Key Takeaways:
Global investment firm Carlyle Group (CG) reported a 28% drop in first-quarter distributable earnings to $327 million, missing analyst expectations, even as it raised $13 billion in new capital and amassed a record $96 billion for future investments. The miss was driven by a sharp decline in performance-based revenue, overshadowing strong fundraising and record cash-outs from its U.S. buyout funds.
"We continue to have a deep set of assets to monetize for our investors," Chief Executive Harvey Schwartz told analysts, reaffirming the firm's target to raise a further $200 billion by the end of 2028. Schwartz highlighted a "first-of-its-kind" $5 billion anchor commitment for its next U.S. buyout fund, structured by its AlpInvest unit, as a key innovation.
The results paint a mixed picture for the private equity giant. While distributable earnings, the cash available to shareholders, came in at 89 cents per share, below the 94 cents anticipated by analysts, the firm's fundraising engine appeared robust. Inflows of $13 billion were led by its secondaries specialist AlpInvest, which pulled in a record $6.8 billion, and its global credit division, which raised $3.9 billion. However, net realized performance revenue, a crucial metric for profitability, plunged 84% year-over-year to just $20.5 million. The firm explained this was due to the "composition" of exits, with many recent sales occurring in funds not yet eligible to pay out carried interest.
The disconnect between cashing out on investments and returning profits to its own shareholders underscores the complex fund cycles in private equity. Carlyle said it returned a record amount of capital to investors in its U.S. buyout funds—over 40% higher than its previous peak in 2021—and generated $12 billion in total realized proceeds. Yet, the firm posted a net loss of $132.2 million under generally accepted accounting principles (GAAP), weighed down by a $616.7 million unrealized investment loss. Looking ahead, Schwartz pointed to a pickup in transaction fees in coming quarters, supported by the announced acquisitions of MAI Capital Management for around $3 billion and an $8 billion carve-out of BASF's coatings business.
Carlyle's total assets under management (AUM) grew to $475 billion, supported by the $13 billion of inflows during the quarter. The AlpInvest unit, which specializes in second-hand private equity stakes, saw its AUM swell by 20% year-over-year to a record $107 billion. The global credit platform's AUM reached $209 billion, up 5% from a year ago. This growth provides a foundation for future fee-related earnings, which the firm aims to grow to $1.9 billion by 2028.
Carlyle declared a quarterly dividend of $0.35 per share, consistent with the prior year's level. The firm also repurchased or withheld 3.8 million shares for $205 million in the quarter, with $1.9 billion remaining on its current buyback authorization. Despite the weak quarterly profit, CEO Harvey Schwartz expressed confidence in the firm's long-term targets, including reaching or exceeding $6 or more in distributable earnings per share by the end of 2028, driven by its record $96 billion in capital available for investment.
This article is for informational purposes only and does not constitute investment advice.
