A Defenestration at the House of Rubenstein

Kewsong Lee
Photo: Patrick T. Fallon/AFP
William D. Cohan
August 10, 2022

The big Wall Street news out of Washington over the weekend was not that the people who make money from money—private-equity moguls, hedge-fund managers—once again beat back the latest attempt to close the so-called “carried interest loophole.” That was to be expected, as I predicted last week when some people actually thought that finally it was les jeux sont faits for the loophole (or whatever you want to call it). And, really, the outcome was never in doubt thanks to Kyrsten Sinema, the senator from Arizona, who was well-paid by the money industry for her insistence that the Inflation Reduction Act not contain any provisions related to carried interest. 

No, the truly stunning news out of Washington, as it pertains to Wall Street anyway, was the “sudden exit” on Sunday night of Kewsong Lee, the C.E.O. of the Carlyle Group, after nearly five years at the helm of the powerful, and publicly traded, private-equity behemoth with $376 billion in assets under management and a market value of $12.8 billion. Carlyle’s stock has fallen some 10 percent since the firm announced Lee’s shock departure. “This is a sudden and unwelcome surprise change, particularly in light of the positive progress that we believe the firm has made during [Lee’s] tenure in terms of accelerating growth, entering new business verticals, and expanding profitability,” Robert Lee, an analyst at Keefe, Bruyette & Woods, told the Financial Times.

In 2017, Lee and Glenn Youngkin, now the unlikely Republican governor of Virginia, were deemed to be the worthy successors of the three co-founders of Carlyle: David Rubenstein, William Conway, and Dan D’Aniello, who remain the firm’s largest shareholders, owning a third of the company, and who serve prominently on the board of directors. Youngkin and Lee didn’t always see eye-to-eye, and Lee became sole C.E.O. of Carlyle after Youngkin announced that he would leave the firm in September 2020. Youngkin ran for office in 2021 and won. Conway, whose 73rd birthday is later this month, is returning as interim C.E.O. (For his part, Rubenstein has become a ubiquitous media presence and has a new book, How To Invest, coming out next month. I’ll be interviewing him about it soon.)