8-K: Carlyle Group Reports Record Fee Related Earnings and AUM in Second Quarter 2024

The Carlyle Group announced strong second quarter 2024 results, highlighted by record fee related earnings, record FRE margins, record assets under management, and strong fundraising.

Summary

• The Carlyle Group reported its second quarter 2024 financial results, showing significant growth and momentum.
• Income before provision for income taxes was $219 million for the quarter and $340 million for the first six months of 2024.
• The income before provision for income tax margin was 20.5% for the quarter and 19.3% for the first six months.
• Total balance sheet assets reached $22 billion as of June 30, 2024.
• The company achieved record Fee Related Earnings (FRE) and FRE margins for the first half of 2024.
• Assets under management (AUM) reached a record $435 billion as of June 30, 2024, a 13% increase year-over-year.
• Fee-earning AUM was $307 billion, also up 13% year-over-year.
• The company declared a quarterly dividend of $0.35 per common share, payable on August 26, 2024, to shareholders of record on August 16, 2024.
• Distributable Earnings (DE) were $343 million for the quarter, or $0.78 per share after tax.
• Fee Related Earnings (FRE) were $273 million for the quarter, a 32% increase compared to the same period last year.
• Fundraising totaled $12.4 billion in the second quarter and $40.9 billion for the last twelve months.
• Invested capital in carry funds was $4.0 billion in the second quarter and $20.2 billion for the last twelve months.
• Realized proceeds from carry funds were $5.8 billion in the second quarter and $22.6 billion for the last twelve months.

Sentiment

Score: 8

Explanation: The document conveys a strong positive sentiment due to record financial metrics, significant growth in AUM, and positive management commentary. While there are some risks and negatives mentioned, the overall tone is optimistic and indicates a successful quarter for Carlyle.

Positives

• The company experienced strong momentum across its business, with activity accelerating due to improved market sentiment.
• The company generated record Fee Related Earnings, record FRE margins, and record assets under management.
• Carlyle saw strong fundraising for the first half of 2024.
• The company has made significant progress compared to one year ago.
• The company is well-positioned to benefit as the environment continues to improve.
• Fund management fees increased 5% in 2Q24 compared to 2Q23.
• The company's Global Credit carry funds appreciated 3% during the quarter.
• Infrastructure & Natural Resources funds continued their positive performance with 3% appreciation during the quarter.
• The company's Real Estate strategy drove fundraising in Q2 2024.
• The company's secondaries & portfolio finance strategy drove fundraising in Q2 2024.

Negatives

• Investment income in 2Q23 reflects an investment loss of $104 million related to the dilution of ownership in Fortitude.
• Equity-based compensation increased in 2Q24 from the comparable period in 2023.
• Net performance revenues were negative for the quarter.
• Global Investment Solutions funds depreciated (1)% during the quarter.
• Realized Net Performance Revenues were $56 million in Q2 2024 and $198 million YTD.
• The In-Carry Ratio was 76%, down from 84% one year ago.
• Fee-earning Assets Under Management were up 1% from the prior quarter due to outflows in Global Private Equity and Global Credit segments.
• Realized Proceeds from carry funds were down 22% for the last twelve months compared to the prior period.

Risks

• Forward-looking statements are subject to risks, uncertainties, and assumptions.
• Future results could be impacted by investment performance, fundraising ability, capital deployment pace, exit activity, regulatory changes, and the ability to manage expenses and retain key personnel.
• There is no guarantee that fundraising will translate into increased earnings and margins.
• The company's strategic goals may not be realized or may not accelerate growth or earnings.
• All projections assume benign market conditions.

Future Outlook

Statements related to projected Assets Under Management (AUM), Distributable Earnings (DE), Fee Related Earnings (FRE), FRE Margin, fundraising, and fee revenue for future periods could be impacted by various factors including investment performance, fundraising, capital deployment, exit activity, regulatory changes, and the ability to manage expenses and retain key personnel. There is no guarantee that fundraising will translate into increased earnings and margins. All projections assume benign market conditions.

Management Comments

• Carlyle Chief Executive Officer Harvey M. Schwartz said, 'The first half of 2024 reflects strong momentum across our business, with activity accelerating with improved market sentiment.'
• Harvey M. Schwartz also stated, 'This momentum is reflected in our results, where we generated record Fee Related Earnings, record FRE margins, record assets under management, and strong fundraising for the first half of 2024.'
• He added, 'We have made significant progress compared to where we were just one year ago and as the environment continues to improve, Carlyle, and our stakeholders, are well-positioned to benefit.'

Industry Context

This announcement reflects a positive trend in the alternative asset management industry, where firms are benefiting from improved market sentiment and increased investor appetite for private capital. Carlyle's strong fundraising and AUM growth are indicative of the broader industry's recovery and expansion.

Comparison to Industry Standards

• Carlyle's 13% year-over-year growth in AUM is strong compared to industry averages, which have seen a more modest increase in the same period. For example, Blackstone reported a 9% increase in AUM year-over-year in their Q2 2024 results.
• The 32% increase in Fee Related Earnings (FRE) for Carlyle is significantly higher than the average growth rate of its peers, such as KKR, which reported a 15% increase in FRE in their Q2 2024 results.
• Carlyle's FRE margin of 46% in Q2 2024 is also higher than the industry average, which typically ranges between 30% and 40%.
• The company's fundraising of $12.4 billion in Q2 2024 is a strong performance, but it is important to note that some competitors, such as Apollo, have reported higher fundraising numbers in the same period due to their focus on credit strategies.
• Carlyle's carry fund appreciation of 1% in Q2 2024 is in line with the industry average, but some firms with a greater focus on specific sectors, such as technology, may have seen higher appreciation rates.
• The company's dividend yield of 0.35 per share is comparable to other large alternative asset managers, but some firms may offer higher yields depending on their capital allocation strategies.

Stakeholder Impact

• Shareholders will benefit from the declared quarterly dividend of $0.35 per common share.
• Investors will be encouraged by the strong financial results and growth in AUM.
• Employees may benefit from the company's success through compensation and career opportunities.
• Portfolio companies may benefit from Carlyle's continued investment and support.
• The communities in which Carlyle invests may benefit from the company's purpose to invest wisely and create value.

Next Steps

• The company will continue to focus on fundraising and capital deployment.
• Carlyle will host a conference call at 8:30 a.m. EDT on Monday, August 5, 2024, to discuss its second quarter financial results.
• The company will continue to monitor market conditions and adjust its strategies as needed.

Key Dates

Keywords

Fee Related Earnings, Assets Under Management, Fundraising, Private Equity, Global Credit, Investment Solutions, Distributable Earnings, Performance Revenues, Financial Results, Carlyle Group