Credit enhancements contribute to Carlyle's financial improvement, despite falling short of profit expectations.
The Carlyle Group, a global investment firm, reported lower distributable earnings in the fourth quarter of 2024, missing market expectations primarily due to a decline in realized performance revenue from its private equity arm. Despite robust inflows into its third opportunistic credit fund, the immediate impact on distributable earnings was offset by weaker performance revenues in private equity.
Carlyle's total assets under management (AUM) grew by four percent year-on-year to $441 billion, with the global credit AUM increasing by two percent. The increase was driven by inflows across the segment, including the closing of 10 new collateralised loan obligations and its latest opportunistic credit fund. The growth was boosted by inflows into AlpInvest's secondaries business, portfolio finance, and private market funds.
Fee-related earnings for the fourth quarter of 2024 were $287 million, and for the full year of 2024, they amounted to $1.1 billion. Despite the earnings miss, Carlyle's chief executive, Harvey M. Schwartz, stated that the company met all financial targets set for 2024 and expressed a focus on driving long-term shareholder value for 2025.
Schwartz highlighted robust inflows as a key achievement for 2024, with the company's third opportunistic credit fund receiving robust inflows in the fourth quarter. However, the earnings at Carlyle's private equity business dropped by 24.1% in the same quarter, outweighing the positive effect from strong inflows into the opportunistic credit fund.
The decline in realized performance revenue reflects a temporary headwind in exits or realizations from the private equity portfolio, which can affect earnings even if fundraising activity remains strong. Realised net performance revenues for the full year of 2024 were $366 million, and for the fourth quarter, they were $78 million.
Despite the earnings miss, Carlyle's broader strategic picture remains positive, as indicated by its $311 million in fee-related earnings projected for Q1 2025 and a $40 billion fundraising target for 2025, highlighting continued investor confidence and expected earnings recovery.
The share price of Carlyle fell by 3.1% in pre-market trading due to the earnings miss. Schwartz expressed expectation for a high level of activity across Carlyle's platform in 2025.
[1] Source: Carlyle Group's Q4 2024 Earnings Release
Carlyle's focus on driving long-term shareholder value in 2025 involves continued investment in its business, as indicated by the $40 billion fundraising target for the year. In addition, the company's strategy includes expanding its portfolio finance, private market funds, and secondaries business, which contributed to the growth in total assets under management (AUM).
