Q4 2020 Carlyle Group Inc Earnings Call

February 4, 2021

[music].

Okay.

Ladies and gentlemen, thank you for standing by and book through the Carlyle Group fourth quarter 2020 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you need to press star one on your telephone if you require any further assistance. Please press Star then zero I would now like to introduce your host or day Mr Day.

Harris you may begin.

Thank you Kevin Good morning, and welcome to Carlyle's fourth quarter and full year 2020 earnings call.

With me on the call is our Chief Executive Officer keeps on Lee and our Chief Financial Officer, Kurt user. This call is being webcast and a replay will be available on our website, we will refer to certain non-GAAP financial measures. During today's call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with <unk>.

Generally accepted accounting principles, we have provided reconciliations of these measures to GAAP in our earnings release.

Any forward looking statements made today do not guarantee future performance and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factors section of our annual report on form 10-K that could cause actual results to differ materially from those indicated.

Carlyle assumes no obligation to update any forward looking statements at any time.

Earlier. This morning, we issued a press release and detailed earnings presentation, which is also available on our Investor Relations website for the fourth quarter, we generated $145 million in fee related earnings and $237 million in distributable earnings with de per common share of <unk> 64.

For the year FRE was $520 million and de per common share was $2 <unk>.

Bolt up from 2019 levels, we declared a quarterly dividend of <unk> 25 per common share.

This quarter, we're reporting our results under our new segment structure, which is more aligned with how we operate our business all equity investment strategies are now captured in a single segment global private equity that includes our former corporate private equity and real assets segments. All of our credit investment strategies remain in global credit and our investment.

<unk> segment continues to house, our portfolio management strategies.

As a reminder, we look forward to hosting our first Investor day as a corporation on February 23rd at 830, a M. Registration is open and we do encourage you to pre register if possible at IR Dot Carlyle Dot com.

At our upcoming Investor day, our leadership team will discuss our corporate strategy and financial objectives as well as opportunities for each of our businesses I'm sure. Many of your questions today could be tied to our longer term outlook and topics, we'd like to cover comprehensively at Investor day, and as such we may defer responding to these questions and address them at that time and in <unk>.

<unk> with our broader plan.

And with that let me turn the call over to our Chief Executive Officer <unk>.

Thank you Dan.

2020 was a year of growth and positive change for Carlyle, despite the challenging and complex environment or.

Our focus in 2021 is to build on our current momentum and we look forward to providing more detail on our strategy for accelerating growth at our Investor day in two weeks.

Today I'd like to focus on three points first.

Carlyle delivered very strong results for shareholders in 2020.

Second.

Our investment portfolio is in great shape.

Third our business model and organization proved extremely resilient and adaptable to the changing environment.

Let me start by focusing on our 2020 results, which were strong across all metrics.

We generated a record $520 million in fee related earnings with margins in excess of 30%.

Substantial progress from just a few short years ago on FRE was less than half of this year's level.

Continuing to grow FRE remains a primary strategic focus.

Distributable earnings increased 18% in 2020, and we expect continued growth in earnings as our investment portfolio has performed and mature.

Our investment activity picked up sharply throughout the year.

Despite a challenging environment, we exited the year with great momentum deploying $9 billion of capital in the fourth quarter alone an $18 billion for the year.

Our ability to consistently deploy in good times and debt demonstrates the value of our global platform and multi asset class approach.

We also accelerated our exit pace, realizing 7 billion for our fund investors in the fourth quarter and $21 billion for the year.

And since the beginning of 2020.

We've taken eight of our portfolio companies public and have over $17 billion of current value in public securities debt when realized will generate proceeds for our Lps and earnings for our shareholders.

And the final highlight.

We raised $27 5 billion in new capital during the year with nearly 90% of the capital raised from our global credit and investment solutions segments.

We will have much more to say about the trajectory and scale of our next fundraising cycle at Investor day.

Let me now move to some remarks on our investment portfolio, which is diverse and balanced and in great shape.

A few highlights.

Our private equity buyout funds appreciated 19% in aggregate in 2020.

Our largest fully invested fund U S buyout six appreciated 46% in 2020.

And our latest fully invested Asia buyout fund was up 34%.

Our global credit funds also performed extremely well despite significant volatility during the year.

Our opportunistic credit fund appreciated 21% in 2020, and our structured credit strategy appreciated 16% positioning both strategies for future growth.

When combined across the firm our strong performance drove our net accrued carry balance up 36% in 2020 to a record $2 3 billion.

Which positions us very well for a substantial step up in realized performance revenue over the next few years.

The last point I want to make is on the resiliency of our business model and adaptability of our firm.

Nearly all just about 98% of our capital as committed to us for the long term in many cases 10 years or more.

These fund structures provide us with predictable and stable management fees, regardless of market volatility.

While the remote environment last year was personally challenging for each of us our people and platform adapted rapidly during the year and our business operations, where virtually unaffected by COVID-19.

Our global investing platform pivoted quickly to operate in the new environment.

Our investment teams effectively sourced and closed new deals carefully monitor our portfolio and completed Ipos and exits.

We found new investment opportunities in regions, like India, and China, and pivoted to private equity growth, particularly in healthcare and technology.

And we provided flexible credit solutions to sponsors and corporates, despite the volatile environment.

At the same time, we spent countless hours with our limited partners developing a new cadence that enabled us to forge deeper relationships with them. Despite not meeting in person and raised over $27 billion in a year when we werent in the market with our flagship global private equity funds.

2020 has demonstrated our resiliency and ability to adapt and we find ourselves well positioned to manage through the challenges ahead to deal with the continued impact of Covid on economies markets and our portfolios.

Most importantly.

We remain focused on the health and safety of our people and our success in 2020 to their dedication hard work and expertise.

I want to say a sincere thank you to each and every one of them for their extraordinary efforts last year.

Let me turn the call over to our Chief Financial Officer, Curt Buser to go through our results then I'll come back with some final thoughts Kurt.

And good morning.

We performed well on 2020, despite the pandemic and economic volatility throughout the year.

Generated $762 million on distributable earnings our best year, since 2015 and day per share of $2 five for the year increased 20% over 2019.

Before digging into our financial results I'd like to touch on three items.

First our outlook for 2021 fee related earnings and realized performance revenues.

Second the trajectory of our effective day tax rate and third stock based compensation expense and equity awards.

First fee related earnings were $520 million in 2020, and excluding $30 million on cost recoveries. During the first quarter adjusted FRE of $490 million increased more than 8% year over year, despite not raising new capital for any of our global private equity.

QWERTY flagship funds.

FRE margin on the adjusted basis was 30% up nearly 200 basis points relative to 28% in 2019.

For the year global credit fee related earnings of $99 million more than doubled the 2019 level, while investment solutions FRE of $37 million was also more than double the prior year.

Both cases topline growth drove the majority of the year over year increase in margins expanded substantially in both segments.

Looking at 2021, we expect realized performance revenues to continue to grow and we expect to produce similar to slightly higher FRE compared to adjusted 2020 results.

Consolidated top line management fee revenues should modestly increase with more noticeable growth in investment solutions and global credit more than offsetting some downward fee pressure and global private equity as portfolio realizations increase.

Global private equity will see growth in management fees and FRE on our next multiyear fundraising cycle begins for our large flagship funds, which.

Which we do not expect to meaningfully affect our 2021 FRE results.

Our net accrued carry of $2 $3 billion is now 18% higher than its previous peak balance.

And the remaining fair value invested in our carry funds of 95 billion is 50% greater than its average balance during the period of 2012 to 2017, when our net realized performance revenues averaged over $600 million annually.

With our funds performing well and assuming no material surprises in the capital markets.

We expect realized performance revenues to gradually increase in 2021, and then in the years thereafter surpassed our prior annual averages.

Regarding our outlook on our day tax rate and.

In our first year as a full corporate taxpayer our effective tax rate was 5%.

The relatively low rate benefited from the utilization of legacy net operating loss Carryforwards. In addition to the basis step ups and tax amortization arising from our corporate conversion.

For 2021, we expect our effective tax rate will increase to the mid teens as.

As we fully utilize the remaining legacy Nols early in the year.

Thereafter, the effective rate is likely to continue to increase annually before settling in the low twenties in later years.

Of course this outlook is based on current tax laws and should changes arise in any jurisdiction or expectations for effective tax rates may change as well.

Moving on.

Stock based compensation expense was $29 million in the fourth quarter and $117 million for the year down 23% from $151 million in 2019.

The decline owes to the positive impact of granting fewer at year end stock awards than in previous years as well as the departure of certain senior executives during the year.

As part of this year's compensation cycle, we granted long term strategic equity awards to a small number of our most senior executives, which are predominantly tied to achieving milestones in our strategic plan.

As a result, we expect our equity based compensation expense to increase to amounts comparable to 2019.

Let's shift to a broader discussion of our results.

Overall, we had an active year.

And have great momentum entering 2021.

As <unk> noted earlier, we raised 27 $5 billion on new capital in 2020, with both global credit and investment solutions posting a record fundraising years.

Global credit surpassed its previous record by nearly 50% and.

In investment solutions raised more than twice as much as any prior year.

During the fourth quarter investment solutions had a final closing on its 9 billion dollar Alpha invest secondaries program.

Which wound up nearly 40% larger than its predecessor.

On its new co investment strategy is now raising capital.

In global credit we had an initial closing on our second opportunistic credit funds.

And activity in several platform wide strategies.

Both segments are positioned well for future growth.

Fund performance was particularly strong fourth quarter carry fund depreciation of 11% in corporate private equity, 3% on real estate, 3% natural resources, 7% and global credit carry funds and 7% in investment solutions.

Fee related earnings in the fourth quarter were $145 million with a 34% margin up.

Up from $108 million at a 26% margin in the fourth quarter of 2019.

With the upside largely owing to higher total fee revenue and lower G&A expenses.

Fee revenues for the fourth quarter of $429 million increased 5% from last year, largely driven by higher transaction fees of $21 million nearly double a year ago and up from virtually zero in Q3 2020.

During the fourth quarter, we also activated fees on our new Japan buyout fund, increasing global private equity management fees from Q3.

Fee, earning assets under management was $170 billion.

Up 3% for the quarter and 6% over last year with a 28% increase in investment solutions and an 11% increase in global credit both driven by strong fund raising offsetting a modest decline for global private equity as we continue to realized proceeds for our fund investors.

Shifting to expenses cash.

Cash compensation was $202 million for the fourth quarter and $822 million for the full year, 4% higher than 2019, and we continue to be disciplined on managing compensation expense.

G&A expense was $73 million in the fourth quarter down from $95 million a year ago.

For the year G&A of $241 million.

Slide 27% year over year, owing to lower travel expenditures as well as the $30 million litigation cost recovery in the first quarter.

G&A expense should increase in 2021 due to a normalization in both items.

But we believe G&A expenses are likely to remain below prior peak levels as we capitalized on learnings of the past year.

Net realized performance revenues were $87 million on the fourth quarter and for the year increased 50% from 2019.

The majority of realized performance revenues this quarter was from our six U S buyout fund with carry from our real estate funds, making up most of the remainder.

In sum, we continue to be pleased with the durability and sustainability of our fee earnings and.

We are increasingly optimistic about the opportunity for growing day over the coming years.

We look forward to speaking with you all in a few weeks when we will go into more detail our growth plan.

With that let me turn it back over to <unk> for some final thoughts.

Thank you Kirk.

We have worked hard over the past few years in our results. This year reflect the momentum we have built we're proud of the performance we delivered on behalf of our limited partners and our shareholders. In 2020, we are excited about the opportunities in front of US. We look forward to speaking with all of you in more detail on February 23.

I'll now turn the call over to the operator to take your questions.

Ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your question on telephone. If your question has been answered he wished remove yourself from the queue. Please press the pound key and we also ask that you limit yourself to one question and one follow up.

Our first question comes from Craig Siegenthaler with credit Suisse.

Thanks, Good morning, Q current hope you're both doing well.

Morning.

So we wanted to start with the impressive fundraising results from the solutions business, which now almost at $60 billion on <unk>.

Could you provide us an update of how you view the addressable market the competitive landscape and also the growth trajectory for your secondaries and co investment businesses across both op invest in metropolitan.

Let me start so in global credit it was a very good year nearly $10 billion of capital raised good growth across the platform and its really nicely dispersed in terms of the various components of the business and.

Including even the CLO business and an alpha invest $14 billion of fund raising this year a record year for fund raising.

AUM has been growing nicely and the thing to also remember in the case of Alpha invest as the burn off that we had in a lot of AUM in early years really from some of the two major investors or shareholders in that business prior to our ownership and so really the growth in AUM is even bigger than what you kind of see by looking at the aggregate numbers because you got.

Take into account that historical run off the team has really done a nice job of repositioning the industrial base across that whole platform and that secondary program with $9 billion now in terms of the total program size. It Didnt turn on fees really until the fourth quarter and so that should be a nice driver of fee revenue.

Growth for that next year and then as you think about the co investment program. There are now just in raising their next kind of generation of that and that will be additive to next year as well, so really well positioned for continued growth.

Hey, Craig it's Kew.

Taking a step back if you think about it.

Clearly the private capital markets have really grown on our huge and so it shouldn't surprise all of us debt large Lps and small Lps are in need of what I would call portfolio management solutions as they optimize risk and allocation to the asset class and the way they do that.

Is.

First focusing.

Focusing on secondaries.

Trying to add two co investment opportunities and third obviously in a diversified way theyre looking for a potentially ways to pick up interesting new GP commitments, but in a more diversified way and ALP invest is a platform that lets them do that.

And so this whole area of alternatives I think it's just going to continue to grow on the heels of the fact that the broader industry is growing so that's a big picture number one number two it used to be debt. These types of solutions, we're very bespoke in the past.

But increasingly we're seeing large.

Carryover from our existing LP base as they try to.

Minimized or add to deployment manage risk worth on co investment strategies et cetera, and so about 40% of the Lps in solutions. I believe are also Lps and our existing global private equity and global credit franchise. So there is a huge.

Cross sell but also an introduction to all of Carlyle, which solutions offers us.

To introduce to our LP base.

And then finally.

And we're going to get into this in Investor day. The performance of these strategies has been terrific.

And we're going to we'll show you more of that in two weeks. So please be patient, but that performance is the underlying driver for why we believe in these three very focused strategy secondaries and co investments and primary fund to funds, we see real growth opportunity ahead of us in.

<unk> solutions.

Great. Thank you for the comprehensive response.

Thanks, Greg.

Our next question comes from Mike Carrier with Bank of America.

Hey, Good morning. This is dean Stephan on for Mike carrier.

Given the active deployment levels in the fourth quarter can you just update us on the deployment outlook heading into 'twenty one.

Maybe what the pipeline is looking like and how quickly the $13 billion in pending fee, earning AUM can potentially be invested or activated moving forward. Thanks.

Hey, Deane, it's Q here I mean look we're about as busy as we've ever been our pipelines are really full on.

And if Theres one thing last year has taught all of US its debt with change comes also lots of opportunity now the good news is our platform.

Be it regionally b at different asset classes be a different investment strategies to be a different investment sectors, we're well positioned.

To go to where the opportunities are and be one step ahead valuation levels certainly very high.

No doubt about it.

Also.

The ability for us to add value work with our teams to grow these businesses and help them is also high.

So that's the challenge which is to keep finding these deals.

I think last year was a good.

Indication of the way this platform can pivot if.

If there is volatility we see opportunities in credit.

If traditional buyouts get way too expensive, we see ways to grow in private equity growth investing if certain western economy markets are a little bit more or less active we saw lots of activity in the far east in India and in China. So.

Our pipelines are very busy.

Valuation levels make it very difficult, but our platform is very well positioned I believe to keep finding great opportunities and create value.

Just to add on on Deane.

13, a little over $13 billion of pending fee, earning AUM.

Relatively evenly spread across the three segments, a little bit larger in global credit and investment solutions and global private equity and a lot of that is really tied to the funds either turn on as we complete fund raising or as we invest capital and so both providing really good FRE ramps.

Particularly in global credit and investment solutions.

Got it thanks guys.

Thanks, David next question.

Our next question comes from Robert Lee with <unk>.

Great. Good morning, Thanks for taking my question.

I just wanted to postpone the capital management, a little bit so just wanted to refresh on.

As you look forward, particularly with realizations ramping.

The stable quarterly dividend, so how should we think of dividend growth from here.

And where does how do you think down the road buybacks versus reinvesting in.

That business, how do you think about travel.

Robert Thank you for that question.

Managing capital to really drive the businesses is obviously our core priority.

Priority, making sure that capital really is driving growth in earnings and growth in the business and so making sure that we have capital to invest in our fund new initiatives available for strategic growth initiatives M&A et cetera is always a priority for us, but cornerstone to everything we do is making.

Sure that we maintain our fixed dividend.

And looking at how we will plan to grow that as we have indicated in the past is really as FRE growth. That's how we will grow our fixed dividend. So yes, I would not expect anything near term because as I already have indicated on kind of FRE will be similar to this past year or slightly up but when we.

Really kind of well positioned for growth on FRE, because that way, we can underpin that fixed dividends, what we want to do with respect to dilution management. What we have said before is we want to be around 1% in terms of dilution.

We're cautious with our use of capital and buybacks really in 2020, given the pandemic on all of the related uncertainties, but you can see us kind of be enacted to think through how to make sure. We manage that solution both through equity grants as well as through buybacks.

Great. Thank you.

Thanks, Rob.

Our next question comes from Bill Katz with Citigroup.

Okay. Thank you very much for taking the question and good morning.

So maybe one for Kirk could you just sort of go back to your guidance on the realization outlook for 2021, and I was just sort of wondering the jump off point is at the full year 'twenty as we look to 'twenty. One is it the pacing for the fourth quarter and growing off there and then maybe the interplay of how that will tie to in terms of the.

Comp ratio against those revenues. Thank you bill.

Bill Thanks for your question and good morning.

Yes, so as we talk about I presume you're talking a net realized performance revenue. So our net carry just.

Level set we had 246 million of realized carry this past year on was up about 50% from the prior year, but well below our average that we ran between 2012 to 2017 of over $600 million a year, we're clearly positioned to surpassed $600 million.

Crude carry remaining fair value on the ground, but thats not going to occur in 2021 outlook capped.

Capital markets could do something and we could.

Exceed expectations to the high but we could also missed and predicting carry is always really hard to predict with precision.

Said in my remarks in particular was expect a gradual increase and things to watch.

So just in the past year as we said Carlyle partners six turned on carry in Q3. We also said that we werent taking carry on a full 20% rate, which was true through all of 2020, we did not take carry on CP six at the flow rate and if you look at where that fund is nicely.

Setup, so there's room to take it at a higher rate on CP six going forward.

More importantly, though there are many other funds that have not yet turned on carry that are in accrued carry Asia buyout. Four is a good example, Japan three is a good example, and so as those funds also.

Net to physicians, where we're comfortable from a callback management perspective, and you know we are careful on that well signaled to you as the bigger funds turn on.

That ULIN kind of know kind of what that trajectory is but thats also kind of thinking gradual increase because not all of that will hit on right away.

Hopefully that gives you some color bill.

Okay. Thank you.

Our next question comes from Ken Worthington with Jpmorgan.

Hi, good morning, turning to insurance.

Can you give us an update on fortitude and maybe your priorities for your insurance operations.

And then what are the next steps for <unk>.

For insurance for Carlyle.

Hey, Ken it's Kew.

Let me give you a little bit of color as of the here and now, but I would ask that everyone be patient because we will talk a bit more about this at.

At our Investor day.

I mean look we're very pleased with our fortitude is right now.

Adjusted book value is doing great. It's annualized ROE right now is closer to the mid teens and the liabilities are performing just in line with our expectations, It's got excess capital.

More importantly, we have stood it up fully it is carved out and it is ready to start scaling via reinsurance and or acquisitions.

In terms of rotation.

My understanding is about $4 7 billion have already been rotated over to Carlyle in terms of assets under management.

And this is on a track towards $6 billion, which we think will hit over the next year or so.

Now what's more important to understand is that rotation that's occurred.

It is.

Very broad across our platform I think it's close to 25 funds.

Have received the semi permanent type of capital investment that fortitude represents into our funds and it's across all three segments skull private equity global credit and investment solutions.

So the platform itself is very much on track.

We feel very good about it and so the right question now is okay, where do we go from here and with respect to that I'm going to ask that you <unk> you.

Be patient and wait because we want to talk about this a little bit more comprehensively at Investor day in a couple of weeks.

Great well, thank you very much.

Okay.

Our next question comes from Michael Cyprus with Morgan Stanley.

Hey, good morning, Thanks for taking the question, maybe just coming back to some of the commentary on the multi year view on on the carry.

Pick up if you will I think if we look back at the 2011 to 2017 realization cycle you guys seem to turnover.

Carry receivable balance of that every two years or so so call. It like a 50% pull through on monetization of the receivable in a given year over that cycle. I guess is there anything different today with your fund lineup and fund performance that could result in a different outcome than a 50% pull through range so as well.

Look out over the next couple of years and what would you say on the top.

Top if any limiting factors that would prevent you from hitting say that 50% pull through that you've done in the past from hitting that over the next couple of years.

Mike It's Curt.

Really good analysis in terms of how to look at that and Thats exactly right in terms of what happened back in 2012 to 2017.

On average.

If you look at the past couple of years, that's not held true in the past couple of years and a lot of that is making sure that the portfolio has been mature enough.

And we're not yet at that place where it is fully mature to make that same kind of conclusion with respect to 'twenty, one I'll speak more to the outer years at our Investor day in two weeks, but right now I would be cautious about applying the same map 21.

Is that math, a fair to apply to next couple of years beyond 'twenty. One would you say or is there anything different with the portfolio today that could result in a in a different outcome than that sort of 50% roughly.

You always have to be a little careful in that math only because a lot of it has to do with makeup at any point in time.

And I would say, it's more a correlation as opposed to causality, but over a long terms.

Good markets and capital markets and making sure that.

Although the big buyout funds are producing Kerry, that's where it gets a little bit more comfortable.

Okay. Thank you.

Our next question comes from Jerry O'hara with Jefferies.

Great. Thanks, perhaps one just on on global credit fund, raising obviously has been getting stronger and clearly momentum building in that segment, but perhaps you can give us a sense of what products are seeing the most traction and even what the pipeline for new solutions might look like.

Yes.

Sure Jerry on the Q here and.

You guys are going to be board of hearing. This from me. This is one area, we're going to do a deep dive on in two weeks.

Highlights as we sit here today.

Youre right there is great momentum in the global credit segment.

It is a broad platform as you know.

Our credit opportunity strategy is doing quite well.

We are seeing in all of Youre seeing this debt.

CLO market is coming back.

Certainly a pickup in activity levels from last year.

And we are projecting to see continued strengthening.

In that market.

With respect to some of the initiatives we have in the market today I don't want to comment on them because they are fund raising but we do have global infrastructure credit for instance in.

In the market raising funds.

And.

This is a segment, which is very scalable given what we have set up and we're also seeing real traction with respect to platform wide.

Special accounts and strategic accounts that can be on any one singular account quite large.

So let me let me hold hold there.

And just say, we're pleased with the platform the progress the look the dropdown in growth directly into into earnings.

But more to come in two weeks.

Fair enough thanks for the thoughts.

Our next question comes from Glenn Schorr with Evercore ISI.

Hi, Thanks.

Piqued my interest a little bit.

You mentioned when talking about the equity grants debt there.

It's obviously the senior people net high for long term milestones.

Wondering if you could talk a little bit about the long term milestones at that time.

I know there is aligned with the same things investors are looking for but just any specifics there I think people will find interesting.

Hey, Thanks for your question as I said these grants are mostly to the most senior people in the firm.

That can really kind of drive.

Our FRE and our earnings results.

Largely are predominantly performance testing as opposed to time vest and there is a component of time, but it's mostly performance.

On those milestones are really what underpins the strategic plan and a lot of that is FRE and so as we grow FRE youll see vesting.

And so.

So we think that alignment is very good.

Hopefully that helps.

And the Lumpiness.

Yes definitely.

I think the.

<unk> I should say, maybe even the stair stepping history historically of FRE is due to some of the big capital raises.

Has the growth.

In both global credit and investment solutions is that enough to help smooth the cycle. If you will or do we need to see more growth in say infrastructure retail capital markets.

Like is that is that even the goal to smooth that lumpiness.

So well.

First talking fee related earnings I think over the past three years, we've seen nice step up in fee related earnings in each annual year and I would say over the last three years that lumpiness has not been that lumpy for 2021.

<unk> been very clear that you can expect.

Similar FRE to 2020, as adjusted for that $30 million or slightly up and that from a managed top line growth.

Again kind of similar but youll see the more growth within the two segments of credit and solutions and some pressure on the fee side in global private equity simply as its real and its realizations were expected to be really good and so that will put some downward pressure.

And then as they get back end from a fund raising perspective.

That'll bring backup management fees and FRE in that sector, but thats in later years so again.

Table to slightly up next year or this year 2021.

Okay, Yeah on the 23rd for the rest thank you.

Net.

Our next.

Comes from Adam Beatty with UBS.

Hi, Good morning. Thank you for taking the question I wanted to circle back on the discussion around solutions.

From a competitive standpoint, not the competition there is new but some of the standalone providers have recently gotten more attention from public offerings and such so just wanted to see how Carlyle and op invest are positively differentiated there and also you mentioned the interaction between solutions on the rest of Carlyle is that proceed.

By Lps.

Net advantage. Thank you.

So let me let me start and then maybe Q will jump in here.

So the thing that I would point you to in terms of how we compete in the market for solutions and <unk> in particular.

It's a long standing business, great relationships with its respective GPS that invest with.

But look at its track record of performance in solutions and particularly in the Alpha. Thus funds has been phenomenal and I think that that really is a distinguishing factor in terms of how investors into that platform view us and from a competitive standpoint.

Carlyle as well as the solutions platform goes to market under a separate brand we have a very strong walls internally in terms of making sure that.

Key information around their relationships are not breaching those walls, but the things from a fund raising perspective in terms of bill on the make introductions on the like really helps.

Build the platform using our distribution model to help them really bring on around this very strong product set so hopefully that gets at most of your question.

Excellent. Thank you Adam the only thing I would add yes.

Adam the only thing I would add is.

First of all.

From our LP perspective.

This is a complementary strategy not a substitute of strategy.

They are using help invest as a way to further optimize.

Allocation into private markets to further gain efficiency through co invest et cetera. So.

It's very much now in the discussion with our Lps.

With respect to adding onto.

Their allocations to private capital and sitting side by side with Carlyle funds. So that's a huge advantage in the sense of it's now a portfolio discussion and that's why I say the existing client base of Carlyle is going to be a huge advantage for us as we try to keep growing out the best second of all second of all comp.

Petition is good.

It's going to create further growth in this market and like I said all these strategies.

Are going to benefit from the fact that there are trillions of dollars in private markets right now and these Lps are trying to figure out how to optimize allocation and risk into private equity private credit strategy. So.

Certain extent healthy competition is a good thing it's going to create more awareness and growth in this segment, which I think is has got good tailwind.

That's perfect makes sense. Thank you.

Okay.

And I'm not showing any further questions at this time I'd like to turn the call back over to Daniel Harris.

Thank you Kevin and thank you all for your time this morning and throughout the course of the past year.

We are very much looking forward to speaking with all of you on our Investor day on February 23rd any other questions. You have today. Please give me a follow up with Investor Relations. We hope you have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

[music].

Ladies and gentlemen, thank you for standing by and walked through the Carlyle Group fourth quarter 2020 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to introduce your host per day Mr Day.

You may begin.

Thank you Kevin Good morning, and welcome to Carlyle's fourth quarter and full year 2020 earnings call.

With me on the call is our Chief Executive Officer, Keith on Lee and our Chief Financial Officer Curt per user. This call is being webcast and a replay will be available on our website, we will refer to certain non-GAAP financial measures. During today's call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with <unk>.

Generally accepted accounting principles, we have provided reconciliations of these measures to GAAP in our earnings release.

Any forward looking at what's made today do not guarantee future performance and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factors section of our annual report on form 10-K that could cause actual results to differ materially from those indicated.

Carlyle assumes no obligation to update any forward looking statements at any time.

Earlier. This morning, we issued a press release and detailed earnings presentation, which is also available on our Investor Relations website for the fourth quarter, we generated $145 million on fee related earnings and $237 million in distributable earnings with de per common share of <unk> 64.

For the year FRE was $520 million and de per common share was $2 five.

Bolt up from 2019 levels, we declared a quarterly dividend of <unk> 25 per common share.

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As a reminder, we look forward to hosting our first Investor day as a corporation on February 23rd at 830, a M. Registration is open and we do encourage you to pre register possible at IR Docs Carlyle Dot com.

At our upcoming Investor day, our leadership team will discuss our corporate strategy and financial objectives as well as opportunities for each of our businesses I'm sure. Many of your questions today could be tied to our longer term outlook and topics, we'd like to cover comprehensively at Investor day, and as such we May defer are responding to these questions and address them at that time and income.

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With that let me turn the call over to our Chief Executive Officer Q suddenly.

Dan <unk>.

2020 was a year of growth and positive change for Carlyle, despite the challenging and complex environment.

Our focus in 2021 is to build on our current momentum and we look forward to providing more detail on our strategy for accelerating growth at our Investor day in two weeks.

Today I'd like to focus on three points first.

Carlyle delivered very strong results for shareholders in 2022nd.

Our investment portfolio is in great shape.

Third our business model and organization proved extremely resilient and adaptable to the changing environment.

Let me start by focusing on our 2020 results, which was strong across all metrics.

We generated a record $520 million on fee related earnings with margins in excess of 30%.

Substantial progress from just a few short years ago, when FRE was less than half of this year's level.

Continuing to grow FRE remains a primary strategic focus.

Distributable earnings increased 18% in 2020, and we expect continued growth in earnings as our investment portfolios perform and mature.

Our investment activity picked up sharply throughout the year.

Despite a challenging environment, we exited the year with great momentum deploying $9 billion of capital in the fourth quarter alone an $18 billion for the year.

Our ability to consistently deploy in good times and bad demonstrates the value of our global platform and multi asset class approach.

We also accelerated our exit pace, realizing 7 billion for our fund investors in the fourth quarter and $21 billion for the year.

And since the beginning of 2020, we've taken eight of our portfolio of companies public and have over $17 billion of current value in public securities debt when realized will generate proceeds for our Lps and earnings for our shareholders.

And the final highlight.

We raised $27 $5 billion of new capital during the year with nearly 90% of the capital raised from our global credit and investment solutions segments.

We will have much more to say about the trajectory and scale of our next fund raising cycle at Investor Day.

Let me now move to some remarks on our investment portfolio, which is diverse and balanced and in great shape.

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