carlyle group is a bit player in arranging loans for companies but new chief executive officer harvey schwartz is betting the private equity shop can do more to compete with banks he asked a team to craft a plan to grow a business that secures loans for portfolio companies by expanding a unit that acts as an inhouse investment bank carlyle can control costs and recoup some of the roughly 1 billion in annual fees it pays to banks “it’s kind of obvious white space” schwartz a former goldman sachs group inc copresident 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 schwartz 59 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 nonbank 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 washingtonbased 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 25 billion term loan to chemicals giant nouryon carlyle has a team and access to internal and external balance sheets to do more 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 buildout of its capital markets group are at an early stage said a person familiar with the matter the expansion isn’t without risks the unit can take loans on a balance sheet briefly before syndicating them to a broad group of lenders and to the firm’s own funds if carlyle gets into deals while markets suddenly sour the firm could be saddled with loans it can’t sell a big expansion could expose carlyle’s bottom line to the changing pace of dealmaking which has slumped recently as rising interest rates make debt more expensive this exposure could pressure the firm to diversify its business even more carlyle also runs the risk of competing too aggressively with investment banks and alienating major financiers for deals despite the risks schwartz expressed confidence that carlyle’s capital markets arm should expand “that’s an area we can grow because we have all the raw material” he said at the recent conference it’s a business schwartz knows at goldman sachs he coled a business that did financing for companies among other roles before eventually becoming copresident he left after being passed over for ceo now that he’s at carlyle schwartz will have to manage pressure from wall street “extending the capabilities of the capital markets business is a lowhanging fruit” evercore isi analysts said in a note this month “carlyle’s capital markets should be a lot bigger”