Carlyle's search for new CEO is seen stretching into next year

Carlyle Group's search for a new chief executive officer is expected to extend into the new year, dashing hopes among investors and insiders for a swift resolution to its leadership limbo.

The board has a list of candidates that includes credit head Mark Jenkins, 55, and private equity investment chief Pete Clare, 57, though it's debating whether the job should go to someone from the outside, according to people familiar with the deliberations. It was still interviewing external prospects at the end of last month.

Carlyle hasn't set a hard deadline and wants to get it right, one person said. The Washington-based firm declined to comment.

The stakes are high for the private equity giant, which is seeking to rebound from three leadership transitions and whose founders — David Rubenstein, Bill Conway and Daniel D'Aniello — are keen to play less prominent roles. Mr. Conway, 73, has been running the business since August, when the board lost confidence in then-CEO Kewsong Lee.

Top challenges for the next chief will include restoring Carlyle's image as a dominant force in the industry, unifying the firm's competing factions and persuading shareholders that it has a clear path to grow and find new sources of steady fees. The stock, meanwhile, has tumbled almost 50% this year, lagging behind rivals Blackstone, Apollo Global Management and KKR & Co.

"It's a delicate balance they need to strike," said Piper Sandler analyst Sumeet Mody. "If you bring in a CEO who is old guard and going to continue to do the things Carlyle has been doing for the last decade, people might not love that. If someone comes in and shakes things up, it could not be positive either."

Mr. Conway, the interim CEO, has signaled to associates that he sees Messrs. Jenkins and Clare as capable leaders but that his mind isn't made up, some of the people said. Mr. Jenkins was hired from Canada Pension Plan Investment Board in 2016 to overhaul and grow the credit arm into a fee-generating machine. Mr. Clare is a three-decade veteran of the firm.

Some board members have told associates that Carlyle would benefit from hiring an outsider with a fresh perspective, a person familiar with their thinking said.

A newcomer would also have to persuade the co-founders — who collectively own more than 25% of the stock — that the person can be trusted to protect their legacies. Mr. Lee's push to aggressively grow Carlyle fueled rivalries. Former colleagues have accused him of alienating the founders, rather than harnessing their expertise.

Meanwhile, some prominent executives who Carlyle staffers had hoped would consider the job have told associates they're not interested. They include J.P. Morgan Chase & Co. asset and wealth management chief Mary Callahan Erdoes and Nasdaq CEO Adena Friedman, who previously worked as Carlyle's chief financial officer.

Mr. Conway has made it clear that he hopes his latest stint as CEO will end sooner than later.

"We are making good progress on finding the right leader," Conway said in a November call with analysts. "We want to find somebody that is better than I am."