Q1 2021 Carlyle Group Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Carlyle Group first quarter 2021 earnings call.
This time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session. If you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today.
So Daniel Harris. Please go ahead.
Thank you Mary good morning, and welcome to Carlyle first quarter 2021 earnings call with me on the call. This morning is our Chief Executive Officer, Tucson, Li and our Chief Financial Officer of Curb user. This call is being webcast and a replay will be available on our website and we will refer to certain non-GAAP financial measures during.
His call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. We have provided reconciliations of these measures to GAAP and 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 <unk>.
Current management expectations and involve inherent risks and uncertainties, including those identified and 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 and anytime.
Earlier. This morning, we issued a press release and detailed earnings presentation, which is also available on our Investor Relations website for the first quarter, we generated $129 million and fee related earnings and $215 million and distributable earnings with de per common share of <unk> 58.
We declared a quarterly dividend of <unk> 25 per common share.
And to ensure participation by all those on the call. Please limit yourself to one question and one follow up and then return to the queue for any additional questions with that let me turn the call over to our Chief Executive Officer <unk> <unk>.
Thank you Dan.
Good morning, everyone and thank you for joining US today, we hope you are all doing well and that you and your families are safe and healthy.
Our strong results this quarter highlight that we are making good progress against the strategy, we outlined at our Investor day in February.
We are encouraged by our early results and are committed to sharing transparently our progress.
Our plan is focused on accelerating the scope and scale of our investment platforms.
Expanding our efforts and Adjacencies like insurance and capital markets and institutionalizing the firm to drive higher incremental margins.
Over the next four years as we execute this plan, we expect to raise $130 billion or more and new capital <unk>.
<unk> at least $800 million and annual fee related earnings per.
And at least $800 million, a year and net realized performance revenue.
And ultimately deliver one $6 billion or more and annual distributable earnings for shareholders all by 2024.
We had a strong first quarter and I am confident and our ability to achieve or exceed the goals we have set for ourselves.
Today I'd like to highlight three areas of progress.
First our investment platform is firing on all cylinders.
Second our strong performance is translating into accelerating near term results and setting the stage for growth.
And finally, we continue to improve how we operate as a firm to drive sustainable and improving performance for all stakeholders.
Let me start with our investment platform.
On performance simply put our funds delivered their best quarter in the past decade.
Many of our largest and most significant funds appreciated materially in the quarter.
Our corporate private equity carry funds appreciated, 15% and the quarter and.
Our investment solutions carry funds appreciated 14%.
And with global credit and natural resources carry funds, each delivering 7% to 8% appreciation and the quarter, we saw strength across our entire global investment platform.
On new investments.
Deployment activity and our deal pipeline are as robust as they have ever been.
Our global platform is an incredible advantage and sourcing deals, creating value and our portfolio companies and helping us navigate a rapidly changing environment.
We invested $5 $5 billion of new capital and our carry funds this quarter and nearly $21 billion over the last 12 months.
We saw significant regional activity in Europe.
The ramp up and private equity growth opportunities and Asia, and the United States and strong activity across the tech healthcare and consumer sectors.
With respect to exits.
We generated more than $6 billion and realized proceeds for our Lps. This quarter completing full sales of portfolio companies, such as consulting and Europe.
And the United States and win our first in Japan.
We took both out of tech and ortho clinical diagnostics public and the quarter, increasing our public portfolio to more than $20 billion.
And from that portfolio, we sold $1 billion and shares.
And most importantly.
And our pipeline for future realizations continues to build with the maturation and seasoning of our portfolio.
Finally on fundraising.
We raised nearly $8 billion and new capital and the first quarter with investment solutions and global credit driving a majority of that activity.
Early feedback is positive on several flagship global private equity funds that are returning to market and we expect to have first closings and several of these funds over the next few quarters.
It's fair to say that our strong investment performance and elevated level of investment activity positively impacts our fund raising efforts.
This brings me to the second point.
That success and these major business activities is generating strong financial results and positions us well to produce a material increase and future distributable earnings.
The strong start to our fundraising campaign increases our confidence that as we raised capital as laid out in our plan and Youll see a commensurate increase in management fees fee related earnings and margins.
And the first quarter, we generated $129 million and fee related earnings.
Which is an increase of 30% from and as adjusted basis last year.
We continue our focus on driving FRE and growth and FRE should really gain steam as we activate fees on large new fund closings over the course of the next several years.
But the real Big news and this quarter is our record net accrued carry balance of $3 2 billion and increase of two five times from a year ago.
This record level of accrued carry on.
Alongside our strong investment performance.
Physicians is to see an acceleration and net performance revenues over the course of this year and beyond as our exit pace picks up.
Our momentum and continued focus on fee related earnings and our better visibility on accelerating realization activity from the growth and accrued carry on.
All underpinned our confidence and materially growing distributable earnings as we execute against our strategic plan objectives.
And finally, my third point is on the continuous changes and investments we are making at Carlyle to evolve and further institutionalize the firm to sustained improved performance.
We have challenged our <unk> thousand 800 people to think bigger performed better and move faster.
We're running the firm more effectively scaling everywhere possible and streamlining where prudent.
We are focused on continuing to attract grow and retain the very best talent across our entire global organization and have no doubt that our results will drive meaningful value creation for shareholders.
In closing, we feel great about our strategy performance and improving how we operate the firm.
We are building on our solid momentum to accelerate growth and create lasting impact.
We're excited confident and optimistic for what's ahead.
Over to you Kurt.
Q and good morning, everyone.
And my remarks, I will address three areas to support and build upon Qs opening comments.
First I will provide additional context around the strong first quarter carry fund appreciation and our record accrued carry balance.
And second I will quickly review, our first quarter results and finally leave you with some considerations looking forward.
So let's begin with the higher portfolio valuations.
Our investment portfolios are generally in great shape.
Concentrated and high quality assets diversified by sector and vintage and managed by a highly experienced investment teams.
Continued improvements and operating performance at the individual portfolio company level, and increasing public and private market valuation levels were tailwind to valuation this quarter.
AD and greater economic certainty alongside historically low interest rates and our funds benefited from significant fair value increases and the quarter.
With the past few quarters strong appreciation our most recent fully invested flagship buyout funds.
And our all at the upper end of relative performance as compared to their predecessors.
And the invest and generation of these funds is also tracking favorably.
We believe this positions these strategies very well upon their return to the market.
This depreciation resulted in a significant increase and our net accrued carry balance, which we already noted rose to $3 2 billion.
Up 36% from $2 $3 billion just last quarter.
The size of the accrual has accelerated and its composition has diversified. We currently have five funds that have more than $100 million and net accrued carrier.
Carlyle partners six remains early and its cash generation cycle and has a net accrued carry balance of nearly one 4 billion.
And we have not yet realized any carry from our latest fully invest in Asia and Europe buyout funds and so both funds are performing very well and are also now and accrued carry.
Notably three significant carry funds posted very strong and appreciation and moved into carry this quarter, including our fourth generation Europe buyout, and Europe technology funds, each of which appreciated more than 25%.
And are currently investing seventh U S buyout funds, which appreciated 10%.
Keep in mind, however, that our seventh U S buyout fund and our fourth Europe Technology fund remain and their investment periods and could move in and out of accrued carry as they fully investor capital.
Let me now move to a review of our first quarter results.
We generated $215 million and distributable earnings and day per share of <unk> 58 for the quarter and increase of 21% over a year ago.
The growth is driven was driven by a $30 million or 30% increase and fee related earnings to $129 million when adjusting for the $30 million and legal recoveries a year ago.
Our FRE margin this quarter of 31% was up about 600 basis points from and as adjusted 25% a year ago.
Positively impacting FRE this quarter was a higher level of transaction fees, which had $15 million and the quarter and $36 million over the past six months illustrates the strong traction Carlyle global capital markets is already experiencing as we focus on growing this earnings adjacency.
We're excited about this growth adjacency and believe we have significant room to continue to expand as outlined at our Investor day.
Net realized performance revenues of $76 million for the quarter increased significantly compared to last year.
But on a longer term view remained low by our historic standards, we expect to see both the pace of assets and performance revenues associated with those exits increased significantly.
Realized investment income was $30 million and was higher than any quarter in 2020.
And with investments on our balance sheet now at $1 $8 billion on a projected healthy exit pace investment income should remain higher than in prior periods.
Fundraising was also strong out of the gate seven $8 billion of new capital raised this quarter similar to last year activity was driven mostly by global credit and investment solutions are.
Our fund raising mix should shift more towards global private equity later this year as several GP funds are expected to have first closings.
And the first quarter, we took advantage of a strong CLO market to issue four new CLO, three and the U S and one in Europe and in April Alpha and that's held a final close on its latest co investment fund at three and $5 billion.
More than twice as large as its predecessor fund.
Fees on this program will begin with second quarter results.
Finally, let me cover a few items to look out for over the next few quarters.
First we expect significant distributable earnings growth as our exit pace increases across our platform for.
For example, we have already announced exits for Epica med risk and PPD and Carlyle partners, six and Amnio and Carlyle Europe partners III.
All of which should close over the next few quarters.
G&A expense continues to benefit from lower travel and conference expenditures as well as lower professional fees that we expect G&A will increase throughout 2021 as activity normalizes, but is likely to remain below prior peak levels.
Equity based compensation expense of $35 million was up versus $32 million a year ago and reflects the impact of February strategic equity grants.
Equity based compensation expense will modestly increase next quarter to reflect a full quarter of expense amortization on these awards and will likely remain at those levels for the near to medium term.
Our effective day tax rate, which was approximately 5% for the first quarter reflects the ongoing utilization of existing tax operating loss carry forwards, but we continue to expect our full year effective tax rate to wind up closer to a mid teen blended rate.
We maintained our dividend at <unk> 25 per share for the quarter and expected to remain at this level for the balance of the year over.
Over time, we would expect our fixed dividend and to grow with FRE beginning as early as next year.
We are committed to maintaining a balance sheet light approach and have ample resources to accomplish our organic growth objectives.
And with the persistence of a low rate environment, we continue to assess opportunities to optimize our capital structure and lower our average cost of capital.
And finally subsequent to quarter and we completed the sale of Metropolitan real estate for a small game and sublease its previous office space, and New York, which will result in a GAAP charge and the second quarter for the loss on the sublease.
Both the sale of MRI and the sublease will modestly improve our FRE margins prospectively.
And some we're pleased with our results for the quarter and the exceptional performance of our funds we remain on track to meet or exceed our 2024 goals to grow our pretax distributable earnings to at least $1 6 billion with an attractive mix of sustainable fee related earnings and strong performance from our <unk>.
<unk> and investments.
And we'll continue to keep you updated on our progress with that let me turn the call over to the operator for your questions.
Sir your line or to ask a question you will need the pad size and the number one on your thoughts on can we draw your question Craig.
Your first question comes from the line of Glenn Schorr from Evercore ISI.
Your line is now open.
Alright, thanks, very much I appreciate it.
Maybe if we could just talk a little bit about <unk>.
Global credit sales.
You mentioned that you got for Cielo is off from the quarter as the market open which is great.
Maybe if we could.
Talk about what to expect over the next coming quarters maybe.
Maybe for direct lending opportunities to credit and aviation infrastructure credit.
That'd be great.
Hey, Glenn it's Q.
We're doing well look big picture progress and global credit continues on track and we're quite pleased with how things are going and right now we've got about 60 billion and AUM just.
Just to remind you it was at about $50 billion last year at this time, so about a 20% growth.
As you pointed out our CLO businesses is really doing well.
It is priced a bunch of things and Europe and in the U S. As Kirk pointed out we feel really good about that franchise I just wanted to.
Now that the most important thing that is is it's performing well, it's default rate and the and the performance for its investors is top notch in terms of direct lending. We are looking for opportunities to continue to expand that platform I think our bdc's performing quite well and our track record is is such that we believe.
We are well positioned to continue raising money into that.
And to that strategy.
Opportunistic credit is just doing great.
Not only is the track record thus far.
Moving to our expectations more and more importantly, delivering for Lps, but they are and the markets I want to be careful the reception continues to be quite strong and were confident and our ability to continue driving to build out that whole platform. The one area that I would say is tougher and this environment.
As distressed credit.
Obviously with all the liquidity that's in the market.
A rising tide lifts all boats and I would say distressed credit is a little bit harder to see where we're going to find significant opportunities for ramp up and deployment in the current conditions that were seeing and.
And then finally, you mentioned aviation swell.
Ill give you a little bit of color on that platform.
And we're really pleased the funds are performing well.
The most recent SaaS off fund just closed on a very large transactions, which I'm sure you read about.
On the portfolio quality is through the most disruptive period of time, you could have imagined and the travel business and the aviation business has performed and our view very very well.
And our Lps are quite happy with what they're doing and so thats that seeds. The that sets. The stage for continued growth in that platform. So all and all I think big picture I. Just gave you a color a bit of color across our platform, but big picture, we're feeling very good about our credit platform and our ambitions to.
Continued doubling that business as I laid out for you and our strategic plan and Glenn just to add on just a little bit with some numbers global credit raised $3 $2 billion and new capital this quarter almost $12 billion over the last 12 months that really drive that.
And one of the things that you'll see here on the first quarter, both for new CLO that and then on in terms of management fees for the whole quarter. So you've got to keep that and account and then the other thing that few pointed out on distressed credit. We did have one carry fund and there that had a step down and so that was part of what Youre seeing there and then keep in mind that a lot of our.
Mobile capital markets transaction fees, which we're feeling really good about come through that segment and Q4 was a blowout for that piece in terms of looking at it historically from a Carlyle perspective, Q1 was also strong but a little bit of a step down so very pleased with the trajectory and global credit.
I appreciate all that color. Thank you.
Next question comes from the line of David Your line is now open.
Hey, good morning, everyone.
Good morning. Thank you mentioned on your prepared remarks that you expect to maintain a balance sheet light approach, which in my mind doesn't really jive with your shift to reinvesting most cash flow back into the business and having some book value compounding. So could you kind of address what appears to be a little bit of a conflict with what you said on the call and then.
And cash distribution policy.
Hey, Patrick.
Let me start and maybe Curt will have a little bit of color to add at the end as well look we are pursuing an asset light model, we are and investment firm and we believe if we can achieve our strategic plan, we're going to grow very nicely and drive a high return on capital for our shareholders.
Now that doesn't mean, we're not going to use our balance sheet appropriately to grow and you've seen what we've done with fortitude you've seen what we've done with the aviation platform and yes, we do.
Anchor all of our fund raising with significant investments from the balance sheet for purposes of alignment. So the way I would phrase. It is while everyone is talking about asset light I believe we are and asset right type of approach, which is focused as an investment firm drive high growth and high.
Return on capital and strategically use our balance sheet and the right way, that's my asset right categorization and the right way to step function of our growth and.
And in the future.
And I'll add to that Patrick is we have ample resources to be able to fund our organic plan.
And we're looking at.
Just as we talked about on our Investor day opportunities on an opportunistic matter and we will continue to review our capital structure and terms of what do we think is best at the right time to take advantage of the market and to continue to really drive a growth trajectory for all stakeholders and the firm.
Operator.
Next question comes from the line of Craig Siegenthaler.
Credit Suisse. Your line is now open.
Good morning, and hope you're doing well Hey, Craig.
So my question is on compensation.
Several of your peers run with models that accrued compensation against performance fees, where they shifted more towards performance fees relative to match and fees. So I'm just thinking what is your thought on reallocating compensation out of FRE, which could include improved the <unk> stock valuation, while also incentivizing employees more.
Performance.
Great. Thanks.
Thanks, So let me start and then maybe <unk> will add in.
We have really done is really tried to grow fee related earnings and distributable earnings the old fashion way by earning it one step at a time growing the business doing the things right and we.
We're not trying to.
Hide the ball in terms of our true compensation. So all of our base and bonus is clearly spelled out and Thats all within fee related earnings and within our performance revenues. There is a portion of that generally it's 45% and shared with the deal teams and with people and so thats the basic compensation model.
Will that's not been tweak obviously, we grant equity awards on top of that.
Right down the center of the fairway kind of approach early on it as we go we'll continue to look at ways to incentivize our people and different ways, but right now we're feeling pretty good about our overall plans in terms of how to attract and retain key talent.
Yeah, Craig I would just say at a higher level.
We're just going to be very transparent and very direct about these types of issues, we really feel solid we feel great about our alignment.
And accounting as accounting, but we're not going to use accounting too.
And in lieu of substance and so.
So on.
And our investment professionals, they receive cash compensation.
And if the performance of their funds is strong and they will benefit with carry that's and complete alignment with our limited partners and our shareholders, who get a good share of that as we perform and then of course finally.
We have broader distribution of stock and the hands of those leaders that can really help drive performance on behalf of the whole enterprise and.
And we feel good about overall, how we compensate our professionals and how we've aligned them appropriately could we find different ways to optimize and and and better align as our objective shift and as our plans evolve of course, and that's what we will always be looking to do but as Curt laid out we are very comfortable.
<unk> with the transparent and clear.
And quite frankly, the the right down the middle of the fairway way that we've laid out compensation for all of you.
Thank you.
The next question comes from the line of Ken Worthington of Jpmorgan. Your line is now open.
Hi, Good morning, I wanted to follow up on Patrick's question with Carlyle entering the next fundraising cycle. How does seeding of this next vintage of flagship funds look I think the founders we're big investors in the earlier funds it might not participate to the same extent and next generation of free.
And so.
How much would carlyle.
Have to contribute in terms of incremental capital to.
The next round of fund raising and to what extent is this these commitments really generated from the investment gains and the prior funds versus what is sort of the new incremental investment dollars that you think you'll need to contribute.
And that's great. Thanks for your question very astute.
One of the things that I've always been really proud of Carlyle is just the level of commitment of all of our investment professionals as well as really all of our employee base to invest and our products. So we what we sell so huge on alignment in terms of vs.
<unk> invested in fact, it's clearly the majority of the capital that goes into our funds really and it comes out of those after tax dollars from our people and guess, what that's highly diversified and.
And so we're not dependent upon any single person and the balance sheet is obviously there to fund it so as I look forward.
The real issue is as we're going from $100 billion to $110 billion before to $130 billion, plus and see incremental on that which is really what's key and.
Comfortable that our strategies are appropriate to build a fund all of that.
Okay, Great makes sense. Thank you.
Mike.
Per year.
From Bank of America. Your line is now open.
Hey, Good morning. This is dean Stephan on for Mike carrier.
And just given the fund raising guidance at Investor Day, and some first close as expected and expected later this year.
Wondering if we could get some color around the fund raising pipeline for the remainder of 'twenty, one and maybe the potential size of successor funds and what percentage of current vintages have been invested or deployed thus far thanks.
Sure Deane, it's Kew.
Look obviously, it's hard for me to talk specifically about anything in light of the rules and regs with respect to fundraising. So let me just put it this way and don't let the brevity of my answer.
Don't read anything into that look we feel really good about our fund raising and our fund raising prospects.
Early reception has been quite positive.
Our performance from our investment platform as we laid out is quite strong and that provides a good backdrop for all of our fund raising discussions.
On the numbers that we posted this quarter as Kurt pointed out are mostly from our investment solutions and our credit business and so are very large flagship products and GTE have formally announced and are in market.
As we speak.
So, hence I'm going to be careful.
And we feel very good about our prospects and there is one other thing that I would like to point out.
And over the past year.
And.
Across our broad platform right now I'd say about 70% or more of our Lps have committed to more than three funds at Carlyle.
Up from about 60%.
At the end of the at the end of 2020.
So so we're seeing broad positive reception and the environment is strong for fund raising our performance is very good and.
And let me just leave it at that until you were pretty confident about our fund raising prospects.
Got it thank you.
Next question comes from the line of Gerry O'hara of Jefferies. Your line is now open.
Great Thanks, and good morning.
Perhaps you could give us a little bit of an update on on your strategy with respect to kind of streamlining fund structures I think you've touched on it.
And recent and the recent and recent history as well as on some of your prepared remarks, but if you could perhaps give us a few specific examples or perhaps.
How we should think about that going forward and that'd be helpful. Thank you.
Sure.
I appreciate the question look as I laid out on our strategic plan.
We are focused on.
Building and scaling our strongest and our best platforms.
And if we can do that big will become bigger.
But we will benefit from operating leverage.
And you saw and example of that in this quarter when current announced.
The final closing of the sale of MRV out of our investment solutions business.
Great franchise, but not in keeping with our strategic plan and principles are focusing on our biggest and best and scaling the biggest and best even more so for example.
In the past you've seen us.
Stop investing out of.
Or move or sell fund complexes or fund products and meant to say that are in our opinion subscale and not really going to be moving the needle for us and a big way with respect to what our strategic ambitions are.
In Asia, we've done this with certain growth product and.
And in the Middle East.
In Mexico.
And there are numerous examples throughout our global private equity franchise and in our credit franchise, where we've made the tough decisions, but the strategically important decisions to say.
These are not part of our strategic plan.
And now you've seen our platform with our redesign and focused on global private equity global credit and investment solutions, which we've streamlined and where our best strategies and teams are the ones that we're going to really support growth.
And scale and that really sets the foundation for the first big leg of our strategic plan, which is accelerating the growth of our best and strongest investment platforms.
So hopefully that gives you a little bit of color of how focused.
And on this principle and how we continue to drive and build Carlyle around this moving forward.
Got it thank you.
Next question comes from the line of Michael Cyprus from Morgan Stanley. Your line is now open.
Question wanted to circle back on credit and I was hoping we could do.
And then a little bit more on the performance of the different credit strategies I see and the presentation that you mentioned.
8% carry fund depreciation for the quarter, but I was hoping you might be able to elaborate on the performance and some of the other credit strategies and particularly the ones you are looking to build out and including Clo's direct lending and some of the real asset credit strategies, how has the performance and and those strategies during the quarter and how does that compare versus <unk>.
Key benchmarks and.
And again, how they did last year and as well. Thank you.
So.
Question and one on I suggest we do this I'll start and between current and me we will give you a pretty good and so I'll start with our CLO business and you specifically asked about performance so.
And our long term default rate since 1999 is 1%, which is less and the third of the <unk> index, which stands at three 3%. So clearly great performance relative to that index and our net implied loss rate at the moment is 40 basis points versus the index at one two.
Percent so one of the biggest.
Investors and the CLO market.
In large part because our performance is great and we are recognized for that which is why we have.
And I believe so busy and why this platform will continue to grow.
Difficult ahead Kurt.
Look I think just as I said before Mike the fundraising has been really strong and Thats really and this business you have to perform in order to fund raise the clo's have done really well despite some of our concerns a year ago, but the team is really kind of.
Donlin is always on which is manage default rates and then and a lot of our other products like.
And we talked about aviation before but if you really to talk about some of the retail products that we have as well as and direct lending those are performing very well and the new dollars that are coming and continue to track not to mention things like infrastructure credit and we're even starting to put together some things and other.
Net backed lending areas.
And so more to come around some of that in terms of building out not just aviation and infrastructure and other places as well so all of that has really been.
Put together by our fund and by actual performance and need to be a little careful Mike in terms of house and.
And because the BDC is not yet reported and I don't want to front run our own BDC from a public perspective.
Got it and any color maybe on last year, where it has been reported just in terms of what the private credit direct lending performance had been and also on the real estate credit and the infrastructure credit to solve these strategies you are looking to build out.
Hoping to get a little bit more granularity on the performance on those I don't have all of that on my fingertips, Mike. So maybe we can do something and a subsequent point and time.
It would be great. Thank you.
Next question comes from the line of Adam Beatty.
UBS Your line is now open.
Yes.
Good morning, I wanted to ask about investment solutions.
And the context of fund raising the release mentioned the closing of some separate accounts and we tend to think in terms of discrete funds were and fundraising and solutions has also been quite strong.
But I wanted to get your comment on the potential for separate accounts to kind of provide drip drip and the background. If you will of fund raising for solutions and also if I could squeeze it in maybe the outlook for realizations just in the context of the way.
I can say and agreement with helping them. Thank you.
Alright, let me.
And I appreciate the question look estimations.
And as an important part of our business specifically at released two solutions.
We raised I think a little over $2 billion, just and SMA with respect to ALP invest.
And Thats part of the success, we've been having and that business.
Over time, we expect to see larger and larger commingled funds, but this is an asset class that is growing and we have real interest from very large Lps, who would like to structure.
Unique programs with us and of course to the extent, we can do that and and economically attractive way and something that makes sense for our business, we will engage and do and those types of discussions, but more broadly speaking SMA as it relates to solutions, but also on the credit business is something that.
And we've been having real success and and we carefully are growing that to ensure that we're doing that and a way which is building the business, but is doing it and.
And in an economically accretive way.
Just picking up on the comment around distribution pace or investment solutions. So again, a lot of that we're dealing with.
Primary fund the funds and secondary co invest and so that's really kind of as you see the overall market's returning there isn't getting that cash now one thing I want to point out to you is on page 10 of our release you will see that the net accrued performance revenue with respect to solutions has gone from $110 million net.
A year ago to $191 million and so that's very good improvement from the net accrued carry and more and more as these new programs are much larger percentage of 40.
On comes to Carlyle as Thats realized a keep in mind. These are European style waterfalls, and so it takes a while for that to flush through and come to us. So I would not expect a huge increase in the immediate future, but I do think that the amount of carry that investment solutions contributed to the firm.
<unk> will be more meaningful, especially next year and the year thereafter than it has been and the recent past, but look global private equity will continue to be the lion's share of our unrealized carry.
Excellent. Thank you for hitting all of those points, especially including credit and SMA.
Next question comes from the line of Robert Lee from CDW.
Your line is now open.
Great. Thanks, so much and taking.
Taking my questions I guess.
And I apologize I got on the call late.
You may have covered this earlier, but on clear.
Nearly crude carriers.
It continues to kind of ramp.
Actually.
And from realizations.
Is there any change or update in terms of how youre thinking about the pace.
And the realizations and the market's been pretty buoyant.
And we expect needs scale and 2022 and beyond.
Any sense and maybe.
Come on faster than utility.
A quarter or two ago and then.
Well that's my question.
Yes, Hi, Robert it's Kew.
Look at.
The environment right now is very robust and the capital markets.
And when you marry that with the fact that we've been working really hard on the investment platform side.
Investing working with our portfolio companies and our funds that we think have been constructed well those portfolios are maturing and their seasoning and so to the extent that we can take advantage of these capital market conditions. You should expect that we will be doing that and that is why I made the comment that that.
Pipeline and realizations continues to grow and we tend we intend to be active now look.
My Crystal ball isn't perfect.
With respect to capital market conditions and the future.
And so I just want to point out that.
A big part of the appreciation and our views on realizations are dependent in large part on making sure.
Dependent in large part on the environment.
Being healthy.
Healthy and to the extent that that is the case, we do expect to see a meaningful ramp up and exit activity, which should drive strong distributable earnings for the balance of the year and beyond and just just to add and on and Robert I mean I.
I think we gave very clear color that we expect increases in both distributable earnings and really being driven off of our expected realization activity and the pipeline that I called out on my prepared remarks, <unk> and Europe partners, III, PPD and med risk and Carlyle partners six those are deals that are on.
We announced and therein and funds that are taking cash carry so you can just kind of see and obviously that there's clear pathways to very good realization activity in the near term.
Alright, thanks, so much.
Next question comes from the line of Greece.
Your line is now.
Yes, good morning, and thank you on.
And on.
Investor Day, you highlighted kind of strategies for.
Sure.
Drive to kind of add to the core strategies and I Wonder if you could update us on that.
Yes.
<unk>.
I would like your core plus real estate fund as a 2016 vintage fund should we be expecting kind of a more permanent vehicles thats always raising capital quarter in quarter out and I'm also curious just as the investor base for those core strategies different than the.
On a periodic.
Private equity funds.
So let me maybe start just our core plus real estate platform is doing really well growing and very good and that is one that's just ever opened so that's not one that we need to redo. So it's a core plus strategy, it's evergreen and.
And the trajectory here has been fantastic in terms of rates and Rob Stuckey and the team have done a really nice job of how they've invested and so we're very optimistic with with respect to that and.
On our private equity space, that's where it is more as you pointed out traditional from you need to reload, but those are longer duration investment periods and longer life funds and so waste.
And in terms of my professional career, when you start getting up and $10 10 to 20 year time periods that get the feel very kind of a permanent and.
But even on a regular funds.
Generally have a six year investment period, and and then take another five or six years thereafter to fully realize.
And they are very sticky and 90% of that.
88% of that is.
And really very sticky capital management fees coming from that so.
And the business from a permanent perspective, I think feels really good.
Q, if theres anything you want to add to that.
Chris the only thing I would add is I thought where youre going with your question is in terms of Adjacencies.
Above and beyond our core businesses Curt did point out the success, we're having and vehicles like CPI, which is our core plus real estate fund, but also our global capital markets business only six months and we feel really good about we've established and globally coordinated team.
We know what we're trying to do in terms of risk and.
And we're executing at a revenue.
Run rate right now which is.
And the beating our expectations quite frankly, so we've got we feel really good about our momentum there and obviously, we haven't talked about on this call, but everything we're doing at fortitude and and the insurance space continues to be.
Exciting for US we're very busy for day to the platform is performing very well and I believe it's just a matter of time before we see growth and that platform, which then comes back to benefit Carlyle and our investment management activities. So it's a fulsome answer for you Chris but we.
Feel pretty good about.
On about what's happening above and beyond the first major leg of our plan, which is our core investment platform.
Okay. Thank you.
There are no further question at this time.
And Harry.
Thank you everyone for your time and attention. This morning, if you have any follow up questions feel free to reach out to Investor relations anytime otherwise, we look forward to speaking with you again next quarter.
Yes.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
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