CG - Earnings call transcript Q2 2018 | The Carlyle Group Inc.

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Operator

Good day, ladies and gentlemen, and welcome to The Carlyle Group's Second Quarter 2018 Earnings Conference Call. At this time, all lines 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] I’d now like to turn the call over to Daniel Harris, Head of Investor Relations. Please go ahead.

Daniel Harris

James. you, Thank welcome and second XXXX quarter Good to call. earnings morning, Carlyle's Officer, are the Youngkin, Executive Financial on me our and Buser. call Chief Glenn With and today Co-Chief Lee Officers, our Curt Kewsong on being webcast replay be This call our and is website. will a also available

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

morning GAAP provided of in based not Report indicated. on of any earnings future Annual identified should reconciliations from statements time. materially cause Form which forward-looking of to could involve the made website. presentation a release update have on performance statements reliance on Investor with obligation factors is this to second that Relations statements measures issued on to We expectations those and Any in any quarter forward-looking risk copy our our inherent our actual these differ undue our are results results, and detailed them. management These placed release. XX-K we and today Carlyle risks guarantee at a including section earnings current not no available press do be assumes and uncertainties, those Earlier

per after-tax and $X.XX. DE me $XXX million million with in was for the unit $XX in ENI in unit the Earnings second the results per of Fee Economic quickly income quarter Related $XXX quarter summarize million Distributable Let quarter. of with We in second generated the $X.XX. Earnings common

please remarks. to turn any acquisition from XX.X% participation morning on that, the per return Kew depth and all Buser. $X.XX discussed AIG, follow-ups. to we To in call, his additional stake will Curt in yourself Our announced me Distribution the it queue the over for quarter by one Reinsurance limit common unit. for Also during more will which DSA this to With of the be question those ensure let

Curtis Buser

in Thanks, Dan. business Carlyle results and driving in the progress earnings second sustainable demonstrate growing our continued quarter growth.

grew in performed remain Our the year have we for on out this achieve increased laid while, goals accrued funds and XXXX. Related we Fee track we carry to Earnings,

funds. quarter strength carry a capital that corporate of Real realized proceeds during fund portfolio segments. with with half outside Solution raised appreciated than carry in our Specifically of and invested new equity. X% Investment $X our $X.X private we billion $XX.X billion the in We particular Assets We more deployed and billion in

in growing generated results Related our year. our a exceed on Our we FRE in fourth quarterly generated and the the quarters. the We will quarterly financial now quarter few of $XX next Earnings. believe Earnings over Fee the we focus We continue to million nearly target to year-ago grow FRE reflect million by Fee $XX quarter expect Related triple this

today around basis. fact see to the fourth on potential for we FRE In rate run $XX million a quarter be

contributed drive will of of in fees management quarter. have not which Catch-up incremental along funds fees raised year. compared the first management funds. of our Buyout During management in quarter the U.S. two a third been the net over Contributing $XX quarter. newly $XX over million and fees increase to on year this we second fees activated to the These base million million management Asia the significant in quarter $XX

this less million, first higher expense was the in results expenses to $XX than quarter fundraising Cash quarter. million million fundraising first total than $XX of $XX the compensation this year. strong year’s Our quarter drove related

management newly to compensation increased earning Pending assets earning strong equity-based expense raised increased management reflecting Asia fundraising by over the the to Fee ago billion, our $XX million increased under from compared year billion XX% XX billion earning results. of Buyout under $XX Total into XX% last fee funds $XX to under $XXX first declined U.S. Although, last $XX up our to record assets fee million. months. AUM a we and moved quarter a $XXX billion over as management. quarter assets

achieved our fundraising largest as now billion year, pace we reloaded. our target $XXX will our next decelerate As fully are naturally funds

the Now of the to in $XXX billion Private growth in highest review $XX fee by represented a driven past the Equity, million years is new In equity segments. raised our private let's with management turn capital business level Corporate up over year. three

equity that this for and the of the transactions several $X.X fund pace investment with line over and we quarter $XX were over was $X.X next roughly more June in as the than last quarters. year. committed in quarter ago, a investors billion should billion Our signed close year to proceeds over billion in XX, had Realized

the final a the announced During at final close Carlyle $XX.X V VII Partners just for had on close last we Asia second And at billion. U.S. Buyout $X.XX fund billion. week, we quarter, our

over have we latest fund. raised vintage today, Buyout U.S. billion for of €X.X As

this on fees have fund activated. Although, yet not

next In raise addition Europe fundraising in expect to other Corporate we over to several begin funds year. the Equity Buyout, Private to continue

move on in quarter we Private Asia see the U.S. in associated impact a Earnings $XX of Corporate the inclusive Fee fund. only in While expect over our full higher once Earnings were quarter and Related fees million and the Equity Corporate costs, new Related fundraising quarter second Fee in third Private Equity with $X we million to

income Distributable For both $XX below realized were $XXX the million Private million net revenues levels. by $XX quarter, second recent and Corporate Earnings X% were million performance appreciation. driven portfolio Equity’s was economic

percentage realizations carry. carry, accrued of While realizations in funds yet from to this a are that not generating increased as cash current but a compared quarter are ago, year the greater

a U.S. up funds deployed a Assets. the of strong loss very in catch quarter up second impact more million, funds. were $XX the million, less over million in million and year-over-year quarter funds Fee $XX from largely Related Real management XXXX appreciation fees positive and X% the $X X% past funds. million strength than and Fee our than estate quarter. Results of Related accrued funds. Real assets produced $X first our resources realized Fund half included XX% performance XXXX. quarter up increased Year-to-date from of XX% second to $XX net was $XXX also of estate XX% our in and in $XX record our net Fee year. slowed We and was natural attributable revenue Earnings second NGP compared management billion, and million Assets in quarter U.S. though to economic a up with in driven real our Distributable Earnings than $XXX active by estate Real of driven quarter XXXX. in performance of income of to this a of to first the is real were billion in this under earning in fundraising Turning the Earnings $X.X quarterly million the real the higher record capital Assets carry by

Moving on Credit. to Global

Our We two other scale to $X progress several for our increasingly new raised billion and new in results broaden repricings. the capital operating are segments metrics. visible CLOs Global of financial and including quarter, and in this Credit

Income expect from We Earnings scale growth second lending We third also for last double second $XX $XX quarter, in to the we and $XX Economic Distributable $XX continued nearly funds and less than to Earnings direct of we were quarter by the as Fee million Related grow incremental reached million year, year-ago million level. $X year. accounts. up fees the million was and one raised and compared grew quarter, managed numeral and managed accounts. the management further last in million of capital attract

to remains we We progress much done next continue are the years in this pleased with Credit, work few our build business. be but over to Global as

in but dividends Related believe years investments we Our and on products near-term, will for new put investments pressure come. the people to in could pay new these Fee Earnings

billion for last decrease which Moving With over active sequential on months. the total realized contributed quarter in assets These investors. last proceeds the from billion realizing bringing fee to for earning to under Investment quarter, realizations $X.X an Solutions, management fund XX to quarter. the the $X.X had

we appreciation quarter fee economic $XX to compared AUM While has X% Investment AUM decline with the is a $XX runoff. of legacy higher earning driving to as year-ago, performance income been strong expect fee of million. fund assets in earning to billion

performance million months. $XX $XX last quarter. $XX Net were Both Fee year. and carry Earnings reached over Earnings million $X the compared last Investment Second XX in the quarter Related were Distributable Solutions accrued revenues and million, to net up in million XX%

I turn over Before it final will two make comments. Glenn, we

our This will our in GAAP Midtown. remaining third year, you or XXXX, one-time our to employees. with In the be We're relocating One at charge efficiency quarter will meaning results for million. be not units. a current we million repurchase to results And for with authorization Glenn. under Earnings in approximately quarter charge $XX of million. the late and and turn have will space, our almost sum, over $XX And among which be me early from that, new Vanderbilt units increase excited non-GAAP Distributable we will we office during of New we space of related it lease pleased had incur quarter, and about excluded our X.X as main million to new second, XX, In the York will as First, $XX may read, the collaboration are retired let repurchased we quarter this June third there XXXX impact.

Glenn Youngkin

Curt good just progress Curt are will takeaways off, you, from morning DSA Thank from To we left Kew, entire we across to excited want I big or hear are And this about pick the the re-announcement picture the good up quarter. morning. business. two highlight and as you making everyone. also

strong raising pace XXXX. two of and for fund our head First, we momentum targeted and thousand remains are

And and our continue Fee performance growth fees. funds increased second, positioning level well, in generating As of future highest accrued funds Related Earnings. a realized driving our result, carry new the our are us to perform for larger

of $XX though would about momentum, our year estimate raised now year, us faster billion originally the the the of billion bring our So months. XX anticipated. the has our is team target. equity we one in by moving new commitments, entire the $XXX pace over for for XXXX, billion, level consistently than that first delivered the strength. decades. billion is are We a more investors way for of the expect towards was from portion both year of the prior and fundraising Asia, we on expectations the XXXX. of over the We have even what a forward $XX are U.S. raise recently finished this latest originally In some fairly to which planned raising capital our of the for pulled capital strength two best $XX from of last we our the At to time, region, we great private about for Asia fund end teams up funds. XX% And at being performance one past our States, same from investment And high record buyout raising had vintages we in have fundraising United to

critical just investing now fund regional $XX to large to in have on heard see accelerating strong is history. Earnings. than and Along predecessor our in buyout us Outside and highlighting achieving momentum Global having as Credit buyout billion, growth three Real As commitments segment. $XX over growing long-term funds six-fund have second the their remain commitments over more we to-date, before finished say vintage three Equity, Fee in billion billion of largest success larger raised you've Corporate raise and these quarter in funds Solutions the with investor this interest and Fee year. a Europe we received funds, Carlyle’s latest is in with importantly goals. over Earnings continue focused of in our in Related growing last Related our our Private the growth with segments closes $X.X the The XX% the we're The we extremely Assets, Investment and in fundraising

onto second topic. the Moving

performance be Index. the X% World despite a funds continues investment carry flat investment on Country Overall Our MSCI very this a environment. to All appreciated return outstanding, quarter our challenging with compared

Solutions which appreciated was strong appreciation with but in and segments, Investment Real especially which quarter. of the X% performance appreciate Assets all X% in Our across our broad-based

points in underlying quarter. before fund company appreciation Assets investment and like basis As that deliver private both XXXX drove Private specifically our year expansions and metric. outperform Real long-term as the to to performance a opposed we XXX public markets on we Strong continue in multiple over said strategies, try in portfolio Equity equity we the to by to

Over the in direct XXXX Private metrics QX revenue XX EBITDA months XX%. We period median portfolio Corporate Equity growth through lending our portfolio. saw with across and similar our

to from XX% $X previously revenues expect realized record XXXX more fund a to below heard which than XXXX. Our drove is say continue up year. And performance carry us last performance you billion be accrued we to as

in level carry fund beyond. give and most challenging and realized high of with revenues in strength that Environment performance heavy new us competition of this and our confidence remains the investments prices performance However, every class. XXXX rebound should accrued asset for

new around $X investment in can almost than return hurdles. into we activity. have deploy teams available loans find we of the in And anything to capital billion last more remain $X confident experienced XX our billion the world, deep that had risk during hard billion investments funds in and underwrote our meet but And that We right hustling billion CLO and easy our the $XX invested nearly carry we months while $XX opportunities. everyday do

to vary recent lower will said funds invest generally we be activity committed we However, as years expect That investment quarter-to-quarter us to trend. the provides to flexibility investment and X the you pace near-term have to our capital, which patient. somewhat do remain than know our X

hand let me we our to over corporate I do now on Before spend not to it have quick new say. Right anything Kew, a structure. moment

the how attention reacting paying close to evaluate converted firms is to and this are of conversion. pros those However, we continue to a C-CORP the have that cons very and we market to

we you today good for firmly and achieving with to our over we're track the that, Carlyle heard going. where it better year. Kew. And about objectives feel remain We as hand about even So I'll towards where is on

Kewsong Lee

a entered variety morning wholly-owned investment Company investment this of In into AIG. we Holdings, that Reinsurance deal Group also stake Carlyle of Carlyle management whereby an strategic the $X a by of into will acquire into equity Thank Fortitude a DSA definitive re-insurer with agreement connection DSA billion Re be agreement to announced assets entered strategies. committed has XX.X% Earlier this a you, in Glenn. parent Limited,

managing Over which explored years options in $XX growing assets few insurance of the market have to past the we to space, increase a about several global trillion. our exposure is

a extending in Our helps into XX, XXXX. based by our season DSA investment DSA as AIG Reinsurance $XX Company and March company partnership Re with GAAP with regard portfolio of as this and reserves a capabilities insurance sector. Bermuda in of Re The manages diversified the billion reserves about sticky other words has and general sources assets annuity years duration Re a quarter to of insurance have life. of The over potential life to policies. XX a average of XX-year partnership and the DSA reserves long-term for investable In manage. those is provide this Carlyle

policyholders. responsibility Given its ratios capital the prudently risk. made Re DSA healthy obligations its grow to DSA Re satisfy maintain generate primary it has attractive manage ability and to adjusted help base, Carlyle's risk capital long-term will to returns

is why and provide opportunity Let additional itself transaction me this give Carlyle. more in the on on commentary details process you we believe an the attractive for

approximately payment of million upfront years. in five We $XXX will cash $XX an the additional of an payment interest fund to acquisition our with million AIG and equity of XX.X%

available We fourth subject engaged important is investment approvals. sheet out conditions take already balance expect quarter regulatory XX will and months teams the finance which customary from should to are carve stream. in about our this Re AIG DSA the parties and XX and complex all on a closing work from transaction this to on close to of with process The cash

a equity help manage. investment. the In With for become over for investment teams manager and asset features to $X investment agreement, addition, alternative protection existing the we will Carlyle period management other committed DSA invest is reserve to our structure XX-month Re to that the investment protect transaction which includes respect billion preferred

the Credit and we estate, being to flow of mix expect fine the asset resources While capital with private in still approximately real XX% Global investments. equity, tuned, remainder into natural the is

regarding anticipate Now benefits deal. of economic the Carlyle. We for streams this three of revenue

lead First, several the we to billion amount million $X new $XX fee that the the of years. revenue invested in eventually after next annual estimate will management approximately is full assets over

declared and in are obligation dividends generate consistent returns its investment on DSA its create will our and fees third, growth the we value our our Re if company an meeting capital And record, are to as XX.X% investments on through with we over consistent requirements track time. these equity the produce Second, attractive return stake franchise we performance investment with should believe by policyholders.

subset Further, durations Re these that of just sector Looking which source we pools growth. now it investor returns. products other companies, capabilities for excited we forward, as are The traditional insurance and attractive is DSA broadly have pension Carlyle, platform see longer and from a with which on-the-ground improves like into this attractive will Carlyle base. financially our positions have could our generate insurance investment extends a that serve have large deal the sector. for better future management and accretive, investment they this insurance very investment the a maybe of To develop long-term help across interesting about solutions large long-term be need new our wealth liabilities a investment to of AIG reinsurance which to capabilities sovereign of assets We fund source leverage new to sector. very to new management an operating we and initiative, summarize, now

the with Let trajectory. quarter our and on thoughts prepared our me end current following the remarks

we to are fee on earnings. where and be fundraising ahead of related expected We

carry earnings in Our positions investment and us the and performance fees remains exceptional deliver well future. performance accrued increasing to distributable

currently environment. invest our disciplined can reload we to in and Our is pool ability be have has to patient substantial a investment a what we and ensured funds of capital challenging

our extends private you. capabilities good will Credit, the are this to transaction DSA Thank initiative we sector. and develop, but Global We capital about progress insurance excited in take which into fully are time Re making the investment

for questions. me Let up open now it

Operator

first Instructions] from Citigroup. Our Bill Katz [Operator comes you. with question Thank

open. now is line Your

William Katz

taking good very the everyone. question you morning Thank much for and Okay.

picking last some up bit thanks I maybe in just I of further. of apologize, maybe guidance. that the a taking guidance terms insurance of of bit a some opportunity, on question. that little So area multipart a for the guess but

more the FRE help of You some there FRE, could to or quickly opportunity you one need of scale well? think hurdle type terms either deals similar add mentioned down, in impact, other was think you do how between scaling is this you. you then maybe accretive the the kind so us time as out, And this – revenue of what with carry? broadly, the Thank rate you

Curtis Buser

Sure, Bill.

to I of our with it over all the that a Once want allocated of very this just terms about majority by estimate. I billion of platform. fully comes that. result these in out vast from be because of as incremental being to gets teams point our transaction First just think FRE, we amount out on assets are million in be I and And nominal it's the fee laid added that $XX revenue think annual management $X is do invested, will there's expenses needed existing of managed

nothing are In terms. The of changed normal apply has terms the hurdle as hurdle rate, there. rates

confident generate we to And we that quite fees. performance in be should able that we will as so past have we're the perform

get last and great In will terms platform AIG. thing of this Clearly bit. partnership and Carlyle the and thing this carved closed just your timeframe, in platform if with like growth finally, is that got then months things We've as work for to a future lot to and bring those out. AIG I this this of think in managed if types work will a get do little And benefit. question and that, happens, prudently a of take was about then chuckling I'm scaling we other to XX assets DSA

this our getting going this and that I think thing right from now the got particular full transaction. deriving just we've benefits hands

William Katz

you. thank Okay,

Operator

you. Thank

with Research. next comes Our Patrick Davitt Autonomous from question

Your now line open. is

Patrick Davitt

become on of guess appreciation guess how acquisitions the Hey, And insurance they to the how future long the I to extent this to would company? there guess play? to the vehicle? point the would question. make thanks stake, the come an for independent I third for run fund money from planned you expect it I be to into over on

Glenn Youngkin

Good question.

we set company DSA in is independent of management. for conjunction AIG a this clearly AIG path on with company, terms independence In and and

with figure diversifies entity. possibility shareholder possibility. for We is will is base, It we've it up. be that got this path thing to the and out all public management that Again could it a did set getting or it now, our its team what a that ultimate could it carved this get scenarios hands just obviously happen. that right full Is becomes out working

then it's the So that be is of – our lot current funding, first company. assumption of was to it growth. a funding And the its And cash it part in that very and question. as it of your a so generates great large will terms relates

Operator

Thank you.

from comes Our next Ken Worthington JPMorgan. with question

line now open. is Your

Kenneth Worthington

of I that move top morning. you for Hi, been are like like Performance pie six call? guys sort example going as making good thinking not or well. seen bit from efficiency, to details scenes else higher during reporting structure But from position awful you've us a here. as using little have how future? seems behind company like, guys What months how lines is subtle, the the sky. apologize, have changes Kew, to but to One position given of Carlyle an certain come you this well to positions are Fundraising might you And be Vanderbilt what be about the to and going well. level, of to the firm this doing capital it, going seem you’ve seats the in the empowering lot you maybe strength given things important the a seems a going other you that like are Glenn are I've as in on in positioned so, for and a seems things really But call? during and well to us details The well. the public

Glenn Youngkin

that at let start thanks accolades We'll thanks the of for and question it. way the for Ken, by you join the team. our

focused can on and demonstrate what quarter that to you that against all driving from our itself continues we executing against. investment told results that focused are actually in see We're our on We we're focused executing you on the really goals. finishing fundraising performance were

building As all we've shift we And that a said, strategy. against in we all things talk execute against. those business focused you us you the just growing hear executing and there's We're that are and underpin credit FRE. about just would massive we're we've no on what focusing on goals told

said As the in were call sector Kew executing an earlier had on we we focused insurance here on insurance sector. are and

I whole we So mean well. what just plan, we were do but and a don't you not give detail to do doing going said going we're I think it's

Kenneth Worthington

Okay. Thank very you much.

Operator

Thank you.

comes question next with Stanley. Our Morgan from Michael Cyprys

now line is Your open.

Michael Cyprys

morning. for Assets guess that quarter driving little bit Thanks question. that changing just record division. on out the Can just good Hi, more talk topics taking about a what's Real I for you we long-term years success of the earnings in coming Real we ahead segments there you in in of the should and Assets. ENI can this power degree sort repeat about thinking how expect

seems So momentum lot be it's really here? to of getting a

Glenn Youngkin

a quarter, and good segment Mike. it's momentum a infrastructure, also do just Real had thanks good seen said had performance from there. you really good Curt and real estate of year all of as as The segment our and has Assets Real Assets but number good energy, we've a them. see components And know Yes, we

and was been X% good business the as the estate key of resources up last from XX portfolio performance. saw X% go the the resources natural over by of has in was last quarter, it's real the the in months, to underpinning. scale the obtain investment the the the to the able you strength-to-strength up business in to by course year the quarter real both continue and say up the course have I that's just high-XX's business natural success to been estate over that we've the think I underpinned the the

the we these a things I done think to that great thing find vision do. of to I second the we've teams long-term and continuing have sector. we've just And built build continue finally think to as teams good

it we as see behind good so and sector. continue grow think you'll to chart to be invest this And sector, the a path And us will continue the continue performer Kew I force. to

Michael Cyprys

Thank you. Great.

Operator

Thank you.

Bank next Mike Our of with from question comes Carrier America.

now is open. line Your

Michael Carrier

Thanks quarter that the mentioned little good quarter, in drive a you in past look we sustain I fourth think a much growth right. at the All bit and so appears you more rate. on cyclicality than Maybe you question probably trying on Curt longer-term run Carlyle for more you it. just FRE, this just have look guys when I'm the guys. had focused some know you maybe been know year to $XX

Just wanted are we've some looking either at to past. well? that or level may the sense putting you to you how be the over you FRE maybe are mute get place the sustain what some in longer-term cost any this catch-up the like quarters, fees helpful in of that's the if few fundraising as seen encouraged And you have Thanks. color over and on just next on

Curtis Buser

Mike for that. thanks Hey,

right. you're So

historically much both really kind very natural the And kind of business support done that we we help focused seen. to really where and will kind on just growing the transaction that. we've scale, our growing and much these level global the announced, Fee some of Earnings really of higher and higher cyclicality under that's are been results all business, cyclicality you've much have there in So credit minimizes of and core of Related a

from – an everything expense from it's fee standpoint we from you're the and else factoring I factoring from very standpoint million that from always some We'll in what place. I wrong already pleased the you couple see up think really quarter in to back probably in mostly it always really fees originally. so Real little it will say what back during be catch-up that the is to to you is going when forward, about it eliminate business What we've in the some a cyclicality will it remembers the leave seen $XX go really we've to perspective seen in but Assets been that's in continued you're historical FRE here comes growth the next have when and and tacking quarters on going what would in see fundraising $X turned management expecting continue to we're million. say say and

the know don't we I our not focused along I terms $XX a see to be driver of hit think think that think continue it's going on Fundraising to fees going as but that So catch-management we'll FRE number we expenses of really think I helpful, to with by a million be costs in look big and you somewhat costs, but will grow are managing QX. forward. we're fundraising going

about on a So underpin feel good how forward really I'm and we go things basis.

Michael Carrier

lot. All Thanks a right.

Operator

Thank you.

from comes Robert question next with KBW. Lee Our

open. now is line Your

Robert Lee

morning, Good everyone. taking Thanks. Great. Thanks for question. my

Glenn Youngkin

Good morning, Rob.

Robert Lee

for mean over concerned kind strategies look peers, that and do fundraising so And industry exceptional enjoying you just what been maybe it’s slog curious have I’m and if you that been capital or look robust of – to the can – party of been as it of speak as What about have ahead next you and are ahead, of the formation. you about couple the dampen such where even you of or products LPs kind many years? what there faster kind think then I been are a resistant. going to or second Good that clearly have than maybe part but of more more any morning. you mean anticipated, your

Glenn Youngkin

Glenn. It's Rob. morning, good Well

all by of fundraising a driven is the of last number factors. over of success the year the you First, as know course

and lines across Carlyle it it's across We're just LPs. across world support is board are great performance strong category result, the has and increased their industry the one and our product with performed and really of performed. the And a not first around The seeing and the globe. increasing allocations our allocations LPs as has

is the course do category easily the new the and everything investors of and heard you've single and about driving as this, our new of new. we're one as lift market gets everything of So in natural raised is just key course driving it launching this, our across products think extra because credit I board else some And factors into is they're little resources. things new of a of geography doing those no are uplift. not that take funds no

the key record, for to And or raising so just stuff eight I industry finally, fund five, And fund so little to continue extra you're lift. when takes track much a our just think it’s is perform. longer then fund seven a and or new

XXXX mention remarks, going Carlyle every this public to period and to long of quarter, me the basis and outperform. it's to has premium to heard to my time but XXX particularly a not over point markets continue be point in industry basis You

see you continue internal investing we do where that. have to to us confidence, that's really degree high good do can And our capabilities we in of the so And thing that. is a

Robert Lee

Thank you.

Operator

you. Thank

next Our from UBS. with Dilts comes Brent question

open. is line Your

Brent Dilts

with that? we Hi. credit you're Could credit growth you where just and how are in guys talk Good in morning. about segment cycle think you the balancing the

Curtis Buser

Hi. Great Brent. question,

can't innings first And inning the in carefully the feels the we're kind what performance to to credit you United talk the expansion. only private and all like the health equity it the underlying economy continues of our side, of we're having and our loans few perspective, everyone the think be. economic what's want we and credits what and platform, are the seeing we in from China now, along. delinquencies later of But our throughout look to not we're also defaults it in kind at portfolios seeing on in line my that, the said growth right sense with very trying States, stay real innings. in happening we be to that have as we we the on for about that but the without motor and track in continues credit is when And are on all globally them track some economy. with cycle Europe having I understand not clearly And focused current but

one supportive. a on real is more spreads focused still more and the some with starting that so where se. the much be underlying about the just starting discipline recent I to seems continue also seems on is out get much some and that just pushback cycle economy a a to with coming everyone market. of institution these And things per to would trend, of of be I'm worried which are respect focused observed not to credit opposed see see there to we're kind volatility point out that the worse. terms everyone to with softer just seen, we saying to that and as spreads meaning saying has terms it's constant the there terms to pushback to on that bit terms as little compression flattening of opposed back is a that's respect credit, we've I'm I'm into

to So color and on steadily but the stages, later is seems economy helpful right are seeing you, know still well. that's clearly now I we the don't but everything we're to performing jest real

Brent Dilts

Thank great. you. Okay,

Operator

you. Thank

Jefferies. Our next with question comes Gerald from O'Hara

now open. line Your is

Gerald O'Hara

moment growth, days, what or to perhaps there a geography, that and opportunity with that elaborate can perhaps looks Circling be self attractive? industry platform by respect to you that its either for insurance you. it up the bit thanks. funding the make some picking realizing market clearly like of comment growth but dynamics Thank back the a would on future little Great, on perhaps early and

Glenn Youngkin

early Gerald. Sure, is It days.

sense. me let So a give try to you

that team DSA cultural let's are with on fit the managed and First and ensuring a of of and talented for and that we keep DSA and good is is – taking prudently. here truly risk AIG to what's best capital of all, there's in and respect that the management off focused mind, prudently care really that managed partner, DSA DSA our policyholders doing well quite

a intends do balance talented could a respect tying reserves to be to business on without of trillion and a where positioned companies' cases, With And step take growth, if many capital books and market $XX a that platform up So to in do of what in more enormous a liability. way an portfolio, sector with efficient it's global is very do the liabilities capacity positioned also in dialogue only and a footprint in of the its reinsurance insurance diversified engage solution, a solution, but not owners season perspective, those is the very its to to with current than comprehensive provide from to which what DSA these there goes team, with there orphaned go on that well with it's amounts of very take are and saying. is perspective sheets. in this back, insurance well you investment

to get assets We thing this carved this thing AIG enormous want what find get grow. into and We through billion different an We there up. ourselves. we of for to DSA. to but stood doing are real is way ways it's So in get working. to don't need to do. need rotate others Carlyle $X what out. work partnership It's growth get We And think real that and opportunity this We and that be very to market. all ahead prudent us do there the a with I here, need trying to ample need in I'm will to sure as go we're

Gerald O'Hara

Great, thank you.

Operator

you. Thank

question comes Evercore. Glenn with next from Our Schorr

line Your is now open.

Glenn Schorr

awesome. Investment Hi, follow-up on performance Maybe Solutions, thanks very was a much. just

there? talked behind about on But scenes You color closings in maybe AlpInvest. little what's on more just the a going some

Glenn Youngkin

all that seeing Glenn, quarter it's really so some Their over estate Glenn. investing give Investment as be assets that secondary there's The remarks investment continue of that continue business business, what number so. Thanks highlighted will the co-invest original the I last well performance AlpInvest. are visibility some are are manage. secondaries and agreements the They well, will we're movement Curt the highlight from think strong owners be and will to you few momentum last been good. of off, question those from is have have all group and burns made or set and and seen with here earning for good to legacy for co-invest is comment the off. over kind burning strong. to there. But we think such so underlying are in to I the to highlight returns and that and standpoint the performing an from replacing as pace quarters, Solutions side that assets fee that that we continue there momentum real continues the continues very the we a came good business off gain his attractive AUM we of a AUM the bleed them course particularly good we assets in and of number really on That

Glenn Schorr

We've impact new has business, as direct any secondaries the some taking seen competition business And just I up you don't across immediate secondaries at the that funds on on just is if as know bid other all? open board. spreads heating curious specifically. on have

Glenn Youngkin

are asset closed Yes, like competitive secondary lot that the you which of it's well, a aren't good. very capital they the they year. $X.X billion, are And remind single that's funds They more doing To been all the classes last There's market. Alpinvest big well a I far and approach. and structured competing raised. competitive. positions, is will of fund business are say a secondaries GPs, recapitalizing returns unique has the LP they buying but deals, deals Alpinvest team

Glenn Schorr

very Glenn. All much right. Thanks

Glenn Youngkin

Thank you.

Operator

you. Thank

Brian next comes Our Deutstche with question from Bank. Bedell

open. Your line is now

Brian Bedell

for Great. quarter. getting into much. Curt question, Thanks go up the just the Good bill very that fourth in morning. guidance on FRE this part $XX rate million Hey is to with just two XXXX one appreciated week run

you expect think do on lot differentiated go one question Kew or on how since more to move you and have then detail the the of sort spend - others your trajectory a Thanks. effort a XXXX in can XXXX of quarterly initiatives, counterweight on fee-paying AUM going the little And that given that? in be sort investments you investment different little just that you're of your a verses the the funds up. of to but you to a you for into a on that, mention of insurance for success thanks as bit global may of As lot thinking in did that be rate think in more into detail run $XX business first $XX growing credit. moving the follow-up you about you you're Should we of and

Curtis Buser

FRE given Brian, thanks. rate. also we've we terms Look and as been focused we've to remain careful on guidance like run use

but kind can peak kind really of numbers sustain like so of and we and and to what signal not trying like really And the cyclicality generate.

of for impact quarter so comfortable number big the growing going raising Asia big feel U.S. next you're not full turned and here number we've be that we've of in feel on you’ll also basis. that quarter completed to to to I on the a drive that's comfortable I things about $XX a is seen get near that's term in if growth good not already the about fun a yet so number It we've a and the fees. that contributor fees as will that another is sustained think the with million kind and And

that number will We also and other of are the those products have turn market on. across all segments. They are in those as of in really a the contribute

also Our global contribute. is credit to really going business

number products of a continue have and We to we're there new invest. going

just to account you or we that run in there basis. into be Glenn off put term near really invest Now the as a number that all to really that be and on as want to FRE some as be long-term. just about going near global FRE know continue total I solutions, until there on Overall I some trajectory pressure items could pressure really is there term but credit, on could those we caveat on nice think investment and good legacy takes remarked a although that’s of to the on mentioned

Kewsong Lee

Brian. Hey,

wholesale distribution from differences end or policy the at to set In we're originate we're or up need terms all. deal just of channels - consumer very consumer. different origination with to channels facing don't We not

not facing. both it's our a book And lines. consumer monocline. diversified broad product range DSA and is business not very of P&C It's an we're upper So of life

just global. it's extremely as As well

duration it the leading companies for platform up path future. and it's So of our great really come is the And like sets in the Carlyle we first real liabilities tail, the is about this compare apples and in what book platform assets one that, to about we're really can sticky long and different a in long I'm the of all so industry. not oranges just itself to a is sure and a you foremost potentially what season really

humongous just we have avoid a is to point management trying that differentiated not sector. $XX trying to we I'm how so very approaching your different different just question just extend capabilities trillion all It's a market and at I'm into can of And investment in way out. our the

Brian Bedell

types you news because there's more it's the are part to of But direction. insurers do the lot growth a hard of on dynamic? [indiscernible] a an and these arrangements timing guess it's I it's of of market do [indiscernible] just access long-term in or they sense completely to thoughtful And huge and that more urgency

Glenn Youngkin

as the My see partners is time when against you of prolonged down books to do a interest agency low efficiently, in moment how long to a that types insurance regimes how care to of the period more manage these capital what free these level figure is and to reserves. environment the sector in with take supporting a companies for period lot I trusted from up and out there a perspective investments businesses, of C policyholders. duration of with capital have you'll a That insurance is companies for favorable these think insurance and frankly types huge investment but where of do holistic going of faced terms juxtaposed time yield and to the liabilities rating regulatory solutions just in pressures that need a of that quite very of a is are fashion a the prolonged of sector lot looking capital forever, in it's in be to of consumptiveness

Brian Bedell

Thanks for that much Great. very color.

Operator

Alex Blostein comes question from with you. Sachs. Goldman next Thank Instructions] Our [Operator

Your open. now line is

Alexander Blostein

Great. Good Thanks. everyone. morning,

you the feels around the back plus the you scale, you Re discussion FRE like first I the of that $XX and fundraising point get in XX% when million quarter, at business. the investing going you highlighted guys Just to and margin, for stop guess to looking will be

plus more and do through the how DSA So through transaction I cycle, $XX a they include go? that million then FRE does Thanks. I think And time you margins year over any what think guys could FRE? the you months fundraising specifically, guys do guess about looking contribution from out guess

Curtis Buser

thanks. Alex

So DSA in incremental. not first include that the is $XX so that number, anything million does from

XX%. a more said, target. high remind quarter lot margins, you specifically we what about FRE margins do I prior really talked on before of regarding Now to FRE we about further a I'll have last work to commit

through see on pushing in we're back at through If number that you the page. numbers, look XX% and other this I at the additive. but like XXXX, sometime getting to committed to not a and hopefully to work that quarter DSA XX% things it’s that growing on yet we're business more the fully pushing that, be new need working credit Look, Re, will do. things putting probably We

Operator

you. Thank

from Autonomous Our question Davitt is Patrick Research. follow-up next a with

line Your now is open.

Patrick Davitt

money some the about as from extent in follow-up. it other LP the of as have And already? Thanks we have they you account words could raised would to of into kind raise probably funds should for another flow vehicle? guess from new excremental I just some you DSA what assets to point? money Will replacing raised or sort co-invest think at separate

Kewsong Lee

say, a between Patrick. versus Kew really pretty like of think That's question. to of understanding SMA incremental assets portion It’s we’re essence DSA it a behalf be to sensitive the the in we to that and difference through I it's And again. Hey believe great we manage fair structure, say, Suffice will cannibalization. significant on incremental.

us. and classes So of asset it goes let this over, exactly leave how raised, a dependent me be portion it to have deploy come you of that to what into structured about cognizant on way able at issue over we the is that feel and to et quite we're important be very we will large the the good what rotates assets cetera. exactly going But we

Operator

you. Thank

from also KBW. a with is Our Lee next question follow-up Robert

line open. now is Your

Robert Lee

commentary call about much curious, recent past too I PE taking for expanding my heard in you how on they're guess I Thanks haven't real I'm it you and this the long-dated us franchise PE in did thing just could you maybe Great. calls, thinking on into more them in I about the talk you – kind same I mean but update just initiatives going? of the PE what follow-up. and and estate. some think call core a Could those of of certainly

Glenn Youngkin

Sure, question. Sure. Robert, great

into Global Carlyle now We in well it a Partners. because to longer we has partners we the And it's invested equity limited that launched have years to the a close done Partners allocate so long of we increasing was LP Global into private time was to first one a into and happy the Partners very ground of launched billion $X traditional a a first – it's launch ago and Carlyle see business. very first way are one and fund get strategy. the complementary have One imminently So Carlyle it’s But didn't type dated II. that not fund. to the our demand buyout several already yes, the firm Global dated although to we Carlyle – from about in at some strategy base it

you've longer So also private positioned base, heard believe period up. on public. of it's a BDC-X It's equity $X and are Clearly, to not capital. very much plus got asset but $X.X time. fund. raised the I to an – really It which billion BDCs form hold targets CPI, it what allows with find already, core, permanent real we're scale of ended to side, has a a we inability classes, fact already billion and benefit over in assets of we've core our estate return is a well feel that permanent done other of trying rates the strategy capital of it. these for and is in in Clearly, open capital lot which

side permanent power just leverage – dated ratios scaled capital in we but then changed got and side several you your to well quite continue that As perspective up. has back and franchise and oriented longer first the initiatives longer years from put that that the to only to are just up. speak estate started doing asset we've on the to on AUM know and I actually think a total terrific, real And so equity initiatives scale that assets, like question, of private are

Robert Lee

you. thank Great,

Operator

Stanley. Cyprys Morgan Thank question is next from follow-up you. with our a Michael And

Your line open. is now

Michael Cyprys

for taking thanks the Hi, follow-up.

share terms back there, circle step down if be could could talk would – differ just from flagship dynamics the to maybe prior Just any anything generation, helpful? fee of you. to those wanted funds economics color on to some in you the on fund you’re Thank the terms how of raising, in the that you

Kewsong Lee

And We terms great are instances Without let the without getting fund in comparable if our fee for Sure, that weighted laid degradation yes. funds. thanks And resets fee feel or from basis Hi, into kind about like fund our of in Kew. some periods Mike. details, On anything we same of real the question out that's a and that previous flagship softer our all terms it’s I this. me just of raising are say, cetera et average fund. the would fact better. by

our So hasn’t you should assume and carry obviously changed. rate

a the and structure You or the the than economics had are past. instances little the we've better should assume some bit in what same in

Michael Cyprys

Okay, thanks. End of Q&A

Operator

Thank further showing I’m no in you. questions queue.

So Harris Mr. I'd the back for remarks. to over like closing conference to turn

Daniel Harris

Thank your time you all today. for interest and

If you look again talking quarter. out follow-up any reach to forward to free have next you feel we Relations and to questions, Investor to

Operator

this much your does Thank today's you. participation. conclude conference. very Ladies you and gentlemen, Thank for

Have wonderful may You disconnect. day. a all

The Carlyle Group Inc. (CG) 1 Aug 182018 Q2 Earnings call transcript