CG - Earnings call transcript Q1 2018 | The Carlyle Group Inc.

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Operator

Good day, ladies and gentlemen, and welcome to The Carlyle Group's First Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference may be recorded. I would now like to turn the call over to Mr. Investor of Head Harris, Relations. Daniel begin. Sir, you may

Daniel Harris

and to Thank XXXX quarter today Curt our Kewsong Buser. webcast welcome Financial copy morning our on you, Good morning are Lee Officers, will and website. Executive Chelsea. available is Earlier Carlyle's co-Chief Youngkin, earnings on be Officer, call and Investor Chief first Relations the and Glenn we release call. presentation our this our me which detailed issued website. a replay first of with call and is available on being This earnings also press quarter With a results, a our

We will prepared with generally considered call. be in today's refer isolation accepted from accounting in during accordance principles. a to measures non-GAAP measures or measures for not financial These should as certain substitute

Glenn with any take let questions. will turn forward-looking Kew we follow-up and to for the remarks our will them. yourself review on a the have statements remarks involve reliance call, of reconciliations release. performance forward-looking statements in measures guarantee Curt. limit Carlyle update not and today one call and GAAP to one should and risk and on be including report prepared by statements those Any annual at our brief to any that me and future our provided any inherent We not of on obligation no With then to time. over financial those Similar Form uncertainties, question the queue questions. Curt XX-K those are do of section based to participation These made from indicated. materially last cause and each on current actual to all start undue management that our the earnings ensure additional factors differ follow-up To could these return placed quarter, your identified please results before assumes to quarterly provide in risks expectations results

Curtis Buser

Last beyond. Dan. Kew and objectives XXXX quarter our for and outlined Glenn Thanks,

those Our results in the first towards quarter our objectives. progress advanced

fund we Specifically We our in per quarter and ENI during outperforming portfolio proceeds investments. as quarter the that markets. after-tax of $X.XX quarter Economic that first distributable realized in in million $X.XX was of billion $X.X funds quarter, driving in per our in our X% buyout the the billion carry billion raised over of per exiting with large $X remained active deployed in produced We income And We unit half months. $XXX the with the appreciated Real last $X.XX DE the earnings $X.XX and quarter the million $XXX total. unit in unit we Assets. of about months. equity carry half $X.X XX first XX over funds public last of invested generated or common with

common per We distribution $XX quarter earnings expenses. Our generated fundraising to million $XX for unitholders million unit. the will in net be fee-related $X.XX of in

were you would quarter pace, this our given year's $XX than first expenses million robust fundraising As expect fundraising last quarter. higher

and, on which capital as at capital the up as recognize billion fundraising $XX of result revenue while billion, yet in fee many fees management, a as from we fees positive raised turned under newer have assets not turn fees We we we benefiting always, on certain $XX have reached the in the funds. Management substantial half for Pending earning new of grow over noticeably year-end. but from attract expenses to years. of second will beginning fundraising continue amounts upfront increased

of assets more by than from ago. year billion, We ramping to up QX. continue run fee-related increased expect to year earning management million X% to Fee earnings to a increase $XXX quarterly a throughout under the $XX rate

management. under $XX the reflect earning up assets management increased assets XX% Total over Importantly, this yet months. last $XXX not the does in XX under billion billion, to fee pending

at capital available for sits $XX billion. investment now Our

our a business Corporate and turn helping review Equity exiting Private to investments, let's companies segments. mature Now busy our In investments. portfolio grow of evaluating teams new are

of investments transactions an have than this $XXX new only $X pipeline we and, close first to while more active the we in million in billion announced scheduled closed investments new We year. have in quarter, new later

proceeds during quarter, billion U.S. volatility and continue additional resulting investments to Asia in commitments including raised Corporate billion. to $X.X funds. new exit fund Equity investors We capital despite for We the market first in $X.X of for our buyout realized Private

end increase second vintage management half the funds fund of fee-related We of in expect offsetting year. U.S. of fees, the latest first-quarter to our segment. and for fund quarter alone new buyout These significantly than in the more will earnings loss on second the towards Asia the million the $XX the turn fees in two

portfolio. continue Equity Private value We to build our Corporate in

For We generated economic by equity included in net in that $XX performance earnings quarter the revenues. first portfolio million, X% appreciation. income million $XX from realized corporate was driven and distributable private million $XXX

the realizing particularly than X% deployment was million of XXXX. the to and the in as first distributable million $XX We of $XX the realized growth realized space. Real below quarter $XX investments Assets earnings Most in earnings last with and funds were modest total Real lower the first period for We quarter the billion, of produced $X.X the In year. as fee-related quarter. revenues not first North the drove substantially in $X.X appreciation we and economic commitments produced to assets million large earnings Europe raise over in capital. we We continue in Turning ago $X.X QX this of Assets. Assets performance as fee-related in nearly new proceeds a received quarter. year of We performance of from several year Real Real net invested to occurred XXXX in Therefore, the than further incremental in America, Assets results for during group income level resources higher quarter, next our expect X% revenues. in natural were billion, billion tripled currently in active of record for

right were average. investors line with in fund longer-term for our proceeds realized However,

Moving on to Global Credit.

continue to returns, investment investment expanding and capabilities our building make delivering We raising our progress team. capital,

last of growth Global we momentum. results demonstrate will raised under largely the in time, quarter's our structured Credit, new quarter, and this positive business $X credit We As in just take but credit businesses. said of capital our direct lending billion

$X Over loans under have gross lending year, the CLOs billion $X new just we originated past across of our directly and platform. direct of billion priced

by to increased a scale our first continue thereby by of year-over-year retain their our can earnings figure share of to team during first the a fees to we larger of As XX% the $X improving originations lending million, direct should million in quarter and of Global million, generated $X fee-related $XX distributable Credit We that grow. continue economic management $XX million quarter. business both driven income profitability. earnings

of up ago. that with benefit accrue fund of accruing begin An quarter. We in and to realized acquisition appreciation proceeds performance are as from $X consistently billion of X% a to in Carlyle platform $XX net in $XX raised Solutions. million Economic the of Investment invested to Performance Alpinvest XXXX strong since capital on billion the year Turning funds quarter. remains our $X.X launched the was and revenues increasing carry. of million, income the now share

a than the compared accrued Net a earnings quarter $XX reached first double level first of carry of XXXX. generally in quarter in As XXXX. Investment the with net earnings million, QX line and XXXX. result million, $XX Solutions up performance in Distributable fee-related to more record revenues were the XX% were

trends; I and would of to areas: over Glenn I from color the generation like it performance of the Before, second, funds to hand transition two in provide compensation additional our realized expense revenues to next. one first,

First, compensation on the front.

attributable we see expense firm-wide past across to both cash three in and for three to drivers. year-over-year. main increase QX years, The increase of significant Carlyle did compensation and expense no is Following increase XXXX compared the compensation equity-based largely

out increasing Global but the year. continue the a in we segment expect driving is and also our to build trend throughout increase scale product compensation, diversity, First, an is Credit

expectations, larger hiring the platform. along actual of to and reflective XXXX increase we poised of our on our of fees management which, our full-year we compensation discussed, investment full-year Second, the throughout third, capital. selectively activation And of to revenue pace compensation are resources the level is with as raised support expected scope sharply new upon newly a fundraising and is first-quarter have

three the I make want On main to points. revenue performance front

to First, funds both by realizations, deeper carry newer driven of which accrued but respective carry. fund our moving the realize early are and only into carry continued accrue investment position to not better appreciation

realized older remind the revenues with third, XXXX in I to generate carry of from newer and of accrued growth realized realized revenues sum, is everyone XXXX we transition our increase over XX%. funds let we we And our it expectation me carry that performance vintage in-carry net portfolio level lower and positioned to in to Glenn. growing significant now in earnings of in in want a XXXX substantially this as expect for in billion compared turn this to beyond vintage. With year, strong quarter prospects and fee-related the net XXXX at ratio to that, performance our beyond. addition see $X.X to Second, In to

Glenn Youngkin

we and Last everyone. you, priorities out morning, quarter the Thank laid year. good four Curt, for

will performance, coming in growth our years. investment latest over revenue driving especially performance the which First, funds, vintage underpin

raising $XX $XXX goal XXXX. march Second, by our the continuing towards billion fundraising billion in

would reach growing fourth, credit quarter at fee-related a this $XX quarter million earnings our year. we with on the of building least by Third, rate that And run expectation business. the fourth basis per

the fronts year. are we the to good made Curt As explained, progress tracking all absolutely on and objectives quarter we meet for our first in

our expected million earnings factors highlight that our want Given confidence key fee-related the target. growing year achieving and ramp $XX to the in importance two I of underpin the this

to very in months momentum six the sovereign in $X our good LP funds representing funds. commitments high capital past to with investors, largest institutional of billion fundraising raised in capital from the our months billion to raised. last This community, its demonstrate XX interest this and come ranging funds net funds. than to funds, of committed the worth broad-based. bulk support $XX raising to continued wealth momentum year. continues new is targeted we from see and over we the our in First, systems fundraising or XX% retirement over more our see strong more investors Having billion feel The Over our platform new $XX XXX about the global across XX yet investor capital investors Carlyle

in vintage latest $X NGP fund over is commitments. Our crossing billion

in US Europe billion. vintage And buyout recent these at Realty past a our Tying Curt on anticipate fund while combined billion $X the Asia week. to $X of the additional recent held made and earnings closing billion, to of buyout most AUM. Our closings its first latest last We ramp US a fee buyout over $XX a and $XX in reiterate this just earning moved closed commitments this are point fee-related all pending billion these year, back large earlier, of funds. to portion have

the of drive fees Turning and in management fee-related on those fees drive turn growth in ramp in the over year QX, will these quarters. will in in which earnings course QX the

the funds leverage capabilities XX% our of FRE to this expect FRE, next quarter's drive and and provide approximately selected highlighted these Credit. growth FRE from improved Global expectation the it we be average investment the in meaningful by run growth generation not our to will we previous areas change Last today rate the our quarter quarter. businesses the $XX on of next in than investments Second, $XX scale will improves A expected important, will operating growth the that to step only ability business. time. fourth we funds other areas drop funds our our will are making Equally target through Scaling and larger also generation. providing critical as of like portion continue to in invest over increase Credit this scale million both growth, stage the Global million

we fact, I $XXX from keenly and our in Real are fee-related has are seeing earnings yearend In to Kew growing rate happen million where an at on earnings. focused already this today. increased XXXX run annualized fee-related Assets million $XX

results investment continue. of generated and that strong a to performance steady the stream we expect have Over consistently years, Carlyle's revenues

and against our Kew. With execute we which as revenues for let Carlyle me good to performance have we over earnings, and the turn drive is conviction fee-related in in our for Importantly, for ability simply it an that our goals year, investors. quite to increasing growth both

Kewsong Lee

to I perform Glenn. my today our our in comments to fund market you, valuations conditions. of continues investment namely on one We an theme, major for remain Thank environment difficult despite and platform want now focus volatility. well increased high investors

our prices asset appreciation investors conditions specifically with investment remind realizations portfolio our especially I our to ought of existing Despite not as capital, As last become of challenging are complacent, high relative exits. performance, volatility these and remain stated history. to deployment quarter, we from pleased to

to talk Let $XX Carlyle me each the over XX deployment, approximately over in and in With respect quarter invested the about turn. months. $X billion last first billion

and long-term fundamental elevated Our enables market short-term beyond on helps portfolio value offset in our orientation our and us focus price environment. gyrations, creating to the growth companies look

few through recent you transactions. a walk me Let

Our energy of Africa day. the executed. the EURX.X North E&P dispersed Asia that global to this than generate More platform, the out Southeast worked complete. Neptune Energy, acquisition Nobel, producing took and carve that which from of carved is Asia has executed over specialty complex the $XX.X about conglomerate professionals difficult out the was than second amongst private our three business equity backed XXX,XXX oil throughout enormously North transaction, segment ever in billion energy announced and United States, French Neptune a year. expected together across more of year Europe collectively Similarly Sea, XXX transaction Akzo Carlyle a an the years close assets gas oil half Carlyle equivalent a for net recently deals from to that billion chemical a per business most in and barrels Carlyle the on

aided of on of financing to and fast-growing segment end corporate resources the across to the our with traded a basis these States are quite fund transactions the the in which, million a regulatory this Global in tax needed for our structure On frankly, pursues, creative examples our have that proprietary Credit a ability that in $XXX the just completed significant other weeks firms United together its capital, investments downside complete. a a of publicly weeks in or a two two two expertise types transaction in protection just or we world, few In-house in pull whether or to spectrum U.S. years, equity few three or the Carlyle capital subsidiary. recently for nontraditional debt, expertise

of any to quarter, While across predict to in investment opportunities source the well over strategy Carlyle's the time on deployment our constructed diverse platform investors. mix difficult ability behalf region and is portfolios given actual has level interesting build to our of sector, fund and

that investment be to our portfolio returns replicate I comment. our remarked and Now to with cautionary respect last appreciation, to stick quarter that will recent hard I

generate However, our performance attractive investment to existing portfolios of the do our across breadth continue platform.

over equity appreciated performance. Equity But the in Our outperforming XX% Corporate exhibiting generated over Private carry year. and X% X% listed asset Natural portfolio volatility year, value quarter in funds periods. focused X% global part funds X% lending exceptional factors. carry of in in last team estate declined. quarter the building which has past in currently direct year, portfolio many over XX% credit we the short-term the in loans mind, public markets Real the Short-term carry quarter long-term. publicly a up is and our Credit resources in level over existing in the period assets doubt an the in No up with of approaching on both markets two And estate an Global funds. yield our are muted impact on our keep XX% marks last were and real funds were by movement in

only generated of our taken value our carry First, in XX% equity second, annual revenue current EBITDA of public as growth results. continue funds to exhibit market private XX%. portfolio underlying our while a and strong portfolio median growth their XXXX have in And XX% companies companies, equities. increased very segment whole, our fair In

assurances the these fundamental are performance no strong but current there given we will in trends the of from our portfolio, course here. potential companies creation continue, see underlying value Of substantial

finally Now with respect realizations. to

the historical realize make our XX for are we be environment can billion tailwind. an by this billion execution $X.X We volatility proceeds While even successful been past current have standards. of very months. exit, investors returns generated during our when $XX fund over good, difficult And can the more and a for quarter with

Corporate IRR fully In average on of times across performance conclusion, remains focusing generated exited transactions and past of multiple X.X weighted investments strong. funds XX%. example, our Equity over a gross year, these the For in Private a

attracting amount and capital towards goals meaningfully are fundraising our a are and we making year-end. significant We FRE tracking new progress of a towards of level great are higher by

are happy questions. now We to take your

Operator

line Thank question Instructions] with Citigroup. of [Operator Bill first comes And you. from the our Katz

is open. line Your

Bill Katz

taking for very this question morning. you thank much Okay, the

a So, I FRE I the question two-part appreciate outlook. the guess. about commentary

little of more, you compensation? we the on to your break about the commentary include build bit and thinking part in cost the down FRE exiting think the So bit how be quarter, year maybe a the you fourth concert that as should out? the FRE exit about a of that full And XXXX, does with early credit

Curtis Buser

Hey, Bill, question. your it’s Curtis. Thanks for

Things $XXX per comfortable we with million rate higher. hope translates are a run we $XX and $XXX are for real been AUM in look, with before fee fee that way earning the first, here ultimately having. quarter we The million end really billion year the first forecast that have pending track. second needs a the – to be hit the of really rate. performance $XX feel paves We in so, million but of And on that's year. we reset like are half a So into very and the increase second pleased – at that revenue on the forecast do to quarter of we strong the track, better.

where comfortable are. So again, very we with

high in comp a to are level thing levels those ramp that costs, our is fundraising costs that here All than number and million, $XX will been bit everything see revenues fundraising you of you have and in that into The in million, see little are included are as so the more that a this $XX of offset. predict. But obviously the first expectations. baked quarter hard will

So are where going we end are real we up. with comfortable to

Bill Katz

Okay, billion been raising, by to obviously doing that where thank a you asset in longer-term on you. very left do greatest based capital just $XXX this be and maybe geography? would then gather What’s on And guide the terms of see quarter. even opportunity or follow-up you’ve class well just where

Glenn Youngkin

Glenn. that Hey, Bill. as for Thanks well. It’s question

are at $XX $XXX us for leaves first be tracking. of we to should end $XX So raise. on said, billion year, I of the billion billion, which this We the all, as XXXX by about

year slate Of driven that raised course by products big include into is have in funds market. our dated our fund of Global will a Private which private and of are Corporate fundraising to coming to is equity of by we then. the year products back Many which energy called in been market our hopefully have half Equity XXXX, Partners; great But also the fully the year this long fund. international

We part fund. offerings as our are real estate business. imagine, of credit, Lots important can still that’s our raising an as of in incredibly European you

the back across the to those slate strong of half will market business in a and still and bring really we we have into XXXX. product So this year

Bill Katz

for Okay. Thank questions. you taking the

Kewsong Lee

Bil. Thanks,

Operator

Thank you.

of Stanley. question line the Our Morgan Michael from next comes with Cyprys

line open. is Your

Michael Cyprys

question. Thanks Hi, taking for good morning. the

you portfolio strong mentioned. Just company circle health, on wanted back trends to the some

top XX% EBITDA I line said for think you I growth, if had you heard correctly, and XXXX. XX%

tax out been it’s the couple since just reform into over we’ve passed. trending And seeing you that XXXX. months are looking XX a So next then how had curious months

at of seeing of investment any extent portfolio to sort you’re impact company. initiative in how sort curious from across company is what resulting that the any level. Just corporate portfolio that new And the

Kewsong Lee

and With is time will Kew. portfolio just since Sure, our XX-month growth question. From a portfolio, recent than than tax color. I’ll the global company little then me of the respect is bit give most to perspective stronger you Michael. Glenn It start XXXX. periods let tackle any

a as EBITDA some as bit grew it were I while region, operating if by was little earnings said, to I you XX% of in point And break sales So And South strong America by see XX%. for median to especially advanced Asia to up Europe was we outperformance some out XX%. down pickup XX% up in by in are and in in Africa the XX% also emerging markets was also as growth starting year-over-year year-over-year. XX% and I’d like

the probably about mining to transportation want helped sector were sector industrial contribute point do readout you to growth and XX% in If activity Also to energy it to energy industry top-performing by of prices. growth our China rebound increased our in and was out in XX% thanks that portfolio.

back, around step synchronized we to So globe. basically the taking see continuing a are growth

are and of of the has that helpful any deceleration. a stopped out signs for the to steadying We as opposed it’s growth Hopefully seeing color you. that’s acceleration more

Glenn Youngkin

of And effects just is the Michael, it tax the underpinned bill. by

to bill tax companies flows to the pro-growth; whole be portfolio the cash for are a expected We expected as improve.

impact slightly the we a Of for tax tax positive portfolio. we each of our course expect the as quarter, different bill. last net said to company has from bill effect the But be

Michael Cyprys

you Great. curious if as What And night? risks just as I see do there? And articulated, to a geographic follow-up, either starting given asset could you of regions, you form if keeps just sort growth, classes, synchronous cetera? at strong do what what see any, you cracks, the et out up ask key

Kewsong Lee

at frankly, not far business to on about to this on what at Are all that’s a any ability our activities. course. seeing Of will the on are one-off there whether going impact question we large we to of thus Europe which about we days lots is about things fundamental will any it’s rates impacts Brexit America us over happen. of talking we or not and portfolio to mean? what’s our up in politics for happen? the be Well, what’s in, values stuff our keep in geopolitical that Sure. we happening focused focused frankly, really because not be things really that’s has thinking try or not and that early the Sure. the But that any us are invest or, keeps this. really talk could night of are a potential Quite Are focused whether that Obviously and happening company. big on Are could quite I’m – rising here? on look, to

to track. So like we become of thing remain we to are said, is most I sure the do think But complacent don’t is the thing do. risks the lot on investing we we And of the our continues needless around keenly making say, business aware can performance important us. important I most and a

Michael Cyprys

Great. Thanks taking for questions. my

Operator

you. Thank

Our next question comes Gerry Jefferies. of from line with O’Hara the

Your line is open.

Gerry O’Hara

really at me, just Maybe that if growth you past obviously of segment, the from the cited sorry, of Global I’m XX I’m kind the looking CLOs and one Credit billion market of or – $X months for the correct.

trends environment, maybe could characterized demand you amount issuance as by be some in fair and the pricing risks of of that and that maybe what some of seeing the to whatnot, seeing there demand Thank in a market. you’re and there would could of if the of Just But as market, comment on that wide-open kind seems given what lot helpful. maybe well, that be talk about kind just overall clearly, or you – a you.

Kewsong Lee

I’ll of there. little try you a bit to Sure, color give

than one CLO retention strong four could over strongest We’re consumptive the Risk as capital our are totaling $X it more months impact have the we $XXX million. entrants in into very reset less And this growth last seeing to million I and XX that the does the us, on think in rules issue market. CLO closed new attract growth aware. we’re the changed, to this pace businesses industry. which new CLOs becomes you one on about billion approximately in year, but have year. business, XX% is This it of CLOs also QX of $X

strong way position frankly, comforted do seems is of important. far, But will so up what liability if they in quite very seeing that continues obviously we’re deal it more think as probably this do ability that’s if the – allocation And And picks I activity strong and market to activity. if or CLO our spreads to side, by in be we’re in our could environment. the the our be fact progressing terms M&A thus challenged good is demand rate in for the business. obtain the obviously, interest business financing today, quite

Gerry O’Hara

taking for Thanks Great. my question.

Operator

you. from next Thank question And JPMorgan. line our the Ken Worthington, of comes

is open. line Your

Ken Worthington

Hi. Good morning.

extent higher Chinese sellers. investment from profile profile and to to gone have buyers First, higher some firms investors

how Carlyle So implications and you equity influence asset are this more private change, maybe broadly? maybe impact think might directly? or what do investing And the private for

Glenn Youngkin

for Ken, it’s Glenn. Thanks that question.

of the direct root. all, into last you as the just by meaningful, States change of that’s the foreign not the First taken Chinese has been phenomenon firms described investment has that’s XX globally, United over U.S., the months and

both the investors in Of of global earlier. course, that’s referred political Kew currency topics been just been a result have to matters world around of some and one China course, of of reality, that the the In Chinese competitors. many

firms always to are our who’s asset competitive. be And competing. Chinese in there’s selling, somebody competing going whether so, And across or classes, of the world today the all it’s of investing else

aspect pivot is an in to which when just and comments, capabilities of investing I’ll investment we have. today’s important we we therefore the that are Kew’s high back So, decision. bear of breadth to, we do a How bring bear the making to is making capabilities about very to get bring conviction world? are Prices all feel we the confident fact, most that in of

So deal firm, resource for whole mentioned, that on the that areas across investment. opportunities great which extraordinary the see deal base like are Kew Akzo an draws a Nobel we

and think it’s may moment, of there tooled compete very, competitive at So, well while to and the buyers out a we given variety we’re well. reasons very for change any sellers

Kewsong Lee

wouldn’t their specific to Yeah. add, generalize The one versus thing I companies and issues I’d companies. Chinese and or Ken, only overarching an separate – of need is examples dispose I necessarily first behavior from of all about would at of two assets extrapolate

capital capital I but continued Second would source just region is out us. obviously real deploying teams of us, markets. it’s the of investment destination not one the for is the faster believe be a world to do opportunity it ground we – that see continue opportunities of as – the investment for our the China all, much in also leading by that to grow of on point real we only to for than a developed continues And region of investment what there

Ken Worthington

you. and us thank great, where fees Maybe see and how Kurt, should might Great, we about for can on magnitude? any you Maybe give for we XQ XQ? think them help catch-up

Curtis Buser

Catch-up of of we are fee on pending $XX turned the critical on the when fees. The already driver you’ve AUM, fee fees. fees billion is earning yet turned biggest which growth haven’t always our

turned then are and fees going fees to more So we catch-up management have are on be once subsequent powerful those closings.

a see it talking the about much in would’ve far. otherwise bit, has been hasn’t far, thus I’ve done been here thus little this but them as like I really will been that past small noise You

Ken Worthington

but of for so turn any the to as to look And expectations are going big the XQ. we in second maybe the you half on XQ, fund Okay, year?

Curt Buser

The so FRE, to on catch through catch-up the in a of won’t growth in them to. to expecting FRE lot to expectations turning But we’ll we management million there’s obviously of up lead are are that $XX nothing will will see a because fees it fall that generate because QX.

Ken Worthington

much. Okay. Thanks very

Operator

you. Thank

line question Credit comes next Siegenthaler the Suisse. of from with Craig Our

open. is line Your

Craig Siegenthaler

Glenn. Kew, morning, Good

down Evergreen like XXXX revenue We could one follow-up in some you cyclical. forward? have think credit on Or you been mute your see a the the newer Do your cycle has of FRE is and XXXX? businesses going of this private build potentially continuing highly this on this out side. FRE Historically and do

Curt Buser

Curt. Craig, it’s

cyclicality As the business. far we less we to forward look see

a growing, buyout So strong the going news turn that’s into strong piece. is that’s piece, nice good to

I you’re peaks business We’re things but going this a Global those also have like building will work business, in to of carry bit perspective and Look, about which to if go-forward in realized cyclicality historically far think little a think our real you on is Credit than always valleys. less we’ve minimize only it experienced. a what basis from And year this the carry. dip

have had and we of realizations seen. to have stability We And very I that return carry. thereafter a we historically history stable XXXX think that that

Craig Siegenthaler

But is just the one could your XXXX. in was is And also largest then know and deployed I check your And your capital back quarter deal Nobel half of do our standpoint this dry size. getting powder I equity ever. wanted to to know a any conservative quarter fundraising strong Akzo I powder it years. if relative function the be And than globally. lower balance the more the highest the the the given a indicate of expensive And conservative first over just little is see here last coverage But points from investing markets the the you’re side? just dry more couple equity

Curt Buser

we basic don’t some just maybe numbers. start Why with

to invested about is LTM So things. billion. over which of last from prior right really way months $XX the $XX XX the we’ve not Quarter-to-quarter think the up billion,

making investment say this As this over pipeline is will that Corporate investments I even close it and light about later deals quarter. little I billion The to sure in robust. Equity, we a table. that would was But announced those the finding Private are we key year. I the from bring value that picking talked very what seeing spots remains bit am of $X where we’ve our got we

Kewsong Lee

fundamental not paid better that And thesis is that exceptionally because in offset EBITDA engineering private but management question returns, or literally robust. great the and lot are partnering correct equity quite need about if have you for expansion a our prices of growth. It’s and around buying, And this, great quite are are in Kew. of talented activity you we’ve them it’s world revenue the environment. companies, companies throughout the Craig, with high-priced by But these think a a and, great at pointing powder. two-thirds financial XX% our helps is to the But of Hey growth are teams. yes, we that even Yes. generated levels firm some to returns to dry by be out, we looked take make the it multiple do

creation type potential of So, the value through add when we bringing. that value our you orientation yes, we we but that that and fact environment way generate the an have priced, don’t the way it are and love can push see so to drive high is growth, and fundamental the our because

over hard perspective. consistent and Now risk where a deployment. kind predict view through in also portfolios to keep vintage this manage from quarter-to-quarter in a a of timeframe steady of mind to five-year But it’s deployment properly construct type really order deployment it’s to we risk and

seeing we little gives are well. you a color kind as what as more So of environment hopefully in that to bit today’s

Curt Buser

Thank you, Kew.

Operator

Thank Schorr you. Evercore. question from with And Glenn our comes next

open. Your line is

Glenn Schorr

talk global couple reconsidering if guys set key about real direction are there’s firm’s we could you business. Wonder a last at. there estate for level just real of estate of and second there. some Hi see the month where I a, people talk departing was

just that Thanks. a could talk little So about maybe bit. you

Glenn Youngkin

It’s Glenn. Glenn. Thanks, Sure.

our over segment we see, can a big months, when pleased is which with billion we are at many The valuations XX Asset up portion in mentioned. XX% XX% as Real making the $XX backdrop as is of That’s real the last really public well. First, portfolio AUM, that progressing is are we were against broadly estate Assets. you Real A of estate real real of progress look was up And year-over-year, estate. Kew down. that

$X.X fund great open-ended is evergreen. XX% Carlyle fund Investors in behind a and call the take-up Property real of And open which growth at the over $X.X real strong us. for crossed estate which was That’s fundraising we’ve estate which crossed the billion. has strong business versus or heart $X.X our fund driving That billion, course increase. a last had of It billion. our really that is lot Of we Realty plus is very ended business is over that AUM also U.S. U.S. just our is core But fund structure VIII. a

a standpoint, Europe have progressing well mentioned expectations been will put able result, Fundraising the we of that years the really is we’ve So been really number business strong launch a Asia, an over in a the refocused there finally, that into of have is over real to you in U.S. then on has fund. as team to and and the business new course as And moving China. next we strong last really grow. begin strength to from our new team place estate has performer from investment year strength. the

team China. a have in We strong

We have a opportunity. over very good a offer will track great record of in time China. And we think period the a market Chinese investment long real estate

those on areas. So, focused three

We XX expectations months. are and to last with we pleased far grow over have business the the performance so

Glenn Schorr

That thanks. was great,

little one at, share it’s on you Could fee being a of Evergreen I because bit we maybe there’s looking think where type a mentioned. sold and the fund there? follow-up Just are opportunity big do what you structure

Glenn Youngkin

– it’s or first add a of value it XX% is Yes, investments. focused a fee it carry a all And on plus core roughly is is U.S. focused and fund. X% fund. It

Glenn Schorr

And where? distributed

Glenn Youngkin

in they net so and can high ended if choose. open and And again, stay investors it’s institutional worth. forever Both

Glenn Schorr

Okay, Thank awesome. you.

Operator

you. Thank

comes line Carrier Lynch. Merrill next the Our with question from of of Mike America Bank

Your line is open.

Mike Carrier

Thanks guys.

to just just funds that Just XXXX realization build, mentioned But Curt, just you the the, guys performing said to on and lower at and fees well. be outlook, to be sense look the I you first – to the get a question, realize because you before. guess performance expect the net seem distribution wanted the accrued, when have we

outlook year from gauge maybe legacy FRE know thinking soft the you levels. So beyond, transitioning trying like when to heading at and new size way base next we the building years. of about accrued you patches few funds the for into distributions just plus XXXX to said the if the when kind this up of the are any the I to don’t maybe historical look versus net relative to there’s potential But are

Curt Buser

had thanks point in Look, real Mike, the for question. growth the accrued nice out. you we’ve carry, as

of from billion at now, end up billion just $X XXXX. $X.X over So the

of larger end will – continued mentioned to great funds B, almost doing have are, they’ve able products that’s They on really exits The to more So – carry, and run that’s of to of exiting that before, of very now year, that funds which funds. able will good. strong driven have they take The realizations. getting and funds same newer are cusp now, and round be that be are driving deep be of Glenn realizations that ramp rate out through also The have because take are predecessor we driven and done still been have than by the time. of they comfortable going next bunch – fully at like we to the are well being platform And A, those that’s that – beginning really with have this also especially a greater. that essentially carry; lot from the fundamentally and funds really generation been the incredibly returning of of there roughly funds see real accrued current really and really we to invested. historical accrued us go. XXXX. the funds additional They to appreciation are been XX% are generation enough A also energy carry We’ve you XXXX just as carry been But those well. carry. XX% be targeted new to to where returned they are where raising now of are capital for into are

now And this generation. prior their that raising that generation current further. point build we’re better continuing investing So out, we we now have as that than funds of you really see been and have performing

thought level. It’s going higher to returning is the XXXX And have I that’s comments seen So why we latter around not because seen predicting important what out, us carry going into the forecasts, But really was get that. what a that here be point exact XXXX, to which XXXX, XXXX, you you in Hopefully dip exit that would some in into call is hard. I to to made to timing turn to hard especially you’ve color realizations you of half comparable the say before. back gives in on from that forward.

Mike Carrier

as for maybe that’s And a Kew. maybe no, then helpful. follow-up Yes,

helpful. and portfolio was you companies Just a detail of of the that gave on lot

that we’ve some the sector. on think quarter this volatility like I the has seen weighed of market

return. into funds digits, if feel like, So but double of maybe level terms can digits, continue when you the XX% market expectation. gauge, portfolio Because just in the what just growth, not on performance? – XXXX range Because given to whole some with for outlook translate that whether fund for expecting look to what not CPE the it’s and low the of this but high get over trying single trying weighed time volatility, typically returns, the with we company does you that’s just the sector guys, kind I in

of this historical environment? given companies kind So perspective producing are the just in portfolio any where current

Kewsong Lee

our construct our seeing and the tend after we and can is where beauty lot of when buy and why get do indexes very to bit. perform you situations a of GDP, Okay, the specific help teams. we And shouldn’t value better indices, let of rates earnings you’re with that with is generation and to carefully it is of we can portfolios me pick diligence why try average, around conviction company that business that a I their to than little portfolios very don’t our have work create better The growth – we portfolio the that partnership what in we with than think some surprise which management a our be companies. we

for that. that how better “the than, better commonsensically Now should into ultimate if performing doing market” you’re value, be rewarded than translates and average you’re we

relative XXX basis outperform we X,XXX public indices historically by trying always thought so, have points. And to about to market

we think that I target for. we keep is still that shooting a believe reasonable

nothing and coming look would they dissuade type conclusion of outperformance. in performing relative current generation funds to how that are from you of terms at to you a our date, of If

tell create clearly knowledge about is specific breath past got with of the sit Now to our we to to outperform you, of ability investment what to tremendous our I a basis. situations drive where continue future could our the the I’ve staff, of strength indication become. not But chances an and here an the feel with to have platform, with we and as our ability good and pick relative value, pretty on today,

Mike Carrier

lot. Thanks a Okay.

Operator

Thank you.

Blostein from comes with Alex question next Sachs. Goldman Our

Your open. line is

Alex Blostein

couple the much two back very you obviously as business credit building minutes morning if you the the maybe are least currently of of other wondering years? profile on minute the years does a a was the couple The the dominated products as spend probably next that to fee a it like out. for to to of good as half second could what everybody. I for three of the management CLO out some next But Hi, guys spend business at look business. majority over vision the the fees. go build on composition you in AUM, Wanted

Kewsong Lee

Sure.

we’re years rate, to to only and level really Credit. upside the large major are so a AUM made we already Obviously XX%. – is very touched come, continued at from going is strategic by Global to are which start we just we priority this pleased starting in we’ve in need do we really we us significant have really do me run look, here, a And to Let look, is the set. of for do surface And see Management but huge space. and see time, a earning with progress are saying, fee this to We’ve fees of year-over-year. $XXX XX% grow. million an grow ambitions over increase see it

are down in market. intention we now we can CLO a business and giving that position leadership the no have of that I if large So, Clearly in little bit. up break already our

XX% over If occurred has just past lending, you at in XX look months. AUM growth the direct

in We had of increase buying over an have basically XX%. power

on strategy traded grow two you’ll Fund. one. to the SMAs. at was BDC, our have increased now have that we some to We It as vital We strategic established public the if with our we very to know, could publicly get potential approval limits XX%. from changed one rules to one platform. Opportunities are shareholders AUM large obviously of have just our leverage And launched other by and And for a BDC our a Credit have

We potential to relatively billion emerging as now market, that see just deployed opportunities short in a nine And investment in close London period time. person $X.XX referencing, we already do the in volatility with more and more have everyone of in with strategy. New a team has been York

vintage I bump, we real progress markets are the areas we have look the about going occur a that fourth that And hit having account funds, obviously, in you already we into are other include, even that telling doesn’t top if think of in future. does This on forward dislocations – is does credit been not quartile. in so, and the many which of one business more the if distress And that And each there or economy exploring. take to fact wonderful a opportunity be to there. clearly there’s other speed a its lot

Alex Blostein

Thanks Curt. for quick answer. for a just Lee. for that And Great, guys you follow-up

for and run when we and guys about about remind So, opportunity scale expansion rate? more continue the FRE, the I you XXXX margin what’s can as think underpinning run that us guess is $XX you pretax importantly, platform, to think should how into million we FRE build pretax FRE XXXX? the out the that rate margin And

Curt Buser

this mind, terms on in we’re focused on little total well – growth still early Margin as we a the both is of where want the be. keep of are it, it it But standpoint from not FRE Private it overall we outside if on XX%. quarter Corporate where we of Look, you look game in bit margin. But to is are Equity very in at it as focused we’re margin.

add everything, be us and consistent XXXX. quarter, you to is is Equity XX%. I’d Private a although So more. it unreasonable in up in is there like That at, expectation back were with we loss for current Corporate where to excluding an back not be it That’s the where

and timing talking after at we’ve in calling the we we’ll out think especially specific that and at FRE that position we’ve the of end really predicting will a the – now When terms fees, of depresses you better that predicting related right makes tough all driving of so movement But been in the because be on, have we’re We we quarter revenues now margins right be, the forward. million to fundraising target. think that quarter of first where will achieved when terms that I’ve first expenses really we those of management think terms that’s turn in too say, of hard from fundraising an know. mind really got But it’s quarter. give got we $XX of get in benefit this juncture. about quarter this about, margin early. that, real In no to in going expenses, achieve guidance much of fees forecasts year, to that to Keep as we margins now, the

Alex Blostein

Got thanks, guys. Understood, it.

Operator

from comes our Deutsche And Bedell Thank next question you. Brian Bank. with

Your open. line is

Brian Bedell

hard get couple you can realizations can trying to funds. Good I’m of my their think in on morning, rates a to segment, rates answer, just guys. Most be and might but a carry of just sense Maybe asset real maybe. have more in answered, when of – been but questions the of the the asked and just the carry hitting some hurdles on terms overall timing of the improve the of this some

Glenn Youngkin

Thanks Brian. Perfect.

balance. and So, first the carry. over and accruing those accrued the cash segment have proceeds as of those But we'll latest accruing move are into exit and and through to all carry take now crossed accrued as begin funds funds, realization carry NGP the funds carry our in return own all the segment, carry. clear, contributing to US carry our asset of real assessment we the to in largest just and be of funds estate actually And funds. in actually particularly And the are vintage real funds then

Brian Bedell

little Or In carry that that is guess would state? to terms are the you happen conservative I you're it more? a want being accrued and is realization they think you that framework, near-term of given an in out relatively push something bit

Glenn Youngkin

first, So double team Curt are I this. to going and

all not of invested therefore of of exit of base solid a have a those reasonable for when part having in the earlier, And these an funds. take returned as there can is meaningful solid exits of our all, capital portion and as we or critical. mentioned First assessment having distributions comfortably carry, of funds if he been each one

when we've taking with the distributions. So that comments cash important funds of while their combined a earlier very are to have hurdle in milestone when good a taken That run at is the cash Curt's not carry, carry. had mentioned above he fact rate we or

Curtis Buser

quarter question, realized still total that year. the this is on It course from in so are increase obviously in the XXXX, I of But see believe adding a will over realized segment. perspective the in fully that this for we XXXX. your in for profile going than Alex, of just year a think this segment overall on carry the to very was over XXXX segment. modest carry improvement balance the the particular change perspective lighter won't to

start they we've platform the to get engines as lot later of XXXX pickup the as think this really really more you in well and carry. coming. that positioned realized real I And all really are contribute are though a that said, Glenn and of really in got

good basis. very on feeling a So about go-forward segment this

Brian Bedell

page XX those of one Thank from press And that on use that you then broadly know much some increasing you the Has those. just you of on their equity you of the the lines, have usage private do just in facilities sense for – follow-up is question. firms facilities? the increasing use in get Do the I that. on maybe that magnitude to I that. been very that buzz industry. wanted see commitment increasing? a been site of credit There's industry

Kewsong Lee

a me Let up few lines. of on comments fund offer usage the

very we be and and forms performance these funds of effect in a lines all benefit out manner provide with encouraged internal LPs of have vast other them to including how subscription operationally, I of limited lines. out use so have doing operates they point return. but optimize each capital credit of have leverage lines want us that such that ILPA clear of a to it minimize disclosure Not this the of govern years of for it initiatives to rates our the agreements are we very credit does us it's majority how lines but of to fund. and of credit, supportive uses way the help number of our set that the just our few using the partners LPs so of last these in over So have are of also described. the to supportive have kind of in with fund lines to I the calls But of of both to without from the several just view, investors heard helping

supporting we've know template early with an adopter actively reporting very been may have you As engaged their transparency and been of initiatives. in them ILPA

lines – do very think used being how and are credit careful we say I so. are is we but fair these more, prudent it's it So to very in of

Brian Bedell

Great. Thanks much. very

Operator

Robert with Lee from question next comes Our KBW.

open. line Your is

Robert Lee

Great around your a the and you're capital, for patience with thank questions of way usage. guess your questions. thanks I how in thinking really all both you your Two capital

in have actually into that is you're should acceleration deeper this so and cash use start to acceleration a FRE, possibility cash a XX%, have lower it's a and I payout So we you given start up this look who is, and as are FRE little generating, thought the variable having there distribution, balance in your where other where of to if are relative or to – therefore beyond big could just cycle acceleration sheet. you we realizations, to understandably more think in see where your XXXX your I But acceleration distributions or peers guess a maybe ratio payout migrate you your of big in also your the realization composition that ratio, cycle? get as

Curtis Buser

your current distribution our Thanks are for question. comfortable with Look, we policy.

there's considered know, ago a any generally, $XXX it's that obviously policy. in potential in just of get but that that change look been you'll nothing something think and million years that remind start as We so rethink $XX disclosed, of piece our units And to one dilution that XX% and that is, authorized dilution that authorization. expect practice. as distributable do we causes I thing appropriate make of announcements us manage a units. couple that see have We million kind to our remains, that. that's comes we've have been for that really $XXX more made that rethink our we The payout we to want I at everybody not up or the announcements would to to us remaining be used will buyback. potential There's you our any million potential related distribution in our using change caused and earnings us after-tax has appropriate of If in active has outstanding

think the up. have And that, capital where some we to from see probably thought question more relevant a more starting you pick perspective. that's I around I that's can but So, back think activity

Robert Lee

your my thoughts just updated follow-up, interested just Great and as maybe then in on inorganic growth.

disruptive? you Investment then well. so and don't So had the business seem had need you when to past, others had think obviously Solutions don't didn't I of that – you fuel now you maybe it in some your NGP, out your – in work But the you Just are clearly just potential why to too but your thinking credit a messy something interest you or and is that faster even that. say accelerate business at pace? growth, too it's at thoughts the point on about this current how inorganic bother, Or

Kewsong Lee

and can where we Glenn it's we good and be and is at But for Okay, off to value. and to things in it's got always are I terms finding the new way add fair think pursue. look is initiatives we're to an us development capabilities acquisition Robert. that of Look, it say looking team that extension at the I at of something strategic core

something ways that we'll it to the that's So think default that we the is our start touch fact insurance upon of have the franchise, it side build asked looking at exploring guys will case way I old-fashioned credit price benefits environment thinking us you obviously out, we expand it clearly is about other which to from that together of to making we are should there's do assume and you on and the sticks build platform. we're lot throughout all this Clearly think are about But looking but a very sure against and platform I strategic that now. of for interest. just has with trying additive, If going be very types the and culturally the our a can mandates execute I we in opportunities. past let's right actually investment high are that there. that

front know. being big done, interested. any a the continue a there to just first there, be progress There's set to obviously right lot be if guys state Let now. we to of that there's me work you will on report is opportunity And nothing

Robert Lee

Great. for my taking questions. Thank you

Operator

from with UBS. And Brent Thank Dilts last our you. comes question

open. is line Your

Brent Dilts

Thanks, good morning guys.

are like how due cap? specific or money is Given fundraising Carlyle the turning LPs strong other is you funds somewhere it that going to And else often momentum, away outside hitting the from firm? to the going funds

Glenn Youngkin

that for Thanks question.

hit to is money the our you've challenges to on much our limit. would historically. challenge And one the as we great and great do can now, could that think have market oftentimes which we opportunity actually we we we've make and face as sure I fact the take possibly with of take, a commit investor done that capital funds that to base, like we right have to because we as limit the it job have we to just size

course, Of coming can't to capture you not and always another hopefully Carlyle or we them try to tell Carlyle I that to demand with Carlyle. whether it's present coming opportunity.

across with more result of invest of or and than a to a mentioned I from to of think there's that that in development of a funds. are see our largest our funds. more largest our more capital however. XX% we handful fewer their investors absolutely investors more as earlier number six our firms. investors I’ve of commitments want fewer coming clear One, activity concentrate our continue and And do

things. all, Carlyle job second think where the demand our investor third a hopefully we and in we the those funds. the best in and other base. part second at of first a front-end a have can those right investors and growing introduce a on we their finally, bit overall of funds sometimes capping investors experience and And to as in investor new have it's can And of that our critical We then part that of value have on interested us continue can manage new means, Carlyle. we below come I see do to investing. creation they now to platform are that's for And we levels great great of keep part number into And a truly yes, then which we happening of investors a can them fund.

Brent Dilts

just the versus then fundraising left Okay, about one, internal target? should remaining think we forward? for How million mix be the great. external costs And rated that. going last of the capital on for Thanks to $XXX

Curtis Buser

in terms be to good a starting mix. great It’s of question

I here will fundraising here this will XXXX costs the think a that of think it's to but point, greater level I second me too mix on costs quarter. early be of what in greater balance external saw I a even the how first for you little the a about quarter, external impact you see in think the comment in year versus at

Glenn Youngkin

through we has fund what just percentage Let been a has the of dollar we what feeder call arrangements The constant; the fund worth high primary me feeder external do with that. however, a arrangements, up. add as little gone amount generally color net has accessing fundraising cost to are investors raising to

About So reasonable high and $XX portion in over will just a that the or to raised have investors. worth XX% through we put for we worth fundraising net And months. course things XX billion of last -- that the of my context, expenses. external net of the channel came

And course fundraising raising amount external factors percentage expenses. is we but increasing. that used money, we so, there's raise are that order absolute absolute two the to our impact is of One the in

over the to going XXXX so, money we've to it a would the the to months. down We relative about go just And stay XXXX. relative probably it expect amount same basis we're in in XX of will on versus last raised what raise

Curtis Buser

guys. Okay, great thanks

Operator

Thank you.

I'm the Harris back Daniel closing for I As questions to remarks. now Mr. this turn like would further no showing at call time, to

Daniel Harris

for this your for to quarter's Thanks, everyone, thank you, And Chelsea. participation. listening call and

look If talking quarter. you you after we and forward free call any do next to with have Relations other the follow feel questions to up to Investor

Operator

program thank today's participating all gentlemen, may conclude have disconnect. does and the great in and for conference. Everyone Ladies you day. a you This

The Carlyle Group Inc. (CG) 4 May 182018 Q1 Earnings call transcript