Carlyle Chief Executive to Step Down

Shares of the Washington, D.C., firm have lagged behind its publicly traded peers since its 2012 initial public offering. Carlyle was slow to branch out beyond the volatile private-equity business and into others, such as credit and insurance, that generate the steady, predictable management fees prized by shareholders.

Mr. Lee’s departure marks a rare instance in which a handpicked successor to a private-equity firm’s founders has been shown the door. Firms such as

Blackstone Inc.

and

KKR

& Co. worked for years on their succession planning, telegraphing it to fund investors and shareholders long before a formal announcement was made.

Mr. Conway and a fellow co-founder,

David Rubenstein,

served as the firm’s co-CEOs until 2018 when they handed the title to Mr. Lee and firm veteran

Glenn Youngkin.

Daniel D’Aniello,

the third co-founder, was chairman until the start of 2018. Mr. Lee, 56 years old, became sole CEO in 2020 when Mr. Youngkin, now governor of Virginia, stepped down to focus on public service.

At the time, Mr. Rubenstein said Mr. Lee was “extremely well positioned to serve as our CEO.”

Mr. Lee set to work simplifying the firm’s structure and streamlining its sprawling private-equity business, trimming the number of funds and integrating its infrastructure and energy businesses into one platform. He focused on expanding Carlyle’s credit platform and bringing the firm into the business of managing insurance assets through the purchase of a big stake in Fortitude Re.

Mr. Lee had successfully launched Carlyle’s long-term fund strategy, and in 2015, the founders granted him authority over the direction of the credit business. The following year, Mr. Lee orchestrated an exit from Carlyle’s struggling hedge-fund business and hired

Mark Jenkins

from Canadian Pension Plan Investment Board to build and lead a stand-alone credit-investment platform.

Assets under management for Carlyle’s credit segment nearly doubled year-over-year to $143 billion in the second quarter, surpassing the firm’s private-equity segment for the first time. Fee-related earnings climbed 65% to $236 million.

Despite these efforts, shares of Carlyle have significantly underperformed those of its peers since Mr. Lee assumed the top spot. Carlyle stock, including dividends, nearly doubled over 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 LLC, Mr. Lee’s ascension and strategic shift ruffled some feathers at the hidebound firm. A handful of senior investment professionals—some with tenures of two decades or more—left amid the changes.

Before Mr. 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 serving as nonexecutive co-chairmen and Mr. D’Aniello as nonexecutive chairman emeritus.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com