Carlyle Group Inc. and subsidiaries (The)

Under the leadership of CEO Harvey Schwartz, who started in February 2023, the company has changed its pay structure to tie compensation more closely to investment performance. It gave employees a higher share of performance allocations while reducing cash compensation. The reduced cash compensation benefits our calculation of leverage because we discount the performance fees asset managers earn, given their volatility. We are uncertain how significantly and quickly Carlyle will be able to grow across its businesses, and it faces meaningful competition from other alternative asset managers. While its margins are improving, they remain lower than those of most higher-rated peers. Our stable outlook on Carlyle and its operating subsidiaries reflects S&P Global Ratings' expectation that over the next two

...Carlyle has significantly grown and diversified its assets under management (AUM) and fee-related earnings in recent years. The company has increased its fee-earning assets under management (FEAUM) by almost 60% since year-end 2021, supporting strong recurring EBITDA growth. Carlyle has shown particular strength in growing its global credit business, which is now larger by AUM than its long-standing private equity business, mostly through a combination of fundraising and acquisitions. That business has reduced Carlyle's reliance on the carried interest it realizes when it sells investments in managed funds. Its investment in and relationship with Fortitude, a Bermuda reinsurer, have also helped propel its overall growth. Leverage has fallen with increased EBITDA and reduced debt, and the company appears committed to operating with low leverage. We expect the company's debt to EBITDA--measured on an adjusted three-year weighted average basis--to be around 1x. That is down from above 2.0x...

Full Report