Private equity giant Carlyle Group is replacing its CEO Kewsong Lee, who will leave the New York and Washington-based group just two years after being appointed in July 2020.
Lee’s departure, announced Sunday evening, came after Carlyle’s board 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 that expired at the end of the year.
After Carlyle notified Lee that he had decided not to renew his contract, he decided to resign immediately. Carlyle co-founder William Conway will become its interim leader while it searches for a full-time replacement.
“With the closing of Kewsong Lee’s employment agreement and the company on a solid footing and entering its next phase of growth, our board and he mutually agreed that now is the right time to begin 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 across our three segments,” he added.
The decision shocked Carlyle’s close followers. “[T]his is a sudden and unwelcome surprise change, especially in light of the positive progress we believe he has made during the company [Lee’s] Sustaining in terms of accelerating growth, entering new business sectors and expanding profitability,” said Robert Lee, an analyst at Keefe, Bruyette & Woods.
“We had met last week with Lee [and] a group of investors, and seemed comfortable in his position and optimistic about the firm’s strategic direction,” he added.
Carlyle shares had fallen 5.4% in early afternoon trading in New York.
The sudden exit means the $376 billion group’s leadership has been revamped as it navigates a tougher investment environment, with volatile markets and a pullback in commitments from institutional investors.
It also marks another impromptu shift in Carlyle’s succession planning beyond co-founders Conway, David Rubenstein and Daniel D’Aniello, who formed the group in 1987.
Unlike competitors like KKR, Carlyle has struggled to identify its next generation of leadership. Lee served as co-chief executive alongside Youngkin, a split role that was supposed to resemble the joint leadership of Conway and Rubenstein during the company’s rise to 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 disarray. In 2021, Youngkin launched a successful run for governor of Virginia.
Lee took sole leadership of Carlyle as it recovered from the shock of the coronavirus pandemic, which had seen it post steep losses as performance took a hit at many of its investment funds.
Under Lee, Carlyle’s business rebounded as he planned the firm’s expansion into credit and insurance-related investments under new leadership. It also set a target of raising $130 billion in new money by 2024, with much of the fundraising focused outside of Carlyle’s traditional corporate buyout business.
In second-quarter earnings released in late July, Carlyle had reached more than half of Lee’s target, which he insisted the company would achieve. However, fundraising in its buyout unit has slowed. In the second quarter, its new flagship fund raised just $2.2 billion.
At the same time, Carlyle quickly expanded elsewhere, landing a partnership with insurer Fortitude Re that brought in $48 billion in assets last quarter.
In an interview with the Financial Times in late July, Lee emphasized Carlyle’s diversification away from private equity buyouts, in which the firm first made its name under Conway and Rubenstein.
“The largest portion of our fee-earning assets under management is now associated with global credit,” Lee said, dismissing the fundraising challenges of Carlyle’s eighth flagship buyout fund as “old news.”
“It’s a very different company than it was a few years ago,” he said. “We have been deliberately diversifying our business.”
Conway, who oversaw Carlyle’s private equity investments for decades, said he was “grateful” to Lee for his efforts to “position Carlyle for the future.”
Lee said he was “grateful for the opportunity to build the company with an incredibly talented and committed team.”