Good day and thank you for standing by. Welcome to The Carlyle Group Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I’d now like to hand the conference over to your speaker today, Daniel Harris, Head of Investor Relations. Please go ahead.

Thank you, Shannon. Good morning, and welcome to Carlyle’s Fourth Quarter 2021 Earnings Call. With me on the call this morning is our Chief Executive Officer, Kewsong Lee; and our Chief Financial Officer, Curt Buser. Earlier this morning, we issued a press release and a detailed earnings presentation, both of which are available on our Investor Relations website at ir.carlyle.com. This call is being webcast, and a replay will be available on our website. We will refer to certain non-GAAP financial measures during today’s call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with Generally Accepted Accounting Principles. We have provided reconciliations of these measures to GAAP in our earnings presentation to the extent reasonably available. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our Annual Report on Form 10-K that could cause actual results to differ materially from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time. Turning to our results. For the fourth quarter, we generated $174 million in fee-related earnings and $903 million in distributable earnings, with DE per common share of $2.01. We produced net realized performance revenue of $683 million and enter 2022 with an accrued carry balance of $3.9 billion. And for the full year, we generated $598 million in FRE and $2.2 billion in distributable earnings, with DE per share of $5.01. We declared a quarterly dividend of $0.25 per common share. To ensure participation by all those on the call, please limit yourself to one question and one follow-up and then return to the queue for any additional questions. And with that, let me turn the call over to our Chief Executive Officer, Kewsong Lee.

Thanks, Dan. Hello everyone, and thanks for joining us today as we discuss our fourth quarter and full year 2021 results as well as provide line of sight into 2022. We started last year by laying out our strategic plan for future growth, and I’m pleased to tell you that we are delivering on our goals. We had an exceptional 2021 with records across the board and fee-related earnings, distributable earnings and every major investment metric. I’m proud of our people and the results they have collectively produced. Our fourth quarter performance caps this strong year and illustrates the powerful growth trajectory across a more diversified platform. I want to highlight the key drivers underpinning our record year. As our FRE has grown to new sustainable levels, our growth initiatives are starting to payoff, and our performance has set the stage for robust distributable earnings over the next several years. Let’s start by underscoring our investment performance with valuations increasing 41% year-over-year and realizations of $44 billion across all of our traditional carry funds. Portfolio construction continues to be a strength, especially as we enter a period of greater volatility. We’re investing more capital as we expand our aperture and leverage even more effectively our global scale and sector expertise. This has resulted in record investment activity. We deployed $14 billion in Q4 alone, and $34 billion in 2021, each a record. This investment performed ability to send realized proceeds back to our limited partners has helped their fundraising efforts. In 2021, we raised $51 billion nearly double what we’ve raised in 2020. We aim to continue this momentum over the next few years as we focus on the substantial upside potential to our Investor Day target, which would help us drive financial results beyond our FRE ambitions. Alternative sources…

Thanks, Kew, and good morning, everyone. I want to begin by reiterating many things Kew mentioned to emphasize what our strong performance this year means. We generated over $5 per share in distributable earnings in 2021, well more than double the average generated in the last 5 years. In fact, the fourth quarters $2.01 per share would have exceeded the full year in 4 of the past 5 years. These results are driven by attractive investment performance, and are fortifying our balance sheet to help us deliver long-term sustainable growth in our global platform and fee-related earnings. Let’s dive deeper into all of this. This year we focused on delivering strong, sustainable and growing fee-related earnings. 2021 was a record year for the firm’s overall FRE, every segment generated record FRE, and our full-year FRE margin grew to 33%, up from 30% in 2020. In fact, FRE grew more than 20% off the adjusted level in 2020 and our 5-year FRE CAGR is 24%. This is the outcome of scaling our platform and positioning Carlyle for growth. As Kew noted, we also had a record year for fundraising, and much of that will have a stronger impact on fee-related earnings in 2022. Record fundraising of $51 billion along with strong fund performance to help drive total assets under management, up 22% over the past year. As we look ahead, we will continue to focus on running the firm effectively and efficiently. On an organic basis, we expect to see FRE growth of more than 20% in 2022 driven by strong top-line growth. 2021 fundraising underpins much of our expected growth in 2022. Notably, we activated fees on our new U.S. buyout and growth capital funds, as well as our most recent U.S. real estate fund, all in Q4, elevating fee…

Thank you. [Operator Instructions] Our first question comes from Alex Blostein with Goldman Sachs. Your line is open.

Hey, good morning, everybody. Thanks for taking the question. So first question just a little bit more strategic, I guess, Kew, 2021 was a really strong year essential on every front, but most notably FRE growth. One of the concerns we continue to hear from investors and Carlyle broadly, is that you really won’t be able to sustain that kind of growth momentum going forward. But from your comments, you seem to be obviously pretty confident in that. So where is the disconnect, how do you expect the dynamic to play out and maybe give us a little bit more in terms of the drivers that gives you that confidence?

Yeah, good morning, Alex. Look, I’m really confident. And importantly, the entire team is confident in our momentum, and the fact that we’re going to keep this going. Look, the FRE has already been growing 20% a year for the past five years, I think, that’s mostly gone unnoticed. And if you get a little bit more granular, if you look at Q4, we generated $174 million of FRE, that run rate multiply that by 4, it already positions us for a strong year of FRE growth in 2022. And that’s before additional upside from our activities that we’ve got underway. Look, with respect to business building, I think you touched on it in your note this morning, and it’s the right place to look. Our Global Credit business is about to have a breakout year, we’ve talked to you about the fundraising, it’s got over $70 billion of AUM raised $17 billion last year, but really the thing to look at all the patients in building that business, this is the year where I think operating leverage really starts to kick in. And I think off of that growth, more is going to fall to the bottom line with respect to FRE. And then turning to our incredible investment performance. It’s across the board and despite the record realizations we had, we still have about $4 billion of net accrued carry balances. It’s very diversified across regions, across sectors across funds. For me – for us, it’s not a question of, if this comes out, but when it comes out, as Curt alluded to in his comments. And then let me just address, the broader base momentum we have on fundraising. So we pointed out $51 billion of fundraising, I want to note, two-thirds of that was away from corporate private equity, healthy fundraising in U.S. real estate, in solutions, in credit, it’s broad-based across all segments. And I point that out, because, I think folks on appreciating that we’re much more diversified and it’s a much broader business and a platform than ever before. Now, of course, this is all before the fact that our balance sheet is about as strong as it’s ever been. And, I’m very focused on driving the firm into new strategic adjacencies in markets that are large, that are scalable, and that can be very FRE generative. So when you throw that all together, yeah, I’m really confident. And the last piece to all this, you need a great team, this team is executing. So all of that is what gives me confidence that this is going to continue.

Great. That’s super helpful. Thanks for that. My follow-up is going to touch around just the operating leverage in the model and I really want to zone in on compensation philosophy. We’ve seen a number of players in the alternative space sort of shove the compensation structure toward paying out more carry and obviously maximizing FRE margins, including a recent list at a large private equity firm, as I’m sure you guys know. Although, there’s a degree of just P&L geography, obviously, and all of that it does align compensation with fund performance and therefore, LP. So what are your thoughts about that dynamic for Carlyle? And as you’re a lot more scale today than in the past, just with respect to management fee base, why not pursue a similar strategy?

Alex, thanks for that. This is Curt. Let me take that. So first, compensation structures, as you point out, are really important in driving behavior. And we feel good about our structures, and how they’re aligned for stakeholders across all investment cycles. Of course, we’re always thinking about compensation and alignment, and how to better align compensation of our professionals with that of our shareholders, and performance. Because what you pay for is likely we’re going to be what you get. At the same time, we do believe in pay for performance, and have been consistent in saying that our split our performance compensation shows strong alignment with limited partners on carry and fund performance with shareholders on driving fee-related earnings, and using the firm capital to build our retained earnings. So that’s important for driving future growth. We’re going to continue to grow our business and earnings that’s what we’re focused on. We’ve been doing that really well as Kew just outlined have great confidence in the future. And to the extent that we decided to make any changes in our compensation models, we’ll let you know. But the bottom line is we believe in alignment.

Great. Thanks for taking both questions.

Thank you. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.

Good morning, Kew and Curt. Hope everyone’s doing well.

Hey, Craig, nice to hear from you.

Great. Nice to hear from you.

So my first questions on credit and a similar question to Alex’s first one. But $17 billion of fundraising in 2021, this was a pretty big increase year-over-year. And we see you keep expanding horizontally into new segments. We saw that with iStar this week. So how should we think about the forward run rate for fundraising credit given larger funds, wider offering, and also, some scale advantages on the distribution front, because I believe you will be doing new things on the retail side, too?

Hey, Craig. It’s Curt here. Just thanks for that question. Global Credit set up really well. So let me just kind of tick through some of the areas in starting with fundraising. So you look at kind of our past, it’s been a nice tick up in fundraising, in Global Credit over sequential years something like $10 billion or $11 billion last year, $17 billion this year, and in our pending figure in AUM, which is about $16 billion. But the vast majority of that is global credit. And it’ll turn on mostly as we deploy capital during next year and so that’ll be an underpinning a lot of growth. Let’s tick through some of the big components. First, the structure credit business, our CLO that business is just booming. So we issued 14 CLOs globally in 2021, which is currently managed about $34 billion in liquid credit strategies. That $14 billion of CLOs we issued is about $7.5 billion. And we think we’re taking market share in this space that’s really going to help underpin a lot of further growth in FRE in 2022, because you didn’t get all the benefit of that FRE growth this past year, and so you’re going to see more in that space. So activity in the CLO is really good. As Kew mentioned in his opening remarks, our opportunistic credit business is already at $8 billion deploying really well, all those fees, again, turn on as they deploy capital. So as that investment pace continues, more increase in revenues, so good space and opportunistic credit. In aviation business, boy, really nice, nearly a triple run rate and fee-related earnings. The size of that business has continued to go up, you’ve seen some of these big transactions that they’ve done a recent Fly a…

Great. That’s helpful.

Hey, Craig. This is Kew. And really good to have you back with us here. The only thing I would add, and let me just take a step back. We’re being very strategic and thoughtful in how we build out our credit business. It’s a platform approach across big scalable strategies; you see how we’re doing this. You’ve been very patient with us, and it’s really starting to pay off. The other thing I would say, as I talked to LPs, we’re in the early innings here. Credit is relatively – private credit is relatively underpenetrated relative to private equity. There continues to be secular tailwinds and more flows are coming in and wanting private credit exposure. So we’ve got great momentum. Curt touched on this. This is an asset class with products that fit particularly well to retail. It’s an area where you can find permanent sources of capital, which we’ve done now with our BDCs, and you noted that publicly. So we’ve got great momentum. It is sustainable. These are sticky FRE businesses that that we think just keep growing, as we have secular tailwinds behind our platform.

Thank you, Kew. And Kurt, I heard your commentary on forward to being a breakout year in 2022. So does this mean insurance M&A? Or is this really kind of robust more organic growth in the institutional B2B channel? I was just hoping you could articulate that comment, and it probably relates to some of the stuff you just said in credit.

Yeah, so let me talk about Fortitude. First and foremost, that business is doing great. It’s bigger, and it’s better, at this point in time than what our expectations are. So let me step back a little bit, we completed the carve out, which was not easy to big business, really pleased with the management team, they’re executing really well. They’ve been able to execute a couple of acquisitions. The Prudential Assurance Life product that was announced in Q3, and then there’s another big reinsurance contract that just got done. They have a great pipeline for future deals. All of that is – already – it has a fee run rate to Carlyle about $50 million to our business. And there’s about $10 billion of total assets under management that are fee paying, 7 of which are invested directly into our funds, three of which is how we structured the actual Fortitude investment with our partners. So it’s really set up well for further growth. The pipeline is there. And we think this is going to be an active year for that business in terms of future scale and good things are happening.

Thank you, Curt.

Thank you. Our next question comes from Bill Katz with Citigroup. Your line is open.

Okay, thanks very much. So, Kew, I think you’ve mentioned now a couple times and Curt, both, it sounds like the deal pipeline might be picking up and you have some good balance sheet. Could you maybe go down a layer and talk to where you think you might see an opportunity? I think last quarter, so you had mentioned you want to monetize and take the free cash flow from the realizations and drive FRE, I think permanent capital, I think I heard that again today. But can you talk a little bit maybe specifically, what segments or products you could see that opportunity playing through?

Sure, Bill. Thanks for the question. I mean, look, take a step back, the criteria for us is we’re looking for strategic adjacencies in big and scalable strategies that are going to be generative of FRE that can be great growth drivers for us in the years to come. Okay. So we’re very focused and discipline on that. If you recall, back at Investor Day, which is about a year ago, I mentioned that I think the 2 best areas for this for us are going to be in the credit asset class and in the solutions business, which continues to grow very fast in our industry. We’re already a dominant Global Private Equity player around the world. I think the bigger opportunities for scalability and FRE generation are going to come into credit asset class, and then into solutions for us. Hopefully, that gives you a little bit more color.

Okay, thanks. And then just to come back to the net realization guidance for the next couple of years. So sounds like it’s up a little bit from the Investor Day, which is nice to hear. When I look sequentially, there’s maybe 2 tactical view, but your net accrued carry balance actually dipped a little bit month – quarter to quarter. But when I look at some of your seasoning ratios like in-carry ratio, [you sent publics] [ph] and those age 4 years or more. Those also have slipped a little bit maybe it’s quibbling. But how do you sort of triangulate between sort of appreciate 2020 was a great year to $1 billion sort of on average now, when you have sort of a bit of a less public portfolio loss being equal. Thank you.

So, look, I really think that the overall platform is set up really well, the $5 billion that we generate a realized carry last year is far beyond, anyone’s expectations, just a phenomenal year. And if you look at kind of on a go forward basis, I think, we can continue to do really well. And let’s talk about some of those specifics. So we started the year not at $3.9 million. And in fact, if you look at last quarter to this quarter, the fact that we still had depreciation that we had to keep it essentially round the same $3.9 billion is pretty [dag gone good] [ph], when you realized $683 million in a quarter. Let’s go back to Carlyle’s big realization years from when we went public to 2017, $683 million of net realized performance revenues. That was an annual number. We did that in one border. And so, as we look going forward, I’m very confident this $3.9 billion of accrued carry. But more importantly, is the $124 billion of invested capital in the ground remaining fair value. That number is about double what it was during the last cycle and it’s 30% higher than at the beginning of this year, so all of the components to really be able to drive carry going forward are in place. So the in-carry ratio still really good like 75%, the amount that is still accrued despite really strong realizations, I feel really good about it. And you look at our GAAP numbers, even there. I mean, look at the GAAP EPS number, the nice forward indicator of things to come.

Hey, Bill. It’s Kew. Great exit activity is a function of great investment activity and hard work that’s gone into it 3 or 4 years prior. And our investment engine is really firing. And our deal teams, they’re really performing, we’re creating real value in our portfolios. And if you look at our investment pace, and our ability to deploy more, I mean $34 billion in 2021. That’s really the forward indicator, the setup for what our earnings power is going to be 3, 4, 5 years hence, right? So the $3.9 billion of carry that we have now the fact that it stayed flat, despite record realizations talks to our business model, that we are driving great deployment and great portfolio company appreciation. So the engine is really working. Okay. So we’re managing more money. We’re investing more money. We’re creating more value than ever before. And it’s just going to be a matter of time before that comes out in our earnings over 3, 4 or 5 years.

Okay. Thank you both.

Thanks, Bill.

Thank you. Our next question comes from Chris Kotowski with Oppenheimer & Company. Your line is open.

Yeah, good morning and thank you. I wonder if you could give us a bit more color on the iStar transaction, just because I have a feeling this is kind of like a case study for your strategy of using balance sheet capital to try to drive FRE growth. So in the press release, it said that you acquired it for roughly $3 billion and you just said on the call that $200 million came from your balance sheet. So I’m curious about the remaining $2.8 million. Does that come from a specifically raised third party vehicle? Or does it come from just ordinary funds across the board? And then, how should we think about in terms of the day one revenues that it generates at this level? And in the press release, you say you expect it to scale to $10 billion, what would it be at a mature fully platform level at that level kind of those – you can give some color around those things?

Sure. So, Chris, I think it’s a great question. And we’re really pleased about the transaction. And really overall what’s happening in credit just today kind of comment on a minute ago. The deal itself $3 billion purchase price really kind of setting us up for a good platform in real estate credit, it’s one that we know well, the [Roger cost] [ph] just take the lead in all of this, really built that in the past, bring it over some of the people that he knows really well. So, from a personal perspective, really good from an asset perspective, we know the assets. It’s levered transactions. So there it’s about 2 to 1 1everage. And from an equity piece that was funded by some of our LPs, both in existing products and a strategic investor, and we’re about 20%. The important part is will be the GP. So kind of think about this as fund structures, where the GP have that. This enables us over time to potentially use this to be in the retail channel. But more work to come on all of that. And it’s going to take us, as I said before, 2 to 3 years before, this really culminates. But we need to make investments like this now to build a drive that kind of growth in 2024, 2025 and thereafter. So this is a good move for us as a firm and really jumpstart to what I think is going to be a very big business. Mark Jenkins, who runs this, said, look, he’s looking to build a $10 billion business. And I know Mark pretty well and Mark’s not going to stop at $10 billion.

Okay. All right. That’s it for me. Thank you.

Thanks, Chris.

Thank you. Our next comes from Gerald O’Hara with Jefferies. Your line is open. Gerald O’Hara: Great. Thanks. Just maybe wanted to pick-up a little bit on the Investment Solutions business. Clearly, you see some kind of growing momentum there as it relates to net accrued revenue. But perhaps you could just kind of give us a little bit of an update on how that segment is evolving, and where you might see that kind of headed into next year?

Gerry, hey, thanks for the question. Investment solutions, it’s done really well. We’ve doubled our FRE at $84 million this year, $37 million a year-ago. More importantly, this is in a very attractive space. So solutions products are really a good way for a lot of people to come into private equity and their performance is phenomenal, 48% this past year. They’ve mastered really data and how to help LPs construct portfolios. And so they’ve done a really nice job of that, and their deployment phase has been really good this year. You point out the recruit there. Obviously, that’s a reflection of the 48% appreciation. And look, I think, we’re well positioned for carry in that business to be realized carry to be a much bigger number. Now, you start to see some of that really coming in here in the fourth quarter, still small relative to overall Carlyle, but much bigger than what you’ve seen before. Remind you that, this is all European style waterfalls. When we bought AlpInvest, we didn’t buy the historical carry. And so it’s really only on the funds then they’re raised where the participation rates, right? So that’s going to really start to play off 2023, 2024, 2025 is when those numbers most of that 320-ish of that accrued carry will really pop in those years, I think, you’ll see a nice increase until that point for be those years where that number really comes through. In the meantime, Ruulke and the team are really working hard on ways to continue to grow that business, the secondary platform and the co-investment platform, our hot platforms. They’re looking at other ways to kind of take advantage of what they know and do things. But more to come on that is that all kind of unfolds.

Hey, Gerry. It’s Kew. The only the only high level thing I’d add is, there’s a theme that I introduced which is – or actually came with the first question which is under appreciation, I think our FRE strength is underappreciated. I think the diversity of our platform is underappreciated in the breadth of it. And quite frankly, I think people are starting to figure out AlpInvest, which is a leader in the solution space, a great brand, a great platform used to contribute, oh, probably, I don’t know, $12 million, $13 million of FRE, 3, 4 years back. Now, it’s closing it on $100 million. It’s a strong platform, one of the market leaders, and that whole space just got real tailwinds in our industry, because as the Alps [ph] business has grown. CIOs and CEOs have these big plans, they need tools for better deployment portfolio optimization, and access to liquidity. And it just shows, it just talks to the maturation and the scale of what this industry has become. That this part of the industry now is as vibrant as it is with real growth and momentum behind it. So we’ve got real – we feel really good about the prospects of AlpInvest. It’s a great team, market leading. And I think like I said, we’re underappreciated with respect to how important it is and what its opportunities for growth are within Carlyle. Gerald O’Hara: Great. That’s helpful. And then, I guess, Kew sticking with you, and as it relates to sort of strategic opportunities. The other deal, I think that was announced was, I guess, a partnership with iCapital and Allfunds, perhaps you could comment a little bit about, how your vision into the kind of retail market would is expected to evolve, I guess, in the coming years? Thank you.

Yeah, let me jump in and take that. So look alternative sources of capital for us really include high net worth capital, retail, open-ended funds, permanent capital and insurance, and they’re all additive to our efforts to drive growth. And we have a number of initiatives to in each of these areas, some of which we’ve already talked about, and thanks for pointing out the iCapital announcement yesterday. It’s another one of these initiatives that we think over time will be meaningful. We’re an investor in iCapital. I wouldn’t think that this is a major revelation. It’s just additive to the overall process here. The bigger picture is the $51 billion that we raised this past year, double over raised the prior year, momentum is good. And it’s diversified. It’s diversified across all of our businesses. This coming year, we’ll probably have about 20 different products in the market really enabling that strength and momentum to continue. And more importantly, feel really confident about our ability to drive FRE. Gerald O’Hara: Thanks for taking the questions.

Thanks, Gerry.

Our next question comes from Patrick Davitt with Autonomous Research. Your line is open.

Hi, good morning, guys.

Good morning.

There’s a view in the marketplace that private equity broadly has been one of the most boosted asset classes by this long period of central bank accommodation. So in that vein is now perhaps one of the more negatively exposed asset classes to this year’s inflationary higher rate, less accommodative environment, particularly given the pivot to growth, a lot of firms appear to have taken. So could you give us your reaction to that perception and more specifically frame, which you think Carlyle’s exposure as to what might be considered growth, your higher multiple positions in the PE portfolio?

Sure. Hey, Patrick, great question. Obviously, this is something we’re really everyone is focused on us especially. And, it’s a question about rising rates; it’s a question about volatility inflation, all in one. So let me try to address it. So first of all, with some of the correction that’s happening in the market, and we’re all seeing it the rotations that are occurring. Clearly, this will have an impact on marks. But I’d like to point out, and Curt or Dan helped me out here. I think only 11% of our portfolio in public names right now. Is that correct?

Correct.

Okay. So about 11% of the names are in public names at the moment. But we really feel good about our portfolio construction very well diversified across industry sectors, big companies, smaller companies, across all regions. And that type of portfolio construction with our long-term orientation, where we don’t have liquidity pressure, because of marks. It gives me real good comfort that over the long-term, our portfolio, it will be quite resilient as we enter a period of volatility. Now, if you think about some of the corrections we’re seeing, especially with respect valuations. Quite frankly, on the buy side of the equation, we’re meeting great companies, and the entry points are now more attractive. So I think longer term, this bodes well. And I’m on record as saying, a healthy correction, not necessarily a bad thing with respect to our investment activity. So with a long term view, again, we have a view that as multiples trade down, it could be more attractive to us from an investment perspective. Turning to the credit business, I think folks have to appreciate a vast preponderance of our assets there are floating rate. Okay. So all else equal assuming economic backdrop is benign. A rising rates means that platform generates more profit. Okay. And then with respect to volatility, volatility with respect to the credit platform actually creates flow, especially in our special sitting credit opportunistic strategies. But more broadly speaking, I’d say, Patrick, there’s one thing I’ve learned, volatility creates change and change creates deal flow. And our platform is very broad. It’s around the world. It’s very diversified across strategies across industry sectors, and we’ve been able to pivot really nicely over the past several years to finding opportunity. So as we enter this period of volatility, and make no doubt about it, we’re not being complacent. We’re studying what’s happening very carefully. Of course, we’re focused on inflation. Of course, we’re focused on rising rates. Of course, we’re carefully tracking markets. But volatility creates changes that are creating opportunities for a broad-based platform, especially with a long term lens. So hopefully, that gives you a little bit of color on the environment, and how we’re positioned to navigate through it.

Thank you.

Thank you. Our next question comes from Schorr with Evercore. Your line is open.

Hello, there. Quickie first. You talked about this great growth and 20 plus on FRE, which I think is very welcomed. Could we talk about the margin you plan – you talked about in the past about plans to increase that over time? I think you’re scaling really well. I don’t have to repeat all the things you said. Any specific thoughts on what you think the margin can be the next year or two? As the scale starts coming through?

Glenn, it’s Curt. So thanks for the question. In our Investor Day, we said we get the 40%, I’ve not backed off of that target. That’s for 2024. We grew from 30% beginning of this year to 33% for the full year this year, Q4 was 34%. We’re really well positioned. Yeah, there’s some increases in some costs in the fourth quarter, but our job is to grow the top-line faster than expenses and feel really comfortable with our ability to do that. I think you’re going to see continued expansion and margin over the coming years. We’ll hit the target in 2024.

I’ll take the sooner on that, Curt. Okay, no problem.

Hey, Glenn, it’s Kew. I read your note this morning. Yes, 15 positives and only four negatives in your quick takeaway if I count it correctly.

Yes, it is. Question for you. I’m curious if this is more theoretical, I guess. But if I look at your private equity business, it’s big, it’s global, it’s been fully integrated. It’s one team on dream, they share everything. I’m curious, in credit, the growth is great, the capital raising is great, the performance great, everything that you pointed out. I’m curious on how you’re integrating it and whether or not it needs to be integrated meaning does each sub asset class stand on its own, raise capital on its own, go to LPs on its own, or underneath the covers years out, will it look just like private equity?

Yeah. Glenn, it’s a great question. And when I say and Curt says, we are taking a platform approach. We are being very intentional with that language. We have teams of investment professionals that are managing multiple strategies. And we have a credit distribution capability set that is raising money across our platform strategies and increasingly, we are also talking to LPs that are coming in to multiple strategies at the same time in SMAs and other type of structured programs. And so it is with real intention that we’ve designed for the long-term, a strategy that is platform driven, it takes time to get that going build it the right way, and to have it really pay off, which is why you’ve heard me from the very beginning several years back to ask for patience, I think it’s starting to pay off, not only is the growth starting to happen, okay. And you’re seeing that organically and also in organically, we’re going to be very thoughtful and take our shots in organically, but you’re seeing a consistent strategy on the platform. And what that means is, at some point in time, there’s a tipping point where the AUM base and the revenue base starts to drop more earnings, because of the operating leverage that we’ve created. Okay. That has not yet occurred to date. But we are approaching that tipping point, which is why we are keep alluding to the fact that that we think we’re going to have a breakout year in credit as it relates to the FRE drop from all the growth that we’ve been seeing, and that we expect to continue. So hopefully, that gives you a really good color, not only the strategic design of the platform, but what we think the business model will enable this to do from a financial perspective, no longer long-term, but in the short- to medium-term.

Thanks for all that.

Thank you. Our next question comes from Rob Lee with KBW. Your line is open.

Great. Good morning. Thanks for taking my questions. I guess it’s hard to believe there’s any more questions left at this point. But real quickly, on the capital markets business, I know it’s a relatively small piece, but maybe this is another one of those underappreciated initiatives. Can you maybe just update us on that kind of your current expectations for that over the next couple of years, and you gave an update, obviously, in the Investor Day while back but just like to get another update?

Sure. So look really pleased with how this initiative is really commenced and gone on. And it’s a good example of people teaming together working across the entire platform. Brian Lindley, who quarterbacks this initiative, has really done a nice job of working with all of our credit and buyout professionals and also with our solutions teams. And just capitalizes really on the deep activity that we see around the globe and really looking to add value in anything and everything that they’re involved in. So adding value is the cornerstone of that. The other pieces, obviously, deal flow really makes this business drive. And what you’re already seeing is in total, we have about just shy of $100 million this year in transaction advisory fees with the vast majority of that coming from this capital markets activity. We’ve – it’s just been great in terms of what they’ve been able to do this year. I think as we go forward, a lot of the learnings in terms of how to make all the internal workings work right how to have everyone incentivized right to work in coordinate together. Remember, we’re not an investment bank. So I’m not going after, other people’s stuff. We’re just trying to help them do the things that we’re doing really well. So this has had a really nice trajectory. I think it will continue to grow. It’ll be somewhat dependent upon capital markets activity and deal flow. But given that all that remains relatively strong, I think we’ll continue to do some good things here. Hopefully, that’s the color you need.

That was helpful. That was my only question. Thanks for your patience.

Thanks, Rob.

Our next question comes from Adam Beatty with UBS. Your line is open.

Hi, good morning. Thank you for taking the questions. Just wanted to circle back to retail more from a product angle, in the release yesterday, you mentioned [NFO funds] [ph] and BDCs sounds like you got a pretty full suite. So which of those is kind of gaining the most traction right now, anything that you expected in terms of getting traction, not getting traction? And finally, if there are any product gaps that you might have to fill in, or is it more about just expanding distribution at this point? Thank you.

Good question. Look, as I said before, there’s a number of alternative channels we’re chasing and working on and we have initiatives in each of these, some of the – and I would just, say, look, a lot of this is not what we’re dependent upon to drive the results that we’re talking about the confidence that Kew expressed earlier is really from running the ship the way we’ve been running it. And to the extent that we can execute really well on this, it’s all going to be additive. So in terms of specific products, but we have a very good product within our credit business, we call it CTAC. And it’s been growing really nicely, throwing off nice fees, because the performance there has been phenomenal and has been bringing in new investors. And so, I’m optimistic about where that can go. We have a number of BDCs. They’re performing well. Teams working really hard to ancillary products are around them, so that is also helpful. And there’s new things in the works across the broader platform of the firm that we’re working on, but it’s still not really ready for primetime in terms of talking about in detail. Thanks.

Got it. That’s good detail. Appreciate it. And then just circling back, one of the phrases that kind of resonated in your prepared remarks, is picking your spots? And so just wondering if you could talk about spots, maybe that you didn’t pick like certain opportunities either that other firms are doing, or maybe just opportunities that weren’t a good fit for Carlyle, and how you’re thinking about that? Thank you.

Look, where we’re going to be picking our spots is, we’ve now been focused on kind of building a big balance sheet, not for the sake of having a big balance sheet, because that gives value that not very much, but for the sake of being able to grow fee-related earnings. And so the iStar transaction that you saw is the start of what we’re doing there, more to come, but we’re focused on kind of, in particular, inorganic growth, but also then using that capital to grow a lot of our own internally developed initiatives, and expand in terms of getting bigger scale out of funds, and the like. So really see a way that we’re going to be using our capital to grow the firm.

Makes sense. Thank you very much.

Thanks.

Our next question is from Bill Katz with Citigroup. Your line is open.

Okay, this is just some fine tuning from my model. When you look at your management fees, they had a significant bounce sequentially. And I appreciate your turn on a number of funds. Was there any catch-up fee in there? And as we look at the expense side, anything unusual on the cash comp or the G&A line as we think about in the next couple of quarters. Thank you.

So Bill, look on – probably on your revenue question on fee-management fees depends on how you’re doing it. Remember, we turned on a number of funds here in the fourth quarter, not really catch up management fees, because we turn them on, there’s nothing to catch up back to. This actually the fourth quarter, very light and catch-up management fees, very light the whole year, next year will be a little bit of a different story on catch-up management fees, I think you’ll see a lot more in catch-up management fee next year, in part because when you turn it on early, and then you have a long fundraiser, that’s where you’ll have it. But in the fourth quarter, a higher effective fee rate if you’re doing it off of an average of fee paying AUM beginning of the period, end of the period, the denominator will get distorted there. So just be careful if that’s the math that you’re doing. In terms of compensation, look, at the end of the year is the bonus period, we had just a great year really hit all of key records on really all the metrics like what our people were doing, and like their focus on driving FRE. And so, we pay them. And I feel good about that, and as you heard, Kew and I talked about we’re very confident about our ability to drive growth, and drive FRE and continue to be focused on margin and running the firm effectively and efficiently. And I think that also makes sense in the current market where talent and attracting and retaining top talent is important. On G&A. Yeah, well, G&A pops all over, as you guys know, as you’ve followed us. For the full year, we’re about 270, which is about the same as last year when you adjust for the litigation cost recoveries. Fourth quarter did have some investments that were being made and some new initiatives and legal costs associated with that some extra fundraising costs. Actually, I hope that kind of continues, because that’s really kind of what fuels long-term growth. And then, we have some compliance costs that tend to be back in, because tax returns and all that kind of nonsense occurs more at the end of the year. And so you end up with a bit of more profit at that point in time. So hopefully that gives you some color on how that plays through.

Yeah, that’s perfect. Thanks so much.

Thank you. And I’m currently showing no further questions at this time. I’d like to turn the call back over to Daniel Harris for closing remarks.

Thank you, everyone, for your time today. Should you have any follow-up questions, feel free to call Investor Relations at any time. Otherwise, we look forward to talking to you again next quarter. Thank you.

This concludes today’s conference call. Thank you for participating. You may now disconnect.