Carlyle Group has hired former Goldman Sachs executive Harvey Schwartz to be the private equity firm’s next chief executive, completing its search for a new leader after Kewsong Lee’s abrupt resignation in August.
Schwartz, a two-decade veteran of Goldman, left the Wall Street bank in 2018. He will take the helm of one of the world’s largest private equity groups, with $369bn in assets under management, but whose growth and stock price have lagged behind competitors such as Blackstone Group and KKR in recent years.
He will have the task of stabilising Carlyle after a period of leadership uncertainty and setting strategy as a decade of benign financial markets for private equity groups makes way for more challenging conditions.
William Conway, a Carlyle co-founder who acted as interim chief while it searched for a new leader, said in a memo to employees that Schwartz would continue to expand the New York and Washington-based group beyond its historical speciality in corporate buyouts and execute a strategy “that advances and accelerates the diversification plan” it has pursued.
Carlyle, a pioneer in the private equity industry, has trailed peers in expanding into strategies targeting real estate, infrastructure and credit-based investments to increase overall assets.
“I will be available to help Harvey in any way I can, but I firmly believe the best thing I can do is let him — supported by the rest of the team — lead the firm and determine the right path to drive the business forward,” said Conway, who will retain his title as co-chair of Carlyle’s board of directors alongside co-founder David Rubenstein.
Schwartz’s appointment comes almost six months after the unexpected resignation of Lee, who left the group after talks over a new contract broke down.
The former chief’s departure upset a succession plan Carlyle had put in place five years earlier and revealed deep conflict between Lee, who had been seeking greater autonomy in setting strategy, and the firm’s co-founders. While Conway and Rubenstein retired from Carlyle years earlier, they maintained influence as board chairs holding significant voting power.
After an extensive search process in which Carlyle reached out to numerous prominent financial executives, Schwartz last week emerged as a frontrunner as the firm worked to reveal a new leader by its fourth-quarter earnings announcement, due on Tuesday.
Carlyle’s board of directors met on Sunday to vote on the appointment, said sources familiar with the matter. Rubenstein and Conway were joined by Schwartz at a global town hall on Monday introducing the firm’s new leader.
“Harvey is a widely respected business builder with significant leadership experience in a high-performing, highly competitive global financial institution,” Rubenstein and Conway said in a statement on Monday.
The change of leadership at Carlyle comes at a time of uncertainty for the broader private equity industry, which has enjoyed a decade of almost uninterrupted growth.
Fundraising industry-wide has slowed as investors weigh their exposure to private markets, forcing Carlyle to seek an extension in raising cash for its newest buyout fund. Carlyle has also long been considered a less efficient and profitable operation than peers such as Blackstone, signalling a further need to improve margins.
Schwartz has experience overseeing large financial operations during times of change. He left Goldman five years ago after losing out to David Solomon in a contest to take over from Lloyd Blankfein as chief.
While at Goldman, Schwartz was best known for his operational and risk management skills in steering the bank’s trading division through the financial turmoil of the 2008 financial crisis.
He was co-head of Goldman’s securities division in the years during and immediately after that period, becoming chief financial officer in 2013.
As CFO, he helped Goldman adapt its overall operations for a stricter regulatory environment in the wake of the financial tumult.
He held the role for four years before being promoted to co-president in January 2017, working alongside Solomon.
A year later, Goldman’s succession plans for Blankfein were clarified when Solomon was named the bank’s sole president, while Schwartz announced his decision to retire from the bank.
“[We] think the CEO announcement will be well received by the market given Mr Schwartz’s impressive tenure at Goldman Sachs as well as his deep industry expertise,” said Brian McKenna, an analyst at JMP Group.
Carlyle shares were down 2.5 per cent in early Monday trading, slightly below the level they traded at before Lee’s departure.
Additional reporting by Joshua Franklin in New York and Kaye Wiggins in Hong Kong