Like most of the other publicly traded private equity firms, the Carlyle Group (NYSE: CG) recorded an accounting loss for the first quarter.

The loss is a result of mark to mark accounting rules than none less than Warren Buffett has labeled ridiculous. Without the markdowns, Carlyle had Distributable Earnings of $175 million for Q1 2020 on a pre-tax basis or $0.48 per common share on a post-tax basis. Over the last 12 months, the alternative asset manager had distributable earnings of $721 million, or $1.93 per common share.

Carlyle Group Earnings Report

On the conference call, Co-CEO Glenn Youngkin told analysts and investors that the Carlyle group entered the fourth quarter is a fantastic position. Before the crises hit, the firm was able to execute several IPOs, secondary trades, and announced transactions. They also sold several assets form their real estate funds. Fundraising remained strong, with $7.5 billion of new money flowing into their funds. As a result of all this activity, they were “sturdy and steady” going into the economic storm.

Co-CEO Kewsong Lee pointed out that traditional private equity investing will probably slow down as firms work to steady their own portfolio companies and assess the ultimate impact of the pandemic on businesses and sectors. With $74 billion of dry powder, Carlyle is well-positioned and can afford to be patient and disciplined. Private equity firms are never forced sellers and can hold assets through periods of market volatility so they can with until the economies and markets begin to level out.

He also said that they were starting to deploy capital in credit markets. Mr. Lee pointed out that they saw market dislocations in credit opportunities, distressed and special situations. The credit funds managed by the firm were taking advantage of these dislocations and beginning to deploy capital.

He also told analysts that the private equity funds Carlyle manage avoided most of the more troubled sectors of the economy. He said, “With respect to the remaining fair value of our entire corporate private equity portfolio, we have very little direct consumer retail exposure at about 5%. Relatively low exposure to commercial aviation at approximately 7%. We have very little energy exposure at 2% and less than 1% exposure to lodging and hotels. Finally, only 7% of the remaining fair value of our corporate private equity portfolio is in publicly listed securities.”

Most of the firm’s energy exposure was confined to energy-specific private equity funds. Only 2% of Carlyle’s U.S. Real Estate fair value is invested in hotels, 2% in a traditional office, and only 1% in retail.

Mr. Lee also pointed out that the firm does not expect a quick recovery in the economy, telling us “We believe there could be a continuing and significant impact from this pandemic. The severity and duration of various health and economic issues and the shape and nature of the recovery are still unknowns, and therefore, all of this will take longer to play out than not.”