Apollo, Carlyle hint at slow buyout fundraising amid volatile markets

The private equity industry is facing one of the most challenging environments in years

Blackstone headquarters in New York. Many investors have maxed out how much they can put to work in private equity. Bloomberg

After buyout companies enjoyed years of raising money at a rapid clip, Apollo Global Management and Carlyle Group are sending their strongest signal yet that era is fading.

Apollo, among the most aggressive private equity companies in gathering cash, told investors this year it planned to raise its $25 billion fund in one go by year-end. It has changed the timetable.

The company is preparing an initial close of that fund in the next month or so — at half the original goal, although it still plans to raise the full amount eventually, according to sources. It also told clients it will continue to collect money into next year.

“There’s no way anyone will raise money on the schedule they’ve initially envisioned,” Apollo chief executive Marc Rowan said at the Milken Institute Global Conference in May.

Carlyle told investors at a client meeting this month that it had gathered about $15bn so far for its new buyout and growth fund, the sources said. That is less than the $17bn it anticipated collecting by roughly midyear as it targets raising $22bn for the flagship fund.

At the same time, executives at Washington-based Carlyle said at that meeting that they expect fundraising for the vehicle to be slower than the company originally set out, the sources said.

Investors were told that Carlyle understood the constraints that pensions and other big institutions face parting with cash during volatile markets.

The private equity industry faces one of the most challenging fundraising environments in years, creating a test for a rising generation of buyout leaders.

Pension fund and endowment coffers have shrunk in the stock sell-off, making them reluctant to lock up more money in funds that are hard to sell and value.

The end of easy-money central bank policies, rising odds of a recession, and Russia’s invasion of Ukraine have made investors wary.

Many have maxed out how much they can put to work in private equity — and cannot afford the risk of adding more exposure to buyouts and private markets.

“There is an overcrowding” in private equity, Carlyle chief executive Kewsong Lee said at an investment conference this month.

That is in part because funds are doing deals faster than investors planned for and coming to market faster than expected, Mr Lee said.

That is creating more difficulty for companies racing for cash to put to work before a potential economic downturn. The biggest are raising giant buyout funds at the same time.

Blackstone, Carlyle and Apollo are collectively seeking more than $70bn for flagship funds.

For New York-based Apollo, the earlier initial close for its $25bn fund will allow the company to continue to finance deals at a time when it has only $2bn to $3bn of dry powder as its previous fund is almost fully tapped out.

It is already in the mix on several big transactions. Apollo is part of a group said to have put in a binding bid for Walgreens Boots Alliance’s international arm. It is also said to be among potential bidders for Grubhub, the US unit of Just Eat Takeaway.com.

As Mr Rowan sees it, Apollo is likely to take about a year to raise its new fund. The previous flagship took six months to raise.