts, media, telecoms, aerospace, chemicals Markets: France, Germany, Italy, Spain, UK Team: 37 professionals in Barcelona, London, Milan, Munich, Paris
• Carlyle Europe Venture Partners Launched: April 2000 Fund size: E650m Focus: high tech investment Sectors: material sciences, communications technology, infrastructure software, financial services Markets: throughout Europe Team: 17 professionals worldwide