The Carlyle Group (NASDAQ:CG) Q3 2026 Earnings Call

0:00 Welcome to the Carlyle Group's third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1-1 on your touchstone telephone. Please note, this call may be recorded. I would now like to turn the call over to Daniel Harris, Head of Investor Relations. Please go ahead.

0:24 Thank you, Michelle. Good morning and welcome to Carlyle's third quarter 2026 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz, and our Chief Financial Officer, Justin Plouffe. Earlier this morning, we issued a press release and a detailed earnings presentation, which is available on our investor relations website. This call is being webcast and a replay will be available. 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 will have provided reconciliation of these measures to GAAP in our earnings release 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.

1:11 These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factor section or annual report on Form 10-K that could cause actual results to differ materially from those indicated. Carlisle assumes no obligation to update any forward-looking statements at any time. In order to ensure participation by everyone on the call today, please limit yourself to one question and return to the queue for any additional follow-ups. And with that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

1:41 Good morning, everyone, and thank you for joining us. We delivered a strong third quarter for our shareholders with distributable earnings of $1.12 per share, one of our best quarters ever. This is up 17% from a year ago and driven by a five-fold increase in net realized performance revenues. More importantly, we continue to build momentum across the global platform as we execute our strategic plans. We have a near record level of pending fee-earning AUM that will result in more than $230 million in new management fees when activated. We continue to lead the industry in returning capital with distributions to our clients approaching $100 billion since the beginning of 2024. And we are just in the early stages of a powerful fundraising super cycle that will accelerate growth over the next several years.

2:30 Before I walk through the highlights, I want to spend a few minutes on the macro environment. The first observation I'll make is that the underlying economic engine remains quite strong. Our Carlyle economic indicators systematically roll up time series data across all of our portfolio companies, which collectively employ approximately 750,000 people. This gives us a unique perspective on underlying economic activity. The data shows that annualized revenues grew at 6% while EBITDA grew at a double-digit rate. This points to a durable and healthy economy, showing resiliency even during periods when market sentiment has been more volatile. The strong economy in combination with sticky inflation reinforces our long-held view that rates will stay higher for longer. That view reflects more than five years of inflation above the Fed's target. We've been adapting to this higher rate environment for a long time and have found that the more normalized cost of capital rewards discipline underwriting, operational expertise, and global scale, all of which are Carlyle's strengths.

3:29 At the same time, geopolitical dynamics are reshaping the global investment landscape. In nearly every conversation with clients and government officials, new priorities come up, security and economic growth. Whether it's national security, energy security, or data security, Those priorities are driving enormous demand for capital in areas where we have deep expertise. With US midterm elections behind us, the results were more decisive than expected, but the outcome was largely as anticipated. The favorable market reaction is consistent with historical trends, as greater clarity on the political landscape helps reduce uncertainty. And as I've said before, confidence is the greatest elixir for markets. Now a few highlights from the quarter. First, in global private equity, We remain a significant outlier in returning capital to our clients.

4:17 Across our global private equity segment, we returned $24 billion to our clients over the past year and drilling down into corporate private equity, we returned 21% of fair value to investors over the past year. That's nearly double the industry average and represents levels not seen since 2021. As a firm, we made a strategic decision to monetize assets and return capital to investors. Substantial liquidity we've delivered over the past several years has addressed investors' needs and contributed directly to our success in attracting new capital. Second, we continue to see real operating momentum in global credit. During the quarter, we brought in more than $7 billion of inflows into global credit. Fortitude's reinsurance transaction with Unum Group, which closed earlier this week, will add more than $5 billion to our AUM in the fourth quarter.

5:07 More recently, we announced a $7.7 billion asset-backed finance transaction with Truist Financial Corporation, which shows how we're helping banks manage their balance sheets while giving our investors access to an attractive set of investment opportunities. These transactions underscore the accelerating demand for the strategy we've built in private credit and insurance. Third, we have systematically diversified our revenue stream over the last three years. Transaction fees over the past year are a record $264 million. More than three times the 2023 level. We've also delivered record year-to-date fee-related performance revenue, driven by record AUM in our global wealth platform. Looking ahead, we're seeing strong momentum across our businesses, and we expect the fourth quarter to be one of our strongest ever for inflows, which Justin will discuss shortly.

5:52 To wrap up, the forward momentum across our global platform is exceptional. We're delivering for our shareholders and are well-positioned to build on that success in 2027 and beyond. With that, let me turn the call over to Justin.

6:05 Thanks, Harvey, and good morning, everyone. We delivered a strong third quarter with a step up in realizations and healthy net realized performance revenue. We generated distributable earnings of $433 million in the third quarter, or $1.12 per share. That's up 17% from a year ago. Year to date, distributable earnings were $1.2 billion, or $3.08 per share. Fee-related earnings were $293 million at a 47% margin. and year to date, FRE was a record, $950 million. As we look forward, we expect full year FRE to be the highest in our firm's history. Fund management fees were $1.65 billion year to date and were $547 million in the quarter. We expect management fees to step up meaningfully in 2027 as we activate the next generation of our flagship funds.

6:58 Transaction fees were a record, $197 million year to date Up 25% compared to the same period last year and $33 million in the quarter. Fee-related performance revenues were also a record at $184 million year-to-date, up 46% compared to the same period last year and were $50 million in the quarter. Net realized performance revenues were $235 million year-to-date, and our third quarter result of $100 million increased five-fold from a year ago. This increase was driven by a diverse set of strategies in private equity and our global energy platform. Realized proceeds from our carry funds were $28 billion year-to-date, up 25% from the prior period, and were $9 billion in the third quarter.

7:46 Net accrued performance revenues were $2.1 billion. On a per share basis, this equates to over $6 per share in future earnings power. Turning now to inflows. We raised $41 billion year-to-date and $11 billion in the quarter, and we expect to close out the year with one of our best-ever inflow quarters in Q4 with at least $20 billion of inflows expected, including the $5 billion transaction with Unum Group that Harvey mentioned earlier. That is expected to bring full-year inflows to about $60 billion, more than 10% above last year's level. As of the third quarter, total AUM was $479 billion. and even more importantly, pending fee earning AUM rose to $28 billion, up almost 50% year over year and nearly the highest level in the firm's history.

8:37 That pending amount reflects a diverse set of strategies that have raised capital but have not yet activated fees and it will give us more than $230 million of annualized management fees once fully activated. We expect this capital to be a key driver of our top line growth in 2027. Again, this is important to note, we remain at the very beginning of our multi-year fundraising super cycle. We ended the quarter with $94 billion of available capital for investment, also approaching the highest level in firm history. This capital is spread across all three segments, with $40 billion in global private equity, $32 billion in Carlyle Alpenvest, and $22 billion in global credit. Now let me turn to the individual segments, starting with global credit.

9:24 Fee-related earnings were a record, $324 million year-to-date, up 8% compared to the same period last year. For the third quarter, fee-related earnings were $93 million, 11% higher than a year ago, driven by a 10% increase in management fees. Fee-related performance revenues and global credit continued to build, with $120 million year-to-date, up 40% compared to last year. Total AUM ended the quarter at $207 billion, which was supported by $7 billion of inflows, including a strong first close in our latest venture opportunistic credit fund. Deployment was $5 billion in the quarter, led by our liquid credit, aviation, and opportunistic credit strategies. Carlyle Alpenvest delivered record year-to-date FRE of $222 million, including $68 million in Q3.

10:15 Run rate management fees increased 16% year-to-date after adjusting for catch-up fees. Total AUM was $110 billion, up 8% year-over-year, with $15 billion of inflows over the last 12 months. This strong momentum reflects the broad array of investment solutions that Alpha Invest has introduced over the past several years. Alpha Invest has historically invested largely through closed-end carry funds and institutional SMAs, but we have systematically introduced new evergreen strategies for the wealth channel and new verticals, like portfolio finance and credit secondaries, which have allowed Alpha Invest to expand its investor base and it's a universe of investable assets. Tipping to global private equity. Third quarter distributable earnings were $237 million, up more than 60% year over year on higher net realized performance revenue.

11:05 Fee related earnings were $131 million in the quarter and fee earning AUM was $96 billion. GPE realized proceeds were $5.7 billion in the quarter and $24 billion for the last 12 months with notable exits including Ragaku, Camino Natural Resources, and Tescan Group. Deployment was nearly $4 billion, including Sicturium, first transaction from our new defense and industrials platform.

11:32 Finally, let me turn to capital management.

11:35 We ended the quarter with over $7 billion of balance sheet assets, or almost $20 per share. We declared a quarterly dividend of 35 cents per common share, consistent with our dividend policy. We repurchased or withheld a record 15 million shares year to date, including 4.5 million shares in the quarter. Our share count is down about 2% thus far this year as we continue to actively manage dilution and see value in our share price. We have $1.4 billion remaining on our $2 billion share purchase authorization giving us ample ability to continue managing share count. As Harvey noted, the underpinnings of our platform continue to show strong momentum. We remain on track for our three-year plan and are confident that growth will accelerate as we move through our fundraising super cycle.

12:22 With that, let me turn it back to the operator to take your questions. Thank you. As a reminder, to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself in the queue, press star 1-1 again. Our first question comes from Alexander Blostein with Goldman Sachs. Your line is open.

12:44 Hey, Harvey, Justin, good morning, everybody. So I wanted to ask you guys around the growth outlook for the rest of the year and also into 2027, just given your comments around accelerating momentum that you expect in the business. You highlighted a number of times now that 2026 is a bit of a transition year, which we're obviously seeing play out. So maybe a couple of questions. One, should we still expect FRE growth to be in mid-single digits for 2026? and then secondly, maybe you could speak to the budgeting of management into growth into 2027 and kind of some of the key building blocks. Thanks.

13:21 Thanks, Alex. Appreciate the question. So, yeah, I think at the end of the year, we told you guys this would be more of a muted year for growth. It's more or less exactly on plan. Give or take, I'd say, mid-single digits. Might fall a little bit short of that as we come to the end of the year. It really depends on how the flow is, but we're talking 1% or 2% either side of that, so we're not talking meaningful numbers. Again, it's more or less on plan. In terms of where we're really feeling quite good about the plan is the momentum in the aggregate franchise around the buildup and the beginning of the super cycle. So as Justin mentioned, and we really wanted to give you some sense of this, obviously, as we come into the end of the year, we're also one month. Thank you. Thank you. But I would say that's probably the only thing that's been a bit of a headwind for the industry, and obviously in credit, and we've experienced a bit of that as well.

14:39 But otherwise, everything feels more or less on plan, exactly as we described to you guys, give or take a percent or two. And where we're really outperforming, obviously, is on the realization side. That continues. The pipeline on realizations actually feels quite good still. So in that sense, the momentum and the flows feel quite good across the whole platform.

15:00 All right. Thank you.

15:01 Sure. Thank you. Our next question comes from Steven Chubach with Wolf Research. Your line is open.

15:11 Hi, good morning, Harvey and Justin. Thanks for taking my question. So I was hoping to double-click into some of the comments you just made, Harvey, on the monetization outlook. Despite the challenging environment for some of the public holdings, you managed to realize a good chunk of the book this quarter. Rengaku, among others, was hoping you could speak to how you're thinking about the monetization pipeline over the next three to six months. It sounds like you guys are still seeing some good momentum there. and what's your line of sight on monetizations in early 27 and beyond and how is that informed by the midterm outcome if you can speak to that too?

15:52 I'll let Justin walk you through but in terms of how we think about it what we generally do is we give you insight into things that we actually know are in queue so we don't really speculate beyond that just so everybody has a sense of how we frame the numbers every time so when we talk about it you know absent market disruptions we talk about it with a very high degree of confidence But a lot's obviously happened. I would say, stepping back before Justin walks through the details, I think the market reaction to the midterms is consistent with history. The market, broadly speaking, tends to like something that approaches more of a gridlock situation in the second half of an administration. I think what we saw yesterday, less specifically around private markets, but public markets, I think what we saw was really The reaction to the degree to which the outcome, though expected directionally, actually ended up being more significant.

16:47 Obviously, some of this is around the whole anticipation and thought process about capital flowing into data centers and AI. As you know, strategically as a firm, we've approached this in a more diversified, I would say on a relative basis, more cautious, if you want to say, Thank you. Thank you.

17:33 Realizations have been a strength for us for a while. We're actually approaching $100 billion of realizations now over the past three years. So it's been a consistent theme for us. Right now, we've got almost $6 billion of deals already signed up for exits that will come through in Q4, and some of those will be in 2027. But we continue to see momentum on the realization side. It's been a strength for us, and we're continuing to return capital to LPs, which obviously they like. And to Harvey's point, I think the market for realizations is going to react well to stability and having one more thing taken off the table in terms of uncertainty. So I expect the market for realizations will continue to be strong for us.

18:14 And on the public positions, obviously you guys track all the public positions. They were a little muted for a while. Obviously, more recently, I don't know. What are the current numbers, Justin?

18:23 Well, yeah, they were a bit more muted in Q3, but they're up 17% since the end of the quarter, which is a billion dollars, actually a little more than a billion dollars in value for our investors just in the last month. So, you know, we don't focus on the day-to-day movements of public stocks. We focus on whether or not we own good companies, and we think we do. But since the end of the quarter, we've really seen momentum there.

18:48 That's great, Tyler. Thanks for taking my question.

18:50 Sure. Thank you. Our next question comes from Brendan Hawkin with BMO Capital Markets. Your line is open.

18:58 Brendan Hawkin Good morning. Brendan Hawkin Hey, Brendan. Brendan Hawkin Hey. So I was curious. I looked at the AUM roll forward and saw that within credit, there was a $5.7 billion headwind from market and other to the fee-paying AUM line. The Kerry Fund performance doesn't seem to reflect that, so I was guessing maybe it was SMAs. Could you maybe unpack what might have caused that and how we should think about that going forward?

19:30 Thanks. Yeah, that's actually sort of a simple one, Brendan, although it isn't obvious and jump off the page. Rates went up during the quarter, and what that means is that the Fair value of assets at our Fortitude affiliate go down. Doesn't mean it changes really the amount that we're managing. It doesn't change anything about performance. It's not outflows. That $5 billion is really just the impact of higher rates on the Fortitude fair value mark. Overall, look, we're returning capital to investors at a high rate, which we said, which is a good thing, and that's what You want us to do? So, you know, there's some AUM impact of that, but the particular one you mentioned is really just the math on higher rates.

20:15 Yep, that makes sense given September. Thanks, Justin. Sure, no problem. Thank you. Our next question comes from Mike Brown with UBS. Your line is open.

20:28 Great. Good morning. Thanks for taking my question. Hey, Harvey. Hey, Justin. If you could touch on the fundraising and the wealth channel, how have the inflows been into drawdown and evergreens here? Can you talk about is it kind of a challenge raising in both types currently? And then on the evergreens specifically, can you maybe just provide a pulse check on the gross sales by major fund and then how redemptions could trend for CTAX based on some of your real-time conversations in the channel?

20:59 Yeah, sure. Look, we continue to have really strong momentum in the wealth channel. Our inflows are 24% up. LTM, our AUMs, 30% up year over year. So wealth continues to be a growth engine for us. I'd particularly call out our products in Alpenvest, which continue to take in strong inflows. And then our CPEP product, which is our Carlisle-wide private equity product, that actually, just as of yesterday, crossed a billion dollars in AUM. So we're seeing great momentum there. You know, at a high level, obviously the entire market in private credit started to have some noise around it. Back in the spring, we're starting to see redemption levels stabilize and come down. So if those products continue to perform across the industry, I think you'll see that turnaround as well.

21:48 So look, wealth for us continues to be a growth driver. We've got a great momentum and we expect it to be key for us in 27 and beyond.

21:59 And sorry, you're also seeing some capital flowing through to CP9 from the Wealth Channel?

22:06 So we haven't had a first close there. Whether or not the Wealth Channel will be a part of that, I'm sure it will be part of all of our are major fundraisers. But what we tried to do in the Wealth Channel is be really thoughtful about the products that we're bringing to that channel and make sure they're really designed well for that channel. I think CPAP is a great example of that. We spent a lot of time designing that product as a private equity product that made sense for individual wealth investors. We intentionally rolled it out slowly last year, and now we're getting on the big platforms. And I think because it was designed well for that channel, that's one of the reasons we're seeing so much momentum there.

22:44 And my only, I think this is at the core of your question or the way you asked it, but I think Justin's covered virtually all of it is, I think you're asking sort of like the mix of drawdown versus evergreen, virtually, and the team will confirm all these numbers with you offline in detail if you want, but it's really been all driven by evergreen, which has been our focus. We really haven't been in the market with drawdown. As the super cycle begins, there'll be a component of drawdown for funds that make sense for drawdown, but what we're just really walking you through is the evergreen mix, which As you know, there wasn't much of an Evergreen strategy a couple years ago, but the team has really done a remarkable job of bringing things to market. But there really hasn't been drawdown activity. But that's in queue for 27-28. Okay, great.

23:29 Thank you for that clarification on that, colleagues. Thank you. Our next question comes from Glenn Score with Evercore. Your line is open.

23:39 Hi, thanks so much. Hey, Glenn. Hey, Glenn. Hello there. So I wonder if you could help us on, even just conceptually, on the FRE ramp through 27 and 28. You have a ton of dry powder. I'm curious on, in a normal-ish backdrop, whatever that means, is that a one- or two-year deployment or two- or three-year deployment? And what I'm trying to get at is how much of that FRE ramp from this low single-digit number is within your control in terms of deploying capital that you already have? And how much do we have to rely on the super cycle happening and, you know, the market could or could not help or take that away? You get what I'm getting at? What's within your control?

24:24 We got it. We got it.

24:25 So, you know, I understand my question. We're not going to unpack that completely for you. So I only tell you that so that you can be prepared to be dissatisfied. But let me give you the sort of theoretical framing and thinking about it. So when the way we think about the super cycle, and we have a good feel for the super cycle in terms of, again, barring unforeseen macro factors, what's in queue, what the momentum build looks like. And obviously, in many cases, as we raise those funds, you immediately get fees in those drawdown vehicles, et cetera. In terms of the backlog of deployment, I think you're just seeing sort of the transition of very very large monetization period certain relative to the industry group and then uh the build up in new capital so we're in this transition mode again which going back to the plan we walked you through uh earlier this year it's more or less spot on with the plan with a couple of give and takes and so you should expect fre build as we come through 27 and i think um where you can draw confidence from all this is because yeah we have these different levers We have capital markets activity, which again, flywheels off of the fundraising, actually having all the funds in a position where they can drive capital markets activity.

25:42 So we're feeling pretty confident about all that collective momentum. Hard to unbundle precise deployment because we put no pressure on the teams to deploy. What we really demand from the teams is that they price the risk correctly. and we're seeing some pretty attractive opportunities out there. And I think as we come into 27, we're gonna continue to see great opportunities to price marginal risk, but that's how the teams are thinking about deployment. We obviously control more of the factors around the fundraising. So really it only ends up being really a factor of timing. What we'll try and do is at some point in 27, we'll give you a detailed update so you can wrap your brain around it.

26:23 I hope that was helpful. Yeah, thanks, Harvey. Thanks, Glenn. Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

26:37 Great. Thanks. Thanks. Good morning. Thanks for taking the question. Maybe just to go back to the monetization cycle, to what extent do you expect this pace to accelerate your fundraising plans as we come into 27? In terms of that return on capital, which areas could it help influence the fundraising? Clearly, CP9 is one of them. But maybe if you can comment on what other types of strategies in global PE and maybe even in credit would benefit from the acceleration of return of capital.

27:13 Sure. Thanks, Brian. Look, I think they all benefit from return of capital because it's probably the number one issue on LP's minds. So it's particularly pronounced in PE. The PE industry has been challenged in terms of return of capital. Obviously, we have not. We've been one of the outliers. Thank you for joining us. It's top of LP minds. Returning capital is going to benefit every one of our strategies, particularly in private equity. But that's why we're going to continue to do it.

28:03 And we've always done this. And I can't emphasize that enough. Our teams think about exits at the moment that we make the investment. So for us to say we're doing $100 billion, that's an outlier over three years for the industry. But for us, I mean, this is what we plan to do. This is right on track. And LPs greatly appreciate that. Thank you. Thank you. Our next question comes from Ken Worthington with JP Morgan. Your line is open.

28:36 Hi, good morning. Thank you for taking the question. Fortitude has been active in recent quarters buying blocks of business. Does the change in the interest rate outlook alter the opportunity or appetite to buy and execute on these blocks? and maybe talk a little bit about how dialogue is going to continue to expand that business.

28:58 Yeah, so the short answer to that is no. Obviously interest rates have an impact on the overall environment everywhere, every asset class. I think that what the team has been quite focused on is the integrated approach to Managing insurance capital around the globe. And what Fortitude does obviously gives us the ability to provide capital. But if you think of the entire insurance space globally, where we're getting the collective momentum as a solution provider, as a fiduciary, because obviously we're not in the annuity business, is the ability to be a third-party provider of capital but also an asset manager at the same time.

29:48 So if an insurer has a capital need, obviously Fortitude can be that capital provider. But more broadly across the insurance space, the types of transactions we're doing in asset-based finance, aviation finance, some of the solutions that we're putting together in Carl Alvin, all of these are very valuable solutions in private investment rates. and so this is all about completing out that aspect of the platform so that we can be a solution provider for any insurer whether they desire capital or risk transfer or whether they're in an excess capital position and they want to deploy capital for us to manage. But that's how it fits.

30:32 Interesting, interesting. Thank you very much. Thank you. Our next question comes from Mason Fleming with Barclays Capital. Your line is open.

30:45 Hi, this is actually Ben Budish from Barclays. Thanks for taking the question. You talked about the realization cycle being supportive of flows. I was wondering if you could just click in more to CP9 specifically. That's obviously kind of your largest flagship fund in the market. We've seen, I think, $5 billion come in so far. So curious if you could update on that one, any kind of changing near-term expectations and your confidence on being able to raise more than the predecessor fund. Thank you.

31:12 The specifics on the narrative around the fundraising, we're really constrained about what we can talk about, but obviously we'll be having our first close coming up in the next couple of months, so you'll have more insight into that. I think to add to what Justin was saying before on a prior question, so in terms of fund flows and returning capital, in private equity broadly, where we've been the most significant outlier, we get the most significant benefit. So in a sector where clients are feeling that they're not getting out of the return of capital, if you're one of the outliers that's actually returning capital, obviously that resonates with them. And so, again, this was a strategic decision we made a couple of years ago. We like the market environment. Thank you for joining us.

32:19 We've obviously been monetizing a lot of assets and will continue. I think that just sets us up better for fundraising over time and speaks to the breadth of the diversification of the business. So in particular for private equity, when you can return capital or any sector where others aren't, it's a differentiating factor. So it's a plus.

32:39 All right, great.

32:40 Thanks, Harvey. Thank you. Our next question comes from Dan Weldon with Wells Fargo. Your line is open.

32:50 Morning. I wanted to follow up on your comments on AI credit and data center investments where you've been more cautious. It sounds like you might see better risk-adjusted returns in this new backdrop. How do you think about approaching that market? Are we talking about sort of maybe more deployment from existing funds, raising new special-purpose funds, or is it more of a capital markets focus? Like, how do you think about wading into that area?

33:17 Yeah. So, you know, we put out – Mark Jenkins, co-president, head of credit insurance, and Jason Thomas put out a paper not too long ago with a lot of attention, which I think for some of the media was a little misunderstood, but the core of it really reflected our investment thesis as it relates to this space broadly, which is, one, we are very, very strong believers in the impact of AI, the technology, what it will do over time. What we're a little more cautious about were some of the uncertainties around structures, collateral, the rush of capital, and just not repeating some of the mistakes that were made just a couple years ago by parts of the marketplace in the sesquipolites. So we didn't want to be over-allocated, and particularly this relates to credit, where we felt like, hey, the strategy that Mark and the team have been driving for a long time with success is, Look, there's a lot of value in diversification. And so this is about not being over allocated and the same as it relates to equity. Now, I think as we move through this part of the cycle, my own personal view is data centers are going to get built.

34:34 This is a problem that is not going to be an inability to have data centers. I think actually what we're going to do is we're going to end up getting to a place where we have actually more certainty around this. And I think as we get more clarity, the risk-adjusted returns will actually even get better as a deployer of capital. So I see it as an opportunity set. In terms of the ability to raise special purpose vehicles or things like that, that's always an opportunity set. But I was really talking about the framework over the next 18 months. I actually think the opportunities to deploy capital become more attractive. We are not ever going to violate the first principle about diversification here because I think we think it makes it just Better durable returns for our clients and more durable returns for the firm. We're big believers in the thesis.

35:19 And as we get more clarity and work through supporter cycle, I actually think you'll see some pretty attractive risk-adjusted returns with more certainty.

35:27 Thank you. Thank you. Our next question comes from Bill Katz with TD Cowan. Your line is open.

35:38 Good morning. This is Robin Holbein for Bill Katz, and thank you for taking the question.

35:43 We wanted to ask about the $8 billion loan acquisition from Truist. Are there any puts and takes to the timing of how you bring this into fee-paying AUM, and are there any balance sheet considerations from Carlyle, and what are the expected fee economics to Carlyle from the transaction?

35:59 Yeah, so that was a Q4 transaction, and so you'll see it flow through next quarter. There's nothing particularly unusual about it, not a balance sheet commitment, just a transaction done by our asset-backed finance team, one of the teams, I think, that has had some of the best deployment for us over the course of the past year. So I think it's just another example of the capabilities we have in asset-backed finance. A growing business for us, but nothing in particular unusual about it in terms of fees or balance sheet.

36:32 Yeah, I think the only takeaway you should have is we've emphasized this business for a couple years now. Teams done an amazing job. They've been very disciplined about how they built the business, designed the business, deployed the capital, grown the business. But this wasn't something the business was capable of doing three years ago, but clearly you've seen a number of large transactions and they're front and center in a lot of these important flows.

36:56 Thank you for taking the questions. Thank you. Our next question comes from Crispin Love with Piper Sandler. Your line is open.

37:07 Thank you. Good morning. I appreciate you taking the question. Can you share some of the drivers in the transaction and advisory fee line in the quarter? It was a little lighter compared to recent quarters. Some peers had more elevated levels, and I understand these can be lumpier, but just curious on the drivers in the third quarter, and perhaps more importantly, the outlook, just longer-term growth opportunity in this line.

37:30 Yeah, quarter to quarter, it's going to periodically be lumpy. I think the underscoring point you have to remember is we're not really deploying any balance sheet here. So the quality of the revenue stream here is as high quality as you would like. and it's all going to flow off of activity levels. So sometimes you'll see an announcement, then you'll see fees come in in the next quarter, the subsequent two quarters, but it's all about the integrated flywheel effect of building Thank you for joining us today. Again, as we come through the super cycle of fundraising, that creates more activity, more deployment, more fees, but it's not going to be linear quarter to quarter, but you've seen the growth we've had over the last couple years, and we expect it to continue to build.

38:40 Great. I think you appreciate taking the question. Sure. Thank you. Our next question comes from Michael Cypress with Morgan Stanley. Your line is open.

38:52 Hey, good morning. Thanks for taking the question. So you've talked about entering a significant fundraising cycle here with a number of flagships coming to the market. I was just hoping you could speak to what you're seeing in terms of institutional demand trends, how that's evolving in the context of just the broader industry backdrop being a bit lighter from realizations. Understandably, you guys have been a bit more active, so that should be helpful. and as we look to 27, I guess how much visibility do you have on a more meaningful acceleration in fundraising and how should we think about the timing of fund activations?

39:25 So I think at the highest level, the easiest way to do it is to just break down the entry segments. From an institutional perspective, I would say that secondaries co-invest, the solutions business, right in the center of a huge amount of institutional interest and activity. And that has to do with a lot of things, not just the fact that the flip side of that coin is that the industry has been slow to monetize on the private equity side, but portfolio structuring and being a real solution provider has proved to be a really unique advantage. So it might just be reallocating across asset classes or how to think about funds. And so the momentum there feels quite sticky and persistent right now.

40:13 I would say in credit, it feels quite good also. For the wealth channel, which in credit obviously has had some challenges for the industry, I think institutional activities continue to pick up and they're seeing value across credit. And when I say that, I'm not really just talking about a narrow slice. I'm talking fully across the cap stack from investment grade all the way through. You've seen also Great CLL activity for us. And so I'd say that the institutional level of activity and credit is quite good. And then in private equity, I would say institutional activity Hard to say. I would say in terms of, again, the big problem for the industry is that the peer group's not returning enough capital, broadly speaking, across the industry.

41:00 But I think that that has likely hit a bottom. Now, whether or not we see a huge uptick, but clearly for our asset classes, aerospace defense, government services, things we do in diversified energy, healthcare. Those are in vogue. I think if you just ended up in the unfortunate position where you had a technology disruption with very high multiple and a lot of fast exposure, it's a little more difficult. But it feels like institutional interest, particularly around those asset classes, is picking up somewhat. But I wouldn't say it's a hockey stick at this stage. But across the rest of the industry, I'd say institutional feels quite good.

41:43 And then just on the visibility into 27 for acceleration and fundraising, how are you thinking about that?

41:51 As we talked about, we're in the beginning of the super cycle. I think, Justin, was pretty specific. It feels like the fourth quarter will be one of our best inflow quarters ever. And then we'll really be in the thick of things in 27 and 28. But we don't really think about it as like accelerating from Q2 to Q1 or anything like that. I understand the models that you guys have to build. It's just not the way we think through the fundraising. Great. Thank you. Thank you. Our next question comes from Patrick Davitt with Autonomous Research. Your line is open.

42:31 Hey, good morning everyone. Most of mine have been asked, I've got a clarification on the CP9 point. It sounds like you see a first close in 4Q So on that, I want to confirm that you already reported the $5 billion structured commitment in 2Q, right? So the first close will just be the amount above that $5 billion. Is that the right way to think about it?

42:52 I think whether or not it's Q4 or the beginning of Q1, I wasn't specific about that, but in the next couple of months. But yeah, I think you should do that. And that'll likely be, as you've seen, I don't want to get stapled to a wall here on this. I would say that probably feels more like a 1A followed by a 1B. And this is really just a question of Timing for institutional investors to get docs done and seasonality and things like that. But yeah, that'll be a subcomponent of the first close would be the $5 billion.

43:24 But the $5 billion has already been reported is my question. Like it's not whenever you... Yeah. Oh, correct.

43:29 Sorry. We think it's reported. But yeah, that's reported. Obviously, we have to report that. But I view that as sort of like just a cornerstone part of the capital raise. That's not really the first close. That's part of the first close, obviously.

43:42 And it's already run through the AUM flow forward. I'm just, yeah, I'm trying to figure out like how big of a... Apologies. Yeah, yeah, yeah. 100%.

43:48 100%. Thank you. That's the right way to think about it.

43:52 Great. Thanks, guys. Thank you. Thank you. Our next question comes from Bart Dziarski with RBC Capital Markets. Your line is open.

44:04 Hi, good morning. Thanks for taking the question. Wanted to ask in... Given the higher rate environment, how are you evolving or adapting the value creation plans to ensure performance and private equity is not impacted? I presume there's more focus on operational value-add, so anything you can help us understand through that would be great. Thanks.

44:22 Yeah, so one of the great things I stepped into when I arrived at Carlyle, among the many great things, one was a, I would say, very conservative approach to liability management at the portfolio companies. and a great capital markets team. Now, we didn't have a capital markets fee business, which actually we built over that time, but we had a great liability management team, which has now extended all the work they do at Carlyle. But we've always taken a conservative approach to interest rates. One of the reasons, in part, we've been able to have monetizations is, I remember when I first got here three years ago when rates started to go up, We had really the most conservative liability structures. And so we haven't relied as much on interest rates or refinancings.

45:09 When you actually go through the portfolio monetizations and the history of Carlyle, it's not interest rates per se that's driving value. Now, sometimes you get cycles where obviously there was a long cycle where rates were lower and you could refinance and that was a value contributor to certain assets, but that hasn't been the driver of value creation. We certainly, every time we acquire a company, the team is working with all of our economists to best understand how much risk they want to take from that perspective, but we're not aggressive risk-takers when it comes to liability structures in those companies. Where we point our energy is on, you know, if it's a carve-out, the expertise it requires to take a carve-out, whether it's a roll-up strategy, How are we doing marketing? What are we doing in terms of AI?

45:58 These are much more critical components or data science, much more critical components to value creation than interest rates themselves. But we generally, as a firm, take a pretty conservative view to liability management, and that's just the history that Bill Conway and the founders ran the company with for 40 years. Great. That's very helpful.

46:20 Thanks for the color. Sure. Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

46:30 Great. Just a couple of quick follow-ups. Just on transaction fees, is the Truist ABF, is that something that will materially impact the fourth quarter transaction fees? And then maybe just some perspective on the timing of $230 million of ending fee earning AUM fees to come into The fee stream, I know it's always hard to predict, but maybe on the credit side, how would you think about timing of that layering in?

47:03 Yeah, sure. So on the pending fee earning AUM, very broad based where that's coming from. So hard to say blanket statement. I would say historically, you know, it's kind of a 12 to 24 month type of number, but that'll depend on credit deployment. Truist was a fourth quarter deal, so you'll see that come through the fourth quarter numbers. We've got a number of things coming through in transaction fees in the fourth quarter, so I expect it will be a good quarter for us in that regard, but obviously we've got two months left, so we'll have to see how that goes. But yeah, for the pending fee earning AUM, you're going to see that come through in 27 and 28, and as I said before, that's going to be a driver of our top line.

47:48 Great, thank you. Thank you. This concludes the question and answer session. I'd like to turn the call back over to Daniel Harris for any closing remarks.

47:59 Thank you everyone for your time today. Should you have any questions after the call, follow up with Investor Relations and we look forward to talking to you again next quarter. Thank you for your participation. You may now disconnect. Good day.