Private equity giant Carlyle Group is replacing its chief executive Kewsong Lee, who will leave the New York and Washington-based group just two years after his July 2020 appointment.
The exit throws the leadership of the $376 billion group into yet another upheaval as it navigates a more difficult investment environment, with volatile markets and a drop in commitments from institutional investors.
Lee’s exit, announced Sunday night, came as his contract negotiations with Carlyle reached an impasse. Lee, who was named co-chief executive alongside Glenn Youngkin in 2017, was given a five-year contract that expired at the end of the year.
Rather than negotiate further, Carlyle said his board had decided not to renew Lee’s contract. After informing Lee of the decision, he decided to resign immediately.
“Both the Company’s board of directors and Mr. Lee, during their discussions, agreed that the time is right to begin a search for a new CEO,” Carlyle said in a press release.
Lee’s sudden departure marks another spontaneous shift in Carlyle’s succession planning beyond co-founders William Conway, David Rubenstein and Daniel D’Aniello, who founded the company in 1987.
Unlike competitors like KKR, Carlyle is struggling to identify his next generation of leaders. Lee served as co-chief executive alongside Youngkin, a shared role intended to be similar to Conway and Rubenstein’s joint leadership during the company’s rise to a publicly traded industry giant.
However, Youngkin decided to retire in late 2020 after increasing friction with Lee, throwing Carlyle’s succession plan into turmoil.
Lee assumed sole leadership of Carlyle as it recovered from the shock of the coronavirus pandemic, which had caused the company to post heavy losses as the performance of many of its mutual funds slowed.
Under Lee, Carlyle’s business revived as he planned the company’s expansion into credit and insurance-related investments under new, handpicked leadership. Lee also set a goal of raising $130 billion in new money by 2024, with much of the fundraising focused outside of Carlyle’s traditional corporate buyout business.
In the second-quarter results released in late July, Carlyle had achieved more than half of Lee’s goal, which he insisted the company would achieve. However, fundraising in the company’s buyout unit has slowed. In the second quarter, its new flagship fund raised just $2.2 billion.
At the same time, Carlyle was rapidly expanding elsewhere, forging a partnership with insurer Fortitude Re, which brought in $48 billion in new assets last quarter.
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In an interview with the Financial Times in late July, Lee emphasized Carlyle’s diversification from private equity buyouts, where the firm first made its name under Conway and Rubenstein.
“Most of our fee-based assets under management are now associated with global credit,” Lee said, brushing off funding challenges in 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 consciously diversified our business.”
Co-founder Conway, who oversaw Carlyle’s private equity investments for decades, will become interim head while the group searches for a new chief executive officer.
Conway said he was “grateful” to Lee for his efforts in “positioning Carlyle for the future.”
Lee said he was “grateful for the opportunity to build the company with an incredibly talented and dedicated team.”