"It's kind of obvious white space," Mr. Schwartz, a former Goldman Sachs Group co-president, said at an investor conference this month. "Why aren't we bigger already?"
Four months into his tenure, the CEO is confronting his mandate to boost Carlyle's stock price and prime the firm for steady growth after years of leadership churn. Mr. Schwartz is hammering out a broad strategy and hinting about businesses that can expand.
One spot is its capital markets arm, which generated about $50 million in fees last year by arranging and placing debt for its own portfolio companies. Banks and other investment firms have much larger presences in that business. Carlyle's biggest non-bank rival, KKR & Co., has been at it longer and made $600 million from capital markets in 2022.
Carlyle stands to wrest more control over financing as banks rein in lending and shield their balance sheets in a slowing economy. Some regional banks will probably pull back further as new regulations loom: A swath of lenders would have to boost capital requirements under a draft plan by bank overseers.
The banks' retreat could speed up private equity's advance in the business of arranging loans. Unburdened by the same regulations as banks, firms such as Washington-based Carlyle are seizing the moment to expand further beyond their buyout roots into financial supermarkets that defy easy categorization.
Carlyle launched its capital markets unit in 2018. It's led by Brian Lindley, who was a partner in the firm's buyout arm and previously spent almost a decade at Royal Bank of Scotland underwriting loans for private equity deals. The group helps set up and issue more than $30 billion of financing each year to Carlyle's portfolio companies.
This unit can help the firm bypass banks by arranging financing and placing the debt with private lenders on its own. Recently, for example, Carlyle did just that with a loan to back software company HireVue's purchase of a rival.
The capital markets business can also recoup a chunk of Wall Street fees by working alongside banks in pricing loans and matching them with buyers. Carlyle recovers about 10% of fees it pays in a year to investment banks by taking roles in such syndicated deals, and aims to capture some 20% over time. For instance, it worked with several banks on a deal to extend a $2.5 billion term loan to chemicals giant Nouryon.
Carlyle has a team and access to internal and external balance sheets to do more, Mr. Schwartz said at the investor conference. In a key strategic deal, the firm acquired a stake in Bermuda insurance business Fortitude Re and advises the company on its account reserves.
So far, Carlyle has focused its underwriting business on its portfolio companies. The discussions over the firm's build-out of its capital markets group are at an early stage, said a person familiar with the matter.