CG - Earnings call transcript Q3 2018 | The Carlyle Group Inc.

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Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Carlyle Group Third Quarter 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call may be recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Investor of Head Harris, Relations. Daniel begin. Sir, you may

Daniel Harris

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

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

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

quarter unit Economic year-to-date generated earnings fee-related in $XX was $X.XX per of Let $X.XX. me of in unit ENI unit DE $X.XX per in third quickly and with year-to-date in $XXX results the $X.XX. per summarize the DE quarter after-tax common million our We and quarter and quarter. common the in $XXX unit of per the earnings for million distributable million ENI with of income

Carlyle. Apollo XXX% or Global will to will announced is $X.XX fourth have become part acquisition $X.XX of markets on Early There's Group, for our close per we which common distribution quarter the prior per end the we global AAG the quarter, Curt quickly remarks to and the our within Aviation for and on that, January to unit, questions. going distributed of end, we the and ensure please to call, we XXXX. additional of segment across question only to lot year-to-date and yourself any Our queue time common Credit through to of participation unit. work short, be turn for follow-up expected the a limit questions. let ensure will in one and by enough want With to those and Today Buser. for To have over prepared to all and Q&A move your me to that one it return

Curtis Buser

Dan. Thanks,

the and private impact of for in Economic the ahead realized muted, realized was revenues and flow the the quarter significant income and investment of quarter strong. on earnings equity performance results the volatility our quarter. Fee-related income is however, year-to-date Our expectations, market drive funds. of are reflecting help our both Asia distributable earnings in

quarter. the highlight metrics in underpinning me our let Now key results some

XX the We with as fund Sedgwick funds, carry in of Specialty AkzoNobel billion investors in year-to-date in announced Corporate which $X billion across of new proceeds much $X our transactions, billion returned with funds, carry billion have last we our very including and in known We raised billion last in realized XX% billion months. $XX deployed raised billion October. Equity, Chemicals, line average. $X.X over we and $X.X $XX Specifically, XX capital that nearly invested the have over closed to Nouryon, with months, and outside and formerly now $XX over Private our our long-term

growth U.S. continued XX% appreciation billion, to funds. marks $X.X $XXX an over buyout, Asia the last Fee-related real total partially fourth XX from carry energy, the up last several higher $XX recoveries XX% past carry for earlier, double insurance AUM XX AlpInvest our more quarter valuation billion, was increased the Fee-related revenue increased We months. estate, XXXX for in than the billion, $XXX over period. the expectations. focus over when XX% the substantial quarter the and achieved this Our than X% saw quarter and was quarter fundraising $XX months. million September million. of earning and management as lower this fund appreciated quarter FRE the management year We in accrued earnings offset the third our previously quarter XX of funds, exceeded earnings, that portfolio goal to target attention, of by was a as in Net year. the already XX% last excluding under the Fee quarter, and increased from up of since assets amount in

billion funds our the of In the those are raise multiyear and for quarters. demand goal to that and for begin continue targeted to outpaced expectation fundraising will we We we towards still have billion, $XX XX, $XX raised our $XXX Earlier but confident billion substantial billion this across funds next increased we initially that confident have XXXX, are new exceeding fundraising over in goal a platform. raise given and year, we few and our this today expect that September total, we exceed goal about we equally market to we the $XX goal as our capital to quickly level.

this we in and the management quarter the million quarter. year-ago in in to an U.S. quarter the $X year, During catch-up the Asia newly million $X fees in from contributed raised $XX quarter, fees buyout funds incremental compared million third benefited second management base and to our of compared

was $XXX an third million, the Third X% of of compensation cash expense to quarter relative increase XXXX. quarter

quarter expect these remain XX%, Equity-based or this forward. the levels last same second from to $XX quarter. expense the of just modestly significant the and third fees up relative below period, to Over we third going creating was margin million operating at time increased year's management compensation year, expansion in quarter, it

for turn We had equipped Equity reached has $XX record at U.S. our billion. Now fifth several in close Private equity, billion segments. is of $XX Europe teams complete long-dated capital Corporate Fee-related the expect on Private with let's quarters, fund a raise million to over platform Corporate $XX.X and increased buyout scaled private reached and in for to funds over third invest. we and the to a buyout the from technology, Europe Japan next our our earnings levels. of buyout. billion actively an review Corporate Equity during our European million XX% Fundraising In Private up business quarter, buyout Equity, year's of million a $XXX last quarter our increase of to Corporate the our Private fund in XXXX. in to In quarter, €X next final seventh the $X third quarter, record Equity Management fund quarter. fundraising fees

new Europe activated we the X, quarter. will on fees October fund buyout which management the increase Additionally, further on in fees fourth

appreciation quarter, below the X% the third were Private revenues quarter in $XX the billion with realized distributable with the Equity's million, income portfolio the reflecting valuations net proceeds. $XX fund performance million earnings $XXX primarily million, public Equity driven For in was Economic of carry in Corporate appreciation Corporate $X.X in Private lower X% XXXX. realized Asia by

Real now to Turning Assets.

sequential Assets earnings the under million $XX strong fee-earning third Distributable to than Our in funds. driven XX% any to by million $XXX of X% from level. million of performance net appreciation full-year Economic $XX Catch-up third and of assets quarter it $X fund and XX% already of capital earnings of were was the in resources in period year-over-year. a was X% XXXX. third $X increased the net earnings estate as realizations appreciation. $XXX produced the real in accrued in year-to-date third million quarter in of increased distributable the Real quarter, same Fund million and Assets, to management realty results $XX quarter $X.X carry on in in Fee-related past higher fees realized XXXX. remains XXXX, We than similar to million the from million higher nearly quarter, $XXX $XX XX% XXXX. million income is prior quarter, billion $XX million about in deployed Assets year-to-date in quarter up modestly billion million $XX quarter, of of from this segment were while the revenue of continue this deployed natural Real benefit declined the our both over quarterly and quarter, compared than Real in are more realizations in management third capital U.S. the year. this basis,

Global Moving on to Credit.

fees management to a results. $XX investments in the Fee-earning to XX% are beginning Our business to last XX% assets $XX growth over drive driving billion, year increase our year-over-year million. under in management increased in

in in $X However, local earnings launching we including and quarter with of the existing $X when million Distributable million $XX was XXXX from results. the the accounting raised the dampen We near for the earnings credit earnings incremental and business, direct from CLOs. insurance third excluding two CLOs fund quarter, billion third raised repricing the capital our triple term. credit recoveries were while make million which several could lending to also of capital fee-related expect new in this FRE quarter, of in opportunistic nearly the investment for our further $XX of total. XXXX new business fee-related

investors realizing for quarter, and billion billion. $XX.X good in total It realizations but realized billion. the Solutions. XX a proceeds are for had which Investment management, under year-over-year over Strong last driving more fee-earning fund declined Now, investors months to decreased proceeds fund assets X% active over $X than $XX to another outcome

on million performance last have given of funds significant the put years Solutions' European Solutions' legacy This waterfall management delays in increased revenues, slightly Investment over in while so $XX As million. to under over Solutions fees Investment accrued next over as typically assets $XX near Investment income time earnings revenue year, Investment X% pressure carry and impact management the a million will was several realized economic term. performance this discussed XX% have Distributable quarter on which will net $XX were and increase quarter, and a few management structure is of previously, XX compared XX% the off. to this the in months. downward performance last run out, AlpInvest realization. likely we remains with under appreciation fund in the expect assets strong, decline FRE fee-earning years

Before I over final turn comments. to Glenn, it three

to be expected charge a one paid of million New move in our over to our GAAP a of is lease in First, XXXX. we we late to prepare recognized as assignment This is and offices York years. offices existing in to results XX for space charge new $XX incentive related new approximately our the our

acquisition. and XXXX, in used bonds in X.XX% from on $XXX million quarter $XXX we third, the our repurchased note Effectively, prepaid levels. XX-year repay million million $XX debt rates duration issued our million remaining at $XXX our notes during and million. outstanding for X.X NGP to extended we attractive and we the XX-year the and units Second, an retired And modestly proceeds of reduced the debt at of due structure

had repurchase under $XX XX, me approximately turn over million that, With As we September Glenn. remaining let authorization units. current of to to our it

Glenn Youngkin

and Thank you, everyone. morning, good Curt,

of how that and and us start we on with firm continues agenda our the higher the in executed and pleased have strong, me of performance that the saying a more to Let targets at be aggressively robust sustainable January. established or back performing. by exceed against year, Investment are beginning fundraising is putting is Kew We we I good, are levels to delivering and the agenda, meet FRE. track teams set

already we'll and year next our XXXX is goal, outlook provide XXXX. firm ahead our FRE revised heard the that early You've of for

continue few regarding we a where fronts. comments several additional make progress me to FRE, on Let make

on raises across capital reliance we The not the First, family any across fund of our reduce we completed the segments. time. focused families incremental just and FRE, remain generate diversification. fund within in segment over absolute intention as have have to diversification the provide segments and increased only been underpinned the will single It's importantly level on FRE increase current significant but

margins. Second, we are on focusing

wherever benefits the realize possible. operating to from working our are We leverage

revenue, in to last time. versus as in expense we you teams, we As will been FRE have that on in there selectively we driving should Curt and mentioned, our an even increase compensation margins over this continue increase higher a though seen focus expect dynamic has substantially invest XXXX, year in higher

building working out are volatility. there in Assets to Understand reduce and provides we CPE a of but our cyclicality will always natural the some be Real offset Third, breadth segments Credit business. business, to FRE the our Global

increased driving prior Looking results. decline volatility forward, in FRE we believe our years, will investor relative in confidence to

accrued XX we funds. we and of Across fund in balance fee net points value to have also the strong performance time up confidence mentioned. performance a quality at this families, fair that World ability segments particularly FRE, we the in to we All basis Asian billion markets. be is have X% funds' roughly over XX-month last over so to $XXX of would the Strong of million and continue realized to where four of our MSCI generate our as revenues challenges In performance focus appreciated addition our our XXX near carry the $X.X the realized year-over-year revenues success us balance months, significant key, over and time. gives of year record the XX% on trend, $XXX generated nearly performance funds over even with total investment revenues quarter result diversification accrued expected on the XX% better Index, last Curt portfolios return given different carry months. Cap realized in the than funds Again, XX in many a all fund billion, a contributing, driven the have ground, It's below returns the

me not that, expansion, which the over the fundraising, us Kew. move to back, fee-related all we year, accrued foundation milestones the past margin to but and for just With and set quarter, very look earnings, well, forward. firm over milestones, is we it solid balance, related As performance through over continue a revenue looking let important turn performing to

Kewsong Lee

performance our just progress highlight growth. Glenn future our Carlyle I as With Thank described, for track, to on want you. positioning

in before get on and increasingly to perspective and a moment me I value these the quarters. volatile current environment. However, to few declined become over allow divergent markets comments, provide some the have Global past

almost level example previously cautious avoid we this professionals exchange the our the remind divergence a fundamental portfolios, to continue complacency. of our and be have S&P we the of XXX on stark the difference this world, between the stated, the declined period. U.S. to valuation environment our own persist, we Seng a in the is with which rest same As conditions That XX% public to quarter This year be of currently and equity X% Index, A the the equity affects about compared and volatility Hang markets should portfolio higher China-focused has of would Asia whole well appreciation our is those market expect current well. with foreign private equity fourth the in especially performing in global said, to exposure, public affected fund on on as basis. down and

the In fact, XX%, growth with across was the over average entire the portfolio EBITDA weighted XX% revenue growth. year past

year. signs and that continues Europe of U.S. note lower reasonable the are we to year Asia rates growth, While show growth than last in this of

to to long a markets expand, So tailwind the as economy of well, as continues should our of operationally real marks. portfolio our be the perform less even appreciation may

activity and find in slightly interesting arise take and that to in to public market to the we valuation but than we've recent years in future the experienced opportunities have long-term important may the well-positioned short our Private we in investment dislocations they multiples generally environment volatility world and Credit, what complicated recently. investors result and around to funds keep exit relatively more more Real of valuations attractive or Uncertainty to Global as we lower invest. buy make It's across five mind term and believe more may importantly, Equity, could it advantage are and are companies, More be investments Assets.

fee and me growth future ways is comments Carlisle of provide turn earnings. to revenues and important Let driving some now three the on

significantly XX% Investment on XX% Solutions vintage have are Private First, across our average to new their Equity, existing and relative our funds to Real larger Assets, large scaled, and funds predecessors.

$XX.X Some sizes of our larger buyout at examples billion, include than our fund, U.S. XX% predecessor. its more larger seventh fund which than closed

closed increase a more the real Our years. closed eighth existing scale XX% over growth billion, in nicely sets billion, U.S. fifth our fund. stage buyout than revenues $X.X XX% natural than in the larger. estate prior fund next the $X.XX for than Asia fund lastly, The larger at several of fee our And more funds at

strategic will growth. selectively we to pursue investments drive Second,

and of close which is across to be For capital. platform, Holdings, example, expected to our adds quarter soon, we a is quasi-permanent incremental not Fortitude revenue but announced expected only last source

accretive funds announced over world. also AUM the our platform. our The capabilities XXX% We and be similar volatility, of to around mitigate profile. expect lease our equity be purchase we to financings than diversify Credit the extend to transaction and the add Global closing, in investments recently historical Partners commercial to earnings revenue, funds immediately AAG billion of private Both more the earnings. fee-related aircraft be help $XX Aviation acquisition some should FRE renamed first closed, upon closed-end of our will of raises to will million new fee of add to portfolios annual these $X sources of Once year. and our service AAG, earnings Carlyle to

However, and deal please, only are that our please don't announce businesses and a Rather, expect appreciate fit and please capabilities strategic extend will corporate potential significantly, scale cultural acquire with leverage Carlyle. we a to selectively that quarter. will we and they platform, if every have

growth, new organic launch opportunities large products as growth believe firm The will is our where we our exist, driver wherever third natural of possible. bias

and ramp-up significant of I firm In and and a and our Carlyle strategic pleased time Glenn track. through growth the moving there positioning Real believe that have credit. to for the questions. with which launch we of the environment, long-dated earnings. our diversifying well-positioned large over forward. such AUM future good initiatives for date been position It and growth. to needs past infrastructure, strategies new as is existing today's potential equity, With recent growing global opportunistic when several establish take thereby working to take funds our to is development we energy, Estate, on new and that, is we've complex now advantage manage your private intention Over market, international conclusion, momentum a are LPs ready investment our is we to to the firm Core meet years, firm's opportunities, hard launched Plus performance to are Combined and of well We new efforts, identify our for funds

Operator

[Operator Instructions].

Morgan line with the question will Stanley. Michael Cyprys Our from come first of

Michael Cyprys

I you was origination, aircraft do and about it how attractive, finance talk were how about direct find also building if how how about bit and little thinking other other sizing and you're things. just opportunity the well hoping approaching you leasing fits you thinking could into tie could more opportunity you're asset-based areas you finance the business opportunity a that out, as as set, this here set, in what

Kewsong Lee

Okay, that a was broad question.

in building platform I fair the we've that with Credit to out. really think Global it's pleased made and we're say progress the

So, scaling set by business. got direct as me just lending CLO our we've the progress terrific you we and know, made business, stage saying great let a

drive are set We're the got distressed. asset-based market of strategies looking And platform an out, to funds to of top-performing business. bad. platform to which assets business, our out capability may focused that to of always Global and from we energy we've top-level obviously, platforms. behalf professionals. always global related investment look lending for in it's well this the in respect describe management our I we to to has spaces out one in into part are real finance team trying be in so our to They've is things With This does. just business premature investment one make and in We the got We clients, is one infrastructure, of the we've hopefully acquired, with potentially the estate our managing but we're opportunities raise investment is team on firm, beginning at. company, Real a try different terms the build we well types thing. do wants we the of Other all doing through on the AAG, we by this build us institutional opportunistic Credit built terrific way into finance platform teams of do tapping might and and not We've I other credit. are LPs. to in opposed do management in based our to that that as a of performing business, strategies end been acquiring the the strategies. very The way out to hard just go assets think what looking that saying cycles good been want and and a lending and we're seasoned we investment it's Assets a

long are term. this for the platform building We

anything grow. be We going us, not are and quite to we ambition with just aggressive cognizant of rush and conditions around an overly are to into

term, We trying platform. great for are go survive of itself this little over and sustain thing and we returns you do. color that with Hopefully what out building bit we're that deliver it's and long gives into to building to the mindset the that a

Michael Cyprys

And your as that firm just funds and in some follow-up what's I thank press private articles there. been [indiscernible] some suggest holding [indiscernible] equity possible guess does the situation on within happened Great, there reports possibly fraud impact maybe the about question, your you. a what diligence just fact your take business? out approach how some the how misused fiction. exposure business, they versus of there reports there. of secondaries terms A you in And Solutions what's conflicting within lot have this

Glenn Youngkin

equity that's First, the in has and in we're it being teams in the estate of funds private on and that Solutions comment been. as they the has the why performance to have tremendous as I'll the position strong diligent real been reputations just just side Investment business, the for just incredibly both side say pick, business, not circumstance. particular a that the on

they that at just the look of over last XX months, at Solutions business XX% performance the Investment it's appreciation, the the X% You reflects quarter, know, quality do. you and the in

Michael Cyprys

any have confirm you you if exposure? Are to able

Glenn Youngkin

that said, really we particular on As to able regards with comment to situation. anything not we're

Operator

with And the question O'Hara of line come will our next Gerry from Jefferies.

Gerald O'Hara

Glenn's on quantify earnings here. interplay how and scale on one Perhaps -- can margins. the margins all could can balancing to the perhaps the us there But those next on be might versus focus and you years FRE here the appreciate perhaps able we comments, go comments I fee-related over where help obviously think couple drive diversification can margins perhaps those

Curtis Buser

I'll start or add and then Kew maybe will Glenn on.

just about where to terms earnings where been, set maybe XX%, our is and here margin in So level in XX.X%. and year-to-date of are fee-related we we've the third quarter it's

prior I using good managing commented a operating really quarters, higher prior made place a As of FRE. earnings, we've progress in our XX%, on getting sustainable and so focusing expenses platform, we peak where leverage, the can fee-related have level our really was to across

Glenn in XXXX. to opening his remarks, reset expectations As not we're for said yet

up do We and up our not budget yet. we but that the XXXX quite as wrap will wrap year, process

Europe As on buyout I going our Including we're just next said, to we X. do fees have in fund activate good October momentum momentum. on is that

management fact, In come fee that. natural so done that'll you're lift that, in from we've see to going a quarter fourth the

we're right to time or of to factors with quarter, are thinking up us safe invest about as Keep platform, there given Generally, fundraising forward can a or in a the drive a expenses. perspective, Credit, mid-XXs. management in the respect a FRE that can and catch-up to fees, mentioned, Global fees, be place that I margin mind, is I continue that transaction now. to down from over to in in Now, going margin as you XXXX lots counter XX% look it's think somewhat. FRE things But using safe so like

Gerald O'Hara

That's color. helpful follow-up. that. And perhaps one Appreciate just quick

that the of management can over mentioned fees. you a ebb we give X sense next flow here and quarters. to how should the maybe expect us Perhaps of X catch-up kind You to

Curtis Buser

Sure. activated. Look, catch-up driven are has management fundraising funds fees, by the been in fee already really where those follow-on

So predict you're always to given able bit because raise it's always of driven a to little quarter. what it's hard in any off

flow the then management fourth and quarter, fees, and good think with ebb catch-up respect pretty be though, to in XXXX. it'll I should

Operator

And will the our question Davitt line Research. of next come Autonomous with Patrick from

Patrick Davitt

from concerns, things. kind And you're you any broadly. lending and in I your think credit of portfolio, and concerns points considered So that, risk markets we've point trends on side seeing specifically seen Could would in then to credit bank speak particular speak out? increasing CLOs are in of you more what in in increasing within potential credit more alternative shadow stress focus and own to the the the loans

Curtis Buser

a cycle asset that, Obviously, it's and States the focused conditions we or top having decidedly we as being credit appropriately X diverse in and very performers late credit CLO said believe is Having are around of class, world. and on for me, are are cautious, exceptional the and here very general we business, one our quality. the X known

why will we're a putting structures. these assets is as it loss discerning very of ratio reason of it and our one should So new fraction average, that relates type into is vigilance being of continue, you to and industry I think expect that

market, direct first you is plus XX%, last basis, much lien. it's that the first more second portfolio business true should into lien, lending With and that business, is of direct as where, loans as direct it's not unitranche. like actually of It's our be they very lending stack. lien, lien; not first better. if It's our their into true of are volatility, credit, can respect senior Our clearly especially segment in as opportunistic as we're are of were we feel cycle businesses go, can part the does those up and start putting the profile turning. XX% the not there distressed to get the that best profile out; senior a to result you the as

start see opportunities. more You'll start to deals to see more and

color don't say how helpful is this does environment one if strategy. know don't I think So you just you, I can the affect for but

open a clearly, wide whole. got a as this we look to eyes at You've take in are being everything But market.

continuing right things see of we cautious to in. that stage perform, but going to enter are be now, we we're As as we're later cycle this

Patrick Davitt

things And to the own point then stretched getting you the in that concerning credit is terms people you that your of follow-up. seeing what strong To maybe are just portfolio, are willing think you in a Yes, things about or from quick helpful. away are do?

Curtis Buser

say Well, over We're complaining But the of in. a clearly, on thinks see be that out and who, been several covenants that always professional books. That's investment -- just and the as we've to the the I've the pricing met It's protection fair they seeing they past years. credits know, state that you we're who that we with an market wish better. structural putting never could always are we or there. pleased a behavior things doing lot behavior of are such capital there's that lender

that commentary, though, general you're back would are market see to see little is widen, to discerning the the a to push bit, of a and credits in As market. more I you're starting reviews think spreads that I starting say, starting

starting So back you're on a little issuers. feels bit to see to it me like buy the side push

Operator

our Suisse. come next Credit the question And will with of line Craig Siegenthaler from

Craig Siegenthaler

base up get I prior base and your in for comp, a FRE million at we're a add wanted When just equity XX% expenses up So to looking different zone about number ask G&A, comp, you $XXX from is a XXXX. XXXX, which question we way. slightly operating in the

a in think credit? my we should go-forward about growth confirm investments especially given like You but don't future to the on need private expenses and more math, fixed the basis, your how areas

Curtis Buser

we're is one margin. very kind fee-related said or much focused think just expect focused much to recall, and are what we can things And on earnings the very that I of managing you is, I on XXXX. look of for at

very with feel we that, were so, why disclose we able hence comfortable it. to reason the doing And

is this year, expense-based especially bit quarter the you movement this while year-ago at you're see of but if and up an little X% to total second of look our year a you'll and from earnings looking see comp, quarters, numbers, standpoint, the some the in it's thing, last in up cash quarter quarter a XX about over year-over-year at this first below five page compared other quarter. of release The the it's if you'll

it'll focused dampening FRE. that expansion initiatives pretty in around the total with to people, we'll and we're key going to as and good Credit need said, in firm platform again, Credit, on and the a line we and So cautionary flow FRE comments about we potential invest, But, bit, in do that. growing that continue ebb to feel Global on just to obviously do, try little Global we're and hence

generally In our overall. terms process, they've running stable fixed-base pretty been of

if us generally cost. look when be up and G&A you in thing better at obviously but over fundraising we manage time, working movement generally like, external fundraising front. hits have the the So cost, and there that high fundraising ways to high a that's so at that can driving good We're

third in it's vesting comp, we and equity a in little the Usually quarter. usually tad grant really are our so QX, that'll tend we will yes, less a equity-based On quarters the this of second quarter That's and bit and lot quarter occur vesting. QX because equity-based to and in comp. have and second QX, up have higher a QX

equity bit vesting of caused that that other things happened some we a terminations on in and performance-based and little some QX, accelerations had a have pickup some The we this had year, some hitting grants, quarter. marks ticked bit third a some we the that catch-up the that of and up and you given also pretty a were comp little of in strong,

as basis, the going on the see FRE so you I of some kind of think and some just remarks, and hopefully cost color to go-forward that stability you're I that said structure. on a So, in number gives that on

Craig Siegenthaler

comprehensive. Thanks, Curt. Very

should we as either your and my new box? acquisitions how about from can sizing update the new us investment could of opportunity and Just on we AIG DSA make this businesses in or you see closed insurance follow-up, strategic partnership minority additional and Carlyle entire guys your think with Re, venture, business

Kewsong Lee

a have partnership what announced through I of about soon. already should this our expectation. if going to assets are don't any certainly close. everything teams is know on We to a to we formally close intend significant work don't starting I the we you and working of I so of quarter have carve-out great, AIG. is changes what the matter our think we investment rotation expect announced last of been that partnership on we The but assume from know, to sometime that last do quarter. it's current you matter is think track, As weeks a And talked days, there

impact last assets we of so, $XX And to quite three business. as the partnership from new rotated. that this will Approximately fee that quarter, different do million-plus you healthy. we our expressed comes is And expect revenue that in ways being

the through do is, on sheet carry. on a finally, up, And this over was think balance obviously fees, generate when which that you will the investment, on just all expect investment, how hopefully if I return to we investment, sheet in let's I investment over we size an to that remember, years. performance the want assets about, which corporate that Second, said I related intend about flow attractive come three this in we our caution itself, think where balance financials. you perform, say then will And rotate time. can to we would this

feel it's add so, over And This does in track. day time. partnership. up and on this all math great But rotate I assume We wouldn't we're one. about our

of terms stretch. final I'll to I the we is to just was do on mode by prepared not say do a which more, to intend In my a quarter, which a deal suffice -- we do it's in are rest question, part comments, any it of think your and

about of DSA there's new thinking acquisitions. and sense, make it But does very We not doing that's expand internal segment now that selective which we that nothing it this where platform, are consider But makes right -- will something being to aggressively flow. to expand cash for does with being out-of-the-box a is a have AIG it. very careful. plan in its we're Where the and business, clearly its own because it lot sense is

Operator

Carrier of will America next our the And Mike question Merrill line with from Lynch. of Bank come

Michael Needham

Mike Needham in Mike It's for Carrier.

have affects wondering your realizations. First sell-off the question I market on how monetize I'm is investments. your to ability

been quarters? fees performance this we distribution expect You next be already Should pretty the had the modest year. lower guiding couple to to over realized

Curtis Buser

Look, largely from lower XXXX, be was we than picked XXXX going to up, as they have maturity that perspective. are funds where of of terms in as we the a before said and we you've said because of mix the

is as being see, $XX $XX a ground. been capital to a $X.X not XX ratio, It billion of strong realized manage accrued well-positioned been, carry to That's able here carry. realizations is to by carry. those months, over as As return that in so we number our carry at year vintages it's a news is as Investment billion roughly has And underpinned Solutions. got generate last exclusive you ago it's of capital take the limited in-carry where nature a to the partners of of realizations. we've it's up question a relative That fund is question billion and Good are is XX%, begin and from can net back of the our clawback risk. XX% of to

ball cloudy more really year are long over that realized when more growing, term, stable, markets Now, my ball so think are I over to it when choppy. X is $X.X also crystal good becomes and X pretty a crystal and My benign, on period. carry the predicting that is realizations billion markets good is but

in I about $X.X good Kew ability into predict And ability The underlying challenged portfolio before. as helps. would our feel are near good, that turn good right more Hopefully, so, and term just good carry. But to shape. said, news portfolios than billion this say is, I remains my realized now to is

Michael Needham

XQ. versus on prepared you of models? started me Yes, the much you can roughly well the or those the marks down have strong marks, remarks And on a But as thanks. portfolio have this marks, in held equity up the touched is And for follow-up, private marked take to growth, too? given guys for you how those revenue comps of reasonably in remind kind just on model also EBITDA

Curtis Buser

reflect real three that precedent at In at we're flows. is and do respect it's we to of Where the them held, all piece that. is sell some is sell the asset there make we really are you what that's this portion, actually can The and we of for. at three can, our approach. privately And think projected we privately-held fair to align looking fundamentally here We're value, is at looking The publicly approach we're is publicly-traded for. methods, all but multiples, those public traded. at investments P the transactions, can't methodology conclusions XX% is times looking always what do we try goal can the with always approach. to look obviously, So underlying cash portfolio what a prong simple, what model assets three we Q. a will are XX%

the pretty clearly good that our a the I about piece so valuations marks perspective then in really from process. back-test question, your say supported. been is other And we embedded our would back-testing have well, Feel

third-party We also of terms of reviewing input use a in lot things.

firm, that just not even a engage we one Hopefully we processes but firm, our doing just valuation we So don't our number that firms and and helps. just can. audit sure we use of use the robust best to experts, make multiple are

Michael Needham

[indiscernible] just just market off And looking you're were comments your has reacting. Thanks, how XQ guidance, for Asian U.S. and the how like at so mainly yeah. publics and your are

Curtis Buser

say. real of be learned for public Asia terms is were calling problematic I income. careful you be right in thing to And way be because quarter's a look of if numbers are continuing the things it, that's to The have fourth at terms But marks now, before doing itself, to calling going hard in quarter over, have this then as down. economic of The about down, changing.

mark market Sometimes what quarter Q the on down. and really times a of portfolio and it's concentrated end really indexes change the more the in seen come public what it's portfolio, was day-to-day, while us public P is small, with our they lot the those third respect as the is of hurt of quarter marks, much really where the in Asia, overall here to you've

Operator

Katz our Citigroup. next the of And with will from line question Bill come

William Katz

if you could some on the way maybe opportunities. was question, incremental first you wondering the So, on FRE, level-set level-set of I growth

said $XXX think that good feel I about still billion you mark. you

What sort might basically that and mark? of XX% then your in you same that equity And higher you assume I commentary was Japan embedded A, in buyout. fair that? XX% in is what's billion the X private things And then off $XXX to So, you're on have then there I going ticked tech around of of think sort it latest success to be is size the aggregate funds, is that? in prior to thinking the successive or market of running that that the for, think and [indiscernible] X other --

Glenn Youngkin

last level-set So, XX% at calls, couple more a original first, billion to faster expected. set And bit, than The little goal. $XXX XXXX. the as just of in we're we we've billion was goal the we've through raised said money $XXX

we're ahead. why And so, that's

Curt the in it. expect $XXX reaching year, we only as his we not that And so, feel will said exceed by fully about billion goal next remarks, but we good

move in would and through $XXX down as doing to have goal, would through in we'll just We Kew keep everybody additions the went road, cycle, expect get the the $XXX $XXX that overall billion new will more that expect and at billion made, we course to fundraises the we're updated in we through next this and portfolio a series look billion of point, and set goal acquisitions longer-term we how we another a further be than plus business, one. and Credit As as outlook that on through of given the through funds, Equity fundraising of time. and Real the full in we've to Assets Solutions Private move

cetera, But in year we course, would $XXX our and we set time than in But billion at happens and move new environment point, way, simplistic we be we cycle to work during through will in through dependent continued at going fundraising billion. haven't et that period, also to more $XXX et that level, very this cetera. a expect that performance yet. a be the goal that what's one on expect fund of that next We know next will, the economic gone that what on overall

Curtis Buser

would market specific say funds will million. European to $X.X find sometime dollars, bit the in be three fund, over then is the in three billion a thing very of our in be all And soon should that, I let And fund, and over is assume current the market technology, just I me those next you just little €XXX billion about long-dated the Japan or will add yen-denominated the it's granular, asked dollars. euros, a get vintage either year. funds, only may current a you and

William Katz

the quarter. a And just acquisitions, your Okay, buybacks bit you Stepping have of lot nice underlying in good are de stock How is it's you strategic here? capital thinking internals that's this management got the company. of stock the and some good back, but helpful. a see about a despite you've follow-up. is down novo to Obviously, growth, also quite

that So maybe you're running up toward I end current going buyback. we exhaustion think and buyback, into deployment about capital think of priorities do more XXXX? the the of broadly, How sort of

Kewsong Lee

I agree, we momentum would you in I valuation, now FRE. given is seen as you've the the point have attractive think that an out, and growth in marketplace the

manage goal about unit. ENI things, whether distributable earnings is per earnings or think that's unit I per unit, per to our As

to components there's that. two And so

pointed Just there's you numerator. as out, the

now So, investing organically, talked about, deployed or capital at grow important, when that continue times. we've to and too acquisitions investments two in the we business requires as capital future to growth, also and really we've

us, managing to obviously, to is and us. as equation at piece, obviously, the and very the have that other needs outstanding do The well. then that's after-tax important the capital our play, and dilution use units, the we having do that's managing And distribute managed XX% and and earnings, important we the of denominator the is of other managed and be that capital to into that

balancing the that's mix. So

job we've bought units over million. the Now, good a done pretty year. million I for $XX past here think back We've about X.X

our outstanding on said we that that I current we left as have the manage important million before, it's important there. it's and $XX capital authorization. units And about have We the

use authorization, of you. it, back we'll to look as once existing we'll that, So come do all report that to and reset we that and we

Operator

line the of Our Robert KBW. next question will come from with Lee

Robert Lee

have specifically worth past. bunch a going like transaction I that who's venture maybe with I'd with you've through it's obviously mean, just of their that, about something in the a little you focus initiatives. to net a talked And obviously bit on Oppenheimer, high maybe your own.

of you think with setback you Oppenheimer or initiatives So could you any and will maybe about market, your or if in just change then some -- be feel that how your venture. there

Glenn Youngkin

get to and bit. I little are tag-team this a I'm to and Kew going started going

So, just, be to high in it for first, continues talked over broadly well as reasonably many quarters, about us. deep investors, net worth a we've

so, on active these oftentimes to We Kew billion. of have the and is raise $XX.X buyout they're hit raise to our into U.S. the and on described, We quickly, real all estate billion. challenges have billion. today the strategies the our buyout hit at funds I funds channels. the U.S. %X.XX capped, We cap we fund themselves of big as Asia cap at on the hit through at the fund capital one say, $X.X that fund cap

that into that And a every are bit also so, raise. part time recognizing what of scarce there's we doing just investors, for little us when we group consistently of inventory of but to tapping go is

that's of product that. that's opening course, specifically. the initiatives Oppenheimer think a it have that number We are I well. so second this you XX% offer are do net captures other worth we finally, particularly to net good most high of group very reasonably in then represents and actually this investors, up very, of of to couple high that of know, a joint example all, our things worth to we new venture order can channels families XX% big are where as to it customize we And worth lot trying a as But, historical high that net and group And recent growing a families. of across fundraising. very,

ability into, And not the wealthy Oppenheimer initiatives the to give these ultra-wealthy would the people. tap to JV? say, new actually I want on of people, you but just comment us some would Kew,

Kewsong Lee

we're I I are respect This days. Yes. with well in quite a it's Oppenheimer think it on would retail right already of we've going question which partnership a different covered All to to you I done dialogue the with your to in investment and quite distribution. look, Oppenheimer. bunch net platforms with that now. on mean, expand to Glenn, The worth active OFI, additional joint the firms bunch and order venture, whole market in specifically refer early has high just other a vehicle add it, well. approved as retail, we target things of and been is

say, business think it's to forth plan with early good no date, why on isn't with comment I based and with progress the it to are the although we and darn we too partnership I on we it's set reason to Oppenheimer something financials, feel very pleased So our we them execute see fair that pretty can't about think on.

Robert Lee

quick maybe Great. And just a follow-up.

to are now in in seeing any of their pace months minds? in change things, Maybe types questions and you the LPs? ago versus, say, of on what's you any You're anything so. be asking global XX%, clearly bullish worried is, very at But markets and what down some I pretty been on it's about human nature good getting fundraising credit given your being even it margin the outlook. mean, people or six change incrementally fundraising or the they're just continues just and tone

Glenn Youngkin

been. we're is answer is gotten is short our every it's behind which on XX% be that we scratch as as The question your us, because we've of to continue glad heads one really it I day, our goal good can think

years, private to any capital slowing Let the and has see recognition a in capital fact years you XX set crisis We're universally but tell and back capital. interest. financial the private investor allocations we we across continue larger and look when with of what me experience not that in see seeing portfolio just last private capital, not seeing just over people's private marketplace. five do the board. the of And just you in the to at we're our recent of that seeing to We're a need everything changing to the great through across and to not allocated increase in be pieces their XX years allocations,

particularly of any the conscientious we course through in that in made we're One we've the So happy In can or interest it over we're that, market very changing the pace the have went is, it. course, made that we've the and time, The we opportunistic Corporate we've the the made is, and of it funds, answer interest funds, collection the And no, to really we what credit at mean funds, in we've reflect and short Real Private now, level investors degree the all and Asset for equity today, infrastructure, off is we're pleased of with seeing answer fact funds what's great that do. happening select what comment. then a funds. and credit big funds, is private last made interesting of a Equity the not volatility market new folks, as some Assets thinking class earlier, pace long-dated credit progress of in right about with in we're the particularly, just in we're seeing markets, And they are Real really finally, there. asset energy, does very go.

Curtis Buser

There pair world opportunities of over firm in an -- gotten a term been deep in good and has only the there we're the is fundraising. a your real business. And is short deep of sector that our on what the long-term impact in market long with mind term. that a hands, have around and that a firm teams, around value volatility investment through having cycles Please seeing appreciate But thing LPs of experience. steady tons in the to is add undertone bad, keep question, we're of clearly concern the in I'd the are there's

of something I that upon through us. to think thing, LPs, the deliver, are quality and of term, something investments, And hands the all to and which we best more now can that making We uncertain that our us the that best times like of the leaders is pair the is Carlyle. with results. doing in benefit think truly, reputation as believe, just about ability cycles broadly behalf and always differentiates of the this types short right institutions that the inures I to managed on terrific that have ability right and different steady decisions And

green red to what's And and screen and always note fun or while it's long-term volatility, in the in so, that's a the happening on focus are business. we

bad. through Our we very time and are long-term, relationships been tested and in have good

keep quite delivering but to and historical many the respects, is allow is, this results what us likely wouldn't keep our the done I that in as think great business past. in franchise say we've I more going usual, will So,

Operator

Brian Bank. question And line our of the will Bedell Deutsche from next come with

Melinda Roy

just volatile far? so in in capital Melinda is Roy we've think the Brian just pace your given ramp seen Maybe deployment of markets this for more quick Hi, Do Bedell. could up XQ a you you one.

Kewsong Lee

say will faster to I pace would affected, as just buyers little know, volatility, sometimes mark-to-market it's and transact. because following. sellers. say tend a experience, with rule, is there's You When the than just be I uncertainty, a the harder could just this my bit And to

we're forward-looking, be the to good And or high things whereas used how cetera. so, thinking always sellers XX-month was, what tend to about be and et

period a conditions, transact. prices, of and we're So so time there where to may to to level-set with trying ability be find respect current affect clearing it could the

very all Sedgwick, to known that, a AkzoNobel, and Nouryon, we're closed said we've positioned having in already large as on that's because deal and we've well now announced Now, come. pretty

been quarter that first So we expect quarter, have pretty quarter, what we about good pipeline we of that fourth next up year. to second already feel in signed close has

having of and pretty feel what the QX, and actual relates that behavior kind into of means given of the deals pace ground the into as in has commentary thus volatility next on and QX, my far means for So, that and but about good you what Carlyle, gone QX, kind it to industry general, year. closing that we to all activity

Operator

with the Our Blostein next Goldman question Sachs. of Alex will line come from

Daniel Jacoby

Alex. This is Daniel Jacoby in for filling

comp bit looks partially rate tilt Can pickup mix-related kind for kind a was quarter, towards of run comp what bit within little on a provide performance into ratio? elevated. Just happened performance this you the looked even on little more with Solutions. the the one like Just expenses. digging rate a the of color Solutions, us quick But the

would incremental So be rate forward. if we there provide great. run going kind color should some just of about you the that can on how think

Curtis Buser

basis, total look at in terms of odd looks It the really looks on it This distorts it the absolutely Solutions mix the quarter, because you're Investment an odd. of when aggregate you right, results.

carry. be Solutions, of embedded got didn't a of even things you've Investment is One the to lot of the in careful buy we really

it's through. going there was small, take very really to position Our comes so that it time before

Now, appreciation. current the X% what happens in is, hey, quarter

of great what's revenue versus the going So but comes to the a former revenue, going is from that portion small. versus standpoint, what's to us that employees versus to taxes owners

And the overall so, in that's what's stored fees.

no there. Equity, in look you Corporate change Private If there's really ratios the in

for expenses If to speak mixtures from you a look in have it's call some on well. Credit harder with little example, NGP as we it, Global in associated of. And from we'll Riverstone and Real no to and Global always then Real different get because Assets, Credit, revenues Assets,

Corporate has fixed. And some volatility. is date have in can been those to all Equity that The share and ratio so, Private lion's

So hopefully gives color. this the for you that's It's that Solutions numbers quarter. the distorting Investment

Operator

And our next question from comes ISI. the Schorr with Evercore Glenn line of

Glenn Schorr

on little repricing CLOs the said, it I I to more think get existing please. just follow-ups, quick in are color resets. the two about Two your CLO release, comments a want

works how was that how that. and Just expensive

Curtis Buser

it think that CLO that expensive constantly to in a how our assets in with that sense that's slough-off the trying without is year. new was, or usually a assets reset. a replace to runoff can are are is say from sense been it to that here. only fees. out the into out under a originations. management, happening grow in Well, extends Resets a there's you're business, good we've base research locks trend actually And the Suffice Obviously, structures thing all the of the running in in done having thing done asset a particulars lot of market phenomenon we a the this getting market reset I it or good

Glenn Schorr

your all process. the call? curious just all And Is on repricing? is on I'm it it decision Carlyle's

Kewsong Lee

you need terms of to folks In -- well, agree.

agrees, you you lock with So, down, you them races know, off everyone structures get if it and the you work to reset and and them, these you go. to reset

Glenn Schorr

seller question and Okay. money falling fell when economy's a first it's lag money there put and pretty companies it. quickly? is, for able other comments really, is what's of And needed then and it was were others XXXX saw of difference obvious previous the to and quarter just, work expectations. one of markets the totally current the we oh, to the Is and the you the strong? really buyer now follow-up maybe I but some then, between energy heard difference still group that Is I back environment about get your

Glenn Youngkin

price oil really, the have Just to in an buyers put and capital sellers when question, work, and to didn't in cracked context XXXX began of overlap XXXX, to go expectation. that until prices remember, and actually XXXX,

multiples when always high stock only months or which rearview mirror, And the is really is X it's this to changed in way appreciation permanently. months works, good, just so, that and that's steady conclude price going the no seller X is

sure just time. fourth the from quarter been on so, it To takes in to we're sometime. working get do on and I'm we're Kew's will it's QX And QX, earlier now QX year into QX We've going in show to and things fact, QX done extend standpoint, and up. will what up an in next this and comments, investment working since which locked QX

this And to three good of resetting for not. reflect but looking trend will, we're And in whether to is process earlier term, really so, one hard and resets one, Curt is have really heard movements expectations or us that or you are the longer this a adjust say long-term sellers week buyers to.

have anything, just attention to portfolios, in going what's for as company industry. pace we're to happened a lot make we've paying better when take immediate as buy that I X into jump of of market read our a of provide kinds all investment is, And and of us X advantage for even to course finally, or of to ups a or of do, volatility the to about. whole talked we're So in it into chance or the a wouldn't we careful we lot anybody and company chance the a we're an weeks in and changes returns us The and great that. construct there's and net into our downs, being of

Operator

my Harris, back remarks. the There in of you. to further queue, comments over hand Head Investor are for questions Daniel it conference no and so Mr. Relations, now closing is to Thank pleasure

Daniel Harris

for your you time Thank today.

any speaking Relations. we'll have feel Investor follow-up free next If Otherwise, to you to or do me call again questions, quarter. forward look with you

Operator

you program today's now Ladies we our and Everybody will disconnect. This does conference. on wonderful gentlemen, conclude and a day. have your for thank participation

The Carlyle Group Inc. (CG) 31 Oct 182018 Q3 Earnings call transcript