Q2 2024 Carlyle Group Inc Earnings Call

Okay.

Operator: Good day, and thank you for standing by. Welcome to the Carlyle Group second quarter 2024 earnings conference call. This time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Daniel Harris, Head of Investor Relations. Please go ahead.

Good day, and thank you for standing by.

Speaker Change: Welcome to the Carlyle Group second quarter 2024 earnings conference call at this time, all participants on the listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Speaker Change: Didn't hear an automated message advising your hand is raised.

Speaker Change: Withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded I would now.

Speaker Change: I'd like to hand, the conference over to your Speaker, Daniel Harris head of Investor Relations. Please go ahead.

Daniel Harris: Shannon. Good morning, and welcome to Carlyle's second quarter 2024 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz, and our Chief Financial Officer and Head of Corporate Strategy, John Redett. Earlier this morning, we issued a press release and a detailed earnings presentation, which is also available on our investor relations website. This call is being webcast, and a replay will be available.

Daniel Harris: Thank you Shannon good morning, and welcome to Carlyle's second quarter 2024 earnings call.

Speaker Change: With me on the call. This morning is our Chief Executive Officer, Harvey Schwartz, and our Chief Financial Officer, and head of corporate strategy genre that.

Speaker Change: Earlier. This morning, we issued a press release and detailed earnings presentation, which is also available on our Investor Relations website.

Speaker Change: Call is being webcast and a replay will be available we will refer to certain non-GAAP financial measures during today's call.

Daniel Harris: We will refer to certain non-GAAP financial measures during today's call. However, 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 reconciliation of these measures to GAAP in our earnings release to the extent reasonably available. However, 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 factor section of our annual report on Form 10-K that could cause actual results to differ materially from those indicated in the report.

Speaker Change: 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 reconciliation of these measures to GAAP in our earnings release to the extent reasonably available.

Speaker Change: Any forward looking statements made today do not guarantee future performance and undue reliance should not be placed on them.

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.

Daniel Harris: Carlyle assumes no obligation to update any forward-looking statements at any time. And in order to ensure participation by all those on the call today, please limit yourself to one question and return to the queue for any additional follow-ups. With that, I will turn the call over to our Chief Executive Officer, Harvey Schwartz.

Speaker Change: And then in order to ensure participation by all those on the call today. Please limit yourself to one question and return to the queue for any additional follow ups with that let me turn the call over to our Chief Executive Officer Harvey Schwartz.

Harvey Schwartz: Thanks, Dan. Good morning, everyone, and thank you for joining us. The first half of 24 reflects strong momentum across our business. And as you can see, when you look at it, this momentum is truly clear in our results. For the first six months, we generated record FRA and record FRE margins.

Harvey Schwartz: Thanks, Dan Good morning.

Harvey Schwartz: And thank you for joining us.

Speaker Change: First half of 'twenty four reflects strong momentum across our business.

Speaker Change: And as you can see when you look at it this momentum truly clear in our results.

Speaker Change: For the first six months, we generated record FRE.

Speaker Change: Record FRE margins record assets under management and strong fundraising.

Harvey Schwartz: Record Assets Under Management and Strong Fundraising. Let me take a moment to talk about the current market activity. Obviously, we've all seen over the last few trading days and this morning that the market remains quite volatile. You know, from our perspective, it's important to take a big step back.

Speaker Change: Let me take a moment to talk about the current market activity. Obviously, we've all seen over the last few trading days and this morning, the market remains quite volatile.

Speaker Change: From our perspective, it's important to take a big step back when we look at our dietary portfolio data.

Harvey Schwartz: When we look at our proprietary portfolio data, this is what we say. The trajectory for GDP. The expected Fed rate cuts this year. All the dynamics still tell us so.

This is what we see.

Speaker Change: The trajectory for GDP the.

Speaker Change: The expected fed rate cuts this year.

Speaker Change: All the dynamics still tell us the underlying fundamentals support improving activity across our platform for the balance of the year.

Harvey Schwartz: The underlying fundamentals support improving activity across our platform for the balance of the year. Now, consistent with that, we've announced two large recent transactions and have others in the pipeline we expect to finalize soon. In addition, we announced a landmark $10 billion transaction to acquire portfolio loans from Discover Financial Services.

Speaker Change: Now consistent with that we've announced two large recent transactions and have others in the pipeline, we expect to finalize soon.

Speaker Change: In asset backed finance, we announced a landmark $10 billion transaction to acquire a portfolio of loans from discover financial services.

Harvey Schwartz: This transaction is a great example of the intersection of our asset-backed finance capabilities, our credit and insurance businesses, and our capital markets expertise, all coming together to drive value for our clients and generate transactions. As we've discussed, asset-backed finance is a critical provider of capital for the financial sector. There is a significant opportunity here to grow as we're in the early innings of a multi-trillion dollar market opportunity, which we're well On exits, we have a considerable pipeline of active IPO and sale processes underway. You just saw today that we announced the sale of our portfolio company Cotentric Energy, a leading power producer, and the assets it manages at a valuation of nearly $3 billion.

Speaker Change: This transaction is a great example of the intersection of our asset backed finance capabilities, our credit and insurance businesses and our capital markets expertise, all coming together to drive value for our clients and generate transaction fees.

Speaker Change: As we've discussed asset backed finance as a critical provider of capital for the financial sector.

Speaker Change: There is a significant opportunity here to grow as we are in the early innings of a multi trillion dollar market opportunity, which we are well positioned for.

Speaker Change: On exits we have a considerable pipeline of active IPO and sale processes underway.

Speaker Change: You just saw today, we announced the sale of our portfolio company potential energy, a leading power producer and the asset managers at a valuation of nearly $3 billion.

Harvey Schwartz: We expect exit activity in the second half of the year to be materially higher than the first half, with several large transactions in our pipeline. Moving to fundraising, we raised $18 billion year to date and north of $40 billion over the last 12 months. We closed our fifth Japanese buyout fund, saw strong inflows into our U.S. real estate business, and raised $5 billion in credit this quarter alone. This was our third best fundraising quarter on record for credit.

Speaker Change: We expect the exit activity in the second half of the year likely to be materially higher in the first half with several large transactions in our pipeline.

Speaker Change: Moving to fundraising we raised $18 billion year to date.

And north of $40 billion over the last 12 months.

Speaker Change: We closed our fifth Japan buyout funds saw strong inflows into our U S real estate business and <unk> 5 billion in credit this quarter alone.

Speaker Change: This was our third best fundraising quarter on record for the credit business at.

Harvey Schwartz: And importantly, we're working towards our target of $40 billion for 2020. Let me just quickly run you through some specific areas of activity across our business. I'm quite optimistic about where our business is today compared to a year ago. As I said, there's a lot of momentum across the franchise.

Speaker Change: And importantly, we are working towards our target of $40 billion for 2024.

Speaker Change: Let me just quickly run you through some specific areas of activity across our business.

Speaker Change: I'm quite optimistic about where our business is today compared to a year ago.

Speaker Change: As I said, there's a lot of momentum across the franchise and.

Harvey Schwartz: In global credit, we're well-positioned to capitalise on industry tailwinds and capture market share. In addition to the Discover Financial Services transaction, we saw strong activity in opportunistic and real asset credit trends, and our CLO business remains very active. In the first six months of the year, we're the second busiest in our 20-year CLO history.

Speaker Change: In global credit, we are well positioned to capitalize industry tailwind and capture market share. In addition to the discover financial services transaction, we saw strong activity in opportunistic and real asset credit strategies.

Speaker Change: And our CLO business, we remained very active.

Speaker Change: First six months of the year, we're the second biggest in our 20 year Cielo history.

Harvey Schwartz: We ended Q2 as the world's largest CLO manager, and we feel quite good about the forward pipeline. Finally, in Global Investment Solutions, the activity levels remain quite high as we address the investment needs of our clients. We deployed $9 billion and raised $12 million over the last 12 months and continue to see attractive opportunities across secondaries and co-ambassadors. In global wealth, our brand continues to resonate with our wealth advisor partner. SeaTac, our private credit product, had a strong first half, and CapM, our solutions wealth product, has significant momentum and has been added to several new wealth distribution platforms.

Speaker Change: We ended Q2 as the worlds largest CLO manager and we feel quite good about the forward pipeline.

Speaker Change: Finally in global investment solutions, the activity levels remain quite high as we address the investment needs of our clients. We deployed 9 billion and raised $12 million over the last 12 months and continue to see attractive opportunities across secondaries and co investments.

Speaker Change: In global wealth, our brand continues to resonate with our wealth advisor partners.

Speaker Change: <unk>, our private credit product had a strong first half in Japan, our solutions wealth product has significant momentum and has been added to several new wealth distribution platforms grafts.

Harvey Schwartz: Wrap things up. Our results this quarter reflect strong momentum across the firm. As the environment continues to improve, which we believe it will, despite, as I said, recent market activity, Carlyle and our stakeholders are well positioned to benefit. With that, I now turn the call over to John.

Speaker Change: Wrapping up our results this quarter reflect strong momentum across the firm.

Speaker Change: As the environment continues to improve which we believe it well despite as I said recent market activity Carlyle and our stakeholders are well position to benefit with that let me now turn the call over to John.

John Redett: Thanks, Harvey. Good morning, everyone.

John: Thanks, Harvey and good morning, everyone. We continue to see significant momentum across our platform and remain on track to achieve our 2024 financial targets.

John Redett: We continue to see significant momentum across our platform and remain on track to achieve our 2024 financial target. We achieved a record AUM of $435 billion in the quarter, up 13% year over year. We also produced another quarter of record FRE, and FRE margins remain strong.

John: We achieved record AUM of 435 billion in the quarter up 13% year over year.

John: We also produced another quarter of record FRE and FRE margins remained strong.

John Redett: We produced $343 million in DE for the second quarter, or $0.78 in DE per share. And year to date, DE per share of $1.79 is 19% higher. We repurchased $178 million of shares in the second quarter, bringing our total repurchase amount to approximately $330 million for the first half of the year. Total shares outstanding are at the lowest level since 2021.

John: We produced $343 million in day for the second quarter.

John: <unk> 78, and <unk> per share.

John: And year to date <unk> per share of $1 79 is 19% higher.

John: We repurchased $178 million of shares in the second quarter, bringing our total repurchase amount to approximately $330 million for the first half of the year.

John: Total shares outstanding are at the lowest level.

John: Since 2021, and we have $1 $1 billion remaining.

John: On our share repurchase authorization.

John Redett: And we have 1.1 billion remaining under the share repurchase authorization. Now, let's cover three important areas: fee-related earnings, fundraising, and the investment and investment environment. Fee-related earnings increased to $273 million in the quarter, up over 30% from the second quarter of 2023. First half FRE of $539 million is far and away a record, and is 35% higher than the first half of 2023. Second quarter management fees increased 2% in the quarter to $525 million.

John: Now, let's cover three important areas fee related earnings.

John: And raising and the investment and investment environment.

John: Fee related earnings increased to $273 million in the quarter.

John: Up over 30% from the second quarter of 2023.

John: First half FRE of $539 million is far and away a record and.

John: And is 35% higher than the first half of 2023.

John: Second quarter management fees increased 2% in the quarter to $525 million.

John Redett: Management fees and global credit and solutions experienced double-digit growth year-over-year and hit record levels. We expect total management fees to accelerate across the second half of the year, driven by the nearly $20 billion of pending fee-earning AUM, the highest level since 2021. Transaction and advisory fees are up almost 60% year over year, driven by the steadily improving transaction environment. We are on pace for a record year.

John: Management fees in global credit and solutions experienced double digit growth year over year and hit record levels.

John: We expect total management fees to accelerate across the second half of the year driven by the nearly $20 billion of pending fee, earning AUM.

John: The highest level since 2021.

John: Transaction and advisory fees were up almost 60% year over year, driven by the steadily improving transaction environment.

John: We are on pace for a record year.

John Redett: We continue to drive towards our target of 1.1 billion FRE for 2024, implying that FRE in the second half of 2024 will be higher than in the first half. Now, let's turn to fundraising. Year-to-date, we raised $18 billion in new capital and $41 billion over the last 12 months. We saw meaningful activity in this quarter in both global private equity and Global Credit. In Global Private Equity, we closed our fifth vintage Japanese buyout, nearly 70% larger than its predecessor. Across Asia, this brings us to $5 billion in capital raises. We recently announced the Take Private of KFC Japan, where our Pan-Asia teams came together to leverage our significant expertise in the restaurant and food sector.

John: We continue to drive towards our target of $1 $1 billion of FRE for 2024.

John: Implying FRE in the second half of 2024 will.

John: It will be higher than the first half.

Speaker Change: Let's turn to fundraising year.

Speaker Change: Year to date, we've raised $18 billion of new capital and $41 billion over the last 12 months, we saw meaningful activity in this quarter in both global private equity and.

Speaker Change: In global credit.

Speaker Change: In global private equity, we've closed our fifth vintage Japan buyout fund.

Speaker Change: Nearly 70% larger than its predecessor.

Speaker Change: Across Asia. This brings us to $5 billion of capital raised.

Speaker Change: We recently announced the take private of KFC, Japan, where our Pan Asia teams came together to leverage our significant expertise in the restaurant and food sector. This remains a robust market for us.

John Redett: This remains a robust market for us. In terms of our latest real estate fund, we closed on an amount materially higher than what we disclosed in our earnings release. And we are progressing quickly to a final close. In a challenging real estate market, it's worth noting the exceptional performance of our franchise, which remains a key area of growth. In global credit, we raised $5 billion in the quarter. As Harvey said, we had one of the most active first six months in our 20-plus year CLO history. We also benefited from continued strength in our credit wealth product, CTAC, as well as other strategies.

Speaker Change: In terms of our latest real estate fund, we closed an amount materially higher than what we disclosed in our earnings release.

And we are progressing quickly to a final close.

Speaker Change: In a challenging real estate market, it's worth noting the exceptional performance of our franchise, which remains a key area of growth.

In global credit, we raised $5 billion in the quarter.

Speaker Change: As Harvey said, we had one of the most active first six months and our 20 plus year Cielo history.

Harvey Schwartz: We also benefited from continued strength in our credit wealth product seatac as well as other strategies.

John Redett: For the balance of the year, we expect to raise significant capital across all segments as we continue to work towards our target of $40 billion. Finally, let me touch on the investment environment. As Harvey mentioned, we are seeing increased investment activity across the business as buyer and seller confidence has improved despite recent volatility. We have access to great proprietary data across our global platform, which also points to increased activity levels. In terms of exit activity, we are now seeing more robust competition where an IPO is a real exit path, and Strategic Buyer Interest has picked up.

Harvey Schwartz: For the balance of the year, we expect to raise significant capital across all segments as we continue to work towards our target of $40 billion.

Harvey Schwartz: Finally, let me touch on the investment environment.

Harvey Schwartz: As Harvey mentioned, we are seeing increased investment activity across the business as buyer and seller confidence has improved despite recent volatility.

Harvey Schwartz: We have access to great proprietary data across our global platform, which also points to increase activity levels.

Harvey Schwartz: In terms of exit activity. We now are seeing more robust competition, where an IPO is a real exit path and strategic buyer interest has picked up.

John Redett: We expect increased activity in the second half of 2024. Wrapping up, we continue to focus on delivering strong results for our shareholders. We have good momentum across our platform and are on track to achieve the financial targets that we laid out for 2024. With that, I will turn the call over to the operator for your question.

We expect increased activity in the second half of 2024.

Harvey Schwartz: Wrapping up we continue to focus on delivering strong results for our shareholders. We have good momentum across our platform.

Harvey Schwartz: And are on track to achieve the financial targets that we laid out for 2024.

With that let me turn the call over to the operator for your questions.

Operator: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Glenn Schorr with Evercore ISI. Your line is now open.

Speaker Change: Thank you to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: Please standby what's called the Q&A roster.

Speaker Change: Our first question comes from the line of Glenn Schorr with Evercore ISI. Your line is now open.

Glenn Schorr: Thank you very much.

Glenn Schorr: Okay, so good morning. Good morning.

Glenn Schorr: Okay. So good morning.

Glenn Schorr: Both here good morning, good morning, I heard both of your comments loud and clear about your exit pipeline CE guides and the backdrop and the brokers and advisors that have reported have all said similar commentary.

Glenn Schorr: I heard both your comments loud and clear about your exit pipeline DE guide and the backdrop, and the brokers and advisors that have reported have all said similar commentary. The market sentiment and the outlook feel like it's changed a lot in the last few days. And so, I'm curious, A, why you think, um... The market's perception is that things are going to slow down materially, but that's different for your business mix. I get it. So I'd love to hear that. And B, just how all that bullishness goes into your thoughts on the capital-raising outlook for PE specifically. Yeah. So Glenn, again, thanks for everything.

Speaker Change: The market sentiment and the outlook feels like it's changed a lot in last few days.

Speaker Change: And so I'm curious a.

Speaker Change: Why do you think.

Speaker Change:

Speaker Change: The market's perception is that things are going to slow down materially.

Speaker Change: But that's different for your business mix I get it so I'd love to hear that and B, just how that how all of that bullishness goes into your thoughts on capital raising outlook for <unk> specifically.

Harvey Schwartz: So obviously, you know, the last couple of days of trading and the way the markets are positioned open this morning, there's a lot of red on the screen. You know, when we form our views, as John and I said, we look at underlying portfolio performance, and we extrapolate that data in terms of economic growth. If we were having this call last Tuesday, none of these questions would have been in the mix about the current market environment. As a matter of fact, you might think we were understating the trajectory of how things felt.

Harvey Schwartz: Yeah. So Glenn, again, thanks for the question.

Speaker Change: The Atlanta again, thanks for the question so obviously.

Speaker Change: The last couple of days of trading and the way to market to position the opening this morning.

Speaker Change: There's a lot of red on the screens.

John: When we when we form our views as John and I said, we look at underlying portfolio performance and we extrapolate that data in terms of economic growth. If we were having this call last Tuesday, none of these questions would be in the mix about the current market environment as a matter of fact, you might think we're understanding the trajectory of how.

Harvey Schwartz: And so, I think all of us have to be a little bit careful not to overreact to a market adjustment, which at the moment feels very, very liquidity driven and very risk sentiment driven. Again, when we had this call last week, we were talking about the fact that we expected Fed rate cuts, and GDP looks solid. So, none of that has changed our view.

Speaker Change: Things felt and so I think all of us have to be a little bit careful not to overreact to a market adjustment, which at the moment feels very very liquidity, driven and very risk sentiment driven.

Speaker Change: Again, we're having this call last we were talking about the fact that we expected fed rate cuts GDP look solid.

Harvey Schwartz: Now, sentiment can extend itself into problematic ways, but it's way too early to extrapolate from that. Portfolio performance looks good, market opportunity feels good, exits still feel good, and pending announcements feel good. We'll see what happens over the next several weeks in terms of the market environment. But if anything, I think this will encourage the Fed to take action, which is really what the market's looking for. And again, we all have to be reminded, one of the things we learned over the last couple years is how the transmission mechanism when the Fed is raising rates is slower than when they're cutting. And again, my crystal ball is no better than yours, Glenn, but nothing about the last couple of days changes our view about the balance of the year at this stage.

Speaker Change: That has changed our view now sentiment can extend itself into problematic ways. It's way too early to extrapolate that portfolio performance looks good market opportunity feels good exit still feel good pending announcements feel good.

Speaker Change: We'll see what happens over the next several weeks in terms of market environments, but if anything I think this will incur.

Speaker Change: Encouraged the fed to take action, which is really what the market's looking for and again, we all have to be reminded of one of the things we learned over the last couple of years is how the transmission mechanism. When the fed is raising rates is slower than when they are cutting.

Speaker Change: And again my Crystal ball is no better than yours, Glenn but nothing nothing about the last couple of days changes our view about the balance of the year at this stage.

Glenn Schorr: Thank you.

Operator: Our next question comes from the line of Alexander Blostein with Goldman Sachs. Your line is now open.

Speaker Change: Our next question comes from the line of Alexander <unk> with Goldman Sachs. Your line is now open.

Alexander Blostein: Hey, good morning, everybody. Thank you for the questions. Well, I'm so sorry, maybe.

Alexander: Hey, good morning, everybody. Thank you for the question as well.

Harvey Schwartz: Hey, Harvey. So maybe just to build on the $40 billion target for fundraising for the year and your sort of confidence level around working towards that remaining $20 billion plus in the back half of the year, maybe talk a little bit about the key contributors you expect to come through, particularly around real estate, where it seems like you guys have seen really nice momentum. And maybe just clarify how much capital you guys raised in those real estate funds and where they stand today. Thanks. Hey Alex, it's John.

Alexander <unk>: Hey, how are you so maybe just to build on the $40 billion target for fund raising for the year and you sort of confidence level around working towards that remaining 20 billion plus.

Alexander <unk>: In the back half of the year, maybe talk a little bit all of the key contributors you expect to come through particularly around real estate, where it seems like you guys seen a really nice momentum and maybe just clarify how much capital have you guys raised in those real estate funds and where they stand today.

John Redett: Hey, Alex. It's John. You know, look, we feel very good about the momentum we have in fundraising. We obviously had a very strong quarter in the second quarter. We're at $18 billion year-to-date. As I said in my remarks, we're at $41 billion in the last 12 months. So we do feel like we're working towards $40 billion.

John: Hey, Alex it's John.

Alex: Look we feel very good about the momentum we havent fundraising, we obviously had a very strong quarter in the second quarter.

Alex: We're at $18 billion year to date and as I said in my remarks, we're at $41 billion last last 12 months. So we do feel like we're working to the $40 billion.

John Redett: And as I look at kind of the next six months, it's really across the platform where we're raising money. We have a lot of products, strategies in the market. I think you'll see continued momentum in our solutions business, both the secondaries, and the co-investment fund. As Harvey said, the CAPM Wealth product is on more platforms.

Alex: And as I look at kind of the next six months, it's really across the platform, where we're raising money we have a lot of product strategies in the market I think you will see continued momentum.

Alex: In our solutions business.

Alex: The secondaries and co investment fund.

Alex: As Harvey said the cap in wealth product is on more and more platform. So we feel good about that.

John Redett: So we feel good about that. In terms of our credit business, we're seeing good momentum in our Wealth product there, CTAC. You'll continue to see strength in our Credit Opportunities Fund, our Infra Credit Fund, and CLO activity will continue. And then when I look at global private equity, you'll see continued strength in our real estate fundraise. As I said earlier, we have a lot of momentum. We're at a number that's materially higher than we disclosed.

Harvey Schwartz: In terms of our credit business.

Harvey Schwartz: We're seeing good momentum in our wealth product there seatac.

Harvey Schwartz: You'll continue to see strength in our credit opportunities fund.

Harvey Schwartz: Or if a credit fund.

Harvey Schwartz: And CLO CLO activity will continue and then when I look at kind of global private equity Youll.

Harvey Schwartz: Youll see continued strength in.

Harvey Schwartz: Our real estate fund raise as I said earlier, we have a lot of momentum were at a number that's materially higher than we disclosed.

Harvey Schwartz: And later in the year, we'll be launching infra infra structure product as well and we have to buyout funds in the market. So.

John Redett: And later in the year, we'll be launching an Infra structure product as well. And we have two buyout funds in the market. So we have a lot of strategies in the market in the back half. And we feel really positive about the momentum we have.

Harvey Schwartz: We have a lot of strategies in the market in the back half and we feel really were quite positive on the momentum we have.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Ken Worthington with J.P. Morgan. Your line is now open.

Speaker Change: Our next question comes from the line of Ken Worthington with Jpmorgan. Your line is now open.

Ken Worthington: Hi, good morning. Thanks for taking the time to answer the question. Can you talk about the outlook for fundraising in SEP6 and CAP6? I think both have been similarly sized funds in recent vintages. Do you see fundraising as easier or more challenging for the next vintage in either Europe or Asia for those biofocus funds? And then, for CAP6, you raised $2 billion. How much longer is that funded market? Any comments you can make on the outlook here? Thanks, Kenneth, and John.

Ken Worthington: Hi, good morning, and thanks for taking the question can.

Ken Worthington: Can you talk about the outlook for fund raising and sub six cap six.

Speaker Change: Both have been similarly sized funds in recent vintages.

Speaker Change: Fund raising is easier more challenged for the next vintage in either Europe or Asia for those by a focused funds and then for cap six you raised $2 billion, how much longer is that front end market any comments you can make on the outlook here.

John Redett: Hey Kenneth, John. Look, I'm limited in terms of what I can say specifically about Cap 6 because we are in the market raising money, and we've been pretty clear previously stating that we do think the current fund, Cap 6, will be smaller than its predecessor fund, and we've said that as well for CEP. Look, our capital business is it's really facing some geopolitical headwinds, but you know, look overall in terms of Asia, as I said, we've raised five billion dollars, and we continue to see very attractive opportunities in Asia.

John: Hey, Ken it's John.

Ken Worthington: Look at unlimited in terms of what I can say specifically about.

Speaker Change: <unk> because we are in the market raising.

Speaker Change: And we've been pretty clear previously, stating that we do think the <unk>.

Speaker Change: Current fund <unk> six will be smaller than its predecessor fund.

Speaker Change: Said that as well for CGP look our cat business, it's really facing.

Speaker Change: Some geopolitical headwinds.

Speaker Change: But look overall in terms of Asia as I said, we've raised $5 billion, we continue to see very attractive opportunities in Asia I referenced the KFC transaction, which was a kind of a pan Pan Asia effort.

Speaker Change: But this is our Asia business is a very important business to us and we are fully fully committed to it as to where we end up in cap six I cant really provide you a number.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Ben Budish with Barclays. Your line is now open. Hi, good morning.

John Redett: I referenced the KFC transaction which was a kind of a pan-Asia effort, but this is our Asia business is a very important business to us, and we're fully, fully committed to it as to where we end up in Cap 6. I can't really provide you with an Okay, great. Thank you. Thank you. Our next question comes from the line of Ben Budish with Barclays. Your line is now open.

Ben <unk>: Our next question comes from the line of Ben <unk> with Barclays. Your line is now open.

Ben <unk>: Hi, good morning, and thanks for taking the question.

Ben <unk>: I wanted to ask about your transaction advisory fees you identified this last year as a strategic area of focus.

Ben <unk>: It's on your comments it sounds like there's a lot more activity coming in the back half of the year just any color on how that line item should evolve in the back half and going into 2025 would be very helpful. Thank you.

Ben Budish: Yeah, this is John. You know, look, this has been a focus area for the firm. For the last 12 months, Harvey's been very clear that the firm is focused on this particular part of our business. I would say we're very pleased with the progress we've made. When you look at the growth we're generating in this business over the last six months, it's quite impressive. It's up 60%. And obviously, it's benefiting from a more conducive transaction environment.

Yeah, Dan This is John.

John: Look this has been a focus area for us.

Speaker Change: The firm.

Speaker Change: In the last 12 months he has been very clear that the firm is focused on this particular part of our business.

Speaker Change: I would say, we're very pleased with the progress we've made when you look at how how.

Speaker Change: The growth we're generating in this business.

Speaker Change: Over the last six months, it's quite impressive it's up 60%.

Speaker Change: And obviously, it's benefiting from a more conducive transaction environment, and we kind of looking at the pipeline of of exits as well as new transactions really across the platform not just specific to private equity.

Ben Budish: And we are kind of looking at the pipeline of, you know, exits, as well as new transactions, really across the platform, not just specific to private equity. We feel like this will be a record year for our kind of transaction capital market.

Speaker Change: We feel like this will be this will be a record year for our kind of transaction capital market fees.

Speaker Change: Got it thank you.

John Redett: Thank you. Our next question comes from the line of Brian Bedell of Deutsche Bank. Your line is now open. Thanks. Good morning.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Brian Bedell of Deutsche Bank. Your line is now open.

Brian Bedell: Thanks. Thanks, Good morning, Thanks for taking the question.

Operator: Just going back to the deployment outlook for the second half, if you could talk a little bit about the timing of the, I think, nearly $20 billion of fees pending AUM in terms of that potential bill for management fees, and then, just in the light of the environment, if this risk-off sentiment persists in the second half, how do you anticipate that impacting your deployment? Potential potential in the U.S., and also Japan, I guess, as well.

Brian Bedell: Just going back to the deployment outlook for the second half.

Brian Bedell: If you could talk a little bit about the timing of the nearly $20 billion.

Speaker Change: C pending.

Speaker Change: Are you.

Speaker Change: In terms of that potential build from management fees and then just in the light of.

Speaker Change: Of the environment.

Speaker Change: If this risk off sentiment persists in the second half how do you.

Speaker Change: Envision that impacting your deployment outlook potential in the U S. And also also Japan, I guess as well.

Speaker Change: Yes.

Brian Bedell: Yeah, Brian, it's John. You know, look, as Harvey said in his call, we're long-term investors, not as focused on day-to-day market volatility or market gyrations. But look, if we're in an extended period of a down market, I don't know what happens, but I think it's probably less positive than where we sit today. But looking at the pipeline today, we see tremendous transaction activity in the back half, so we feel very good about that.

John: Yes, Brian it's John.

Brian Bedell: It has already said in this call.

Speaker Change: We are long term investors not as focused on day to day market volatility or market gyrations, but look if we're an extend period of a down market.

Speaker Change: I cant.

Speaker Change: I don't know what happens, but I think it's probably less positive than where we sit today, but looking at the pipeline today and we see tremendous transaction activity in the back half. So we feel we feel very good about that and it's really again as I said earlier, it's not only private equity.

Brian Bedell: And it's really, again, as I said earlier, it's not only private equity, it's in credit, and it's in solutions. I mean, if you look at the deployment levels we've had in our solutions business, it's quite strong. We're at $4.5 billion year-to-date, and they have a very good pipeline. So I'd say it's broad-based. I'm not smart enough to tell you where the markets are going to be, but where we sit today, we feel very good about the deployment.

It's in credit and it's in solutions I mean, if you look at the deployment levels, we've had in our solutions business.

Speaker Change: It's quite strong we're at $4 5 billion year to date and they have a very good pipeline. So I'd say, it's broad based.

Speaker Change: <unk>.

Speaker Change: I'm not smart enough to tell you where the markets are going to be but where we sit today, we feel very good about the deployment in terms of the $20 billion of pending fee, earning AUM, which is really the highest level it's been since 2021.

Brian Bedell: In terms of the $20 billion of pending, fearing AUM, which is really the highest level it's been since 2021, and there's some global private equity AUM in that number, and there's also some credit, you should expect that to be turned on over the coming quarter. So in global private equity, we have Japanese buyouts in there, we have real estate, and in global credit, it's really spread across the platform. But you should assume those fees will turn on over the coming quarter.

Speaker Change: And there are some.

Speaker Change: Global private equity.

Speaker Change: AUM in that number and there is also some some some credit you should expect that to be turned on over the coming quarters. So in global private equity, we have Japan buyout and there we have real estate and in global credit, it's really spread across the platform, but you should assume those fees turn out over the coming quarters.

Speaker Change: Great. Thank you.

John Redett: Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Your line is now open.

Speaker Change: Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Your line is now open.

Operator: Hey, good morning, everyone. Looks like you're now already in the kind of 30 to 35% FRE comp ratio range, which I think happened a bit faster than most of us were expecting, particularly with realization still so light. So, firstly, can we expect this to be a new baseline from here, or could it ratchet back up later in the year if, say, realization stayed this light? Thank you. Yeah, Patrick. It's John.

Patrick Davitt: Hey, good morning, everyone.

Patrick Davitt: It looks like you are now already in the kind of 30% to 35% Upbring FRE comp ratio range, which I think happened a bit faster than most of us were expecting particularly with realizations still so light. So firstly can we expect this to be a new baseline from here or could it ratchet back up later in the year, if say realizations status.

Thank you.

Patrick Davitt: Yeah, Patrick, it's John. Yeah, look, we're very pleased with where we are on that ratio. But I have to be honest; we're not managing the business to hit that specific ratio. And, you know, we've always said we're going to operate within the range we specified in our fourth quarter. You should expect us to operate in that range. But plus or minus one or 2% from kind of where we are, which is the midpoint at the upper end of that range at 35%, is where you should expect us to operate the business. Look, we're very mindful of investing in the business for growth, not necessarily completely focused on driving the margin, but more focused on investing in these businesses.

Patrick Davitt: Yes, Patrick it's John Yes, Yes look we're very pleased with where we are on that ratio.

Speaker Change: I have to be honest, we're not managing the business to hit that specific ratio.

Speaker Change: We've always said we can operate within the range, we specified in our fourth quarter, you should expect us to operate in that range.

Speaker Change: But plus or minus one or 2% from kind of where we are which is the midpoint.

Speaker Change: Upper end of that range of 35%.

Speaker Change: Is where you should expect us to operate the business.

Speaker Change: Look we're very mindful of of.

Investing in the business for growth not necessarily completely focused on driving the margin, but more focused on investing in these businesses businesses for growth.

Thank you.

John Redett: Our next question comes from the line of Brian McKenna with Citizens JMP. Your line is now open.

Speaker Change: Our next question comes from the line of Brian Mckenna with citizens JMP. Your line is now open.

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

Brian McKenna: Thanks, Good morning, everyone. So we saw the announcement this morning that you're merging two of your Bdcs can you just talk about the merits of the transaction why is now the right time for this are there any financial implications for <unk> and then yes. It will be great just to get an update on your broader direct lending strategy, specifically as it relates to both institutional and <unk>.

Speaker Change: Try to what's fundraising there.

Brian McKenna: Yeah, so we announced the merger of our public BDCs merging with a private BDC. And we'll provide more details over time. And it likely won't close, Brian, until Q1 2025.

Speaker Change: Yes, so we announced the merger of <unk>.

Speaker Change: Our public pdc's merging with a private BDC.

Speaker Change: And we will provide more details over time.

<unk>.

Speaker Change: Don't close Brian until.

Speaker Change: Q1, 2025, but look the.

Speaker Change: <unk> to us is.

Speaker Change: We get more scale in the public BDC. It is a scale business I think it will be easier for us to raise equity capital going forward Thats, obviously financially attractive to the firm.

John Redett: But look, the benefit to us is we get more scale in the public BDC, it is a scale business. I think it'll be easier for us to raise equity capital going forward. That's obviously financially attractive to the firm. But also, there is a benefit to FRE with this merger. And we'll quantify that as we get closer to the close. But it's, it's net net, it's a positive for Carly

Speaker Change: But also there is a benefit to FRE with this merger and we will quantify that as we get closer to the close but it's net net it's a positive for for Carlyle.

Speaker Change: Got it makes sense. Thank you.

Brian McKenna: Got it, makes sense. Thank you. Thank you. Our next question comes from the line of Dan Fannon of Jeffries. Your line is now open. Thanks, good morning.

Dan Fannon: Yeah, so global private equity, we kind of are expecting flattish, Dan, in terms of management fees. Obviously, we're showing some real strength in the real estate side of the business. But as I said in a previous question, we do expect a couple of vintages of our private equity fund, our Europe buyout fund and Asia buyout fund, to be smaller than predecessors. But we're able to mitigate that with the growth we're seeing in the real estate business and other parts of the global private equity business. Thank you.

Operator: Thank you. Our next question comes from the line of Dan Fannon of Jeffries. Your line is now open.

Speaker Change: Thank you. Our next question comes from the line of Dan Fannon of Jefferies. Your line is now open.

Dan Fannon: Hi, Thanks, good morning within global private equity management fees were slightly up quarter over quarter, but obviously still down year over year and given the fund raising you talked about some of the dry powder I guess as you look at the second half of the year and prospectively. What is your outlook for kind of management fees within just the global P/e bucket.

Dan Fannon: Yes.

Speaker Change: So global private equity, we kind of are expecting flattish.

Speaker Change: Dan in terms of management fees, obviously, we're showing some real strength in the real estate side of the business, but as I said in the previous question. We do expect a couple of vintages of our private equity funds or U S or.

Speaker Change: Europe buyout fund, an Asia buyout fund to be smaller than predecessors, but.

Speaker Change: We're able to mitigate that with the growth we're seeing in the real estate business in other parts of the global private equity business.

Speaker Change: Thank you.

Operator: Thank you. Our next question comes from the line of Steven Chubak of Wolf Research. Your line is now open.

Speaker Change: Thank you. Our next question comes from the line of Steven <unk> of Wolfe Research. Your line is now open.

Hi, good morning.

Steve: Good morning, Steve.

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

Steven: How are you doing Harvey so wanted to just ask for a mark to market on some of the progress Youre, making in the retail channel you cited some improved momentum was just hoping to drill down further but how did it flows trend in the quarter and maybe more specifically, how you're designing your retail focus key private.

Speaker Change: Just to be more competitive with some of the peer offerings that are out there <unk> seen some pretty good uptake.

Harvey Schwartz: So, I've been spending a lot of time in this space, just to give you some color. We launched the CAPM, which John mentioned, on a number of platforms in the past quarter. David Rubenstein and I did a whole series of town halls and office meetings with our distribution partners, who we're really grateful for their focus across the US, and we're looking to extend internationally. So, when you look at the momentum behind CTAC, our credit product, and CAPM, we feel very, very good about it. In terms of strategy, we are not of the view that we want to flood these distribution partners and channels with multiple products.

Harvey Schwartz: So I

Speaker Change: So I've been spending a lot of time in this space.

Speaker Change: Just to give you some color we launch the cap M, which John mentioned on a number of platforms in the past quarter.

Speaker Change: David Rubenstein and I did a whole series of.

Speaker Change: <unk> town halls office meetings with our distribution partners, who we're really grateful for their focus across the U S.

Speaker Change: And we're looking to extend internationally so.

Speaker Change: When you look at the momentum behind Seatac, our credit product end cap and we feel very very good about it.

Speaker Change: In terms of strategy, we are not of the view that we want to flood. These.

Speaker Change: Distribution partners and channels with multiple products, we really want to have scale and focus and long term performance and so youll see us stay.

Harvey Schwartz: We really want to have scale and focus and long-term performance. And so you'll see us stay really focused on a mix of platform and programs that we can build on over a very long period of time. And then, obviously, we'll have selected targeted feeder funds, which have always been part of our strategy. In terms of the private equity product, we're still targeting 2025 as a complementary product. And that'll give us the three key footholds that we want across wealth for the coming years.

Speaker Change: Really focused on our mix of platform.

Speaker Change: Programs that we can build on over.

Speaker Change: Over a very long period of time, and then obviously, we will have selected targeted feeder funds, which have always been part of our strategy in terms of their private equity product. We are still targeting 2025, as a complementary product and that will give us the three key footholds that we won.

Speaker Change: Across wells.

Speaker Change: For the coming years.

Speaker Change: That's great. Thanks for taking my question.

Operator: Thank you. Our next question comes from the line of Bill Katz with TD Cowen. Your line is now open.

Speaker Change: Thank you. Our next question comes from the line of Bill Katz with Teeny Cowen. Your line is now open.

Bill Katz: Excuse me, thank you very much for taking the question this morning. I may be turning to the capital. I haven't talked about that yet. How should we think about the pacing for the residual $1.1 billion of repurchase? How does that triangulate up against how you think about the balance sheet? And then maybe Harvey, I was thinking, I was wondering if you could give us an updated thought of this strategic M&A for the company. Thank you.

Bill Katz: Excuse me. Thank you very much for taking the question. This morning, and maybe turning to the capital I haven't talked about that how.

Bill Katz: How should we think about the pacing for the residual $1 1 billion.

Harvey Schwartz: We purchased has it shrank laid up against how you're thinking about the balance sheet and maybe Harvey I was thinking I was wondering if you could give us an updated thoughts of this strategic M&A for the company. Thank you.

John Redett: Yeah, so, Phil, look, Harvey and I discussed in the past how we really took a step back and really rethought how we think about capital allocation, and capital allocation runs the spectrum of buying shares back, investing in the business for growth, and M&A. And, you know, look, I'd say we're very pleased with the buyback activity. Last year, 2023, our share count was down for the first time since our IPO. I think that's a positive. However, year to date, our share count is down again. I think that's another positive thing.

Phil: Yes, so Phil look.

Speaker Change: <unk> discussed in the past, we really took a step back and really rethought, how we how we think about capital allocation and capital allocation runs a spectrum of buying shares back.

Speaker Change: Investing in the business for growth and M&A and look I would say, we're very pleased with with the buyback activity.

Speaker Change: Last year 2023.

Speaker Change: Our share count was down that's the first time since since our IPO I think thats a positive year.

John Redett: And as I said in my remarks, we repurchased $330 million in shares year-to-date. I think the best we've ever done in the past is a couple hundred million in a year, so we're on pace to deliver a fairly large share repurchase. We have $1.1 billion remaining on the share repurchase, and you should assume that we're active buyers of the stock. In terms of M&A, you know, look, to me, it's a multifaceted question in the sense that if we saw something that we liked strategically, and financially, the deal made sense, and culturally, it was compatible, we would absolutely pivot to M&A away from the stock buyback.

Speaker Change: Year to date, our share count is down again I think that's another positive.

Speaker Change: As I said in my remarks, we repurchased 330 million shares year to date I think.

Speaker Change: Best we've ever done in the past couple of hundred million dollars in a year. So we're on pace to deliver a fairly large share repurchase.

Speaker Change: We have $1 1 billion remaining under share repurchase and you should assume that were active buyers of the stock.

Speaker Change: In terms of M&A.

Speaker Change: To me, it's a multifaceted question in a sense, if we saw something that we like strategically.

Speaker Change: And financially the deal made sense and culturally it was compatible.

Speaker Change: We would absolutely pivot to M&A away from the stock buyback and again it comes back to how do we think about allocating capital we think about allocating capital in terms of where can we get the best returns and growth for our business, our shareholders and our stakeholders. So if something on the M&A front made sense, we would pivot away from utilizing the capital for a stock buyback.

John Redett: And again, it comes back to how we think about allocating capital. We think about allocating capital in terms of where we can get the best returns and growth for our business, our shareholders, and our stakeholders. So if something on the M&A front made sense, we would pivot away from utilizing the capital for the stock buyback and do an M&A transaction. Yeah, what I would say, first of all, obviously, I agree.

Speaker Change: And do an M&A transaction.

Harvey Schwartz: Yeah, what I would say, first of all, obviously, I agree with everything John said. It's really important to understand the lens through which we look at capital allocation and the discipline we're applying to that in terms of what's marginally most aggrieved. But again, as I said in my remarks.

Speaker Change: Yes, what I would say first of all obviously I agree with everything John said is <unk>.

Speaker Change: Really important metric to understand the lens through which we look at capital allocation and the discipline, we're applying to that in terms of whats marginally most accretive.

Speaker Change: But again as I said in my remarks sitting.

Harvey Schwartz: Sitting here now, a year and a half in at Carlyle, I really like the organic momentum and the way the team is coming together. Having said that, our platform currently gives us the flexibility to position ourselves in a lot of directions. And if the right opportunity came across, you should expect us to take action. But it has to fit all those prerequisites John just described.

Carlyle: Sitting here now a year and half in at Carlyle I really like the organic momentum on the way the team is coming together.

Carlyle: Having said that our platform currently it gives us the flexibility to position a lot of directions.

Carlyle: And if the right opportunity came across.

Carlyle: You should expect us to take action, but I'd ask it.

Carlyle: It has to fit all of those prerequisite as John just described they're not flexible.

Operator: Thank you. Our next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.

Speaker Change: Thank you.

Question comes from the line of Michael Cyprus with Morgan Stanley. Your line is now open.

Michael Cyprys: Great, thanks. Good morning.

Michael Cyprus: Great. Thanks. Good morning, just a question on insurance I was hoping you could elaborate on the contribution from fortitude in the quarter. How you see the pace of migrating the book over into Carlyle strategies, how is that progressing and then just more broadly if you could just maybe update us on your insurance and 402 related initiatives and how your strategic.

Speaker Change: Thinking about accelerating the pace of growth from here. Thanks.

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

Speaker Change: So the <unk> partnership.

Harvey Schwartz: So the Fortitude Partnership has been fantastic. As you know, we talked a bit about the Discover Financial Services transaction. And that really is a great example of partnership and collaboration across Reddit.

Speaker Change: <unk>.

Speaker Change: Has been fantastic.

Speaker Change: Now, we talked a bit about the discover financial services transaction.

Speaker Change: And that really is a great example.

Speaker Change: The partnerships and collaboration across.

Harvey Schwartz: CSS Business, Capital Markets, and Insurance. And it really does, exemplify the flywheel effect one gets by being in the insurance business and across all of our insurance clients and Partnerships Away from Fortitude, so we feel quite good about that. In terms of our positioning with Fortitude and insurance more broadly, obviously, there's huge opportunity in this sector in a number of ways. One, obviously, is this focus on private investment grade. Again, that's a fantastic example of our asset-backed business growing so quickly over the last several years and our focus there.

Speaker Change: Our CSS business capital markets and insurance.

Speaker Change: And it really does.

Exemplify the flywheel effect, one gets by being in the insurance business and across all of our insurance clients.

Speaker Change: And partnerships away from Florida to so we feel quite good about that in.

Speaker Change: In terms of our positioning with Florida, 200 insurance more broadly obviously, there is huge opportunity in this sector.

Speaker Change: And a number of ways. One obviously is this focus on private investment grade again Thats a fantastic example of our asset backed business growing so quickly over the last several years.

Speaker Change: The focus there, but more importantly from our position and being capital light. It gives us the ability to pivot and grow in any number of ways.

Harvey Schwartz: But more importantly, from our position in being capital-light, it gives us the ability to pivot and grow in any number of ways. In the very narrow answer to your question, the market's been, at the margin, a bit more competitive in the block business. We're being disciplined about the capital deployment there, but the pipeline is quite good in terms of transaction flows around the world, reflecting various regulatory changes and the needs of our insurance partners. But we feel quite good about the partnership and the trajectory already.

Speaker Change: Very narrow answer to your question.

Speaker Change: The market has been at the margin a bit more competitive in the block business, we're being disciplined about the capital deployment, there, but the pipeline.

Speaker Change: Is quite good in terms of transaction flows around the world.

Speaker Change: Collecting various regulatory changes and the needs of our insurance partners.

Speaker Change: We feel quite good about the partnership and the trajectory all round.

Speaker Change: Great. Thank you.

Operator: Thank you. Our last question comes from the line of Craig Siegenthaler of Bank of America. Your line is now open. Thanks. Good morning.

Speaker Change: Thank you. Our last question comes from the line of Craig Siegenthaler of Bank of America. Your line is now open.

Craig Siegenthaler: Thanks. Good morning, everyone.

Thanks, Good morning, everyone and good morning My name.

Craig Siegenthaler: Hey, Harvey, I think part of my name is cut out, but I think you guys know who I am. Can you hear me okay? Yeah, no, we got you. Sorry about that, Craig. I didn't mean to talk over you. Oh, perfect. No, no worries at all.

Craig Siegenthaler: I think part of it.

Craig Siegenthaler: But I think you guys know who I am.

Speaker Change: Can you hear me okay.

Speaker Change: Yes, sorry about that I mean to talk over you.

Craig Siegenthaler: So I actually have another compensation question. So following the modifications you guys announced on the 4Q call, Stock Based Comp is running up a lot year over year. That's not really a surprise.

Speaker Change: Oh perfect now no worries at all so I actually have a another compensation question. So following the modifications you guys announced on the <unk> call.

Speaker Change: Stock based comp is running up a lot year over year and thats not really a surprise, but we're hoping you could give some color on how we should model stock based comp over the next year, because I believe there's a step down coming from <unk> 24 to <unk> 25, due to the roll off of one of the stock based comp tranche.

Speaker Change: As I had in the ballpark of about $25 million per quarter, but maybe you could help us.

Speaker Change #100: With the forward run rate of stock based comp. Thank you very much.

John: Hey, Craig its John.

Speaker Change #101: Look at in terms of the stock based comp we've been pretty pretty clear, saying, telling you that it will remain elevated in 2024.

And look a lot of that is driven by this performance stock unit Grant we gave too.

Speaker Change #101: Key senior individuals of the firm earlier in the year.

Speaker Change #101: And these are the people responsible for driving growth and as you recall. These are very very shareholder friendly instruments, great alignment. They only vest if the stock's up 2040, and 60%. So again very shareholder friendly instruments. The accounting of the performance stock units is a little different in the sense, we still have to.

Speaker Change #101: The award even though we don't even know if it vest and that's we're in the middle of Expensing that award.

Speaker Change #101: Very front end loaded so youre seeing a fairly large impact from this PSU grant, but again I would expect.

Speaker Change #101: Third and fourth quarter stock based comp expense to be elevated and then to start to trickle down trickling down in 2025, I'd say directionally. The number you alluded to is probably not too far off from where I'd start.

Speaker Change #102: Yes, there is accounting.

Speaker Change #102: Versus reality always a little bit of a challenge we're happy to take more of that offline for folks because this question comes up again.

Speaker Change #102: We are obviously very focused on the efficiency of how we're running the company and the discipline, we are bringing to that which is why youre seeing the share count come down so dramatically.

Speaker Change #102: Since John and I started focusing on this a bit over a year ago.

Speaker Change #102: And.

Speaker Change #102: All the capital planning that we've announced.

Speaker Change #103: But I agree it's a little confusing with some comp expense see equity compensation expense up in share count down so much it's a little hard to reconcile that and keep an eye on the share count.

Speaker Change #103: Thank you very much.

Speaker Change #103: Thank you I would now like to hand, the conference back over to Daniel Harris for closing remarks.

Daniel Harris: Yes. Thank you for your time and attention today do you have any follow up questions. Please reach out to Investor relations. After the call. We look forward to talking to you next quarter.

Speaker Change #104: This concludes today's conference call. Thank you for your participation you may now disconnect.

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Speaker Change #105: Good day and thank you for standby welcome to the Carlyle Group second quarter 2024 earnings Conference call. At this time, all participants are in a listen only mode.

Craig Siegenthaler: But we are hoping you could give some color on how we should model Stock Based Comp over the next year because I believe there's a step down coming from 4Q24 to 1Q25 due to the roll-off of one of the Stock Based Comp tranches. I had in the ballpark of about 25 million per quarter, but maybe you could help us with the forward run rate of Stock Based Comp. Thank you very much.

Speaker Change #105: After the speaker's presentation, there will be a question and answer session.

Speaker Change #105: To ask a question during the session you will need to press star one on your telephone.

Speaker Change #106: Heron automated message revising your hand is faced with.

Speaker Change #106: Your question. Please press star one again please.

Speaker Change #106: Please be advised that today's conference is being recorded.

John Redett: Hey, Craig, it's John. You know, look, in terms of the stock-based comp, we've been pretty clear about saying, telling you that it will remain elevated in 2024. And look, a lot of that is driven by this performance stock unit grant we gave to key senior individuals of the firm earlier in the year. And these are the people responsible for driving growth.

Speaker Change #106: I would now like to hand, the conference over to your Speaker, Daniel Harris head of Investor Relations. Please go ahead.

John Redett: And as you recall, these are very, very shareholder-friendly instruments, great alignment. They only vest if the stock is up 20, 40, and 60 percent. So, again, very shareholder-friendly instruments. The accounting for the performance stock units is a little different in the sense that we still have to expense the award, even though we don't even know if it vests. And that's – we're in the middle of expensing that award. It's very front-end loaded, so you're seeing a fairly large impact from this PSU grant, third and fourth quarter stock-based comp expense to be elevated, and then to start trickling down gradually in 2025. I'd say directionally, the number you alluded to is probably not too far off from where I'd Unknown Speaker It isn't counting.

Daniel Harris: Thank you Shannon good morning, and welcome to Carlyle's second quarter 2024 earnings call.

With me on the call. This morning is our Chief Executive Officer, Harvey Schwartz, and our Chief Financial Officer, and head of corporate strategy genre that.

Speaker Change #107: Earlier. This morning, we issued a press release and a detailed earnings presentation, which is also available on our Investor Relations website.

Speaker Change #107: This call is being webcast and a replay will be available.

Speaker Change #108: 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 generally accepted accounting principles. We have provided reconciliation of these measures to GAAP in our earnings release to the extent reasonably available.

Speaker Change #108: Any forward looking statements made today do not guarantee future performance and undue reliance should not be placed on them.

Speaker Change #108: 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.

Speaker Change #108: And then in order to ensure participation by all those on the call today. Please limit yourself to one question and return to the queue for any additional follow ups with that let me turn the call over to our Chief Executive Officer Harvey Schwartz.

John Redett: Yeah, this accounting versus reality is always a little bit of a challenge. We're happy to take more of that offline for folks because this question comes up. Again, you know, we are obviously very focused on the efficiency of how we're running the company and the discipline we're bringing to that, which is why you're seeing the share count come down so dramatically since John and I started focusing on this a bit over a year ago, and all the capital planning that we do. But I agree, it's a little confusing to see top expense, see equity compensation expense up, and the share account down It's a little hard to reconcile that, but keep an eye on the share account.

Daniel Harris: Thank you. I would now like to hand the conference back over to Daniel Harris for his closing remarks.

Harvey Schwartz: Thanks, Dan Good morning, everyone and thank you for joining us.

Speaker Change #109: First half of 'twenty four reflects strong momentum across our business.

Speaker Change #109: And as you can see when you look at it this momentum truly clear in our results.

Speaker Change #109: For the first six months, we generated record FRE.

Speaker Change #109: Record FRE margins record assets under management and strong fundraising.

Speaker Change #109: Let me take a moment to talk about the current market activity. Obviously, we've all seen over the last few trading days and this morning, the market remains quite volatile.

Speaker Change #110: From our perspective, it's important to take a big step back when we look at our dietary portfolio data.

Speaker Change #110: This is what we see.

Speaker Change #110: The trajectory for GDP the.

Speaker Change #110: The expected fed rate cuts this year.

Speaker Change #110: So all the dynamics still tell us the underlying fundamentals support improving activity across our platform for the balance of the year.

Speaker Change #111: Now consistent with that we've announced two large recent transactions and have others in the pipeline, we expect to finalize soon.

Speaker Change #111: In asset backed finance, we announced a landmark $10 billion transaction required portfolio loans from discover financial services.

Speaker Change #111: This transaction is a great example of the intersection of our asset backed finance capabilities, our credit and insurance businesses and our capital markets expertise, all coming together to drive value for our clients and generate transaction fees.

As we've discussed asset backed finance as a critical provider of capital from the financial sector.

Speaker Change #111: There is a significant opportunity here to grow as we are in the early innings of a multi trillion dollar market opportunity, which we are well positioned for.

Speaker Change #111: On exits we have a considerable pipeline of active IPO sale processes underway.

Speaker Change #111: You just saw today, we announced the sale of our portfolio company <unk> energy, a leading power producer in the assets. It manages at evaluation of nearly $3 billion.

Speaker Change #111: We expect the exit activity in the second half of the year likely to be materially higher in the first half with several large transactions in our pipeline.

Speaker Change #111: Moving to fund raising we raised $18 billion year to date.

Speaker Change #111: And north of $40 billion over the last 12 months.

We closed our fifth Japan buyout fund saw strong inflows into our U S real estate business and <unk> 5 billion in credit this quarter alone.

Speaker Change #111: This was our third best fundraising quarter on record for the credit business.

Speaker Change #111: And importantly, we are working towards our target of $40 billion for 2024.

Speaker Change #111: Let me just quickly run you through some specific areas of activity across our business.

Speaker Change #111: I'm quite optimistic about where our business is today compared to a year ago.

Speaker Change #111: As I said, there's a lot of momentum across the franchise.

Speaker Change #111: In global credit, we are well positioned to capitalize on industry tailwind and capture market share.

Speaker Change #111: Turning to the discover financial services transaction, we saw strong activity in opportunistic and real asset credit strategies.

And our CLO business, we remain very active.

Speaker Change #112: The first six months of the year, where the second business in our 20 year Cielo history.

Speaker Change #112: We ended Q2 as the world's largest CLO manager and we feel quite good about the forward pipeline.

Finally in global investment solutions.

Activity levels remain quite high as we address the investment needs of our clients.

Speaker Change #112: We deployed 9 billion and raised $12 million over the last 12 months and continue to see attractive opportunities across secondaries and co investments.

Speaker Change #112: In global wealth, our brand continues to resonate with our wealth advisor partners.

Speaker Change #113: <unk>, our private credit product had a strong first half in cap am our solutions well product has significant momentum and has been added to several new wealth distribution platforms.

Operator: Yeah, thank you for your time and attention today. If you have any follow-up questions, please reach out to Investor Relations after the call. We'll look forward to talking to you next quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #113: If things up our results this quarter reflect strong momentum across the firm.

Speaker Change #113: As the environment continues to improve which we believe it well despite as I said recent market activity Carlyle and our stakeholders are well positioned to benefit with that let me now turn the call over to John.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Good day, and thank you for standing by.

John: Thanks, Ravi good morning, everyone and we continue to see significant momentum across our platform and remain on track to achieve our 2024 financial targets.

John: We achieved record AUM of 435 billion in the quarter up 13% year over year.

John: We also produced another quarter of record FRE and FRE margins remained strong.

John: We produced $343 million in day for the second quarter.

John: <unk> 78, and <unk> per share.

John: And year to date <unk> per share of $1 79 is 19% higher.

John: We repurchased $178 million of shares in the second quarter, bringing our total repurchase amount to approximately $330 million for the first half of the year.

John: Total shares outstanding are at the lowest level.

John: Since 2021, and we have $1 1 billion remaining.

John: On our share repurchase authorization.

Daniel Harris: Welcome to the Carlyle Group 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is frayed. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Daniel Harris, Head of Investor Relations. Please go ahead.

John: Now, let's cover three important areas fee related earnings.

Daniel Harris: Shannon, good morning and welcome to Carlyle's second quarter 2024 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz, and our Chief Financial Officer and Head of Corporate Strategy, John Redett. Earlier this morning, we issued a press release and a detailed earnings presentation, which is also available on our investor relations website. This call is being webcast, and a replay will be available.

And raising and the investment an investment environment.

Daniel Harris: We will refer to certain non-GAAP financial measures during today's call. However, 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 reconciliation of these measures to GAAP in our earnings release to the extent reasonably available. However, 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 factor section of our annual report on Form 10-K that could cause actual results to differ materially from those indicated in the report.

John: Fee related earnings increased to $273 million in the quarter.

John: Up over 30% from the second quarter of 2023.

First half FRE of $539 million is far and away a record and is 35% higher than the first half of 2023.

John: Second quarter management fees increased 2% in the quarter to $525 million.

John: Management fees in global credit and solutions experienced double digit growth year over year.

John: Hit record levels.

John: We expect total management fees to accelerate across the second half of the year driven by the nearly $20 billion of pending fee, earning AUM.

John: The highest level since 2021.

John: Transaction and advisory fees were up almost 60% year over year, driven by the steadily improving transaction environment.

We are on pace for a record year.

John: We continue to drive towards our target of $1 $1 billion of FRE for 2024, implying FRE in the second half of 2024 will.

John: It will be higher than the first half.

Daniel Harris: Carlyle assumes no obligation to update any forward-looking statements at any time. And in order to ensure participation by all those on the call today, please limit yourself to one question and return to the queue for any additional follow-ups. With that, I will turn the call over to our Chief Executive Officer, Harvey Schwartz.

Speaker Change #114: Let's turn to fundraising.

Harvey Schwartz: Thanks, Dan. Good morning, everyone, and thank you for joining us. The first half of 24 reflects strong momentum across our business. And as you can see, when you look at it, this momentum is truly clear in our results. For the first six months, we generated record FRA and record FRE margins.

Speaker Change #114: Year to date, we've raised $18 billion in new capital and $41 billion over the last 12 months, we saw meaningful activity in this quarter in both global private equity and.

Harvey Schwartz: Record Assets Under Management and Strong Fundraising. Let me take a moment to talk about the current market activity. Obviously, we've all seen over the last few trading days and this morning that the market remains quite volatile. You know, from our perspective, it's important to take a big step back.

Speaker Change #114: In global credit.

Speaker Change #114: In global private equity, we closed our fifth vintage Japan buyout fund.

Speaker Change #114: Nearly 70% larger than its predecessor.

Speaker Change #114: Across Asia. This brings us to $5 billion of capital raised.

Speaker Change #114: We recently announced the take private of KFC, Japan, where our Pan Asia teams came together to leverage our significant expertise in the restaurant and food sector. This remains a robust market for us.

Speaker Change #114: In terms of our latest real estate fund, we closed an amount materially higher than what we disclosed in our earnings release.

Speaker Change #114: And we are progressing quickly to a final close.

Speaker Change #114: In a challenging real estate market, it's worth noting the exceptional performance of our franchise, which remains a key area of growth.

Harvey Schwartz: When we look at our proprietary portfolio data, this is what we say: the trajectory for GDP. The expected Fed rate cuts this year. But all the dynamics still tell us the underlying fundamentals support improving activity across our platform for the balance of the year. Now, consistent with that, we've announced two large recent transactions and have others in the pipeline we expect to finalize soon. In addition, we announced a landmark $10 billion transaction to acquire portfolio loans from Discover Financial Services.

Harvey Schwartz: This transaction is a great example of the intersection of our asset-backed finance capabilities, our credit and insurance businesses, and our capital markets expertise, all coming together to drive value for our clients and generate transactions. As we've discussed, asset-backed finance is a critical provider of capital for the financial sector. There is a significant opportunity here to grow as we're in the early innings of a multi-trillion dollar market opportunity, which we're well On exits, we have a considerable pipeline of active IPO and sale processes underway. You just saw today that we announced the sale of our portfolio company Cotentric Energy, a leading power producer, and the assets it manages at a valuation of nearly $3 billion.

In global credit, we raised $5 billion in the quarter.

Harvey Schwartz: We expect exit activity in the second half of the year, likely to be materially higher than the first half, with several large transactions in our Moving to fundraisers. We raised $18 billion year to date and north of $40 billion over the last 12 months. We closed our fifth Japanese buyout fund, saw a strong inflow into our U.S. real estate business, and raised $5 billion in credit this quarter alone. This was our third best fundraising quarter on record for credit.

Speaker Change #114: Harvey said, we had one of the most active first six months and our 20 plus year Cielo history.

Speaker Change #114: We also benefited from continued strength in our credit wealth product seatac as well as other strategies for.

Speaker Change #114: For the balance of the year, we expect to raise significant capital across all segments as we continue to work towards our target of $40 billion.

Speaker Change #114: Finally, let me touch on the investment environment.

Speaker Change #114: As Harvey mentioned, we are seeing increased investment activity across the business as buyer and seller confidence has improved despite recent volatility.

Harvey Schwartz: We have access to great proprietary data across our global platform, which also points to increase activity levels.

Harvey Schwartz: In terms of exit activity. We now are seeing more robust competition, where an IPO is a real exit path and strategic buyer interest has picked up.

Harvey Schwartz: We expect increased activity in the second half of 2024.

Harvey Schwartz: And importantly, we're working towards our target of $40 billion for 2020. Let me just quickly run you through some specific areas of activity across our business. I'm quite optimistic about where our business is today compared to a year ago. As I said, there's a lot of momentum across the franchise.

Harvey Schwartz: In global credit, we're well-positioned to capitalise on industry tailwinds and capture market share. In addition to the Discover Financial Services transaction, we saw strong activity in opportunistic and real asset credit trends, and our CLO business remains very active. In the first six months of the year, we're the second busiest in our 20-year CLO history.

Harvey Schwartz: Wrapping up we continue to focus on delivering strong results for our shareholders. We have good momentum across our platform.

Harvey Schwartz: We ended Q2 as the world's largest CLO manager, and we feel quite good about the forward pipeline. Finally, in Global Investment Solutions, the activity levels remain quite high as we address the investment needs of our clients. We deployed $9 billion and raised $12 million over the last 12 months and continue to see attractive opportunities across secondaries and co-ambassadors. In global wealth, our brand continues to resonate with our wealth advisor partner. SeaTac, our private credit product, had a strong first half, and CAPM, our solutions wealth product, has significant momentum and has been added to several new wealth distribution platforms.

Harvey Schwartz: And are on track to achieve the financial targets that we laid out for 2024.

Harvey Schwartz: Wrap things up. Our results this quarter reflect strong momentum across the firm. As the environment continues to improve, which we believe it will, despite, as I said, recent market activity, Carlyle and our stakeholders are well positioned to benefit. With that, I now turn the call over to John.

Speaker Change #115: With that let me turn the call over to the operator for your questions.

Speaker Change #116: Thank you to ask a question. Please press star one one of your telephone and wait for your name to be announced.

Speaker Change #116: Your question. Please press star one again.

Speaker Change #117: Please standby, we compile the Q&A roster.

Speaker Change #118: Our first question comes from the line of Glenn Schorr with Evercore ISI. Your line is now open.

Glenn Schorr: Thank you very much.

John Redett: Thanks, Harvey. Good morning, everyone.

Glenn Schorr: So good morning around both here good morning, Good morning, I heard both of your comments loud and clear about your exit pipeline CE guides and the backdrop and the brokers and advisors that have reported have all said similar commentary.

Speaker Change #119: The market sentiment and the outlook feels like it's changed a lot in last few days.

Speaker Change #120: And so I'm curious a.

Speaker Change #120: Why do you think.

Speaker Change #119:

Speaker Change #122: The market's perception is that things are going to slow down materially.

Speaker Change #122: But thats different for your business mix I get it so I'd love to hear that and B, just how that how all of that business goes into your thoughts on capital raising outlook for piece specifically.

John Redett: We continue to see significant momentum across our platform and remain on track to achieve our 2024 financial target. We achieved a record AUM of $435 billion in the quarter, up 13% year over year. We also produced another quarter of record FRE, and FRE margins remain strong.

John Redett: We produced $343 million in DE for the second quarter, or $0.78 in DE per share. And year to date, DE per share of $1.79 is 19% higher. We repurchased $178 million of shares in the second quarter, bringing our total repurchase amount to approximately $330 million for the first half of the year. Total shares outstanding are at the lowest level since 2021.

Speaker Change #122: Yeah, So Glenn again, thanks for the question so obviously.

John Redett: And we have 1.1 billion remaining under the share repurchase authorization. Now, let's cover three important areas: fee-related earnings, fundraising, and the investment investment environment. Fee-related earnings increased to $273 million in the quarter, up over 30% from the second quarter of 2023. First half FRE of $539 million is far and away a record, and is 35% higher than the first half of 2023. Second quarter management fees increased 2% in the quarter to $525 million.

Speaker Change #123: The last couple of days of trading and the way the markets are position open this morning.

Speaker Change #124: There is a lot of red on the screens.

Speaker Change #124: When we when we form our views as John and I said, we look at underlying portfolio performance.

Speaker Change #125: Can we extrapolate that data in terms of economic growth. If we were having this call last Tuesday, none of these questions would be in the mix about the current market environment as a matter of fact, you might think we're understanding the trajectory of how things felt and so I think all of us have to be a little bit careful not to overreact to a market adjustment which at.

Speaker Change #125: A moment feels very very liquidity, driven and very risk sentiment driven.

Speaker Change #125: Again, we're having this call last we were talking about the fact that we expected fed rate cuts GDP looks solid so none of that has changed our view now sentiment can extend itself into problematic ways. It's way too early to extrapolate that portfolio performance looks good market opportunity feels good.

Speaker Change #125: Exit still feel good pending announcements feel good.

Speaker Change #125: We'll see what happens over the next several weeks in terms of market environments, but if anything I think this will incur.

Speaker Change #125: Encouraged us fed to take action, which is really what the market is looking for and again, we all have to be reminded of one of the things we learned over the last couple of years is how the transmission mechanism. When the fed is raising rates is slower than when they are cutting.

Speaker Change #125: And again, Microsoft Ball is no better than yours, Glenn but nothing nothing about the last couple of days changes our view about the balance of the year at this stage.

Speaker Change #126: Thank you.

Speaker Change #127: Our next question comes from the line of Alexander <unk> with Goldman Sachs. Your line is now open.

Alexander <unk>: Hey, good morning, everybody. Thank you for the question as well.

Alexander <unk>: Hey, how are you so maybe just to build on the $40 billion target for fundraising for the year and you sort of confidence level around working towards that remaining 20 billion plus.

Alexander <unk>: In the back half of the year, maybe talk a little bit all of the key contributors you expect to come through particularly around real estate, where it seems like you guys seen a really nice momentum and maybe just clarify how much capital have you guys raised in those real estate funds and where they stand today.

John: Hey, Alex it's John.

Alex: Look we feel very good about the momentum we havent fundraising, we obviously had a very strong quarter in the second quarter.

Alex: We're at $18 billion year to date and as I said in my remarks, we're at $41 billion last last 12 months. So we do feel like we are working to the $40 billion.

Alex: And as I look at kind of the next six months, it's really across the platform, where we're raising money we have a lot of product strategies in the market I think you'll see continued momentum.

Alex: In our solutions business.

Alex: The secondaries and co investment fund.

Alex: As Harvey said the cap M wealth product is on more and more platform. So we feel good about that in terms of our credit business.

Harvey Schwartz: We're seeing good momentum in our wealth product there seatac.

Harvey Schwartz: Youll continue to see strength in our credit opportunities fund.

Harvey Schwartz: Or if a credit fund.

Harvey Schwartz: And CLO CLO activity will continue and then when I look at kind of global private equity Youll.

Harvey Schwartz: Youll see continued strength in.

Harvey Schwartz: Our real estate fund raise as I said earlier, we have a lot of momentum were at a number that's materially higher than we disclosed.

Harvey Schwartz: And later in the year, we'll be launching infra infra structure product as well and we have to buyout funds in the market. So.

Harvey Schwartz: We have a lot of strategies in the market in the back half and we feel really we are quite positive on the momentum we have.

Speaker Change #128: Thank you.

Speaker Change #129: Our next question comes from the line of Ken Worthington with Jpmorgan. Your line is now open.

Ken Worthington: Hi, good morning, and thanks for taking the question can.

Ken Worthington: Can you talk about the outlook for fund raising and sub six cap six.

Speaker Change #130: Both have been similarly sized funds in recent vintages.

Speaker Change #131: Fund raising is easier more challenged for the next vintage in either Europe or Asia for those focused funds and then for cap six you raised $2 billion, how much longer is that front end market any comments you can make on the outlook here.

Speaker Change #131: Hey, Ken this is John.

Ken Worthington: Unlimited in terms of what I can say specifically about.

<unk> because we are in the market raising money.

Speaker Change #132: And we've been pretty clear previously, stating that we do think that.

Speaker Change #132: Current fund <unk> six will be smaller than its predecessor fund and we said that as well for CGP look our cap business, it's really facing.

Speaker Change #132: Some geopolitical headwinds.

Speaker Change #132: But look overall in terms of Asia as I said, we've raised $5 billion, we continue to see very attractive opportunities in Asia I referenced the KFC transaction, which was a kind of a pan Pan Asia effort.

Speaker Change #132: But this is our Asia business is a very important business to us and we are fully fully committed to it as to where we end up in cap six I cant really provide you a number.

Speaker Change #133: Okay, great. Thank you.

Speaker Change #134: Thank you.

Ben <unk>: Our next question comes from the line of Ben <unk> with Barclays. Your line is now open.

Ben <unk>: Hi, good morning, and thanks for taking the question.

Ben <unk>: I wanted to ask about your transaction advisory fees you identified this last year as a strategic area of focus.

Ben <unk>: Based on your comments it sounds like there's a lot more activity coming in the back half of the year just any color on how that line item should evolve in the back half and going into 2025. It would be very helpful. Thank you.

Ben <unk>: Yeah, Dan This is John.

John: This has been a focus area for us.

Ben <unk>: For the firm.

Speaker Change #135: The last 12 months he has been very clear that the firm is focused on this particular part of our business I would say, we're very pleased with the progress we've made when you look at how.

Ben <unk>: The growth we're generating in this business.

Ben <unk>: Over the last six months, it's quite impressive it's up 60%.

Ben <unk>: And obviously, it's benefiting from a more conducive transaction environment, and we kind of looking at the pipeline of of exits as well as new transactions really across the platform not just specific to private equity.

Ben <unk>: We feel like this will be this will be a record year for our kind of transaction capital market fees.

Speaker Change #136: Got it thank you.

Speaker Change #137: Thank you. Our next question comes from the line of Brian Bedell of Deutsche Bank. Your line is now open.

Brian Bedell: Thanks. Thanks, Good morning, Thanks for taking the question.

John Redett: Management fees in global credit and solutions experienced double-digit growth year over year and hit record levels. We expect total management fees to accelerate across the second half of the year, driven by the nearly $20 billion of pending fee-earning AUM, the highest level since 2021. Transaction and advisory fees were up almost 60% year over year, driven by the steadily improving transaction environment. We are on pace for a record year.

Brian Bedell: Just going back to the deployment outlook for the second half.

Brian Bedell: If you could talk a little bit about the timing of the I think nearly $20 billion of.

Speaker Change #138: C pending.

Speaker Change #139: In terms of that potential build from management fees and then just in the light of the environment.

Speaker Change #140: This risk off sentiment persists in the second half how do you envision that impacting your deployment outlook potential in the U S. And also also Japan, I guess as well.

Speaker Change #139: Yes.

John Redett: We continue to drive towards our target of 1.1 billion FRE for 2024, implying that FRE in the second half of 2024 will be higher than in the first half. Now, let's turn to fundraising. Year-to-date, we've raised $18 billion in new capital and $41 billion over the last 12 months. We saw meaningful activity in this quarter in both global private equity and Global Credit, and Global Private Equity. We closed our fifth vintage Japanese buyout, nearly 70% larger than its predecessor. Across Asia, this brings us to $5 billion in capital raises. We recently announced the Take Private of KFC Japan, where our Pan-Asia teams came together to leverage our significant expertise in the restaurant and food sector.

Speaker Change #139: Okay.

John: Yes, Brian it's John.

John: It's already starting this call we're long term investors.

John Redett: This remains a robust market for us. In terms of our latest real estate fund, we closed on an amount materially higher than what we disclosed in our earnings release. And we are progressing quickly to a final close. In a challenging real estate market, it's worth noting the exceptional performance of our franchise, which remains a key area of growth. In global credit, we raised $5 billion in the quarter. As Harvey said, we had one of the most active first six months in our 20-plus year CLO history. We also benefited from continued strength in our credit wealth product, CTAC, as well as other strategies.

John: It is focused on day to day market volatility or market gyrations, but look if we're an extend period of a down market.

Speaker Change #141: I cant.

Speaker Change #141: I don't know what happens, but I think it's probably less positive than where we sit today, but looking at the pipeline today and we see tremendous transaction activity in the back half. So we feel we feel very good about that and it's really again as I said earlier, it's not only private equity.

John Redett: For the balance of the year, we expect to raise significant capital across all segments as we continue to work towards our target of $40 billion. Finally, let me touch on the investment environment. As Harvey mentioned, we are seeing increased investment activity across the business as buyer and seller confidence has improved despite recent volatility. We have access to great proprietary data across our global platform, which also points to increased activity levels. In terms of exit activity, we are now seeing more robust competition where an IPO is a real exit path, and Strategic Buyer Interest has picked up.

John Redett: We expect increased activity in the second half of 2024. Wrapping up, we continue to focus on delivering strong results for our shareholders. We have good momentum across our platform and are on track to achieve the financial targets that we laid out for 2024. With that, I will turn the call over to the operator for your question.

Speaker Change #141: It's in credit and it's in solutions I mean, if you look at the deployment levels, we've had in our solutions business.

Speaker Change #141: It's quite strong we're at $4 5 billion year to date and they have a very good pipeline. So I would say it's broad based.

Speaker Change #141: I'm not smart enough to tell you where the markets are going to be but where we sit today, we feel very good about the deployment in terms of the $20 billion of pending fee, earning AUM, which is really the highest level it's been since 2021.

And there are some.

Speaker Change #141: Global private equity.

Speaker Change #141: AUM in that number and there is also some some some credit you should expect that to be turned on over the coming quarters. So in global private equity, we have Japan buyout and there we have real estate and in global credit, it's really spread across the platform, but you should assume those fees turn on over the coming quarters.

Speaker Change #142: Great. Thank you.

Operator: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Glenn Schorr with Evercore ISI. Your line is now open.

Speaker Change #142: Thank you.

Speaker Change #143: Our next question comes from the line of Patrick Davitt with Autonomous Research. Your line is now open.

Glenn Schorr: Okay, so good morning. Good morning.

Hey, good morning, everyone.

Patrick Davitt: It looks like you are now already in the kind of 30% to 35% FRE FRE comp ratio range, which I think happened a bit faster than most of us were expecting particularly with realizations still so light. So firstly can we expect this to be a new baseline from here or could it ratchet back up later in the year, if say realizations status.

Speaker Change #144: Thank you.

Harvey Schwartz: Yeah. So Glenn, again, thanks for the question.

Glenn Schorr: I heard both your comments loud and clear about your exit pipeline DE guide and the backdrop, and the brokers and advisors that have reported have all said similar commentary. The market sentiment and the outlook feel like it's changed a lot in the last few days. And so, I'm curious, A, why you think. The market's perception is that things are going to slow down materially, but that's different for your business mix. I get it. So I'd love to hear that. And B, just how all that bullishness goes into your thoughts on the capital-raising outlook for PE specifically. Yeah. So Glenn, again, thanks for the interview.

Harvey Schwartz: So obviously, you know, the last couple of days of trading and the way the markets are positioned open this morning, there's a lot of red on the screen. You know, when we form our views, as John and I said, we look at underlying portfolio performance, and we extrapolate that data in terms of economic growth. If we were having this call last Tuesday, none of these questions would have been in the mix about the current market environment. As a matter of fact, you might think we were understating the trajectory of how things felt.

Speaker Change #144: Yes, Patrick it's John Yes, Yes look we're very pleased with where we are on that ratio.

Harvey Schwartz: And so I think all of us have to be a little bit careful not to overreact to a market adjustment, which at the moment feels very, very liquidity driven and very risk sentiment driven. Again, we had this call last week and we were talking about the fact that we expected Fed rate cuts, GDP looks solid. So none of that has changed our view.

Harvey Schwartz: Now, sentiment can extend itself into problematic ways, but it's way too early to extrapolate from that. Portfolio performance looks good, market opportunity feels good, exits still feel good, and pending announcements feel good. We'll see what happens over the next several weeks in terms of the market environment. But if anything, I think this will encourage the Fed to take action, which is really what the market's looking for. And again, we all have to be reminded, one of the things we learned over the last couple years is how the transmission mechanism when the Fed is raising rates is slower than when they're cutting. And again, my crystal ball is no better than yours, Glenn, but nothing about the last couple of days changes our view about the balance of the year at this stage.

Speaker Change #145: I have to be honest, we're not managing the business to hit that specific ratio.

Speaker Change #144: <unk>.

Speaker Change #144: We've always said, we're going to operate within the range, we specified in our fourth quarter, you should expect us to operate in that range.

Speaker Change #144: But plus or minus one or 2% from kind of where we are which is the midpoint.

Speaker Change #144: The upper end of that range at 35%.

Speaker Change #144: Is where you should expect us to operate the business.

Speaker Change #144: Look we're very mindful of of of investing in the business for growth not necessarily completely focused on driving the margin, but more focused on investing in these businesses businesses for growth.

Speaker Change #146: Thank you.

Operator: Our next question comes from the line of Alexander Blostein with Goldman Sachs. Your line is now open.

Speaker Change #147: Our next question comes from the line of Brian Mckenna with citizens JMP. Your line is now open.

Brian McKenna: Thanks, Good morning, everyone. So we saw the announcement this morning that your emerging two of your Bdcs can you just talk about the merits of the transaction why is now the right time for this are there any financial implications for <unk> and then yes. It will be great just to get an update on your broader direct lending strategy, specifically as it relates to both institutional try to.

Andres: Andres in there.

Andres: Yes, so we announced the merger of <unk>.

Andres: Our public bdcs merging with a private BDC.

Speaker Change #149: And we will provide more details over time and it likely.

Brian: Won't close Brian until.

Speaker Change #151: Q1, 2025, but look the benefit to us is.

Speaker Change #151: We get more scale in the public BDC. It is a scale business I think it will be easier for us to raise equity capital going forward Thats, obviously financially attractive to the firm.

Speaker Change #151: But also there is a benefit to FRE with this merger and we will quantify that as we get closer to the close but it's net net it's a positive for for Carlyle.

Speaker Change #152: Got it makes sense. Thank you.

John Redett: You know, look, we feel very good about the momentum we have in fundraising. We obviously had a very strong quarter in the second quarter. We're at $18 billion year to date. As I said in my remarks, we're at $41 billion in the last 12 months. So we do feel like we're working towards $40 billion.

Alexander Blostein: Hey, good morning, everybody. Thank you for the questions. Well, maybe just to build on the $40 billion target for fundraising for the year and your sort of confidence level around working towards that remaining $20 billion plus in the back half of the year, maybe talk a little bit about the key contributors you expect to come through, particularly around real estate, where it seems like you guys have seen really nice momentum, and maybe just clarify how much capital you guys have raised in those real estate funds and where they stand today. Thanks. Hey Alex, it's John.

John Redett: And as I look at kind of the next six months, it's really across the platform where we're raising money. We have a lot of products, strategies in the market. I think we'll see continued momentum in our solutions business, both the secondaries, and the co-investment fund. As Harvey said, the CAPM Wealth product is on more platforms.

Speaker Change #153: Thank you. Our next question comes from the line of Dan Fannon of Jefferies. Your line is now open.

John Redett: Hey Alex, it's John.

Dan Fannon: Hi, Thanks, good morning.

Speaker Change #154: Within global private equity management fees were slightly up quarter over quarter, but obviously still down year over year and given the fund raising you talked about some of the dry powder I guess as you look at the second half of the year and prospectively. What is your outlook for kind of management fees within just the global PV bucket.

Dan Fannon: Yes.

Global private equity, we kind of are expecting flattish.

Dan Fannon: Dan in terms of management fees, obviously, we're showing some real strength in the real estate side of the business, but as I said in the previous question.

Speaker Change #155: We do expect a couple of vintages of our private equity funds or U S or Europe buyout fund, an Asia buyout fund to be smaller than predecessors, but.

Speaker Change #155: We are able to mitigate that with the growth we're seeing in the real estate business in other parts of the global private equity business.

Speaker Change #155: Thank you.

Speaker Change #155: Q.

Steven <unk>: Our next question comes from the line of Steven <unk> of Wolfe Research. Your line is now open.

Steven <unk>: Hi, good morning.

Steven <unk>: Good morning, Sarah so.

Steven <unk>: How are you doing Harvey so wanted to just ask for a mark to market on some of the progress Youre, making in the retail channel you cited some improved momentum was just hoping to drill down further.

Speaker Change #157: It flows trend in the quarter.

Speaker Change #158: And maybe more specifically, how you're designing your retail focus P product just to be more competitive with some of the peer offerings that are out there <unk> seen some pretty good uptake.

Speaker Change #159: So I've been spending a lot of time in this space.

Speaker Change #159: Just to give you some color we launched the cap M, which John mentioned on a number of platforms in the past quarter.

David Rubenstein: David Rubenstein and I did a whole series of town halls office meetings with our distribution partners, who we're really grateful for their focus across the U S.

Speaker Change #159: And we're looking to extend internationally so.

John Redett: So we feel good about that. In terms of our credit business, we're seeing good momentum in our Wealth product there, CTAC. You'll continue to see strength in our Credit Opportunities Fund, our Infra Credit Fund, and CLO activity will continue. And then when I look at global private equity, you'll see continued strength in our real estate fundraise. As I said earlier, we have a lot of momentum. We're at a number that's materially higher than we disclosed.

John Redett: And later in the year, we'll be launching an Infra structure product as well. And we have two buyout funds in the market. So we have a lot of strategies in the market in the back half. And we feel really positive about the momentum we have.

Speaker Change #159: When you look at the momentum behind Seatac, our credit product and cap and we feel very very good about it.

Speaker Change #159: In terms of strategy, we are not of the view that we want to flood. These.

Speaker Change #159: <unk> distribution partners and channels with multiple products, we really want to have scale and focus and long term performance.

Operator: Our next question comes from the line of Ken Worthington with J.P. Morgan. Your line is now open.

Speaker Change #159: So youll see us stay.

Speaker Change #159: Really focused on our mix of platform.

Speaker Change #159: Programs that we can build on over.

Speaker Change #159: Over a very long period of time, and then obviously, we will have selected targeted feeder funds, which have always been part of our strategy in terms of the private equity product. We are still targeting 2025, as a complementary product and that will give us the three key footholds that we won.

Speaker Change #159: Across wells.

Kind of coming years.

Speaker Change #161: That's great. Thanks for taking my question.

Speaker Change #161: Sure. Thanks.

Speaker Change #163: Our next question comes from the line of Bill Katz with Teeny Cowen. Your line is now open.

Ken Worthington: Hi, good morning. Thanks for taking the time to answer the question. Can you talk about the outlook for fundraising in SEP6 and CAP6? I think both have been similarly sized funds in recent vintages. Do you see fundraising as easier or more challenging for the next vintage in either Europe or Asia for those biofocus funds? And then, for CAP6, you raised $2 billion. How much longer is that fund in the market? Any comments you can make on the outlook here? Thank you, Kenneth, and John.

Bill Katz: Excuse me. Thank you very much for taking the question. This morning, and maybe turning to the capital I haven't talked about that.

Bill Katz: How should we be thinking about the pacing for the residual $1 1 billion.

Harvey Schwartz: Repurchase has it shrank laid up against how you're thinking about the balance sheet and maybe Harvey I was thinking I was wondering if you could give us an updated thoughts of this strategic M&A for the company. Thank you.

John Redett: Thanks, Kenneth, and John. Look, I'm limited in terms of what I can say specifically about CAP6, because we are in the market raising money. And we've been pretty clear previously stating that we do think the current fund, CAP6, will be smaller than its predecessor fund. And we've said that as well for CEP.

John Redett: Look, our CAP business is really facing some geopolitical headwinds. But, you know, look, overall, in terms of Asia, as I said, we've raised $5 billion. We continue to see very attractive opportunities in Asia. I referenced the KFC transaction, which was a kind of pan-Asian effort. But this is our Asia business. It's a very important business to us, and we're fully, fully committed to it. As to where we end up in CAP6, I can't really provide you with an Okay, great. Thank you. Thank you. Our next question comes from the line of Ben Budish with Barclays. Your line is now open.

Phil: Yes, so Phil look Harvey discussed in the past just we really took a step back and really rethought, how we how we think about capital allocation and capital allocation runs a spectrum of buying shares back.

Operator: Hi, good morning.

Ben Budish: Yeah, this is John. You know, look, this has been a focus area for the firm. For the last 12 months, Harvey has been very clear that the firm is focused on this particular part of our business. I would say we're very pleased with the progress we've made. When you look at the growth we're generating in this business over the last six months, it's quite impressive. It's up 60%. And obviously, it's benefiting from a more conducive transaction environment.

Ben Budish: And we're kind of looking at the pipeline of, you know, exits, as well as new transactions, really across the platform, not just specific to private equity. We feel like this will be a record year for our kind of transaction capital market.

Speaker Change #164: Investing in the business for growth and M&A and look I would say, we're very pleased with with the buyback activity.

John Redett: Thank you. Our next question comes from the line of Brian Bedell of Deutsche Bank. Your line is now open. Thanks. Good morning.

Speaker Change #164: Last year 2023.

Speaker Change #164: Our share count was down that's the first time since since our IPO I think thats a positive.

Operator: Just going back to the deployment outlook for the second half, if you could talk a little bit about the timing of the, I think, nearly $20 billion of fees pending AUM in terms of that potential bill for management fees. And then just in the light of the environment, if this risk-off sentiment persists in the second half, how do you imagine that impacting your deployment outlook potential in the U.S. and also Japan, I guess, as well?

Speaker Change #164: Year to date, our share count is down again, I think thats another positive as I said in my remarks, we repurchased 330 million shares year to date I think.

Speaker Change #164: The best we've ever done in the past is couple hundred million dollars in a year. So we're on pace to do.

Speaker Change #164: Deliver a fairly large share repurchase.

Speaker Change #164: We have $1 1 billion remaining on the share repurchase and you should assume that were active buyers of the stock.

Speaker Change #164: In terms of M&A look.

Speaker Change #164: To me, it's a multifaceted question in a sense, if we saw something that we like strategically.

Speaker Change #164: And financially the deal made sense and culturally it was compatible.

Speaker Change #164: We would absolutely pivot to M&A away from the stock buyback and again it comes back to how do we think about allocating capital we think about allocating capital in terms of where can we get the best returns and growth for our business, our shareholders and our stakeholders. So if something on the M&A front made sense, we would pivot away from utilizing the capital for a stock buyback.

Speaker Change #164: And do an M&A transaction.

Brian Bedell: Yeah, Brian, it's John. You know, look, as Harvey said in his call, we're long-term investors, not as focused on day-to-day market volatility or market gyrations. But look, if we're in an extended period of a down market, I don't know what happens, but I think it's probably less positive than where we sit today. But looking at the pipeline today, we see tremendous transaction activity in the back half. So we feel very good about that.

Speaker Change #164: Yes, what I would say first of all obviously I agree with everything John said is really important to understand the lens through which we look at capital allocation and the discipline, we're applying to that in terms of whats marginally most accretive.

Speaker Change #165: But again as I said in my remarks sitting.

John Redett: And it's really, again, as I said earlier, it's not only private equity, it's in credit, and it's in solutions. I mean, if you look at the deployment levels we've had in our solutions business, it's quite strong. We're at $4.5 billion year-to-date, and they have a very good pipeline. So I'd say it's broad-based. I'm not smart enough to tell you where the markets are going to be, but where we sit today, we feel very good about the deployment.

Speaker Change #165: Sitting here now a year and half in at Carlyle I really like the organic momentum and the way the team is coming together.

John Redett: In terms of the $20 billion of pending AUM, which is really the highest level it's been since 2021, and there's some global private equity AUM in that number, and there's also some credit; you should expect that to be turned on over the coming quarter. So in global private equity, we have Japanese buyouts in there, we have real estate. And in global credit, it's really spread across the platform. But you should assume those fees will start coming in over the coming quarter.

Having said that our platform currently it gives us the flexibility to position a lot of directions.

Speaker Change #165: And if the right opportunity came across.

Speaker Change #165: You should expect us to take action, but I'd ask.

Speaker Change #165: It has to fit all of those prerequisite as John just described they are not flexible.

Operator: Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Your line is now open.

Speaker Change #166: Thank you.

Speaker Change #166: Next question comes from the line of Michael Cyprus with Morgan Stanley. Your line is now open.

Michael Cyprus: Great. Thanks. Good morning, just a question on insurance I was hoping you could elaborate on the contribution from fortitude in the quarter, how you see the pace of migrating the buck over into Carlyle strategies, how is that progressing and then just more broadly if you could just maybe update us on your insurance in quarter, two related initiatives and how your strategic.

Speaker Change #167: Thinking about accelerating the pace of growth from here. Thanks.

Speaker Change #168: So the photos of your partnership.

Speaker Change #167: <unk>.

Speaker Change #169: Has been fantastic as you know, we talked a bit about the discover financial services transaction.

Speaker Change #170: And that really is a great example.

Speaker Change #170: The partnership and collaboration across <unk>.

Speaker Change #170: Our CSS business capital markets and insurance.

Speaker Change #170: And it really does.

Speaker Change #170: Exemplify the flywheel effect, one gets by being in the insurance business and across all of our insurance clients.

Speaker Change #170: And partnerships away from Florida to so we feel quite good about that in terms of our positioning with 400 200 insurance more broadly obviously, there is huge opportunity in the sector.

And a number of ways. One obviously is this focus on private investment grade again.

Speaker Change #170: Fantastic example of our asset backed business growing so quickly over the last several years.

Speaker Change #170: And the focus there, but more importantly from our position and being capital light. It gives us the ability to pivot and grow in any number of ways.

Speaker Change #171: Very narrow answer to your question.

Speaker Change #171: The market has been at the margin a bit more competitive and the block business, we're being disciplined about the capital deployment, there, but the pipeline.

Speaker Change #172: He is quite good in terms of transaction flows around the world.

Speaker Change #173: <unk> various regulatory changes and the needs of our insurance partners.

Speaker Change #173: We feel quite good about the partnership and the trajectory all round.

Speaker Change #174: Great. Thank you.

Speaker Change #175: Thank you. Our last question comes from the line of Craig Siegenthaler of Bank of America. Your line is now open.

Patrick Davitt: Good morning, everyone. Looks like you're now already in the kind of 30 to 35% FRE comp ratio range, which I think happened a bit faster than most of us were expecting, particularly with realization still so light. So firstly, can we expect this to be a new baseline from here, or could it ratchet back up later in the year if, say, realization stayed this light? Thank you. Yeah, Patrick. It's

Craig Siegenthaler: Thanks, Good morning, everyone. Good morning.

Craig Siegenthaler: Hey, Harvey I think part of it.

Craig Siegenthaler: But I think you guys know who I am.

Craig Siegenthaler: Can you hear me okay.

Speaker Change #176: Yes, sorry about that I'm going to talk over you.

Speaker Change #177: Oh perfect now no worries at all so I actually have a another compensation question. So following modifications you guys announced on the <unk> call.

Stock based comp is running up a lot year over year and thats not really a surprise, but we are hoping you could give some color on how we should model stock based comp over the next year, because I believe there's a step down coming from <unk> 24 to <unk> 25, due to the roll off of one of the stock based comp tranche.

Speaker Change #178: As I had in the ballpark of about $25 million per quarter, but maybe you could help us.

Speaker Change #179: With the forward run rate of stock based comp. Thank you very much.

John Redett: Yeah, Patrick, it's John. Yeah, look, we're very pleased with where we are on that ratio. But I have to be honest; we're not managing the business to hit that specific ratio. And, you know, we've always said we're going to operate within the range we specified in our fourth quarter. You should expect us to operate in that range. But plus or minus one or 2% from kind of where we are, which is the midpoint at the upper end of that range at 35%, is where you should expect us to operate the business. Look, we're very mindful of investing in the business for growth, not necessarily completely focused on driving the margin, but more focused on investing in these businesses.

John: Hey, Craig its John.

Speaker Change #180: Look at in terms of the stock based comp we've been pretty pretty clear, saying, telling you that it will remain elevated in 2024.

Operator: Our next question comes from the line of Brian McKenna with Citizens JMP. Your line is now open.

Speaker Change #181: And look a lot of that is driven by this performance stock unit Grant we gave too.

Speaker Change #181: Key senior individuals of the firm earlier in the year.

Speaker Change #181: And these are the people responsible for driving growth and as you recall. These are very very shareholder friendly instruments, great alignment. They only vest if the stock's up 2040, and 60%. So again very shareholder friendly instruments. The accounting of the performance stock units is a little different in the sense, we still have to.

Speaker Change #181: The award even though we don't even know if it best and that's we're in the middle of Expensing that award.

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

Speaker Change #181: Three front end loaded so youre seeing a fairly large impact from this PSU grant, but again I would expect.

Speaker Change #181: Third and fourth quarter stock based comp expense to be elevated and then to start trickle down trickling down in 2025, I'd say directionally. The number you alluded to is probably not too far off from where I'd start.

John Redett: Yeah, so we announced the merger of our public BDCs merging with a private BDC. And we'll provide more details over time. And it likely won't close, Brian, until Q1 2025.

John Redett: But look, the benefit to us is we get more scale in the public BDC. It is a scale business. I think it'll be easier for us to raise equity capital going forward. That's obviously financially attractive to the firm. But also, there is a benefit to FRE with this merger, and we'll quantify that as we get closer to the close. But it's, it's net net, it's a positive for Carly

Speaker Change #182: Yes, there is accounting.

Speaker Change #182: Versus reality always a little bit of a challenge we're happy to take more of that offline for folks because this question comes up again.

Brian McKenna: Got it. It makes sense.

Speaker Change #182: We are obviously very focused on the efficiency of how we're running the company and the <unk>.

Speaker Change #182: Disciplined we're bringing to that which is why youre seeing the share count come down so dramatically.

Speaker Change #182: Since John and I started focusing on this a bit over a year ago.

Speaker Change #182: And.

Speaker Change #182: All of the capital planning that we've announced.

Speaker Change #183: But I agree it's a little confusing me some comp expense see equity compensation expense up and share count down somewhat it's a little hard to reconcile that and keep an eye on the share count.

Speaker Change #184: Thank you very much.

Operator: Thank you. Thank you. Our next question comes from the line of Dan Fannon of Jeffries. Your line is now open. Thanks. Good morning. Within global...

Dan Fannon: Thank you. Our next question comes from the line of Dan Fannon of Jeffries. Your line is now open.

Speaker Change #184: Thank you I would now like to hand, the conference back over to Daniel Harris for closing remarks.

Operator: Yeah, so global private equity, we kind of are expecting flattish, Dan, in terms of management fees. Obviously, we're showing some real strength in the real estate side of the business. But as I said in a previous question, we do expect a couple of vintages of our private equity fund, our Europe buyout fund and Asia buyout fund, to be smaller than predecessors. But we're able to mitigate that with the growth we're seeing in the real estate business and other parts of the global private equity business. Thank you.

Operator: Thank you. Our next question comes from the line of Steven Chubak of Wolf Research. Your line is now open.

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

Daniel Harris: Yes. Thank you for your time and attention today do you have any follow up questions. Please reach out to Investor relations. After the call. We look forward to talking to you next quarter.

Harvey Schwartz: So I

Harvey Schwartz: So, I've been spending a lot of time in this space, just to give you some color. We launched the CAPM, which John mentioned, on a number of platforms in the past quarter. David Rubenstein and I did a whole series of town halls and office meetings with our distribution partners, who we're really grateful for their focus across the US, and we're looking to extend internationally. So, when you look at the momentum behind CTAC, our credit product, and CAPM, we feel very, very good about it. In terms of strategy, we are not of the view that we want to flood these distribution partners and channels with multiple products.

Harvey Schwartz: We really want to have scale and focus and long-term performance. And so you'll see us stay really focused on a mix of platform and programs that we can build on over a very long period of time. And then, obviously, we'll have selected targeted feeder funds, which have always been part of our strategy. In terms of the private equity product, we're still targeting 2025 as a complementary product. And that'll give us the three key footholds that we want across wealth for the coming years.

Operator: Thank you. Our next question comes from the line of Bill Katz with TD Cowen. Your line is now open.

Bill Katz: Excuse me. Thank you very much for taking the question this morning. I may be turning to the capital.

Bill Katz: I haven't talked about that. How should we think about the pacing for the residual $1.1 billion of repurchase? How does that triangulate up against how you think about the balance sheet? And then maybe Harvey, I was thinking, I was wondering if you could give us an updated thought about this strategic M&A for the company. Thank you.

John Redett: So, Phil, look, Harvey and I discussed in the past that we really took a step back and really rethought how we think about capital allocation. And capital allocation runs the spectrum of buying shares back, investing in the business for growth, and M&A.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

John Redett: And look, I'd say we're very pleased with the buyback activity. Last year, 2023, our share count was down. That's the first time since our IPO. I think that's a positive. Year-to-date, our share count is down again. I think that's another positive.

John Redett: And as I said in my remarks, we repurchased $330 million in shares year-to-date. I think the best we've ever done in the past is a couple hundred million in a year, so we're on pace to deliver a fairly large share repurchase. We have $1.1 billion remaining on the share repurchase, and you should assume that we're active buyers of the stock. In terms of M&A, you know, look, to me, it's a multifaceted question in the sense that if we saw something that we liked strategically, and financially, the deal made sense, and culturally, it was compatible, we would absolutely pivot to M&A away from the stock buyback.

This concludes today's conference call. Thank you for your participation you may now disconnect.

John Redett: And again, it comes back to how we think about allocating capital. We think about allocating capital in terms of where we can get the best returns and growth for our business, our shareholders, and our stakeholders. So if something on the M&A front made sense, we would pivot away from utilizing the capital for a stock buyback and do an M&A transaction. Yeah, what I would say, first of all, obviously, I agree.

Harvey Schwartz: Yeah, what I would say, first of all, obviously, I agree with everything John said. It's really important to understand the lens through which we look at capital allocation and the discipline we're applying to that in terms of what's marginally most accretive. But again, as I said in my remarks, sitting here now, a year and a half in, at Carlyle, I really like the organic momentum and the way the team is coming together.

Harvey Schwartz: Having said that, our platform currently gives us the flexibility to position ourselves in a lot of directions. And if the right opportunity comes across, you should expect us to take action. But it has to fit all those prerequisites John just described.

Operator: Thank you. Our next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.

Michael Cyprys: Great, thanks. Good morning.

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

Harvey Schwartz: So the Fortitude partnership has been fantastic. As you know, we talked a bit about the Discover Financial Services transaction. And that really is a great example of partnership and collaboration across Reddit.

Harvey Schwartz: CSS Business, Capital Markets, and Insurance. And it really does, exemplify the flywheel effect one gets by being in the insurance business and across all of our insurance clients and Partnerships Away from Fortitude, so we feel quite good about that. In terms of our positioning with Fortitude and insurance more broadly, obviously, there's huge opportunity in this sector in a number of ways. One, obviously, is this focus on private investment grade. Again, that's a fantastic example of our asset-backed business growing so quickly over the last several years and our focus there.

Harvey Schwartz: But more importantly, from our position in being capital light, it gives us the ability to pivot and grow in any number of ways. In the very narrow answer to your question, the market's been, at the margin, a bit more competitive in the block business. We're being disciplined about the capital deployment there, but the pipeline is quite good in terms of transaction flows around the world, reflecting various regulatory changes and the needs of our insurance partners. But we feel quite good about the partnership and the trajectory already.

Operator: Thank you. Our last question comes from the line of Craig Siegenthaler of Bank of America. Your line is now open.

Operator: Thanks. Good morning, everyone. Good morning.

Craig Siegenthaler: Hey, Harvey, I think part of my name is cut out, but I think you guys know who I am. Can you hear me okay? Yeah, no, we got you. Sorry about that, Craig. I didn't mean to talk over you. Oh, perfect.

Craig Siegenthaler: No, no worries at all. So I actually have another compensation question. So following the modifications you guys announced on the 4Q call, stock-based comp is running up a lot year over year, that's not really a surprise. But we are hoping you could give some color on how we should model stock-based comp over the next year. Because I believe there's a step down coming from 4Q24 to 1Q25 due to the roll-off of one of the stock-based comp tranches I had in the ballpark of about 25 million per quarter, but maybe you could help us with the forward run rate of stock-based comp. Thank you very much.

John Redett: Hey, Craig, it's John. You know, look, in terms of the stock-based comp, we've been pretty clear about saying, telling you that it will remain elevated in 2024. And look, a lot of that is driven by this performance stock unit grant we gave to key senior individuals of the firm earlier in the year. And these are the people responsible for driving growth.

John Redett: And as you recall, these are very, very shareholder-friendly instruments, great alignment. They only work best if the stock's up 20, 40, and 60 percent. So, again, very shareholder-friendly instruments. The accounting for the performance stock units is a little different in the sense that we still have to expense the award, even though we don't even know if it vests, and we're in the middle of expensing that award. It's very front-end loaded, so you're seeing a fairly large impact from this PSU grant.

John Redett: But, again, I would expect third and fourth quarter stock-based comp expense to be elevated and then to start trickling down trickling down in 2025. I'd say directionally, the number you alluded to is probably not too far off from where I'd The Edison County

John Redett: Yeah, this accounting versus reality is always a little bit of a challenge. We're happy to take more of that offline for folks because this question comes up. Again, you know, we are obviously very focused on the efficiency of how we're running the company and the discipline we're bringing to that, which is why you're seeing the share count come down so dramatically since John and I started focusing on this a bit over a year ago, and all the capital planning that we do. But I agree, it's a little confusing to see top expense, see equity compensation expense up, and the share account down It's a little hard to reconcile that, but keep an eye on the share account.

Daniel Harris: Thank you. I would now like to hand the conference back over to Daniel Harris for his closing remarks.

Daniel Harris: Yeah, thank you for your time and attention today. If you have any follow-up questions, please reach out to Investor Relations after the call. We'll look forward to talking to you next quarter.