Private Equity: Carlyle Group Reports Fourth Quarter Earnings

The Carlyle Group earnings report for the fourth quarter emerged on Wednesday.

Carlyle Group (NYSE: CG) is the last of the “Big Money” private equity and asset managers to report fourth-quarter earnings. It was a solid quarter for the Washington DC-based alternative investment manager, although it fell shy of last year’s results. The 2018 quarter had the extra benefit of $32 million of $32 million of net insurance recoveries, high transaction fees, and catch-up management fees that were not duplicated in the fourth quarter of 2019.

Carlyle Group Earnings Report

It was a strong year for Carlyle Group as Fee Related Earnings were up almost 30% compared to the prior year, reaching $453 million. Assets under management grew by 4% year over year at the firm totaled $224 billion. The asset manager currently has accrued more than $1.7 billion in net performance revenues on its balance sheet that we expect will ultimately convert to earnings as of the end of 2019

On January 1, 2020, Carlyle concluded the process of converting from a partnership to a C- Corporation. Not only does this have tax benefits, but it also brings increased liquidity. The partnership units could not be purchased by many funds or passive strategies and should get a lift as those buyers become attracted to the stock this year. As part of the conversion, Carlyle announced a fixed dividend of $1 annually. That’s a yield of about 3% annually. The firm will pay the new dividend on a quarterly basis.

On the conference call, CFO Curtis Buser talked briefly about the potential new buyers for Carlyle now that the conversion is complete.

We expect to be added to the various CRSP indices, whose ranking date is early March, with reconstitution in mid-March. Our market cap and one-share/one-vote governance should position us to be added to the Russell 1000 indices, with their annual ranking day likely in mid-May and reconstitution in June,” Buser said. “We expect to be added to the MSCI and S&P total market indices, as well as several smaller indices, which will occur in the March to June timeframe. And we continue to believe we have met the criteria for inclusion in the S&P 500, nut that, of course, is a more subjective evaluation for which we cannot predict an outcome.”

The institutional shift from public to private assets continue to benefit Carlyle’s fundraising efforts. In the fourth quarter, the firm raised another $3.3 billion bringing the year to date total to $19.3 billion. Most observers expect the robust fundraising to continue as private equity, private credit, and real estate remain in high demand form institutional and high net worth investors. On the conference call following the release, management indicated they expected to raise an additional $20 billion this year.

Recent: Private Equity: Chicago-based Private Equity Fund Wynnchurh Closes Fifth Tranche at $2.3 Billion

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