Carlyle CEO Kewsong Lee is leaving the private equity firm as it struggles to expand and its stock lags.
Carlyle said late Sunday after The Wall Street Journal inquired about the matter that Lee will immediately step down as CEO and leave the company when his five-year employment contract ends later this year. William Conway, the company’s co-founder and former CEO, will serve as interim chief executive until a permanent successor is found.
The Washington, D.C.-based firm’s stock has lagged its publicly traded peers since its initial public offering in 2012. Carlyle was slow to branch out beyond the volatile private equity business and into others, such as credit and insurance, which generate the consistent and predictable management fees valued by shareholders.
Lee’s departure marks a rare instance in which a successor handpicked by the founders of a private equity firm has been shown the door. Firms such as Blackstone and KKR worked for years on succession planning, telegraphing it to fund investors and shareholders long before a formal announcement was made.
Conway and a co-founder, David Rubenstein, were co-CEOs of the firm until 2018, when they handed the title to Lee and firm veteran Glenn Youngkin. Daniel D’Aniello, the third co-founder, was chairman until early 2018. Lee, 56, became sole CEO in 2020 when Youngkin, now governor of Virginia, stepped down to focus on the public service.
At the time, Rubenstein said Lee was “extremely well positioned to serve as our CEO.”
Lee set to work simplifying the company’s structure and streamlining its sprawling private equity business, reducing the number of funds and integrating its infrastructure and energy businesses into a single platform. He focused on expanding Carlyle’s credit platform and getting the company into the insurance asset management business by buying a large stake in Fortitude Re.
Lee had successfully launched Carlyle’s long-term fund strategy and in 2015, the founders gave him authority over the direction of the credit business. The following year, Lee orchestrated an exit from Carlyle’s struggling hedge fund business and hired Mark Jenkins from the Canadian Pension Plan Investment Board to build and lead a standalone credit investment platform.
Assets under management in Carlyle’s credit segment nearly doubled year over year to $143 billion in the second quarter, outpacing the firm’s private equity segment for the first time. Fee-related income increased 65% to $236 million.
Despite these efforts, Carlyle’s stock has significantly underperformed its peers since Lee took over the top spot. Carlyle shares, including dividends, nearly doubled during the period, beating the S&P 500 but falling short of the performance of KKR and Blackstone, whose shares have nearly tripled and quadrupled, respectively.
A relative newcomer to Carlyle, having joined in 2013 from private equity firm Warburg Pincus, Lee’s rise and strategic shift ruffled some feathers at the shadowy firm. A handful of senior investment professionals, some with tenures of two decades or more, left amid the changes.
Before Lee’s arrival at Carlyle, Messrs. Rubenstein, Conway, and D’Aniello had made most of the big decisions. The men remain on the board, with Messrs Conway and Rubenstein as non-executive co-chairmen and D’Aniello as non-executive chairman emeritus.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
This article was published by The Wall Street Journal