The Carlyle Group Inc. (CG) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with record proceeds, robust fundraising, and significant dry powder. The Q&A section reveals positive sentiment towards innovative structures and strong momentum in credit and private equity. Despite some concerns about AI adoption and carry realization timing, the overall outlook is optimistic with growth in base fees and management fees. The company's strategic initiatives and market positioning suggest a positive stock price movement over the next two weeks.
Key Financial Performance
Fee-related earnings $300 million, a 47% margin. This represents an increase from $290 million in Q4. The growth is attributed to continued growth in Carlyle AlpInvest and Global Credit.
Fund management fees $545 million, up 4% year-over-year. The increase is driven by growth in Carlyle AlpInvest and Global Credit.
Fee-related performance revenues $45 million, 15% higher year-over-year. The growth is driven by Evergreen wealth strategies, where AUM now stands at $19 billion, 4x the level from 3 years ago.
Transaction fees $54 million in Q1. Expected to increase next quarter due to completion of several transactions.
Realized proceeds $12 billion, the third-best quarter ever. This reflects the high quality of the portfolio and prioritization of returning capital to fund investors.
Net realized performance revenue (NRPR) $21 million, lower year-over-year. The decrease is due to the composition of exits, with most exits in funds not yet realizing carry.
Carlyle AlpInvest FRE $68 million in Q1, higher year-over-year despite $13 million less in catch-up fees. Total AUM reached $107 billion, up 20% year-over-year. Record quarterly inflows of $6.8 billion were driven by institutional and wealth activity.
Global Credit FRE $93 million in Q1. Management fees increased 6%, while transaction fees were modestly lower. Total AUM of $209 billion was up 5% year-over-year. Inflows of $3.9 billion were led by a $1.5 billion first close of a new asset-backed finance fund.
Direct lending nonaccrual rate 1%. The inception-to-date loss rate over 13 years is just 8 basis points per annum.
Structured credit default rate 50 basis points, half the industry average.
Global Private Equity FRE $140 million in Q1, in line with Q1 last year. Fundraising and realizations show strong momentum, with $5 billion in commitments for the next vintage U.S. buyout strategy.
Proceeds returned to U.S. buyout investors $7 billion, a record. CP VII alone returned nearly $5 billion, driving DPI in the fund to more than 70% with nearly $17 billion in remaining fair value.
Balance sheet assets attributable to Carlyle shareholders Approximately $5 billion or roughly $14 per share. This includes cash, net accrued performance revenues, and investments net of debt.
Dry powder $96 billion, a record and up 13% year-over-year.
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Operating Highlights
First-of-its-kind investment solution: Closed a $5 billion commitment for the next vintage U.S. buyout fund, providing a capital-efficient way to address client needs and offering tailored liquidity solutions.
Global Credit inflows: Raised $4 billion in the quarter, including a $1.5 billion first close of a new asset-backed finance strategy, which now totals $12 billion.
Carlyle AlpInvest inflows: Achieved record quarterly inflows of $6.8 billion, driven by institutional and wealth activity.
Fee-related earnings (FRE): Generated $300 million in FRE with a 47% margin, reflecting strong operational performance.
Realizations: Returned $12 billion to investors, including a record $7 billion to U.S. buyout investors.
Deployment: Deployed $10 billion in the quarter, including two large transactions: an $8 billion carve-out of BASF's coatings business and a $3 billion acquisition of MAI Capital Management.
Diversified platform: Continued focus on private equity, real assets, private and liquid credit, and Carlyle AlpInvest to navigate geopolitical and market changes.
Growth targets: Reaffirmed confidence in achieving $200 billion of inflows, $1.9 billion in fee-related earnings, and $6 or more per share in distributable earnings by 2028.
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Risk or Challenges
Geopolitical Uncertainty: The ongoing Ukraine-Russia war, the war in the Middle East, and general geopolitical splintering are influencing capital allocation and investment decisions, creating a complex global backdrop for operations.
Economic Growth and Competition: Intense focus on reindustrialization and onshoring across regions, which could impact investment strategies and operational priorities.
Energy Security and National Security: Increased emphasis on energy security and traditional defense investments, which may require strategic adjustments and resource allocation.
Market Volatility in Credit: Potential for increased volatility in credit markets, which could impact portfolio performance and investment returns.
Fundraising Challenges: Fundraising for the next U.S. Buyout Fund has not yet launched, indicating potential delays or challenges in securing capital.
Realized Performance Revenue: Lower net realized performance revenue in Q1 compared to the previous year, attributed to the composition of exits in funds not yet realizing carry.
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Guidance & Outlook
Revenue and Fee-Related Earnings Growth: Management fees are expected to accelerate over the next two years, consistent with the targets laid out in February. The company anticipates achieving $1.9 billion in fee-related earnings and $6 or more per share in distributable earnings by the end of 2028.
Capital Deployment and Realizations: Several transactions are expected to close in the coming months, including an $8 billion carve-out of BASF's coatings business and a $3 billion acquisition of MAI Capital Management. These transactions are projected to contribute to increased transaction fee revenue in the near term.
Fundraising and Inflows: The company expects first closings for next vintage funds in Carlyle AlpInvest later this year. Additionally, inflows are projected to reach $200 billion by the end of 2028, driven by strong demand across diversified platforms.
Private Equity Commitments: A $5 billion commitment has been secured for the next vintage U.S. buyout fund, with fundraising expected to launch later this year. This demonstrates confidence in the platform and continued interest in core sectors.
Global Credit Performance: The company anticipates taking advantage of potential credit market volatility in 2026, supported by strong credit metrics and active portfolio management.
Dividend and Share Repurchase: The company plans to continue its quarterly dividend of $0.35 per share and remain active in share repurchases, with $1.9 billion remaining on its authorization.
Dry Powder and Growth Plan: Dry powder stands at a record $96 billion, up 13% year-over-year. The company is confident in achieving its growth plan, which includes $200 billion in inflows and significant earnings growth by 2028.
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Shareholder Return Plan
Quarterly Dividend: Declared a quarterly dividend of $0.35 per common share, consistent with the quarterly level in 2025.
Share Repurchase: Repurchased or withheld 3.8 million shares totaling $205 million in the quarter. $1.9 billion remains on the $2 billion repurchase authorization.
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Key Q&A
Q:Can you expand on the structure announced earlier this week, including the dynamics within the structure, asset funding, LP response, and financial implications for Carlyle?
A:Harvey Schwartz explained that the structure is innovative and aligns with Carlyle's capital-light strategy. It involves a $5+ billion cornerstone financing at full fees with no impact on Fund VII or VIII economics. The solution addresses LP needs and aligns with future fundraising. The announcement has generated significant interest from LPs and GPs.
Q:What is the outlook for carry in private equity and AlpInvest?
A:Justin Plouffe noted that AlpInvest has a European-style waterfall, making carry timing hard to predict, but returns remain strong. Several deals in Japan IV, Europe Tech, and Financial Services II and III are expected to contribute to carry in the next few quarters, with realizations expected by 2026.
Q:How is the AlpInvest business responding to scrutiny over day 1 markups in retail products?
A:Harvey Schwartz stated that there are no changes to practices, as the team historically buys higher-performing assets closer to par. Conversations with advisers remain robust, and performance has been strong.
Q:What are the expectations for base fee growth as fundraising progresses?
A:Justin Plouffe mentioned that base fees grew 4% year-over-year and 7% on an LTM basis. Fundraising is expected to accelerate with the super cycle, leading to higher base fee growth in the coming quarters.
Q:Why did CTAC see elevated redemptions last quarter, and what is the outlook for redemption requests?
A:Harvey Schwartz attributed the redemptions to broader private credit fears and noted that CTAC is diversified and marked daily. He expects redemption requests to persist for a while but remains optimistic about CTAC's long-term trajectory.
Q:What is the opportunity in the credit portfolio, including direct lending and CLOs?
A:Justin Plouffe highlighted strong fundraising momentum in credit, with nearly $4 billion raised in the quarter. CLOs have been stabilized, and the firm has a strong track record in private credit and CLOs. Harvey Schwartz added that institutional interest in direct lending is growing, and the firm is well-positioned to grow market share.
Q:What is the outlook for management fee growth in credit?
A:Justin Plouffe noted that credit management fees grew 10% on an LTM basis. The mix is improving with higher-fee products like opportunistic funds and private BDCs, and the platform is now diversified and durable.
Q:What is the firm's approach to AI deployment across its portfolio?
A:Harvey Schwartz stated that AI adoption is steady, with applications in high-scale automated functions. The firm is heavily investing in data science and AI, focusing on efficiencies and productivity gains, though widespread adoption will take time.
Q:What is the exposure to software in AlpInvest and the secondaries industry, and how is risk managed?
A:Justin Plouffe explained that AlpInvest's software exposure is low to mid-teens, which is market weight or below. The team manages diversification across managers, positions, and vintages, leveraging 25 years of experience.
Q:What is the long-term growth trajectory for transaction fees?
A:Justin Plouffe stated that transaction fees are expected to grow alongside the broader platform. While quarter-to-quarter variability exists, the business has seen significant growth over the past two years and will continue to expand as the platform grows.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the timing and amounts of carry realizations, citing market dependencies and the unpredictability of European-style waterfalls in AlpInvest. Additionally, Harvey Schwartz's comments on AI adoption lacked specific examples or quantifiable benefits, making it difficult to assess the impact.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BASF acquisition
Buyout Fund
Buyout confidence
CAPM CAPs
CAPs AlpInvest
COVID Ukraine
Capital credit
Credit Demand
Demand platform
Deployment transaction
East subject
Fund activity
Fund investor
Fund solution
Instructions pleasure
Justin milestone
MAI Capital
Momentum platform
Officer Chief
Officer buyout
Officer press
Realizations quality
Relations Sir
Russia war
Sir floor
Ukraine Russia
change
defense energy
demand
mind
portfolio finance
sector
security
trend
win
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The Carlyle Group Inc. (CG) Q1 2026 Earnings Call Transcript
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The earnings call summary indicates strong financial performance with record proceeds, robust fundraising, and significant dry powder. The Q&A section reveals positive sentiment towards innovative structures and strong momentum in credit and private equity. Despite some concerns about AI adoption and carry realization timing, the overall outlook is optimistic with growth in base fees and management fees. The company's strategic initiatives and market positioning suggest a positive stock price movement over the next two weeks.
The Carlyle Group Inc. (CG) Q4 2025 Earnings Call Transcript
Positive2-6
The earnings call summary and Q&A indicate strong financial performance, strategic growth in various segments, and positive future outlooks. Key highlights include exceeding 2025 financial targets, significant transaction pipeline, robust growth in AlpInvest and Global Credit, and strategic capital management. Although management deferred some details to February 26, the overall sentiment is positive, driven by strong metrics and optimistic guidance. The lack of market cap information limits precise impact estimation, but the overall positive sentiment suggests a likely stock price increase in the short term.
CG Slides
Carlyle Q4 and FY 2025 slides reveal record earnings, 11% growth in fee-earning AUM2026-02-06
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Carlyle Q2 2025 slides: distributable earnings surge 26%, AUM reaches $465B2025-08-06
Carlyle Q1 2025 slides: Record fee-related earnings amid diversified growth2025-05-08
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