Carlyle Group Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Glenn Schorr - Evercore ISI Group - Analyst : Good morning. I heard both of your comments loud and clear about your exit pipeline, DE guide and the backdrop. And the brokers and advisers that have reported have all said similar commentary. The market sentiment and the outlook is -- feels like it's changed a lot in the last few days. And so I'm curious, a, why you think the market's perception is that things are going to slow down materially, but that's different for your business mix I get it. So I'd love to hear that. And b, just how that -- how all that business goes into your thoughts on capital-raising outlook for PE specifically?

Question: Alexander Blostein - The Goldman Sachs Group, Inc. - Analyst : Hey, Harvey. So maybe just to build on the $40 billion target for fundraising for the year and your sort of confidence level around working towards that remaining $20 billion-plus in the back half of the year, maybe talk a little bit about the key contributors you expect to come through, particularly around real estate, where it seems like you guys are seeing a really nice momentum. And maybe just clarify how much capital have you guys raised in those real estate funds and where they stand today. Thanks.

Question: Ken Worthington - JPMorgan Chase & Co. - Analyst : Hi. Good morning and thanks for taking the question. Can you talk about the outlook for fundraising in CEP VI and CAP VI? I think both have been similarly sized funds and recent vintages. Do you see fundraising as easier or more challenged for the next vintage in either Europe or Asian for those buyout-focused funds? And then for CAP VI, you raised $2 billion. How much longer is that fund in market? Any comments you can make on the outlook here?

Question: Ben Budish - Barclays plc - Analyst : Hi. Good morning and thanks for taking the question. I wanted to ask about your transaction advisory fees. You identified this last year as a strategic area of focus. But based on your comments, it sounds like there's a lot more activity coming in the back half of the year. Just any color on how that line item should evolve in the back half and going into 2025 would be very helpful. Thank you.

Question: Brian Bedell - Deutsche Bank Securities - Analyst : Thanks. Good morning. Thanks for taking the question. Just going back to the deployment outlook for the second half. If you could talk a little bit about the timing of the, I think, nearly $20 billion of fee pending AUM in terms of that potential build for management fees? And then just in the light of the environment, if this risk-off sentiment persists in the second half, how do you envision that impacting your deployment outlook potential in the US and also Japan, I guess, as well?

Question: Patrick Davitt - Autonomous Research LLP - Analyst : Hey, good morning, everyone. It looks like you're now already in the kind of 30% to 35% FRE comp ratio range which I think happened a bit faster than most of us were expecting, particularly with realization is still so light. So firstly, can we expect this to be a new baseline from here? Or could it ratchet back up later in the year if say realizations stay this light? Thank you.

Question: Brian McKenna - JMP Securities LLC - Analyst : Thanks. Good morning, everyone. So we saw the announcement this morning that you're merging two of your BDCs. Can you just talk about the merits of the transaction? Why is now the right time for this? Are there any financial implications for CG? And then it will be great just to get an update on your broader direct lending strategy, specifically as it relates to both institutional and private wealth fundraising there?

Question: Dan Fannon - Jefferies & Company Inc. - Analyst : Thanks. Good morning. Within Global Private Equity, management fees were slightly up quarter-over-quarter, but obviously still down year-over-year and given the fundraising you talked about some of the dry powder. I guess as you look at the second half of the year and prospectively, what is your outlook for kind of management fees within just the global PE bucket?

Question: Steven Chubak - Wolfe Research, LLC - Analyst : So, how are you doing Harvey? So wanted to just ask for a mark-to-market on some of the progress you're making in the retail channel. You cited some improved momentum. I was just hoping to drill down further. How did flows trend in the quarter? And maybe more specifically how are you designing your retail-focused PE product just to be more competitive with some of the peer offerings that are out there that have seen some pretty good uptake?

Question: William Katz - TD Cowen - Analyst : Thank you very much for taking the questions this morning. Maybe turning to the capital, haven't talked about that. How should we think about the pacing for the residual $1.1 billion of repurchase? How does that triangulate up against how you think about the balance sheet? And then maybe, Harvey, I was thinking just wondering if you could give us an updated thoughts on this strategic M&A for the company. Thank you.

Question: Michael Cyprys - Morgan Stanley & Co LLC - Analyst : Great. Thanks. Good morning. Just a question on insurance. I was hoping you could elaborate on the contribution from Fortitude in the quarter, how you see the pace of migrating the book over into Carlyle strategies? How is that progressing? And then just more broadly, if you could just maybe update us on your insurance and Fortitude-related initiatives and how you're strategically thinking about accelerating the pace of growth from here? Thanks.

Question: Craig Siegenthaler - Bank of America - Analyst : Hey, Harvey. I think part of my name cut out, but I think you guys know who I am. Can you hear me okay?

Question: Craig Siegenthaler - Bank of America - Analyst : Perfect. No worries at all. So I actually have another compensation question. So following the modifications you guys announced on the 4Q call, stock-based comp is running up a lot year-over-year. That's not really a surprise, but we were hoping you could give some color on how we should model stock-based comp over the next year because I believe there's a step down coming from 4Q '24 to 1Q '25 due to the roll-off of one of the stock-based comp tranches. I had in the ballpark of about $25 million per quarter, but maybe you could help us with the forward run rate of stock-based comp. Thank you very much.