CG - Earnings call transcript Q2 2019 | The Carlyle Group Inc.

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Operator

Good day, ladies and gentlemen, and welcome to The Carlyle Group Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, today's conference maybe recorded.

to host like Mr. today's now would introduce for your conference I Harris, Relations. of Daniel Investor Head go please Sir, ahead.

Daniel Harris

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

should call. certain performance a reconciliations non-GAAP Accepted should financial made prepared We These will in do on placed actual on and the differ based today's from isolation as Annual measures of We've of guarantee indicated. These be current during inherent those or statements results in undue materially refer GAAP statements statements including time. our obligation management Risk to substitute those not today not our are risks on no at in could considered provided and to cause involve any measures in XX-K Accounting that forward-looking assumes Principles. Generally update identified section not reliance release. measures earnings forward-looking any uncertainties, and measures be future to these to them. accordance Factors from with for Form Carlyle expectations Report Any

and on corporate Early a information Carlyle conversion this that morning, this we Relations Investor our have posted structure website. announced change its will with on we presentation

earnings which regarding also Investor is Relations In our addition, a and second our available we issued results, quarter release presentation press on detailed website.

common of and $XXX $XXX million with $X.XX. generated Fee million DE second Earnings Earnings quarter, Related the we For in Distributable unit per in

will and going $X.XX take through us unit. go your will Today, speak Kew Curt questions. our structure corporate distribution will for per and after results, we common then Our which are be on our to Glenn

any additional by and to questions. yourself limit for participation the to the on all return ensure one question queue To those call, please

that, Youngkin. over to our With Glenn it let Co-CEO, turn me

Glenn Youngkin

Thank and everyone. good you, Dan, morning,

Carlyle pleased from a are We at convert to partnership traded fixed to Full $X with initially per publicly a a dividend set annual decision to announce share. our C-Corporation

Let of and happening will for decisions. me these is then describe our some rationale summarize what Kew

XXXX as X, we Full corporation C January a undergoing on what will refer Carlyle become a First, to conversion.

our of be common units private for class holding All of and exchanged shares. units one common will

variable establishing annual at an are the will $X per dividend $X.XX receive shareholders Carlyle we set dividend. or same Second, current per initially distribution, fixed quarter, replacing share all our

a dividend Our current initial the $X approximately X% per our double average yield the unit constituents. to price, on more S&P share equivalent than of dividend is XXX level

the our governance both Third, removing And have terminating forth, our Receivable the we overhang will obligations shareholders under unit, outcome one-vote one are $X.XX over for share five and positive Carlyle tax the out our and new a per public years. for growing liability This Tax future private a is Corporation buying Agreement of structure. significant payable long-term complexity.

current approximately vote of And public today. CG be held ownership of unitholders, Out few make let the specific Carlyle’s here. points proportional XX% public's me our of by shareholder will the directly to box, a units

will XX% And For these senior based a Carlyle’s to employee employees as be are after our of will shares be own controlled initially today's ownership. a conversion, our on finite entity. period and Carlyle right time, Board will with approximately expected the corporation senior of agreements be current who there And voted founders members shares designate the rights our for a shareholder block subset will by general Board of the as specific three nomination partner to a chair. have our common

most extensively Board best-in-class our the Full all attractive and governance and dividend our C-Corporation of team, on Directors conversion worked fixed Carlyle with a is have this we structure The and for founders believe is more important strong conversion investment growth build foundation This create as shareholders. future for proposition. momentum a establish business, for earnings of a and continue shareholder-friendly step Carlyle across our we our to another

progress that over our three began past under $XXX is years has to $XXX a Fundraising now record evident eclipsed have management the billion billion. we years Our increased as XX% ago. assets goal X.X

$X.X than further Our than carry $XXX increased and years, is for Fee and is substantial XXXX Earnings million target Related levels more ago net higher past three three the over XX% room growth. accrued for more FRE than XX% years has there of billion

Carlyle major to new Today's our believe Carlyle and we current are value and for strong continue to milestone another momentum deliver we great announcement well-positioned operating shareholders. potentially is and

Kew. it me Let over to turn

Kewsong Lee

Glenn. Thanks,

why Let shareholders. rationale the our me some just give additional you and the outlined now on path for benefits for provide we the chose context

expect we liquidity. a base ownership significant and First, our in improvement trading

Russell Our others. that maximizes passive indices our including be S&P of new addition Carlyle’s and structure active investors. to we following And attractiveness shares among and leading to for the CRSP, our many conversion, considered anticipate indices benchmarks, market and the will the

Carlyle to one-vote trillion Carlyle passively $X because assets than for conversion will but only class is more from funds. larger it’s estimate common stock. inclusion an of consider by universe buyer actively of our planned to of enhanced likely a with C-Corp not funds potential significantly, their managed into one We opportunity benchmark further our single share to even transition a expand

variable count base an predictable can of distribution prior while a dividend discounted also distributions we our the to multiple initial for fixed above Historically, investors capital Therefore, retain policy valuation yield, set attractive better our dividend. that drive future income new model. to enabling compared to the and level source provides recurring to dividend our on firm as we investment difficult forecast growth. a believe Second,

if and Retained largely our will to and shares of growth reflect after-tax the levels business, over time minimize dividend our supported our investment in be of platform actions should new dividend to appropriate. enable in Fee to invest fixed and higher earnings Related by utilized generate be Our ability will Earnings buyback grow shareholder-friendly our dilution FRE.

alignment more attractive. increases even shares making corporate It is third, our case simple. And new governance Carlyle form includes and shareholder

our and ownership shareholder differentiated. shares. attractiveness will same exact else only all be public’s makes our the there shares from share single of Carlyle’s held dividend. common matches a by will same an investment. to Carlyle shares. decrease structure’s All the an one increase shareholders Every appealing proportionate will And is public in believe percentage the transparency whether class of in receive total price exact shareholder, investors Following be alignment public any the way impacted and employee our We own as vote or conversion improves or simplicity, and equal, investor, more

about changing at it to isn’t Carlyle. structure turn our I me is while over Curt, Before talk evolving, let what

firm, As focused delivering remain on investment strong global we investment a performance.

We continue Related expand FRE momentum Earnings our margins. build to will on to Fee increase and

and fund existing opportunities We will drive growth continue meaningfully large organically building scaling and new as upon by to Global Credit. such our families

way. We platform expand will and our to fund to our and a occasionally thoughtful like for value make Fortitude investors in and selective acquisitions investments create we continue shareholders. in capabilities our in to strategic and drive invest will performance our And platforms global and people

the So firm come. to drive progress years The momentum. in across to wrap continuation the us up, we to puts a have the is growth the path on forward best of announcement and strong terrific today

Officer, With Curtis that, Financial over the let our me turn Chief Buser. call to

Curtis Buser

aspects will Three take results points Today second quarter C cover your our before conversion. Kew. Full our questions. detailed then our some additional on conversion I we Thanks, of summarize and

to our on investors fully K receive We Form From timing. expect on of XXXX one. a January First, point that effective conversion will forward, XXXX. a be X, instead all

to be conversion, subject Second, currently. of our corporate taxable tax, income Upon on the will all only portion a substantially financial compared to impact.

reaching of Distributable XXXX, low We years. in expect the level about before effective increase and Earnings mid range full high our XXs five the to to tax single-digit to teens in be rate on the then the in

dividend. Third, for tax is shareholders on to qualified The dividend the to a be expected pay U.S. purposes. we dividend

then will will to Our of in be last dividends. distribution and unitholder in all begin November cash be shareholders XXXX, XXXX

Moving on prior $XX million million which tax of We for second quarter. the French of of to quarter, the included in results recovery related Distributable charges to a generated $XXX litigation. our Earnings resolution the

were higher million the Distributable of impact, second than this quarter XX% XXXX. of Excluding Earnings $XXX

Our per $X.XX of will and positive Distributable matter unit common distribution we Earnings was unit. $X.XX a the the including tax resolution common of per pay

of management we under management year $XXX in X% past capital new fee increased over year quarter assets $XXX $X.X pass years the set past over this the earnings increased to ago. under Carlyle and goal pushing billion assets Total that our X% billion fundraising billion. $XXX We raised billion several

our $XX with pace year Our consistent half fundraising least billion throughout at of $XX.X XXXX. expectation is billion the for fundraising of first the of

catch-up management our the for expenses, from impacts million. double more run totaled $XXX quarter, and quarter in we than last and notable lower about up Related level second FRE to be million Adjusting rate XXXX Fee estimate quarter, the Earnings the quarterly the in including $XXX continue several second about $XX million in of quarter. normal fees, than to

catch-up Fee revenue smaller energy is XX% of fees in a in quarter fees, in closing in significant in an second XXXX. $XX management this catch-up was result million $XX the attributable infrastructure closings increase Included to global over well the in largely second and of million to million quarter XXXX. $XXX compared of management as as quarter of Europe international Buyout

And second the million high XXXX. were second addition margin additional affected quarter first positively affected. of half of to revenue. XX% the The incremental quarter of million $XX $X FRE fees our by during margin was the the quarter in In in similarly margin transaction compared XX% FRE was

excluding running target While our XX% to FRE ahead our rate year, margin items, XX% in certain the the for run range. year-to-date of margin XX% is is notable

past our the across and platforms of teams, increased investment XX% compensation build Partners million Assets. and out of over Carlyle Aviation year expense the as part well as $XXX Credit Cash Global reflecting Real of largely in continue acquisition

G&A and than quarter, second fundraising affected other lower normal the indirect million $XX positively by in expenses expenses. were

the expense of both $XX of quarter year equity awards expense. than Second quarter the quarter a ago equity-based was XXXX compensation reflecting and million effect lower in lower first of

year full expenses expect to decline year to forward periods. XXXX prior continue We equity-based from and compensation

were the our $X.X for to continue quarter. proceeds our months mature realizations billion Kew need the quarter historical portfolio reflecting last averages outlined as with in over Realized to carry the from last XX down from funds

revenues low. realized million the $XX remained in of Net performance second quarter

While investments. level. realizations quarters, fewer the below revenues will could was reflecting muted last remain expect the they of of Realized $X exclusive the investment And performance prior resolution over of year's and periods. be few higher sheet the to matter will sale million, revenue we balance tax income, performance favorable XXXX realized next also compared kick

That $X.X said, has as value materially investment years. past we billion grow of confident sheet income are tripled our could three balance investment over the over time

$X of XXXX. quarter performance first versus down billion of Net the was billion accrued slightly revenue last from $X.X but up year

U.S. real portfolio we modest and funds saw Our carry performance quarter, higher. several investment a Buyout, solutions fund estate carry but accrued appreciated in the Asia drove strong in which X%

invested roughly with on and the this levels on of $XX billion and billion and across into of the corporate invested transactions almost half remains several track Deployment over equity in capital segments. now half $X.X that the with private amount We years. new quarter year-to-date high past other follow largely have new

Now the recovery we connection in appeal on million French with resolved the a gain. was Distributable a recently reducing Earnings French word the XXXX the XXXX Real ruling and asset quarter. realized Upon investment loss of and adverse out France, back dated resolved amounts an upon fund. which now to initial a ruling of We court gains related income matter matter Estate $XX to current earned tax sale in on we gain reversed in The finally and concerning have subsequently recognizing XXXX. litigation in the the in the France our tax due

today me changes In to reiterate Carlyle. closing, to let announce our also excitement

our and optimistic of for momentum We strong stakeholders. platform across strong deliver can have our results Carlyle are all

are we ready your that, questions. take With to

Operator

[Operator instructions].

question the Our Morgan. Ken from JP of Worthington first with comes line

open. Your now line is

Ken Worthington

C-Corp. on Congratulations

estimate gauge of I preliminary can has the kind when it’s impact Just others impact conversion? C-Corp the but it like question gave you the reasonably different on than a of what impact been. help actual feel their us silly was

the permanent about all earnings can yet? on be the here, through give if latest you impacting actually be conversion what be details might should we how any based that tax and might you’ve the implications So there of gotten you walking And helpful are kind would changes reporting? think if temporary, the us what

Curt Buser

few to our remarks, work as well as be at there’s going in imagine think if XXXX said know be done advisors, of will in lot parts the a particular though outside January drive biggest will to six to the price own get what the so And you and thoroughly, that in this into on my it the of actually around about things the we’ve stock step X, are about Yes, opening moving it months this. structuring the put That tax you as looked upon actual tax been Distributable really be analyzing post Earnings focusing very you it’s way complete, said, rates the will on take conversion. this, this as what actually of up our a both conversion. will can be as teams on I is kind terms effective thought again conversion there also I

And as teens in I and be that it at XXXX mid will to to will then will about years the single-digits five low in high that be then XXs. said after increase

very really of today, so were this, being terms in the as terms dilutive terms expecting hoping of demand the of for effect mid-teens think that much from that average we but dilution it’s and are of impact evaluated I increased how think in kind average XX% stock. we again in of the we or covered on where we

Now things push complications assets. you one benefit have the those really challenges you and to mind, to here ups assets. And down as of are are kind them then that of the underlying as keep you of also the in in to realize underlying take part you part matters, comes also that of of as tax do as step terms aware

So underlying while some basis, should kind it over I fluctuations there could gave how realize of we basis on quarterly those upon how on a work annual depending benefits. an you be

will last because I one lot just have firm, on longer I tax you that body but non-controlling it where financials, I and true our comment. and it’s in just than terms look financial this that whole if Ken, GAAP class you to impact. hopefully understand, the simplified we no the of today. of transaction question from think do far -- are -- is it your interest just our a makes no easier common of answers one that at were does, simple one structure, really unit just same in more corporate shares, know

Operator

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

Your line is open. now

Craig Siegenthaler

the conversion. Full on C-Corp Congrats

go outweigh So staying to corp including thought, the at but pros your an Full CC your independent class annual single cons, meeting. structure are voting peers the C-Corp board, up rights, share

items Full for for moving think Carlyle wondering just and post big were a biggest these I’m which So of why the the cons not issue deal a C-Corp? you into

Kewsong Lee

Kew. Hey, Craig. for And thanks the question. It’s,

of that having goals the potential stock to had class stock. the buyers in was and one-vote single one One one share achieved stock, into us. really for And share liquidity -- of we objective mean stock of maximize of our expand potential one I one common the our share common universe one-vote for

in structure stated the index I terms the earlier, as S&P. of the us for potential maximizes simplicity so the the being of in of included And structure, including transparency potentially everything,

do here try drive at to figure was that transparent forward, page position thought how to way same how are us we was we and the a how in and drive we all firm value, one very this we class to stock, it. the of moving do do we thought so out moving single for the positive And the do liquidity one-vote of common Carlyle. on best And share firm the simplified big right really way to

Operator

the comes Citi. Our next of with Katz from line Will question

open. now is line Your

Will Katz

the the to great questions industry. C-Corp taking for way much very you whole of finish sort off Thank and the similarly for

and violate conversion, moving maybe a for wondering may one away from of within provided part sort sorry sort of XXXX on be on and So just realization question But around Curt. could as into question, conversion. I’m FRE outlook you the given per a lot parts the then analyst margin rule. look supplement your thinking And beyond? update first the the we I just guess us two I of the you the question today

provide more strategy potentially mentioned you if little you. bit just balance had bit that? I color little little about underlying You wondering behind a the was a could And Thank just growing sheet bit. a

Curt Buser

little then the kind on I part. take in to the of bit a will second part Will. Thanks, weigh Kew maybe first and get

FRE over remind our the we very margin, significantly So focus and Glenn internally FRE really past pleased started years, out, And up -- we with as past FRE. three the well that. over people we’ve on grown look as continue We're years. of XX% have been are driving three on all as we as to you

Now for is actual set current about the our what way think is rate run also level try to we that to to And amounts. always versus it call out. try everybody

you million to Related little about XX% a rate normal a $XXX quarter our range $XXX Earnings, at out run million, expenses a actual on million this after our looking is actually So fees, rate to than over $XXX after quarter. our XX% of more $XX a closer of FRE think run margin XX% playing to catch-up management basis think margin, I than of Fee million think bit the in as normal some is lower or

of a get be range. some take that a run of back where due But number items. so today I about we XX% is again short-term, range. be and the we opposed rate years get just outsized the think that can to to do in how think to couple quarterly margin things rate as million that normal XX% our over run time in on at is will obviously will way for to XX% we and so to focused That’s FRE we FRE growing think the I time And kind there that things to kind blip to be where are then some of that $XXX will got

million quarter about if same as to that ago. million half a so back realizations, running $XX performance so you $XX compare a year of light, net million less in we clawback realized in -- first $XXX in year-to-date, were I than out $XXX realizations QX, the On million we're XXXX, of said the were were here

this that is Now grow is. I in do it think perspective, a where but that realizations see our all the this related really we little else bit remains of to in put and kind tick-up will second assuming kind all begin all timing half XXXX will

are are our been. where tracking funds have well. They performing with large historical Our consistent funds

Our in shape. great portfolio is

the essentially last on think quarter that gave you answer I that So out. I all how plays same

balance do billion. source We I’ll sheet, will to significantly continue sheet. for of of light $X.X been another growth that of us. grown has GAAP, sheet added of time. having all ours our That the you present add. is our funny stuff the things having billion do now $X.X have as We’ve noise do the to But grow is to light. to able capital run be you or investments I what’s to a over on some terms drive able to balance think important. we business really be that Kew In I we that of additional look balance always out capital call on you’ll When sheet. be the happens realize grow balance to that think earnings Glenn, the

Kewsong Lee

I it. we sheet investment to of balance you that grows think good of have our growing balance hit for to not the balance looking the the sheet. opportunities sheet sake The build Curt business. grow We're because

to now billion on when We're capital, And it you invest a on back to have an benefit year heard drive as into do earlier to ability so, a fixed growth. pace policy be is reinvest $XX retain to our you enhanced we of that. the going plus about to business dividend the

that is our several and co a is have which year investment investment of $XXX We in million business. core opportunities,

in to the make opportunities very selective acquisitions, we’ve have which about been past. We thoughtful

external continue as to growth. look We carefully it relates very to

that and need cognizant of fact good to our are -- we so we And of course very be very stewards of finally the capital.

back sure I, the shareholders. our Glenn repatriate were managing when very And capital we so capital and and while our appropriate return to of we do appreciate dilution on Curt making and focused, benefits

to of additional And with it's the so in how the that positioning place be us. the and driving view the company growth about with mindset, using in think a available to be that future. it’s we really better would capital But

Operator

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

Your line open. is now

Michael Carrier

of share are partnership voting public benefits the LPs So the old the firms, conversion. mentioned past the since So understand to just right was potential how you it base. do that But the C-Corp and the pressure LPs think the went structure shareholder part the sector public? I changes shareholder just you from that class taking about you protect in as from in some many how made. changes a on the from given

Glenn Youngkin

Glenn. it’s Michael, Thanks,

have quality the have and a the lot foremost many, of think enthusiasm of all of were potential these LPs initial met I great of businesses with when years had I great that first firms listing firms been our ago many performance. for concerns think been transparency built, many, the some and the really that

are that funds alignment issues the things doesn't met And change all predominantly the and so, absolutely conversion our we right LPs more more regards been those investors have I looking of towards this funds. for. to case, think that into with transparency alignment and have do our And and In and move just our with this anything of course that subsided. have this our fits

all There no just and it alignment is think with that will they to viewed along favorably. in the spectrum be moves them all which change this So we further endorse. Carlyle

Operator

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

Your open. line is now

Michael Cyprys

priority? you just you the retained out a taking just I not that for that question little I congratulations out, hoping on could capital for and you bit Thanks around framework that using debt the distributing the on earnings pay guess either more towards down What are to at your C-Corp. was the related flesh expect? can of are buy framework sense the sort again the that M&A, capital at sort point, company M&A And for this management how what’s that, what's we C there? use, about Carlyle you makes or of back mix what’s and thinking

Curt Buser

Michael. Thanks,

can Kew or add. Glenn and start me Let

and the additional the allow us additional invest look to then we will analysis of to: that provide earnings we add to are grow or that So I first have what growing we us. as thoughtful some things thinking firm as how where firm into that as earnings us advantage accelerate to attractive play and think be want of we performing terms that with Those able to be And that to and the in to at come will of firm -- capital. can to we to down in have capital growth, those the opportunities take and comes is about want first, opportunities. of be how be front are the

looking From a And of we’re we and debt prices funds said, around math. sense about funds, be into pay down dilution will capital the makes we’ve makes time as into to point be stock to firm as the manage at that also and can perspective, to we sheet, said et million and to; and going in $XXX expect for continue sense, price also time. grow balance be to that already that million we per And invest our at stock is, shareholder-friendly at firm, kind be requirement always is the the always our over our goes we're $XXX that where that be in looking sheet cetera. grow I does opening year it. as where buyback remarks, want then stock, repositioning balance and any as thinking thoughtful well and But the it a

capital. so And be using we where that’s to our want

things and the at those all given of mixture circumstances a facts it’s So time.

Kewsong Lee

it’s Michael, Kew. Hey,

I first just Let go of and foremost, business. you. for the going investment a to me capital mean support quick bit color to little firm. just our main an is We're add

our foremost. funds. and is growing that first big predecessor XX% the funds, funds Our Supporting are to at clip obviously XX% over

our just quite way exciting infrastructure, billion XX and the into versus by which is year a launching of talked entering Global in which of new off Second, efforts billion we is are all in Credit of business, ago. initiatives we past, the and AUM this about core obviously our XX

that the been businesses. investment So by into has growth we're supported these putting

been at very to do money. we XX we're existing the Global year, into comfortable businesses. we is moves believe Carlyle up going and plan extend or acquisitions, of this relates As all spend say in this in of ahead has our We franchise. last it no to did scaling terms with Credit to strategically thoughtfully Z aviation, platform. X our to with are us to opportunities there have made investment very with we We're Y management in Where moving the

look I continue much will would to us assume types have and careful, This But are that actively platform. these list of targets we and going be that priority major is to opportunities. that trying our assess long at extension We of to we external get. go not that a of for is logical thoughtful more a and

Operator

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

is line Your open. now

Alex Blostein

How through And the they you, mez three maybe ago, kind the you growth? FRE some Margins will delivered spend fund fee that could just management generally been important growth in then news the one was couple to was I billion have very management year comment $X you initiatives? of us flections guys be was through of hoping minutes on it are still go. the I walk But some outlook that key that. beyond of issue of a fund. that, for is a think talking here. days Obviously on for rate, couple have the kind big feels drive of drivers energy within in what room next the of fee like has already from the may growth

line? from on Thanks. the through that us walk management maybe fees So impact

Curt Buser

will is and Alex, I this Sure. Thanks Curt, start.

we obviously input. perspective, a a reasonable credit over I business. As the fee forward, think ability started as very can much key pace our time. look grow do From here, growing FRE on on a focused is we what we management We're

run it XXX about had you that, fee number. at of over we're way the rate we from look million at run rate, run of a management so management rate up fee growth that call If or million off kind is have of $XXX our

the been has good. credit So in growth

mezzanine. account That to growing We on repositioning continue focused the be takes credit. into energy our really will of

in more way that going of kind good things do opportunities energy continue results that to a take platform think mezzanine of good that an that. to for making also platform. perspective which investing integrated remain on is will focused But integrated much we sure we're as about portfolio really we going and be an as on forward, we care margins improve We will and and to

are international -- still Tech, of we we Opportunities Buyout have the we’re rest Credit the actively closed a energy we recently Europe our raising. a our in closed are opportunities We on platform. Carlyle of Japan Fund business, a with Funds. are the there opportunities There From recently -- good with on that market number

to remain especially Resources in are within are Assets in There there with market -- platform. continuing are Natural our the Real initiatives the aviation We products. new

I it our to management feel growth. may near be good fee will drive continue about continue as It but future really the substantial it not has overall so as ability to And to grow. been in

Glenn Youngkin

And Great. it’s Alex Glenn.

short important scaling $XX businesses. well a time. newer that businesses equity we very private in bit impact years our of there we’re will a will the introducing large sometimes particular to billion of add But have our fundraising, will could mean are period color. in me funds where that Let of reasonably that we four larger just little and raise Over a just a campaign of in funds, overshadows a be I something what highlight, course excess out of multi-year newer making bigger progress some there of of call year. over

our seen business. And final close to months, final we’ve nine new infrastructure opportunistic so, a we’ve last a real close credit our close on seen a on the business, seen six our final European estate on just business, we’ve in

exciting. the As market, Aviation into now Partners Carlyle Curt that’s said moving with

to going next progress. these we're just the not continue few our years some same have increases make as They management the will newer see back level But see So when of of the course we would big initiatives to over through. Curt drive cycle fund we fees. to as said

Kewsong Lee

question. Kew, your us Yes, Alex, three get it’s of you on all

is there think correct, of existing to -- is going are what me CEMOF question, just your saw are a add way the Let investing out in And color we of little is CEMOF fund. which to stop you to to the bit you the happening about news. your particular

won’t dry But think trying of really Global so, we're there's important back take appreciate billion out of Credit. to step to do a be $X and And it's really so fund. that powder invested in or about what that I

global integrated credit different many to that an CLOs, distressed, mandates strategies platform the up with spectrum full to from important direct there. out of investing very pillar of lending set We credit exist opportunities the

underwrite them credit will against invest Except way them our them opportunities execute intend direct still or opportunities. our opportunity through in energy credit set platform, pursue originate but We the our lending, to and we strategies. is the into for then that private to distressed

it It’s a So to that gives CEMOF. we over have against in execute Hopefully intend will time. still in moving little way line grow the still which we we do to Credit, in continue we be in with business. and more what happened we're It energy on platform Global build just color will at what to platform that much that different more an is defined credit trying be out growing integrated bit and is energy have how forward. to

Operator

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

line open. now Your is

Gerry O'Hara

new how Will forward? Thank of Perhaps And of how the on little bit about but $X that going how majority and you one sounds in that kind of settled the will kind revisited decided and forward? sort should other per going of on sort Maybe FRE share on be that then like it tied puts you. we of will annually to the color of takes which think distribution of annually? a be policy. be

Curt Buser

for question. thanks the Gerry,

model our appreciated been credit noise, to distribution partnership price very public. a volatility Essentially and we fully variable the hard over since As we’ve was past stock predict. believe in don’t our high

we corporation predictable to a as stable So wanted set highly a dividend. recurring

we’ve way and will as we As initially FRE that covered and it. by that’s that’s we the we've our share about at be said the also said think after-tax pretty $X much set per that generally

stability think we setting we of it. find a make being policy that of Glenn which investors our underpins number. by to price initial But current that not it’s X% after-tax want said And translates as yield Now the of will FRE roughly attractive. -- way again that fix a for stock into that the supported with

Operator

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

Your now open. line is

Robert Lee

are GP one the just of lock-ups terms entity And speak But the in two in stakes? try participants congratulations entity, I to that how and -- on that in have and conversion. within part. my question I’ll Thanks for maybe with can over taking a a I'll with questions there in kind down of parter. any guess limitations on time sell I the have their mind

Glenn Youngkin

Glenn. it’s Robert, Hey,

to and of is which We retained have went continue a ownership always have public. XX% had ownership will minimum when we folks’ level,

And and that And to stay very baseline think in partners own to senior so place. that our good we a for provides shares. continue Carlyle will employees

Robert Lee

of any mean their though I there sell founders -- January -- mean are some there kind down Xnd of Is will stake? they lockups because -- of other that some decide not the to that I

Glenn Youngkin

periods other that and No, lockups the trading there are normal windows have. currently no further we than blackout

Operator

Will question next Citi. Katz Our from comes of the line with

now is open. line Your

William Katz

carry shareholders? you flow any have you the as higher But think cash deal component thought might as similar come business, around of think cash as of business about is you of managers of the much prospective of then growth that you with and the policy variable year of multiples could growth and having have sort a returned that basis, the to the you need where sort to very other to novo about be dividend drive sort on or a some that deals exchanges to some excess scaling asset more flow at might de don’t end the the dividend there free to and of that who

Curt Buser

be to just There’s we so it’s no get it’s to fixed we Xst Will, Curt. -- we’re fixed want -- got also. January said dividend, and as predictable still we and to Thanks,

Glenn Youngkin

about dilution now even get Right to add to Will, could Kew excited with where range that. on balance from said good Xst to cash the and special. when just to position we're do then would that a as are which be get we ways we I to our pretty of managing our will January we sheet various review it, we way things can course getting all have But in getting to if converted. we will excess have a

Operator

from comes question the of line Chris Kotowski next with Our Oppenheimer.

Your open. line now is

Chris Kotowski

some performance fees muted over of not I traded the private gave And a the is we guess interesting You kind quarters. funds markets kind of just it’s is for these invested a and been high are active what's the sponsors next of at outlook for have years. couple you in cover carry that publicly realized equity of and all time M&A an low a in I all odd of that mean just all are and couple and

generating and been kind something the in wondering that for there has market more you all in a have there is that -- you explanation mind that is of Is it? tech the all of kind we this period invest seen traditional in your So why I'm are just companies it EBITDA in for an accounts like this, low? or action there not is

Kewsong Lee

monetize which substantially a levels timeframe realizing yes, I really up we you And just It benefits picture, stepped about pace or that that are takes creation. years Chris, five to do from up been a private historical just playbook deployed being value our Hey, ago, a it prior taking $XX deploying all long-term through all we've to and years, speak. getting funds the step think at then and XX% takes and ground from back a which just in And to the big is for that value four, deployed with business. and plus, five years thereafter to even so start if way think of in remember time actually money to three, is double sometime in the creation we investing thinking creation. money billion close work that value it are XX% capital we’re from about it, its start

And so, business. a of math a time our matter harvested our deployment and you to have happens waiting for just of minds, you’re just deployment when long-term what in of it’s in be it’s a that lot

versus they Now, normalize And investment we timeframe, we that the and It's predecessor funds what track equity our generated their in times money funds above And carefully. cases funds our for marks current about at X predecessor when in some track private do. marks at our you predecessor and your current are were portfolios to speak. their the you or funds. business. so in We're very an funds

major funds. it, track. They are funds -- currently are they estimate X.X X.X some our on roughly to are to if current times Our that about you have of

takes go creation have of time. to it in real terms room but So we value potential

in to surprising value and much the you into ever it's the equity take generate your see that it four is use little models realize if a thereafter, then fact just the so larger going to a why that creation ground, about a with to the which it low. can that be, a with it back actually years was private than time and you takes And all bit is of think input that takes three, step at pace may the not words, before

than complicated that. think anything I more But it's don't

any quirkier I’m quarter quarter at one is big are really play. in that giving quarter. I explanation that two the always gave in that Now picture, this or or you region any now any funds there last But things is one what's again

Chris Kotowski

for That that slides would from funds of make to Great. me. of this analysis set generation great That’s a prior show presentation of versus generations. future it some

Operator

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

now Your open. line is

Craig Siegenthaler

On five agreement cash the other tax you the what of the outside receivable of explore for options $X.XX TRA years? over

Curt Buser

Craig it’s Curt.

receivable agreement a the spent on So of a complex. obviously we're lot conversion. We tax doing this. free tax is time Remember

So essentially that when TRA. that will eliminate doing a conversion tax free

for eliminating this, large because compensation was all part so a appropriate a very be this tax there we're And obligation. it to as of for doing

provides That taxable all step benefit, level tax you they to benefit of but would kind a to complicated with and paying receivable at that our everybody when tax ends filings, to partners pre-IPO goes those and tax for I that out effect look this transaction, giving agreement exchange the lots XX of a is encourage asset, just payment. public So out over up our tax real it substantially years, in of have things the payment up company people that exchanged. the ends

it misalignment the is. of are the all big of partnership of versus obligation the it adds fundamentally have result a as the a in what causes that, between a causes causes So what public private lot and it -- it and complexity, unitholders to

appropriate was away and thought amount this internal and it that after in put that $X.XX it an amount to we lot away, be of a and was get it and That’s goes reasonable. it, to C. of to an analysis was go debate determined remedy that we’ve So essentially get get whole the rid

your answers think hopefully So I question.

Operator

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

Your line open. now is

Michael Cyprys

back FRE on circle the margin. to wanted Just

achievable happening. couple over I the thought mentioned dependent was things certain XX% point upon but be some at years you next that think that you could a

over assets So what also just that some are how was about FRE hoping required growth that? is And the achievable you lumpiness the with XX% from expect on growth elaborate could of but the sustainable term? could hit we the is of into as then flagship look that medium level is we certain double-digit at I Carlyle? FRE are size, what understand I to should the underpinnings there fundraisers we that think

Kewsong Lee

Michael. Thanks,

XX% years. So last we’ve the over three grown

quarter back that on down to our expense this of setting as aspect are remain XX% that XX% long-term as kind is long-term. hit grow I XX% believe margin. improving achieve and We management, help level on scale of we the an on. to there, actual focused that those what but do key platform the in we our will XX% us things on we getting clearly focused can to XX% the We’re where across as get that credit business on to basis

Operator

to Mr. today's And session. closing call that turn would remarks. like to Harris for question-and-answer I the concludes back

Daniel Harris

everyone, for Thank today. you, time your

we're path. and of conversion this speaking news all down look do continue you to as we excited said, forward to we today's As with we announce extremely

you If Investor you Relations quarter. to next again contact questions, feel any we look to and after speaking free call have follow-up the with forward

Operator

the for Everyone, today's disconnect. thank now a in participation gentlemen, you may your and conference. you and day. This Ladies have concludes program great

The Carlyle Group Inc. (CG) 31 Jul 192019 Q2 Earnings call transcript