Q2 2025 Carlyle Group Inc Earnings Call
Good day and thank you for standing by. Welcome to the Carlo group. Second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, it'll be a question and answer session to ask a question during the session. You'll need to press star 1. 1 on your telephone, you will then hear an automated message. Advising, your hand is raised to withdraw your question. Please press star 1 once again, please be advised that these conferences being recorded, I would like to hand the conference over to your speaker today, Daniel Harris, head of investor relations. Please go ahead.
Thank you. Kevin, good morning and welcome to Carl's second quarter 2025 earnings call with me on the call this morning as our chief executive officer Harvey, Schwarz and 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 available on our investor relations website. This call is being webcast and a replay will be available.
We will refer to certain non-gaap Financial measures during today's call. These measures should not be considered in isolation from or to the substitute for measures prepared. In accordance with generally accepted accounting principles. We have provided reconciliation of these measures to Gap in our earnings, release to the extent reasonably available.
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 involved inherent risks and uncertainties including those identified in the risk factor section of our annual report on form 10K that could cause actual results to differ materially from those indicated.
Carlo, seems no obligation to update any forward-looking statements at any time.
In order to ensure participation, by all those on the call today, please let me yourself to 1 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, Schwarz,
Thanks, Dan. Uh, good morning, everyone, and thank you for joining us.
We delivered an exceptionally strong second quarter.
Our performance marks significant progress against our strategic plan and underscores. Once again, the momentum we have globally.
We set a number of new record highs.
And period was a record. 323 million up, 18% year-over-year.
And for f margin for the first half was also a record 48%.
And we hit record AUM of 465 billion.
It's also worth noting at 886 million.
This is the highest level of first, half de The Firm has ever had.
We also brought in $51 billion of organic inflows over the past 12 months.
This is a clear sign of continued Confidence from our investors and is reflective of the Diversified nature of our Global investment platform.
Before I dive into more specifics of the quarter, I'd like to address the macro environment.
As we progress through the second quarter and into the summer sentiment is continued to pick up meaningfully.
Markets are functioning quite well and activity is accelerated.
Equities are near record highs and credit, spreads are also near record high levels.
Markets have responded quite well to progress by the administration on tariff, negotiations and tax policy.
This is reduced uncertainty and an accelerating m&a and deal activity.
as we all know,
confidence is the greatest Market elixir.
And with this increase in confidence, we're seeing continued demand for private capital.
We're investing where we have strong conventions and see relative value while maintaining. Our discipline approach, how we price risk
Cross the firm, we deployed 26 billion dollars in the first half of 2025, this is up almost 50% year-over-year.
but I would also like to highlight how much Capital we're returning to investors,
Firmwide realized proceeds are up nearly 40% year-over-year.
While the corporate private Equity Market broadly has faced criticism for low levels of capital return to investors.
We've defied that trend.
Last 12 months.
Is represented 17% of our portfolio.
And is 3 times the industry average.
And again, this is just for the second quarter which doesn't include significant post quarter activity, already announced.
This is a really impressive achievement for our teams and fantastic for our investors.
It highlights the strength of the portfolio and differentiates Us in the marketplace compared to other firms.
And trends in performance also continue to be quite positive.
Our 2 most recent us bile funds. Appreciate approximately 20% over the past 12 months.
In Asia funds, 1 through 4, each rank in the top 5% for performance in their respective categories.
and our fifth fund appreciated 8%, this quarter alone,
We've also had distinctive performance versus the mortgage in other parts of our business.
Amid 1 of the most difficult fundraising environments for real estate in recent memory this week. We announced the Final close of our 10th us funded 9 billion dollars.
That's nearly 15% larger than the predecessor fund.
This achievement is worth underscoring. Given the team standout performance versus the industry.
In a difficult, real estate investment back up.
This marks the largest U.S. real estate fund raised across the industry in the past 18 months.
A real reflection of the performance Excellence of our team and the power of our Global brand.
Over in Global Credit, we hit key milestones for multiple parts of the platform.
An asset back finance, a key area of growth for Carlile. We see lots of momentum.
This quarter, we announced the first of its kind collaboration with Citi group in the fintech specialty lending space.
We also entered into a new strategic origination partnership, bringing us to 6, platform Partnerships that collectively. Enhance our differentiated origination capabilities, asset base Finance au. But is up 40% year-over-year and continues to scale rapidly
And in our opportunistic, credit business, we provided a landmark, hybrid Capital solution to ricordea a leading insurance broker.
More broadly. Global insurers. Continue to represent an important and growing client base for Carlo.
We continue to see strong demand for Capital and liquidity solutions for insurers can forward a degree which closed on 8 billion dollars of reinsurance contracts, through July.
we also continue to be a compelling partner to third party Insurance clients globally, providing access to a diverse range of investment opportunities, particularly as interest in private investment, grade Solutions, accelerates
this enables us to work with the full spectrum of insurance clients, while benefiting from the growth of our partner or to REI
moving on to car loans.
Business had a record quarter with fee, revenues up more than 50% and F nearly doubling over the past year.
Secondary is continue to be a major growth engine and our latest fund currently in Market is already significantly larger than the prior vintage.
The secondary co-invest in portfolio, Finance business provides us with unique content and a competitive Advantage as Market Dynamic shift and liquidity needs evolve.
Our expertise combined with the scale of our Global platform. Puts us in a strong position as secondaries and portfolio. Finance markets continue to grow
Turning the global wealth.
We've seen the assets and capm. Increasing nearly 6 B over the last year.
Capm provides Diversified exposure. Across our call out, invest investment strategies.
There are a number of reasons advisors and investors have interest in the solution including the speed of deployment, liquidity diversification benefits. And of course, a long history about standing investment performance.
This is an extraordinary solution for our wealth clients.
Last month, we launched a partnership with UBS where we are the only private Equity secondary solution for their International wealth clients.
With world to partner with them and the early response has been fantastic.
UBS is 1 of the leading Global wealth management platforms and we expect this partnership to be a strong driver of growth.
In aggregate. We now have almost 30 billion AUM of Perpetual, Evergreen, strategies up, merely 40% year-over-year.
We continue to gain momentum in our Capital markets business. Another important strategic Initiative for the firm.
Over the last 12 months, we generated over $230 million in capital markets fees.
And we see further upside to this level of m&a and IPO Market activity increases.
As we look ahead to our next phase of growth, we announced a series of leadership appointments last week, including naming John readit Mark Jenkins. And Jeff nettleman is co-presidents and appointing Justin Bluff with our new CFO.
These appointments are a natural evolution of our business, and solidify, our ability to operate at scale with the focus alignment and Agility required to lead in today's environment.
I look forward to partner closely with these leaders as we execute our strategy and deliver significant value to our investors and stakeholders around the world.
With that, let me turn things over to John.
Thanks Harvey and good morning everyone.
This RV said we had a fantastic second quarter. We delivered record F of 323 million.
Up 18% year-over-year.
To date FR totaled. 634 million.
Up 18% with a 48% FR margin.
De of $25 per share over the first 6, months was a record start for the firm.
Management, fees reached 590 million for the quarter.
And 1.1 billion year to date.
A 7% increase.
Capital market fees were $48 million in the second quarter.
And 126 million year to date.
More than double last year.
Overall.
Year-to-date fee revenues of 1.3 billion dollars increased 14% year-over-year.
We also reported record firmwide AUM, ending the quarter at 465 billion.
First half inflows total 28 billion.
And over the last 12 months in flows, reach 51 billion.
A 12%, organic growth rate.
We raised 2.2 billion in our Evergreen funds, during the quarter, bringing our AUM in this important growth area to nearly 30 billion.
Up more than 40% year-over-year.
In Carlile, alpinvest delivered record f.
Together accounting for 55% of firmwide f.
Up from less than 30% 2 years ago.
This shift reflects the increasing earnings power of these businesses.
and the overall diversification of our earnings stream,
Carlile, help invest, furry reached a record 68 million for the second quarter.
In year-to-date, furry of 134 million is up more than 80%.
Driven by a 43% increase in management fees.
We raised 5.1 billion of new capital in the quarter supported by the Final close of our latest co-investment fund, which is nearly 15% larger than its predecessor.
We've also seen strong fundraising in our latest secondary fund.
Which is already significantly larger than its predecessor, and we are still raising capital.
FR margin in Alton reached 54% in the quarter up from 49% in Q2 last year.
Global Credit also delivered strong performance with 111 million in F, compared to 81 million in the second quarter of last year, a 37% year-over-year increase.
For the first half.
FR of 215 million increased 41%, organically year-over-year.
With a 46% margin.
Global Credit benefited from strong Capital markets activity.
Increasing fee related performance or Revenue?
And 11% growth in management fees.
Credit inflows remained strong at $5.5 billion during the quarter. This was driven by CLO issuance.
Asset back, Finance.
It flows into SeaTac.
over the past 12 months, Global Credit inflows of 24 billion, reflect continued, scaling inner strategy, as well as cyclical, and secular Tailwinds,
Turning to Global private equity.
A key highlight in the quarter was the activation of our 10th, vintage us real estate fund.
Which closed at 9 billion dollars.
Nearly 15% larger than its predecessor.
A great outcome in Midstate challenging, real estate fundraising environment.
Performance in our us. Buyout platform remains strong.
With cp7 and cp8 portfolio, appreciation of 3 to 4% in the quarter.
And 17 to 20% over the last 12 months.
We also continue to return significant Capital to our investors.
This quarter realizations and standard error NSM insurance, for toll and Noble extra of nearly 4 billion of realized proceeds in corporate private equity.
In addition, we've announced approximately 4 billion of transactions that have not yet closed.
It's worth repeating. What Harvey said over the last 12 months,
Investors in corporate private equity.
Nearly triple the industry, average.
Realizations, across our Global investment platform. Over the last 12 months are approaching levels, not seen since 2022.
Given the exceptional first half, performance in momentum across the business.
Let me update you on our 2025 outlook.
We now expect full year FR growth of approximately 10%
Up from our prior Outlook of 6%.
while continuing to invest in the business to drive growth,
We see potential upside, if markets continue to improve.
We're also tracking towards full year inflows of 50 billion dollars.
Compared to our prior Outlook of around, 40 billion.
Before we wrap up, I'm really excited for Justin to step into the CFO role in January. I've I've known Justin for a long time, as we've been calling to Carl for nearly 20 years. He's an exceptional investor in business manager, and I'm excited to work with him over the next several months as we both transition into our new roles,
With that, let me turn the call over to the operator for your questions.
Thank you, ladies and gentlemen, if you have a question or a comment at this time, please press star, 1, 1 1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1 and 1. Again, we will pause for a moment while we compile, our Q&A roster.
Our first question comes from Bill cats with TD, cow, and your line is open.
Great. Thank you very much for taking the questions this morning and congratulations to everyone with the promotions, uh, wonderful to see. Um, just maybe pick up John where you left off on the guidance, uh, great to see the increase. Um, for sure I was wondering, maybe 2-part question, maybe part 1 for you. Maybe part 1, 2 for Harvey for you, uh, want to make unpack, maybe the driver to to step up, or the F growth, how much of that is more second half versus sort of a strong first half.
Um, and then where do you see the incremental uh growth on sales? And then for Harvey? I know we've been speaking about this a little bit. A number of your peers are laying out, sort of 5 year targets. Uh, it doesn't seem like you want to do that, but it seems like you might be receptive to looking at a little more intermediate term. I wonder if you can maybe frame out how we should be practically or uh, sort of initially thinking through 2026 opportunity to grow the business. Thank you.
Well, hey Bill, maybe I'll kick off and um uh I heard it was your birthday today. Is that right?
Yes, and thank you for the great results. Great birthday present.
No. That's, uh, we're all about you Bill and we'll happy birthday the um, okay. Uh, to be serious look. Um, when I arrived at the firm, uh, some of the feedback from our stakeholders is that we didn't have, uh, or looking metrics for people to, uh, dive into. So for the first time ever, as, you know, um,
Rapid 2 years ago, we put out the annual metrics, you know, you guys have given us feedback that you'd like to see uh, longer duration. And so,
We'll think through that, we want to make sure you guys have the information you can do. I don't know. Uh, you and I have talked about this. I've talked about this with lots of shareholders, I'm not sure. Uh, anyone in the world can predict 5 years, uh, in any business, uh, given the complexities of the world. But certainly, uh, if there's a bit of a desire for more, we'll certainly contemplate that I'm not committing to anything, um, but we'll certainly take that, uh, into consideration. Um, but yeah, what sort of over John for second part of the question? Yeah, Bill, uh, look the revised Outlook it. It really just reflects the the strong momentum
We have it's across the entire platform. Uh and look the firms. The firm is performing ahead of our expectations. So you know, look, we're pleased with the year is a year to date results. Um, the momentum is strong, as I said, but we continue, uh, to invest heavily in, in the franchise to drive growth looking forward. Uh, I think it's helpful just to frame. I mean, f was up 18%, uh, in the second quarter up 18% year to date. Very, very pleased with the results. So the, the the Outlook really just reflects improved momentum, uh, across the, the franchise. What's driving this outperformance? I would say, uh, the, the growth at the organic growth at Alpha, invest is just it's exceptional. There's no other way to describe it. Uh, they are they in in again, I think it's important to realize, it's all organic. Uh, it's truly
Exceptional. Uh, we had really strong, uh, Capital markets Revenue year to date, uh, and, you know, the markets, I would describe, as kind of neutral not, not super strong, not weak. So I I think that
The fundraising a lot of momentum there. Uh, and you know, we had a good quarter, good couple quarters of of deployment and credit. And, you know, that's how we activate fees and credit based on deployment. So, uh, we feel very good about the back half the guidance is not really meant to manage, you quarter to quarter but more to give you a, a look through for the full, uh, 2025. Uh, and again, if the markets improve their there could be some upside to the Outlook. Uh, we provided you,
Yeah, I add to that. Uh, bill is when I travel the world the level of Engagement is as high as I've ever seen it. The first day I've been at the firm and that obviously, reflects all the great work that teams are doing on executing the strategy, but it's also part of the environment and that last Point, John made, I think there's a lot of
Um, operating leverage to an improving environment. Um,
and so, I think I think there's upside to these numbers
Thank you.
1 moment for our next question.
Our next question comes from Stephen Tubac. With wolf research, your line is open.
Hi, good morning, Harvey. Good morning, John. Thanks for taking my questions.
Hey morning, Stephen. So I wanted to just unpack some of the retail commentary a bit more, you know, the momentum is quite impressive. Flows, are steadily building. We also know the cpep launch is coming in the back half, so it does. Feel like fundraising is potentially poised to take another step function higher. So what do you think is an achievable level of run rate flows on the platform? Just when we think about the vehicles already out there in the market, some of the launches still on the come and given that you're like the marketing CPAP right now. Just want to get a Polish on pulse on some of the initial receptivity to the product.
Yeah. So um why don't I give you some insight into that so you know when I got here there really wasn't a I would call
um,
Systematic strategy for how we were going to engage wealth around the world. But it was very obvious
the wealth Trend uh was emerging. And I say emerging because even though it's been significant I I still remain quite committed to the view that globally. This is a this is a trend that's going to continue for many many years.
And you know, we see systematically repositioned the business the platform with our partners and again this ties back to basic fundamentals, the brand has such Global recognition. Um,
The Partnerships that we have, we're really thrilled with our partners, as I mentioned. Um, you know, launching this partnership with UBS as their exclusive partner internationally. So these are world-class partners that we're working with. Um,
From time to time people, I think.
Suggest. Okay, there's there's a lot of people on platforms. There's not a lot of parallels on platforms with the scale. We have the brand, we have the history we have, and the ability to create Solutions the way we can, um, you know, John talked a bit about Carlile help invest but that's a
You know, that's a category killer in terms of the wealth business, it has all the characteristics and it allows us to build off that and some unique ways.
So the here's the here are the sort of fundamental components of the strategy.
3, Flagship funds, the third of which you mentioned CPAP, which will be coming online in the second half of the year.
All these things have a very natural flywheel effect.
So we're no longer globally. We have a position in the marketplace. I spend a lot of my time with advisors
And advisors, um, are quite interested in including this, in their toolkit. It's not for every advisor, it shouldn't be for every advisor, um, but the momentum is pretty palpable
Um and so we'll have these 3 Flagship products and then it's a lot of what we can do to work with advisors around the world to come up with unique Solutions because we have all the component parts. Um and again this just Builds on the success of the brand. The last piece I'll talk about is obviously um, everyone in the industry is enthusiastic about the potential executive order that may come out of the White House. Maybe as early as today.
Um, around the retirement space. And I think that again is going to open up a space which is long overdue. Wealthy clients have had access to the space for a long time. Um,
Firefighters.
It's great caller. Thanks for taking my question.
1 moment for our next question.
Our next question comes from Alex, bolstein with Goldman Sachs line is open.
Craig, good morning, Harvey. Hey everybody. Hello. Um, I wanted to, uh, maybe double-click into another area, um, of sort of strategic priorities for the firm, which has been around credit, um, really nice results. Uh, this quarter, even when you back out the catchup fees, maybe talk a little bit about how you view the credit business over the next couple of years, specifically related to aspect Finance investment, grade, private credit, the capabilities, you have there and how you expect that business to grow? Not so much for the back out, but if you think about it in a multi-year basis,
so, you know, 1 of the
phenomenons in the industry, which I think is, uh,
really just fits really nicely in our wheelhouse is this convergence of
insurance.
Credits. Private credit.
And private credit has evolved as you know. Like you know several years ago, people talked about direct lending, direct lending, still critical part of the toolkit. Um, but the diversification across the asset classes in private credit is allowing our partners to earn incremental returns and they're effectively as they grow. They're moving assets into the sport.
Face because of the risk-reward and the fact that again, it's private investment grade. It's just another sleep of private investment, right now. A lot of the excitement around, this is around the size of the marketplace and the need for capital in the marketplace, which again, we only see growing.
Um, you know, we've taken the strategy of selectively establishing.
Collaborative Partnerships. Um, I think we're at 6 now where we think we can provide, or we are at 6 now, but we're always actively partnering with people where we can generate unique asset flow. Um, you saw last year we did the largest transaction last year and discover and so we have a pretty fantastic capability set. Um, and I just see this Market continuing to grow over time again, we talked about, well, this will be another wealth opportunity. Part of the sleeve fits in already, nicely into things like CPAC, um, but this is a space that's getting a lot of attention. And again, initially, I think it's really started with the convergence of insurance and private credit and the search for incremental.
Uh, improved risk adjusted returns but now this is a global discussion.
Top and wealth funds institutions, Pension funds. Um, asset based Finance is becoming much more mainstream in these investing discussions and, um,
you know, we built up quite a franchise and a lot of internal content, uh, on the back of our partnership with fortitude. So we got an early start here.
We feel really good about the trajectory.
Great. Thank you.
1 moment for our next question.
Our next question comes from Ben British with Barclays, your line is open.
Hi. Uh, good morning and thank you for taking the question. Um, just curious, if you could talk a little bit more about the near-term outlook for Alvin vest. Uh, and the, the overall Solutions business it seems like the secondary is vehicle fundraising is going, uh, really, really well, curious how much more there is to go there? Um, you know, cap M's in the market. You've got a new secondary vehicle launching a little bit later. Um, you know, I know in the past, there's been a little bit more of a kind of cadence of big fundraisers for co-invest in secondaries and then kind of gaps in between but it seems like that starting to fill out a little bit more. Um, so just curious if you could, you know, I know, you know you mentioned earlier you're not necessarily looking at to give kind of longer term targets but how should we think about that 1? Um, you know, can can the FR potentially double again with the same, you know, speed as it has in the past? You know, how should we be thinking about that kind of medium-term trajectory there given all those moving parts? Thank you.
Hey, hey Ben, it's John. That's the question. Um, look, I I think you're right when you kind of look back historically.
Exceptional growth there. Uh, the funds were, raising are bigger than predecessors. Um,
You know, I said the co-investment fund. We raised we closed in the second quarter, it's 15% bigger. Uh, the secondary is uh, fund, we're raising, uh, is it's going to be significantly larger than the predecessor. It already is and we haven't finished fundraising. Uh, I think it's important to note that, uh, we continue to raise money for our latest secondaries vintage fund. Uh, and that's playing 65% committed. So, you know, obviously we're going to be back in the Market at some point in time in the near term, uh, with it with another secondary fund. So I think that will even out the growth.
Uh, and and this UBS uh, partnership we have uh on on the secondary front, I think we'll continue to drive growth. So
You know, I I look at the business and I I feel very comfortable, uh, that the business can continue to generate consistent growth. I I'm not I'm not going to sit here and tell you it's going to grow at 45%, every single year. I think that's quite exceptional. Uh, but I think this business has tremendous uh, growth attributes to it. And I would fully expect it to continue to grow at a very attractive growth rate going forward?
All right. Thank you very much.
1 moment for our next question.
Our next question comes from Brian McKenna with citizens. Your line is open.
Thanks. Good morning, everyone. And first off, congrats on all the momentum. So John, you've been CFO for about 2 years now. I'm assuming you've had a little bit of a different View and look at the entire business just in this position. So as you transition back to Global private Equity, is there an opportunity to collaborate more and Leverage The broader Carlile, ecosystem to drive better outcomes in that business and and really what are your top priorities going to be? Once you're back in that role and ultimately, how do you permanently accelerate growth in that segment longer term?
Yeah, look, I I I I think collaboration across the carile platform is something that's always been very strong. I think it's a, it's a Hallmark of our culture. Um, we've always been a very collaborative culture and that really reflects
Collaboration, within Global private Equity, but more importantly, uh, between Global private equity and credit and, and credit and help invest. So, uh, I don't, I don't think there's much I need to change their, it's actually, it's quite impressive. Uh, looking at it today. Uh, in terms of global private Equity priorities, look
We've been very focused on on global private Equity the last several years. It's, it's been an area where Harvey and I spent a lot of time and, you know, I I look at the progress within our corporate private Equity business, and I think it's, I think it's quite quite exceptional. Um, you know, we had some made made some changes to that business, and we've talked about it in the past and you look at the business, the way, our corporate private Equity businesses performing in the US. Uh, the performance is very strong Up, 3 to 4 percent this quarter and our, our Us corporate private Equity business
Uh up 70 to 1720 the last 12 months. So I I feel very good about our our us private Equity business, our Asia, private Equity business performances is is very strong. Uh,
You know, look performance Drive drives realizations uh and you know more realizations leads to carrier release. Uh and we talked about it in our remarks, we are a outlier in a good way in terms of realization realizations and, uh, we've been active, the last 12 months, we've continued to be active.
Uh, post post the second quarter. So I I I feel very good with how the investment teams are completely focused on performance and monetization, and look, uh, real estate. Uh, it's probably been 1 of the most challenging real estate fundraising markets.
That I can recall, um, maybe maybe ever and we were able to raise a, a a real estate fund or 10th fund, that was 15% larger than the predecessor which look it reflects. Uh just the the caliber of the team we have in place in the in the performance. So I
Very good about the the role I'm stepping into, I'm stepping into a business that uh, is actually performing exceptionally well.
Really helpful. So you're on the move, I'll just add 2 things on the Move, 1 a little
Maybe a little more nuanced. What do you think about the trajectory of big big uh strategic growth areas of the firm credit insurance?
How we think about global client relationships and just take CPAP for example, which
Basically um to some extent is a horizontal slice of everything we do in private equity and help invest. Um, having John, in this role is going to be extraordinarily beneficial in terms of
Driving, uh, all best practices which we already have for making sure. We're uniform across the board in terms of how we think about resource, allocation investment excellence and product development. Right? You know, John being in the seat leading CPAP, uh, is kind of natural, right? Um, also, you know, look I'll speak on his behalf. Um,
Uh, obviously the last 2 years, is the most enjoyable part of John's career. Um, he doesn't want to say that. Uh, I'll say it on his behalf but, uh, hey, we'll have a chance to thank John. But John's been extraordinary and I'm super excited. Uh, for Justin coming in to see because again, you're taking another big part of the firm, someone who's been with us for 20 years has all the history now coming into the seed and this moving people internally. Um, it's hugely beneficial as we think about strategy for the firm really, really, uh,
I can't overstate how critical it is in terms of these, uh, leadership positions. And the synergies they bring for the company, it was really fantastic that we were fortunate enough to have John, uh, be able to step into the seat. And, uh, and we feel great about Justin and, um, uh,
And so we'll be this transition is going to be seamless for you guys.
Great. Thanks. Harvey.
1 moment for our next question.
Our next question comes from Patrick David with autonomous research, your line is open,
Hey, good morning, everyone.
Uh, you highlighted the strong, uh, Flagship marks obviously returning a lot more Capital, uh, but the net irr of cp7 still kind of stuck at that 8%. So how should we think about the Tipping Point where you, you would feel more comfortable taking cash Care on incremental, realization from that fund and I know you don't give specific like realization numbers, but you mentioned the 4 billion and 3 Q already.
Um,
As you look at that, I think about what could be sold before you're in. How are, how are you feeling about the 10 or I realized performance fees and 2 and and 2 H versus 1 H, or does the cp7 issue and or lead times uh make this more of a 2026 story now. Thank you.
Yeah, it's it's John um look and I we've been pretty clear in previous calls. Uh you know cp7 is not going to be our our best fund. Uh I I think when I look at cp7 today versus 2 years ago
I think what we've done is quite extraordinary; that fund has appreciated 17%.
Uh, and you look at CPA uh CPA. It's a second quartile fund. Uh, and that funds you know, that that fund appreciate 20% and and quite frankly already has a a pretty healthy level of DPI given that it's only 65 70% invested. So uh it's
Hard for me to tell you exactly where where the Tipping Point is, is is for carry. But the only thing, the only thing we can do really to drive
carriers continue to perform and um that's what we're doing. I mean the performance in the US is very strong. Uh performance in Asia is very strong. The first 4 funds are top 5%.
Our Asia, bile fund returned 8% last quarter. So uh you know, we're going to focus on performance performance, drive-thru realizations, and when DPI gets to the right level, that will be the Tipping Point for for Terry. I think it's important. Also to look at just our recruited or recruited carry on our balance sheet, uh, at 2.9 billion, that's up 30% from last year, 30%, from last year. Uh, and the 2, big drivers of that 30% increase have really been, uh, uh, corporate private Equity. Uh, a lot of it us driven, uh, 7 and 8, uh, in alpinvest. Alpinvest had a big driver at this quarter, which is great to see. And again, this 2.9 billion a 30% increase from last year that represents 8 dollars a share. So, it's a tremendous source of value for shareholders going forward.
Thank you. 1 moment for our next question.
Of a alpinvest platform. Carl alpinvest and conventional buyout.
um, so as we sit in a lab and think about solutions for clients, we have the flexibility to build things that advisors with
and that is really the key to. So that's why I spend so much of my personal time with advisors
I was just having the West Coast with advisors because understanding what the advisors wants, are their client is key, solving those issues and we have all the capabilities to do that, we have the brand reach, we have the global footprint. Um and again I I just really think this is early days in this trend around the world. Um, we're on multiple platforms with multiple geographies, and, um, we're very, very excited about it.
Good. I'll hold you to global domination. Thanks.
For that. And the reporter 1 moment for our next question.
Our next question comes from Glenn Shaw with evercore isi, your line is open.
Thanks so much.
Follow hello there. Uh, wanted to follow up on, all the good growth across help invest in secondaries. And my question is more on on
Um, potential for performance because you see you're seeing great growth. The industry is Raising tons of money.
and I know turnover is small as a percentage of the total
Pi, so that's what's exciting. Uh, the flip side is that you're seeing some of the Perpetual products bid through the institutional bid and I'm I'm just wondering, can the industry and you continue to put up good returns in the face of all the capital raised and narrowing um discounts available.
Yeah, Glenn. I
Took a little bit about this in the past. You know, I I think the the industry has cyclical in secular Tailwinds. Uh and you know, I kind of think of the secondary as industry is 1015 years behind the corporate private Equity sector or or or industry. Uh so you have you have tremendous demand
For this for this product, uh, which uh is driving a lot of our growth.
Um, the other thing too is, you know, this is a business, an industry where there are only a handful of large-scale players, which is, you know, something different than the private equity industry. You know, this is an industry that's growing, and the secondary space is going to, you know, 40% per annum. So, you know, I...
I I'm not going to sit here and say alpinvest can continue to grow.
You know, at the 40 plus percent a year, uh, but I do think we are a long way off from this be being a mature industry. Um, the growth Dynamics driving, uh, the growth here are just they're just too strong. Uh, the utilization of secondaries is very different than it was 10 years ago. A lot more people are using secondaries as as a liquidity mechanism that they never had before, not just being driven by lack of realizations in in, in corporate private Equity, but more as a, you know, an annual liquidity mechanism to constantly be rebalancing their portfolio. So I I think it's got tremendous Tailwind, uh, uh, that are going to drive it for the for the foreseeable future. I, I think from a wealth perspective. Um, I think this is 1 of the best products. I, I think it's, it's just a great wealth product. Uh, when you think about it, uh, in the context of like a private Equity product, you know, you, you don't have a J. Curve, uh, much easier to manage.
Uh, it's much more diversified private equity exposure. So I think this, from a wealth perspective, has a tremendous growth looking forward.
It, you know.
I take a step back for a second and first of all underscore everything John said.
I think sometimes.
A couple of points here strategically that need to be identified can kind of get lost uh in the industry. 1 is is John mentioned. There's only a handful of hyperscalers in this business with 1 of them and what it means to be a hyperscalers, it means to have 25 years of History. We celebrate our 25th anniversary of Alum best
In Amsterdam this year. It's about understanding Cycles, consistency of performance consistency of a team, um, but it's also it also often shorthand gets referred to a secondary. Not just a secondary. It's a secondary is just co-invests primary on our platform and it's also portfolio finance. And this I think is where you kind of get into the secret sauce and by that I mean, you know, it is evolving to be a corporate Financial Solutions business.
So when I'm in conversations with Sovereign wealth funds, or CEOs or cios, um, or wealth clients, it's really more about. How can we deliver the full breadth of that platform? And that's been a big part of the pivot over the last couple years. Is that an integrating it into the everything Carlile, uh, to give the business leverage but
When I sit with a C or a CIO in the same conversation, it could be.
Do you want to bid on these assets? We'd like to buy assets, we'd like to rebalance assets, and we'd like to talk to about a portfolio fan solution. It's a solution business truly in all aspects of the word. And so I just feel really good about its place and its value to our clients, whether institutional or wealth.
Thanks for all that extra color.
1 moment for our next question.
Our next question comes from Michael Cyprus with Morgan Stanley. Your line is open.
Hey, good morning. Thanks for taking the question. Just wanted to follow up on the success and the private wealth Channel with the success, with, with cap them CAC and the new private Equity Evergreen product to come in the second half. So just curious how you're thinking about leveraging, the success across our, it even broader Suite of products over time in the private wealth channel. So curious how you're thinking about product development scope for Partnerships to maybe create hybrid public private products scope for accessing the 401K Channel. Just curious, how you're thinking about this how you're approaching this and what, what might be? What might we see from Carlile? Over the
The next several years.
Yeah, thanks a fantastic question. Something you're spending a lot of time on internally as you can imagine. So I think that um the key to all this is putting the client at the center of the discussion.
What I mean by that is, you know, if it's the Retirement Channel, as that opens up, what are the fundamental needs in retirement? How do we think about the fact that, um, there's a lot of talk? For example, we're talking about the TAM and the excitement and enthusiasm. I think all that's fantastic. I think it's true. I also think it's long overdue that...
hardworking people have access to these tools in their retirement. Um, there's a lot to be sorted out between now and then in terms of working with Regulators, ultimately, um,
And government officials to make sure with the industry we get it right. What do I mean by? Get it right? We have to develop solutions that over long periods of time consistently deliver. Um, exactly as an industry of what we say, we're going to do. So when we look at this strategically, it's about okay. What are the things where we have fantastic capabilities? We spent a lot of time talking about the secondary business, you know, there are a lot of things you can do in the lab with a hyperscaler secondary business. In terms of creating Solutions, the key is not, we could create
If you and I got a room, we could create an almost unlimited list of solutions of things. We can provide for this platform we could do Regional funds, we could do tilts in different solution spaces. We can combine it's again about understanding what is the fundamental client need? Whether it's the wealth advisor, the massive fluent ultimate retirement Channel and really developing solutions that over the long term have fantastic performance and deliver and so that's how we're thinking about it. But there's uh any number of permutations that we could build uh we don't want to build for the sake of building.
We want to build the things that are right.
Thank you. 1 moment for our next question.
Our next question comes from Dan Fannon, with Jeffrey's. Your line is open.
Uh, thanks, good morning. Uh, wanted to follow up on the insurance opportunity. Um, you guys had some announcements earlier in the year, um, but was hoping to get an update for the back half or as you think about, you know, kind of longer term uh, the the growth and contribution from that segment.
Yeah, look I we've been pretty clear on on fortitude. It's it's been a it's been a very good investment for us. Uh it's been a big driver of growth uh and and look I I know there's some commentary around 2024 2024 with deliberately quiet for us. We had we had to absorb the, the Lincoln transaction which was in the fourth quarter of 2023. So that was a
Conscious decision on our end. Uh, we really started ramping up uh, activity towards the back end of 2024 and I think the results this year, reflect that we announced
Thing I, I particularly like about fortitude is, uh, you know, it's a, it's a reinsurance solution for us. It's been a great solution on that front. It's it, it's very active, the pipeline's, quite frankly, probably busier than it's been in a couple years. Uh, we're probably the most active, uh, reinsurance business in in Japan, and I think there's more to come on that front. But also, uh, as we think about, you know, how do we, how do we get kind of, more of a, a flow Insurance, uh, capability into car lot. Uh, the way we set up core fortitude is we can do that inside fortitude. Uh, we can do it outside of 42, so we have tremendous strategic flexibility in terms of how we think about attacking the uh, flow segment of the insurance business. But you know, look overall, we're very pleased with fortitude. Uh, this year's been a good good year in terms of growth. And again, I just reiterate the pipeline uh, is is very active.
Thank you. 1 moment for our next question.
Our next question comes from Cayo with KBW. Your line is open.
Hey, good morning, everyone.
Um, just on on gpe. Uh, earlier this year, you mentioned the rate of decline for 2025 management fees would be meaningfully below the 7%. You posted in 2024 and it seems like you're well on track to deliver that. I just wanted to get your updated thoughts on the progression of management, fees for gpe. And whether you think we could be at an inflection point here in terms of getting back to year-on-year management fee growth in 2026 and Harvey. There's been a lot of change in the macro environment just over the past year or the start of the past quarter. Um, when you're out speaking with LPS, how do you think receptivity is right now for potentially allocating to us buyout? And has the tone changed at all there recently? Uh, and obviously asking just in light of you getting ready to launch cp9. Fundraising
Yes, we engage with LPS, it's been great. Um, you see that reflected across the whole Global platform and, you know, when we work with LPS, we work with the entire platform. And so, you know, I think that private Equity industry as I stated in my prepared remarks, as kind of gotten tagged maybe appropriately. So um, and criticized would not returning Capital um,
I am super pleased and proud of what the teams have done, uh, at Carlile, John went through it earlier, so I won't repeat it. But you take what, the US by our leadership has done in the past 2 and a half years. Since I showed up in terms of making changes repositioning the portfolio investing really, really well. I mean, the performance in CPA, Don talked about, uh, second quartile, um, and already, you know?
Distributing.
Liquidity back to our investors. Um and we are an outlier at this stage in the industry. In terms of returning Capital you know, returning 3 times the industry average in terms of capital and corporate private Equity. That's no small fee. Um it's not uh it's perfectly true. Also to say we're not uh happy with some of the net IRS and and we have some work to do but the momentum in this business um and the engagement with LPS is quite High. Um and we're doing everything, our LPS want us to do with the portfolio. So the feedback for me has been positive um in terms of the macro environment.
you know, I think it's taken uh,
Market participants a bit of time to understand how policy gets implemented in the new Administration, right? If you go back to Liberation day, uh, I think everybody's a bit caught off guard by that. I think now there's a general acceptance that the administration um
Is, uh, acting as everybody expected at the beginning of the year, which is very progrowth. Um, and while some might struggle with the approach of the process, um, we actually look at sort of where things land. It feels very progrowth uh, leaning in on regulatory changes getting the tax policy through. So, again, on any given day, you could see a lot of noise in the marketplace, but the marketplace. Uh,
Feels pretty friendly at the moment. Again, anything that happened in the world. There's a lot of geopolitical stress in the world, uh, which were being thoughtful about. But, uh, but the momentum across the whole platform feels good. Um, and I, I'm really proud of what the the teams have done on the Bayou side. It's super impressive.
Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Daniel for any remarks.
Thank you for your time and attention this morning. Should you have any follow-up questions? Feel free to reach out to investor relations. Otherwise we look forward to talking to you next quarter and have a great summer.
Connected, have a wonderful day.