Carlyle(CG) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record FRE of $323 million, an 18% increase year over year, with a FRE margin of 48% for the first half [6][19] - Total DE for the first six months was $2.5 per share, marking a record start for the firm [19] - Management fees reached $590 million for the quarter, a 7% increase year over year, while capital market fees were $48 million, more than double last year [20][19] - Firm-wide AUM ended the quarter at $465 billion, with inflows totaling $28 billion for the first half and $51 billion over the last twelve months, reflecting a 12% organic growth rate [20][6] Business Line Data and Key Metrics Changes - Global Credit and Carlyle Alpinvest delivered record FRE, together accounting for 55% of firm-wide FRE, up from less than 30% two years ago [21] - Carlyle Alpinvest FRE reached a record $68 million for the second quarter, with year-to-date FRE of $134 million, up more than 80% [21] - Global Credit FRE was $111 million for the quarter, a 37% year-over-year increase, with strong capital markets activity driving performance [22][23] - The U.S. Buyout funds appreciated approximately 20% over the past twelve months, with the tenth vintage U.S. Real Estate fund closing at $9 billion, nearly 15% larger than its predecessor [11][24] Market Data and Key Metrics Changes - The macro environment showed improved sentiment, with markets functioning well and activity accelerating, particularly in M&A and deal activity [7][8] - The company deployed $26 billion in 2025, up almost 50% year over year, indicating strong demand for private capital [8] - Asset-backed finance AUM increased by 40% year over year, reflecting significant growth in this area [14] Company Strategy and Development Direction - The company is focused on leveraging its global brand and diversified investment platform to drive growth, particularly in wealth management and capital markets [16][17] - A partnership with UBS was launched to provide private equity secondary solutions for their international wealth clients, expected to be a strong growth driver [17] - The company aims to enhance its capabilities in credit and private equity, with a focus on organic growth and strategic partnerships [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the firm's momentum and performance, expecting full-year FRE growth of approximately 10%, up from a prior outlook of 6% [26] - The company anticipates full-year inflows of $50 billion, compared to a previous estimate of $40 billion, indicating strong fundraising momentum [26] - Management highlighted the importance of collaboration across the Carlyle platform to drive better outcomes and performance [78] Other Important Information - The company returned nearly $15 billion to investors over the last twelve months, significantly exceeding the industry average [10][25] - Leadership appointments were announced, including John Ruddett as Co-President and Justin Bluff as the new CFO, aimed at enhancing operational scale and agility [18][26] Q&A Session All Questions and Answers Question: Drivers of FRE growth and outlook for 2026 - Management noted that the revised outlook reflects strong momentum across the platform, with organic growth at Alpinvest being exceptional [39][40] - They acknowledged the desire for longer-term guidance but emphasized the unpredictability of forecasting five years ahead [36][41] Question: Retail commentary and fundraising potential - Management discussed the systematic strategy for engaging wealth globally, highlighting the importance of brand recognition and partnerships [48][49] Question: Credit business growth outlook - Management emphasized the convergence of insurance and private credit as a significant growth opportunity, with a focus on collaborative partnerships [58][60] Question: Near-term outlook for Alpenvest and Solutions business - Management expressed confidence in consistent growth for Alpenvest, driven by new fund launches and partnerships [71][73] Question: Transition back to global private equity and collaboration - Management highlighted the strong collaborative culture within Carlyle and the exceptional performance of the corporate private equity business [78][81] Question: Net IRR of CP7 and realization performance - Management indicated that CP7 is not expected to be the best fund, but performance improvements are being made, with a focus on driving realizations [91][92] Question: Capital markets fees growth and strategy - Management discussed the strategic development of capital markets fees, emphasizing high-quality revenue streams and organic growth opportunities [98][102] Question: Wealth products and future product development - Management outlined the importance of client-centric solutions in the wealth space, with a focus on developing products that meet long-term needs [127][128]