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Carlyle eyes $25B fundraising target for 3 buyout funds

Putting capital to work remains difficult even as investors continue to pour money into alternative strategies, according to Carlyle Group LP executives.

Carlyle is in the middle of a multiyear fundraising process in which it hopes to raise up to $100 billion in new capital via its next generation of private equity funds. Three geographically focused buyout funds would account for about a quarter of that sum, co-CEO David Rubenstein said on a second-quarter earnings conference call. Rubenstein told investors and analysts that Carlyle expects to raise about $25 billion in funds concentrated on the U.S., Europe and Asia.

Executives conceded that, given persistent low interest rates across the globe, the new funds are not likely to produce return rates that funds from 10 to 20 years ago experienced. Even though prices are high, which has pushed dry powder across the private equity industry to record levels, and return rates are down, investors are not shying away from giving their money to companies like Carlyle. Rubenstein said that the lower returns, when compared to years past, are not discouraging investors because "they see everything else as being less attractive."

Co-CEO William Conway Jr. said Carlyle could attract significantly more than the $100 billion it is targeting if it wanted to just see how much money it could raise, but the company is tempering itself given the difficult deployment environment. Conway said Carlyle would not seek to increase its assets under management for merely the sake of boosting that figure, and stressed that he still expects its funds to generate returns in the "mid-teens."

Conway also confirmed a recent Bloomberg News report that the company was looking at about $15 billion for its next U.S. buyout fund, saying that the figure is a "good number" for the new fund. He noted that Carlyle generally does not do outsized transactions — the largest deals in its current U.S. buyout fund were around $300 million, meaning that the company will have to find a whole host of transactions to invest all of the money it plans to raise.