The Carlyle Group Inc. · NASDAQ:CG

The Carlyle — Investor Presentation (August 2016)

53 slides from The Carlyle's investor presentation, August 2016

  1. Slide 1: The Carlyle Group Unitholder Presentation

    The Carlyle Group Unitholder Presentation August 2016

  2. Slide 2: Important Information

    Important Information This presentation has been prepared by The Carlyle Group L.P. (together with its affiliates, “Carlyle”) and may only be used for informational purposes only. This presentation may not be referenced, quoted or linked by website, in whole or in part except as agreed to in writing

  3. Slide 3: Carlyle Overview

    Carlyle Overview 3

  4. Slide 4: Carlyle is a Leading Global Alternative Asset Manager

    Carlyle is a Leading Global Alternative Asset Manager Corporate Real Private Equity Assets Real Estate ◦ Global Energy ◦ Power Buyout ◦ Growth Infrastructure $57.6 bn AUM • $38.9 bn FEAUM • $599 mm DE (LTM) $37.5 bn AUM • $30.4 bn FEAUM • $156 mm DE (LTM) $125.3 bn $805 mm DE FEAUM (LTM) Global Mark

  5. Slide 5: The Core Drivers of Our Firm Continue to Operate at High Levels

    The Core Drivers of Our Firm Continue to Operate at High Levels $16.8 billion Gross Capital Raised LTM Fundraise $16.3 billion LTM Fund Exit / Deploy / Re-invest Life Invest Cycle $12.7 billion LTM Perform 5% CPE, 28% Real Estate, 3% Overall LTM Note: Data as of 6/30/2016. 5 For illustrative purpose

  6. Slide 6: Annual Unitholder Distribution Remains Robust Even as the CG Unit Price Has Declined

    Annual Unitholder Distribution Remains Robust Even as the CG Unit Price Has Declined $40.00 $3.00 1 LTM Distribution Per Common Unit Avg Quarterly Common Unit Price $35.00 $2.50 Average Quarterly Common Unit Price LTM Distribution Per Common Unit $30.00 $2.00 $25.00 $1.50 $20.00 $1.00 $15.00 $0.50 $

  7. Slide 7: Industry Trends

    Industry Trends 7

  8. Slide 8: Growth Has Steadily Trended Downward Since 2010, Along with Forward Expectations For Growth

    Growth Has Steadily Trended Downward Since 2010, Along with Forward Expectations For Growth 5.5% 5.0% 2011 Projections 4.5% 2013 Projections 2015 Projections 4.0% 2016 Projections 3.5% Actual 3.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 8 Source: IMF World Economic Outlook. There is n

  9. Slide 9: Central Bank Policies Around the World Have Pushed Down Interest Rates

    Central Bank Policies Around the World Have Pushed Down Interest Rates 6.0% US Treasury Yield Curve Over Time 5.0% 2007 2010 4.0% 2014 3.0% 2015 Present 2.0% 1.0% -- 1Y 3Y 5Y 10Y 20Y 30Y 9 Source: S&P Capital IQ. There is no guarantee these trends will continue.

  10. Slide 10: Earnings Multiples Remain Well Above Their Average Historical Levels

    Earnings Multiples Remain Well Above Their Average Historical Levels 18.0x Current vs Average EV / EBITDA Multiples 3/31/2016 Enterprise Value / TTM EBITDA 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x Current 10 Year Average 10 Source: Carlyle; Campbell & Shiller (1988); S&P Capital IQ. There is

  11. Slide 11: Buyout and Growth Outperformance Relative to Public Markets Intact

    Buyout and Growth Outperformance Relative to Public Markets Intact Even as Median Returns Have Declined Global Buyout & Growth Equity Index Performance – Net IRR 20% 16.5% 15% 13.7% 8.7% 11.9% 9.7% 10% 9.6% 8.2% 7.8% 8.7% 5% 4.0% 3.7% 0.9% 0% 1998 - 2001 2002 - 2005 2006 - 2009 2010 - 2013 CA Benchm

  12. Slide 12: Fund Investors Are Allocating More Capital to Alternatives…

    Fund Investors Are Allocating More Capital to Alternatives… Alternatives AUM as a % of Total Asset Management AUM 12% 11% 10% 8% 6% 6% 4% 2% 0% 2003 2014 Source: Global Asset Management 2015: Sparking Growth with Go-to-Market Excellence. There is no guarantee these trends 12 will continue.

  13. Slide 13: …And Expect to Continue Increasing Their Allocations Moving Forward

    …And Expect to Continue Increasing Their Allocations Moving Forward Current Alternative Asset Investors’ Investors’ Intentions for Private Target Allocations to Private Equity Equity Allocations 100% 100% 5% 5% 75% 75% 95% 44% 54% expect to grow or maintain 50% 50% their PE allocations 25% 25% 51% 4

  14. Slide 14: The Consensus Outlook

    The Consensus Outlook • Interest rates are low, even negative, & will likely stay low for a long time • While energy prices may rise a little from current levels, they will stay low, in part due to US shale capacity • The US economy will continue to grow, even if slowly, with minimal prospects of a

  15. Slide 15: Positioning Carlyle For The Next Leg of Growth

    Positioning Carlyle For The Next Leg of Growth 15

  16. Slide 16: Our Carry Fund Platform Has Grown and Enhanced Earnings Capacity…

    Our Carry Fund Platform Has Grown and Enhanced Earnings Capacity… Total Fund Commitments (USD in $ billions) $32 $27 CPE $14 Real Assets $14 $9 $4 $6 GMS $1 $2 Prior Predecessor Predecessor Current Generation Note: Data as of 6/30/2016. Non-USD funds translated at the 6/30/2016 spot rate. There is n

  17. Slide 17: Growth in Fee-Earning AUM Has Been Solid in Core Businesses

    Growth in Fee-Earning AUM Has Been Solid in Core Businesses With Idiosyncratic Issues Impacting New Growth Areas Corporate Private Equity and Real Assets Fee Earning AUM ($bn) • Fee-Earning AUM tends to $75 72 increase around our significant 71 69 69 fundraising cycles for carry funds 63 63 63 62 $6

  18. Slide 18: Our Next Wave of Fundraising Is On The Horizon…

    Our Next Wave of Fundraising Is On The Horizon… Many of our largest carry funds are mid-investment period and will likely return to fundraising beginning late 2017 Fee Inception of Current Fund 2013 2014 2015 2016 2017 2018 2019 2020 US Buyout Q2 2013 Europe Buyout Q3 2014 Asia Buyout Q3 2013 US Equ

  19. Slide 19: …While Strong Fundraising Has Already Reloaded Our Carry Fund Platform

    …While Strong Fundraising Has Already Reloaded Our Carry Fund Platform Current Fund Size Year of Current Dry ($bn) Final Close Powder ($bn) US Buyout $13.0 2013 $6.6 Europe Buyout €3.7 2015 €2.3 Asia Buyout $3.9 2014 $2.0 Japan Buyout ¥119.5 2015 ¥63.8 Financial Services Buyout $1.0 2014 $0.4 US Equ

  20. Slide 20: Breadth of Fundraising Resources and Capabilities Drive New Investor Relationships

    Breadth of Fundraising Resources and Capabilities Drive New Investor Relationships • More than 1,750 fund investors from 81 countries 2009 2012 2015 • More than 275 new fund investors over past 3 years have committed $5.6 billion ~1,300 ~1,400 1,700+ Investors Investors Investors • 63% of fund inves

  21. Slide 21: Four Years of Exceptional Fundraising Results Has Reloaded our Platform

    Four Years of Exceptional Fundraising Results Has Reloaded our Platform and Built up $40 billion in Carry Fund Dry Powder Fundraising: Dry Powder: $55.1 billion $90 2012 – Q2 2016: $80.3 billion $3.7 $80 $70 $16.4 Corporate Investment Private Fundraising 1 ($bn) $60 Solutions Equity $14.8 $20.1 $50

  22. Slide 22: More Than 90% of Fee-Earning AUM Locked Into Long Term Fund Structures

    More Than 90% of Fee-Earning AUM Locked Into Long Term Fund Structures LTM Fee- Mgmt Earning Avg Fee AUM AUM Fee Rate Rev1 Fund / Fee ($ bn) ($ bn) (bps) ($ mm) Duration Long Term, locked up fund structures 100 - 95% Carry Funds $102.6 $73.4 $846 Long Term 150 Credit (Non- $21.5 $19.3 40 - 75 $91 Lo

  23. Slide 23: Carlyle Has Invested $12.7 Billion Over the Past Year

    Carlyle Has Invested $12.7 Billion Over the Past Year Across A Wide Diversity of Geographies and Strategies $14 0.2 0.1 0.1 12.7 0.2 0.2 0.3 0.3 $12 0.4 0.6 0.7 $10 0.8 0.8 0.9 $8 ($ billions) 1.3 1.4 $6 1.4 $4 3.1 $2 $0 Asia Growth Structured Credit Asia Buyout Europe Buyout Natural Resources US Gr

  24. Slide 24: Carry Fund Realized Proceeds Have Been Remarkably Consistent

    Carry Fund Realized Proceeds Have Been Remarkably Consistent, while Net Realized Performance Fee Generation Accelerated Through 2015 Realized Proceeds 1 Net Realized Performance Fees 2 $24 ($ billions) $900 Carry Funds Only ($ millions) $800 Annualized 763 $20 19.7 Average: 18.8 704 17.4 18.1 $700 $

  25. Slide 25: We Have $1.2 Billion In Net Accrued Performance Fees From Current Funds

    We Have $1.2 Billion In Net Accrued Performance Fees From Current Funds Net Accrued Performance Fees Net Realized ($mm) (NAPF, beginning of Performance % of NAPF year) Fees realized With over $1.2 billion 2011 1,050 678 65% in net accrued carry, 2012 1,036 501 48% Carlyle remains well positioned to

  26. Slide 26: A Hypothetical Look at Future Carry Fund Performance Fees

    A Hypothetical Look at Future Carry Fund Performance Fees Highlights Long Term Attractiveness of Our Model Carry Fund Platform Has …Which Can Drive Significant Significant Capital at Work… Performance Fees in the Coming Years 2 And Reloaded Funds to Deploy… Current Remaining If exit @ 1.75-2.25x ave

  27. Slide 27: Each Segment Positioning Itself For Future Success

    Each Segment Positioning Itself For Future Success Corporate Global Private Real Market Investment Equity Assets Strategies Solutions 2.5X MOIC and US Real Estate: Scaling debt and AlpInvest track 29% Gross IRR on 20% Gross IRR on energy carry fund record of 12% net R/PR investments R/PR investments

  28. Slide 28: Well Positioned to Continue to Deliver Solid Economic Results

    Well Positioned to Continue to Deliver Solid Economic Results $805 million in Distributable Earnings over the last 12 months resulting in $1.74 in unitholder distributions (10% trailing yield) $40 billion in carry fund dry powder and $55 billion overall to deploy globally on an opportunistic basis $

  29. Slide 29: Corporate Private Equity (CPE)

    Corporate Private Equity (CPE) 29

  30. Slide 30: Scaled CPE Platform With Superior Long Term Performance

    Scaled CPE Platform With Superior Long Term Performance, Positioned to Deliver Strong Cash Flow In the Future Fee-Earning Assets Under Management ($ bn) Key Points $43 $40 $41  Superior, diversified track record $38 $34 $39 • 2.5X MOIC on realized and partially realized investments • 13 significant

  31. Slide 31: CPE Carry Fund Returns Remain Exceptional, Materially Outpacing Global Equity Indices

    CPE Carry Fund Returns Remain Exceptional, Materially Outpacing Global Equity Indices Annual Carry Fund Performance  Carlyle carry funds have consistently Carlyle CPE Carry Funds MSCI ACWI outperformed global equity indices (1,500 bps outperformance in 2015) 30%  2.6X multiple of invested capital

  32. Slide 32: CPE Investments Remain Well Diversified Across Age and Public/Private

    CPE Investments Remain Well Diversified Across Age and Public/Private Remaining Fair Value of CPE Carry Fund Portfolio1 - $37 billion “Aging” of CPE 11% 2016 investments remains 23% diversified across years 14% 2015 Public with 28% of RMFV 20% 2014 more than four years 2013 old 16% 2012 77% Diverse

  33. Slide 33: Larger Funds & New Products Drive Increased Scale Across CPE

    Larger Funds & New Products Drive Increased Scale Across CPE +19% $35 $32 New and successive $30 +101% $27 $4 buyout and growth Total Fund Commitments (USD in $bn) $25 $3 funds help build Growth superior global CPE $20 scale and reach $15 $14 $2 $25 $28 Current generation $10 Buyout and new funds ar

  34. Slide 34: Carlyle's Private Equity Funds Have Performed Well Even When Investing Through Elevated Valuation Periods

    Carlyle’s Private Equity Funds Have Performed Well Even When Investing Through Elevated Valuation Periods Total Investments Realized/Partially Realized Investing Fund Period MOIC Gross IRR MOIC Gross IRR Carlyle Partners IV 2004 – 2007 2.4X 16% 2.5X 18% Carlyle Partners V 2007 – 2012 1.9X 18% 2.6X 2

  35. Slide 35: CPE Portfolio Company Earnings Growth Drives Value Creation

    CPE Portfolio Company Earnings Growth Drives Value Creation Drivers of Value Creation 1 (% of Value Created) Equity Total Value Invested EBITDA Debt Multiple Fund Growth Paydown Expansion US Buyout 2 62% 12% 26% Asia Buyout 3 72% 11% 17% Europe Buyout 4 61% 16% 23% 1) Includes both realized & unreal

  36. Slide 36: CPE's Proven, Disciplined Investment Process Drives Consistent Returns

    CPE’s Proven, Disciplined Investment Process Drives Consistent Returns $16 165 Deals Median MOIC: 2.1X $12 Average MOIC: 2.7X Gross Profit ($ bn) $8 $4 $0 <1.0 1 -2 2-3 3-4 4-5 5-6 6-7 7-8 8 -9 9 - 10 10+ ($4) Multiple of Invested Capital Note: Data as of 6/30/2016. Represents realized and partially

  37. Slide 37: Global Market Strategies (GMS)

    Global Market Strategies (GMS) 37

  38. Slide 38: GMS: Planting the Seeds For Future Financial Performance

    GMS: Planting the Seeds For Future Financial Performance Fee-Earning Assets Under Management ($ bn) Key Points $31 $33 $34 $31 $29  Scaling of carry fund platform $23 • 2nd Energy Mezzanine fund is twice size of original fund and still raising capital • Distressed fund and Asia structured credit fu

  39. Slide 39: Carry Fund Platform Could Scale More than 2.5x Prior Generation

    Carry Fund Platform Could Scale More than 2.5x Prior Generation The GMS carry fund $7 platform is broadening $6 +164% $5.5 its reach and enlarging Total Fund Commitments (USD in $bn) its global deployment $5 $1.4 If capability $4 Potential Target is Reached All three GMS carry $3 fund platforms +54%

  40. Slide 40: Real Assets (RA)

    Real Assets (RA) 40

  41. Slide 41: Real Assets To Benefit From Growing Real Estate Platform and Opportunities in Natural Resources

    Real Assets To Benefit From Growing Real Estate Platform and Opportunities in Natural Resources Fee-Earning Assets Under Management ($ bn) Key Points $29 $28 $28 $31 $30  US Real Estate business thriving $22 and growing • Strong performance and substantial scaling in opportunistic funds 2011 2012 2

  42. Slide 42: Natural Resources & Real Estate Funds Scaling to Address a Broader Global Opportunity Set

    Natural Resources & Real Estate Funds Scaling to Address a Broader Global Opportunity Set $14 +45% $13.5 Scaling in US Real Estate and build out Total Fund Commitments (USD in $bn) $12 +119% $5.3 NGP of global natural resources platform $10 $9.3 $8 $3.6 Int'l Energy has grown the go- forward revenue

  43. Slide 43: US Real Estate Business is Thriving and Growing

    US Real Estate Business is Thriving and Growing US Real Estate $125 Strong fund performance and $100 Net Realized Performance Fees ($ millions) $79 exits drove NRPF acceleration $75 $63 in 2014-15 $50 $40 $25 $7 Latest vintage U.S. real estate $0 fund is roughly 80% larger 2013 2014 2015 Q2 2016 tha

  44. Slide 44: Our Natural Resources Platform Can Elevate Annual Equity Deployment

    Our Natural Resources Platform Can Elevate Annual Equity Deployment and Generate Incremental Performance Fees in the Future Natural Resources Platform Has …And Drive Upside to Run-Rate Large Deployment Potential… Performance Fees2,3 Promoted Fund Fund Size1 Natural Gas Partners If exit @ 2.0-2.5x av

  45. Slide 45: Carlyle Has More Than $11 Billion to Deploy into the Energy Sector

    Carlyle Has More Than $11 Billion to Deploy into the Energy Sector Dry Performance AUM 1 Fund Family Investment Focus Powder 1 Fee ($bn) ($bn) Ownership NGP X: 40% North American Natural Gas Partners 2 $11.9 $5.0 NGP XI/Future: E&P / Midstream 47.5% Real Assets International Oil & International Ener

  46. Slide 46: Legacy Energy's Diminishing Impact

    Legacy Energy’s Diminishing Impact  Limited fee economics ($6 mn in 2015) relative to Fee-Earning AUM ($6 bn)  Decline in performance fees more than offset by increases in other Real Assets funds  Worst-case clawback liability: $86 million DE • DE clawback occurs only if Legacy Energy funds concl

  47. Slide 47: Investment Solutions

    Investment Solutions 47

  48. Slide 48: Investment Solutions Overview

    Investment Solutions Overview Fee-Earning Assets Under Management1 ($ bn) Key Points $28 $29 $35 $33 $28 $27  AlpInvest has great investment performance with performance fee upside • 12% net IRR & 1.5x MOIC with 2015 2011 2012 2013 2014 2015 Q2 2016 appreciation of 27% 2 • Performance fees could im

  49. Slide 49: AlpInvest: Exceptional Investment Performance and Positioning for Future Impact

    AlpInvest: Exceptional Investment Performance and Positioning for Future Impact to CG Financial Results Gross Net  Carlyle’s share of AlpInvest net Latest Fully Invested Vehicles Vintage MOIC IRR performance fees will increase as Main Fund V – Fund vehicles launched post our 2011 2012 1.1X 6% Inves

  50. Slide 50: Summary Financial Results

    Summary Financial Results Quarterly Annual Pre-tax Segment Measures ($ million) 3Q15 4Q15 1Q16 2Q16 2012 2013 2014 2015 LTM Revenue Management & Transaction Fees 316 287 303 288 993 1,105 1,303 1,223 1,195 Performance Fees (221) 197 148 210 996 2,293 1,708 910 334 Investment, Interest & Other Income

  51. Slide 51: Strong Balance Sheet

    Strong Balance Sheet Key Balance Sheet Items1 ($ million) 6/30/2016 Cash and Cash Equivalents and Corporate Treasury Investments2 $870 Net accrued performance fees (net of giveback and accrued $1,216 performance fee compensation) Investments attributable to Carlyle unitholders3 $509 Loans Payable an

  52. Slide 52: Key Metrics for "The Carlyle Engine"

    Key Metrics for “The Carlyle Engine” Carlyle Group Carlyle Engine Data Quarterly Data Annual Data 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total AUM(1) ($ bn) 202.6 194.5 192.7 192.8 187.7 182.6 178.1 175.6 Total AUM(1) ($ bn) 80.6 86.3 89.8 107.5 147

  53. Slide 53: Reconciliation of GAAP to Non-GAAP Financials

    Reconciliation of GAAP to Non-GAAP Financials Annual ($ millions) 2Q15 3Q15 4Q15 1Q16 2Q16 2012 2013 2014 2015 LTM Income (loss) before provision for income taxes $ 474 $ (529) $ (158) $ 15 $ 68 $ 2,440 $ 1,444 $ 992 $ 402 $ (604) Adjustments: Partner compensation(1) - - - - - (265) - - - - Equity-b

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