Carlyle chief executive resigns after failed contract talks

Private equity giant Carlyle Group replaces chief executive Kewsong Lee, who will leave the New York and Washington-based group just two years after his appointment in July 2020.

Lee’s departure, announced Sunday evening, came after Carlyle’s board of directors met and decided to end contract negotiations with Lee, according to a source with direct knowledge of the situation. Lee, who was named co-chief executive in 2017 alongside Glenn Youngkin, was given a five-year contract which expired at the end of the year.

After Carlyle informed Lee that he had decided not to renew his contract, he decided to quit immediately. Carlyle co-founder William Conway will become its interim boss as he searches for a full-time replacement.

“With Kewsong Lee’s employment contract coming to an end and the company on solid ground and entering its next phase of growth, he and our Board of Directors have mutually agreed that the time has come to launch the search for a new CEO to lead the company forward,” Conway said in a memo sent to employees and seen by the Financial Times.

“[W]We must continue to execute on our business plan and build on the company’s strong performance in our three segments,” he added.

The decision surprised those close to Carlyle. “[T]This is a sudden and unwelcome surprise change, especially in light of the positive progress we believe the company has made over the past [Lee’s] mandate in terms of accelerating growth, entering new business areas and increasing profitability,” said Robert Lee, analyst at Keefe, Bruyette & Woods.

“We had last week met Lee [and] a group of investors, and he seemed comfortable in his position and optimistic about the strategic direction of the company,” he added.

Carlyle shares had slipped 5.4% by early afternoon in New York.

The sudden exit throws the leadership of the $376 billion group into further upheaval as it navigates a tougher investment environment, with volatile markets and a decline in commitments from institutional investors.

It also marks another impromptu shift in Carlyle’s succession planning beyond Conway co-founders David Rubenstein and Daniel D’Aniello, who formed the band in 1987.

Unlike competitors such as KKR, Carlyle has struggled to identify its next generation of leaders. Lee served as co-chief executive alongside Youngkin, a shared role that was meant to resemble Conway and Rubenstein’s joint leadership during the company’s rise into a publicly traded industry giant.

However, Youngkin decided to retire at the end of 2020 amid friction with Lee, throwing Carlyle’s succession plan into turmoil. In 2021, Youngkin launched a successful run to become governor of Virginia.

Lee took sole leadership of Carlyle as it recovered from the shock of the coronavirus pandemic, which saw it post steep losses as performance weakened in many of its investment funds.

Under Lee, Carlyle’s business rebounded as he planned the company’s expansion into credit and insurance related investments under new management. It has also set a goal of raising $130 billion in new money by 2024, with much of the fundraising focused away from Carlyle’s traditional buyout activities.

In second-quarter results released in late July, Carlyle had met more than half of Lee’s target, which he insisted the company would meet. However, fundraising in his redemption unit has slowed. In the second quarter, its new flagship fund raised just $2.2 billion.

At the same time, Carlyle has been expanding rapidly elsewhere, partnering with insurer Fortitude Re which brought in $48 billion in assets last quarter.

In an interview with the Financial Times in late July, Lee highlighted Carlyle’s diversification from private equity buyouts, in which the company first made a name for itself under Conway and Rubenstein.

“The largest share of our earning assets under management is now associated with global credit,” Lee said, calling the fundraising challenges of Carlyle’s eighth flagship buyout fund “old news.”

“It’s a very different business than it was a few years ago,” he said. “We have deliberately diversified our activities.”

Conway, who for decades oversaw Carlyle’s private equity investments, said he was “grateful” to Lee for his efforts to “position Carlyle for the future.”

Lee said he was “grateful to have the opportunity to build the business with an incredibly talented and committed team.”

Carlyle chief executive resigns after failed contract talks

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