Carlyle reports blockbuster Q1

The firm's Global Credit segment put up stellar performance, with fundraising of $3.2 billion handily outpacing all other segments.

The Carlyle Group just completed its best quarterly performance since 2012, driven by strong exits in its buyout funds.

The firm’s Global Credit segment put up stellar performance, with fundraising of $3.2 billion handily outpacing all other segments. The segment’s fee-related earnings of $21 million rose more than 60 percent in the quarter, from an adjusted $13 million in the first quarter of 2020, driven by higher management fees and Global Capital Market Fees.

“Our funds delivered their best quarter in the past decade,” chief executive Kewsong Lee said on the firm’s Q1 earnings call Thursday. “Many of our largest and most significant funds appreciated materially in the quarter.”

“The real big news” this quarter, Lee said, is Carlyle’s record net accrued carry balance of $3.2 billion, an increase of 2.5 times from a year ago.

“This record level of accrued carry alongside our strong investment performance positions us to see an acceleration on net performance revenues over the course of this year and beyond as our exit pace picks up,” he said.

Carlyle’s corporate private equity carry funds appreciated 15 percent in the quarter; investment solutions carry funds grew 14 percent; and global credit and natural resources carry funds gained 8 percent and 7 percent, respectively, according to the firm’s first-quarter earnings materials.

Overall, the firm’s carry funds appreciated 13 percent in Q1, compared to a depreciation of 7 percent in the equivalent period last year.

Carlyle recorded $6.4 billion of realised proceeds during the quarter, up from $4.5 billion a year ago. More than 60 percent, or $4 billion, of the realised proceeds came from global private equity, driven by exit activity in its Europe, Asia and US buyout funds.

“A big part of the appreciation and our views on realisations are dependent in large part on the environment being healthy,” said Lee. “To the extent that that is the case, we do expect to see a meaningful ramp up in exit activity.”

Carlyle gathered $7.8 billion of inflows from January to March with the bulk of fundraising for its global credit and investment solutions programmes, which gathered $6.4 billion. Global Credit’s assets under management jumped 20 percent in the quarter, to $58.8 billion, from a year ago. The increase was driven by incremental capital from CLO issuance and fundraising in the firm’s second opportunistic credit fund.

The Washington, DC-based firm expects the fundraising mix to shift toward global private equity later this year. Lee noted that early feedback from investors was “positive” on several flagship global PE funds that are returning to market. The firm expects to hold first closes for several of these funds later this year, he added.

Carlyle is seeking $22 billion for its eighth US buyout fund and as much as $2 billion for a growth equity fund dedicated to North America, according to Bloomberg. The firm revealed during its investor day in February that it intends to scale its next flagship funds by at least 20 percent and expects to raise at least $130 billion in new capital by 2024.

Total assets of Carlyle’s global private equity portfolio, which includes corporate private equity, real estate and natural resources, increased 4 percent quarter-over-quarter to $137 billion. This was driven by portfolio appreciation and new fundraising, according to the earnings statement

The portfolio generated net performance revenue of $74 million in Q1 led by exits in the firm’s second financial services fund, sixth US buyout fund and third Japan buyout fund.

During the quarter, Carlyle deployed $4.3 billion through its global PE portfolio, representing nearly 80 percent of total investments by the firm. Lee said the firm saw “significant regional activity in Europe, a further ramp up in PE growth opportunities in Asia and the US, and strong activity across tech, healthcare and consumer sectors”.

Carlyle’s total assets under management reached $260 billion as of end-March, up 20 percent from a year ago.

This story first appeared in affiliate publication Private Equity International