Carlyle Group Inc Q4 2024 Earnings Call Transcript

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

Question: Alexander Blostein - Goldman Sachs - Analyst : Thank you for taking the question. So, appreciate the guidance, good color, how you guys are thinking about 2025. I was hoping we kind of pack that a little bit. So I heard your comments in Growth and Credit and Solutions, offset by a more modest decline in Global Private Equity. What are some of the bigger drivers in credit that you guys see for 2025 and solutions that will drive some of that growth? And as you think about the Global Private Equity business, can you help us unpack perhaps the timing of when you expect to come back to market with the next election fund?

Question: Brendan O'Brien - Wolfe Research - Analyst : This is Brendan O'Brien filling in for Steven. I guess I just want to talk on the buybacks. You guys were obviously really aggressive in repurchasing shares this year, but when you announced the authorization, Harvey, you indicated that you would expect repurchases to accelerate alongside realization activity. And so given your more optimistic outlook for realizations, it'd be helpful to get an update as to how you're thinking about capital return and whether you would still expect to accelerate the buyback, and how you're thinking about the balance versus investing in some of the growth opportunities John just discussed and returning capital to shareholders.

Question: Brendan O'Brien - Wolfe Research - Analyst : Great, thank you for taking my question.

Question: Patrick Davitt - Autonomous Research - Analyst : The negative mark in fee paying assets under management was kind of outsized relative to the reported positive 3% mark. So is that a reflection of a negative Fortitude mark? And if so, is there a potential for you to move off of a mark to market fee base there like some others have?

Question: Brian Bedell - Deutsche Bank - Analyst : Thanks for taking my question. Maybe just to talk about maybe G&A expense a little bit, and maybe if you just comment a little bit on the increase in the fourth quarter. And then thinking about the investment for 2025 and some of the businesses. Maybe if you can talk about the two or three biggest areas that -- I think you cited retail and the asset-backed business as well, but if you can comment on how you're thinking initially about G&A expenses during the year. And are you still investing in the Capital Markets platform or do you see the incremental margins there? The investment is mostly being complete and the incremental margins therefore being much higher in the Cap Markets.

Question: Brian McKenna - Citizens JMP - Analyst : So I had a question on the BDC merger. Can you remind us what the incremental fees are to CG post-merger and when those will turn on. And then that vehicle will have north of $2 billion of assets. So how should we think about growth of the combined BDC as well as the broader direct lending platform moving forward?

Question: Brian McKenna - Citizens JMP - Analyst : Got it. Thanks, John.

Question: Glenn Schorr - Evercore ISI - Analyst : Two quickies, follow ups to your earlier. In asset-backed line I'm just curious if you have dedicated strategies being formed yet or is this efforts within your insurance SMAs and credit -- overall Credit business. And then on investment solutions, I think your performance has been great. I'm just curious how you see the evolution and growth in perpetual products in that area and how that might impact growth and returns in the Solutions business going forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 1:30PM, CG.OQ - Q4 2024 Carlyle Group Inc Earnings Call

Question: Benjamin Budish - Barclays - Analyst : John, I was wondering if you could talk a little bit more about your comp ratio expectations for the year. You said on the way to 35% or less. Just curious, what are the other key factors that determine the timing, I imagine some of this related to realizations, but what sort of embedded in your expectations for the 6% FRE guide?

Question: Benjamin Budish - Barclays - Analyst : Got it, thank you.

Question: Daniel Fannon - Jefferies - Analyst : So a couple of questions on Credit, curious as to why the management fees declined sequentially in the fourth quarter than obviously a very large transaction fee. You talked about investing in that business and scaling. So can you talk about the sustainability and outlook for transaction fees in that segment within Global Credit? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 1:30PM, CG.OQ - Q4 2024 Carlyle Group Inc Earnings Call

Question: Bill Katz - TD Cowen - Analyst : John, sorry to go back on this, but I'm just trying to unpack your comments about the fee-paying AUM dynamics in the quarter. You mentioned they should have no economic impact, but I'm just trying to understand that since it's a fee-paying AUM discussion, just sort of walk me through again why the $6 billion decline in fee-paying AUM will not have an economic impact looking ahead?

Question: Bill Katz - TD Cowen - Analyst : Okay. So it's more the fee rate associated with those assets at play?

Question: Bill Katz - TD Cowen - Analyst : Right, okay, thank you.

Question: Kenneth Worthington - JPMorgan - Analyst : You have $500 million of net accrued carry in CP7. The fund is still hovering around 8% IRR. Given the investments in the ground and some of the recent, I'll call it, successful partial realizations, how confident are you that 7 can remain above the [hurdle] rate and collect that that accrued carry? And then along the same lines CAP V and Step 5 IRRs fell a bit during the quarter. Can you talk about sort of marks and exits and how those weighed on this quarter's results for those funds?

Question: Kenneth Worthington - JPMorgan - Analyst : And then CAP and Step 5?

Question: Kenneth Worthington - JPMorgan - Analyst : Okay. Great. Thanks very much.

Question: Michael Cyprys - Morgan Stanley - Analyst : Thanks for taking the question. I just wanted to ask about Global Private Equity. I was hoping you could talk a little bit about how you expect the pace and magnitude of deployment and realization activity to evolve her in 2025 in the context of at times volatile markets, higher [ten] yield treasury yields over the last six months of uncertainty around tariffs. How you expect these and other factors to play into getting deals done and how you see that cadence of activity playing out in terms of the first half versus the second half of the year?

Question: Michael Cyprys - Morgan Stanley - Analyst : Great, thank you.

Question: Kyle Voigt - Keefe Bruyette & Woods - Analyst : Maybe just another follow up on GPE. You mentioned some continued decline in management fees there until you raise your next US buyout fund. Just wondering if you could help us understand when you expect to begin fundraising. When we could expect a potential activation given the pace of deployment you're seeing in CP8? I'm assuming it's 2026, but if you could maybe narrow that down at all. Then how should we think about the size of CP9 relative to CP8 at $14.8 billion, particularly given the private equity fundraising backdrop?

Question: Kyle Voigt - Keefe Bruyette & Woods - Analyst : Thank you.

Question: Michael Brown - Wells Fargo - Analyst : So wanted to just unpack the targets a little bit more. So the fundraising target, John, you shared some upbeat comments on Credit and also Fortitude. So I just wanted to clarify that the $40 billion or I guess, roughly kind of flat year over year, does that assume any contribution from potential blocks that could come from Fortitude? Or would that be kind of in the upside bucket that you referred to? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 1:30PM, CG.OQ - Q4 2024 Carlyle Group Inc Earnings Call And then just on the management fees for -- within your FRE guidance, you talked about deposit tailwinds for transaction fees and included in there for [FRPR], so just in total, how should we think about that management fee growth potential relative to the 6% FRE growth?

Question: Kyle Voigt - Keefe Bruyette & Woods - Analyst : Thank you for taking my question.

Question: Patrick Davitt - Autonomous Research - Analyst : Thanks for the follow up. Hello, can you hear me?

Question: Patrick Davitt - Autonomous Research - Analyst : Just one more quick follow up on that, through the lens of your kind of broader realization commentary. I assume the 6% FRE growth is partially informed by a view that there will be a meaningful pickup in realizations in 2025. Did you give any more color around how you're thinking about that side of the FRE growth equation?

Question: Patrick Davitt - Autonomous Research - Analyst : Thank you.