Carlyle Group L.P. Aktie

All right. I think we can go ahead and get started here. Good afternoon, everyone. I'm Mike Cyprys, equity analyst covering brokers, asset managers and exchanges for Morgan Stanley Research. And we're excited to have with us for our next session, Justin Plouffe, the Chief Financial Officer of Carlyle. With over $475 billion of assets under management, Carlyle is one of the world's largest alternative investment managers. Justin, thank you for joining us today.

Thanks for having me, Mike.

Great. So I thought we could start a little bit about your background. Well, you've been at Carlyle for many years. You're newer to the CFO role. And I believe this is your first sell-side conference appearance. We'll go easy on you.

Appreciate that. Yes.

So I think you've been in the CFO role for now about 6 months, 20 years at Carlyle. So just give us a little bit of color about the transition to the CFO role, how that's been -- what parts of your background at Carlyle have helped you grow into that?

No, it's been great. I've been at Carlyle for almost 20 years now, almost all of that time as a credit investor. So I started off in the CLO business way back in the days when CLOs were esoteric alternative assets. And then I eventually became the Deputy CIO working for Mark Jenkins and helping him grow the credit business to the $200 billion business it is today. I'd say that when I was in credit, a lot of what I was doing was managing the business, talking to our LPs, figuring out ways to grow. So even though I was a credit investor, the day-to-day actually had a lot of overlap with what John does as a CFO.

I will also say that our CEO, Harvey Schwartz; and John Redett, who is CFO before me, they actually dealt with a lot of issues when Harvey came in 3 years ago. They dispensed with a lot of distractions, we'll say, and they left me in a great position, which is to continue the growth story. So what I've been doing for the last 6 months is really just focusing on how do we grow the business, what areas should we be dedicating resources to and how do we ultimately scale what Carlyle has to be even bigger and better. And it's been a great 6 months. I'm having fun.

Great. Well, let's dig in here. Let's start with deployment. Carlyle is sitting on, I think, roughly $100 billion of dry powder at a time when geopolitical uncertainty, higher for longer rates, market volatility, all creating risk, but also opportunities. So how has your macro outlook changed, say, versus 3 months ago? And where are you finding some of the most compelling risk-adjusted opportunities today in the marketplace?

Yes. I would say that given everything that's happened in 2026 so far, it's actually surprising how resilient the economy has been globally. And our companies are generally still growing. The companies that we lend to are generally still performing well. We don't see things like waves of defaults. We don't see problems we weren't expecting. It's been actually quite surprising how well the macroeconomic environment has held up. Now the counterpoint to that, right, is that there's been enormous volatility in the political thing, right? And that has created a great deal of uncertainty.

So when you go around the world, what you hear from just about everybody is that they want security. They're focused on not just national security, but economic security, cybersecurity, right? There's a shift from this sort of just-in-time view to just in case. And that is a very different mindset for investors to have. And that, I think, in a lot of ways, does play into the power alleys that Carlyle has. And we have a 40-year history of investing in aerospace and defense. We have great franchises in health care, in financials and industrials. And these are all areas that over the last decade, probably have taken a bit of a backseat to tech.

But now because we are not heavy in that industry, we don't have a lot of the problems in software that maybe some other firms have. And we have LPs coming to us for the expertise that we have in those power alley areas. So there is a lot of and volatility in the world, but with the stronger-than-expected economic backdrop, I think there's also a great chance for us to put capital to work. As you mentioned, we actually have a record amount of dry powder for Carlyle right now, and we are out there deploying it.

So defense, industrials, health care, those are some of the more interesting areas of opportunities.

There are interesting areas. There are areas where LPs are invested and there are areas where we have a long-term strong track record. Our CEO, Harvey Schwartz likes to say when he came to Carlyle, people said, "Oh, you're in trouble because you're not big in tech, you missed it." And now not being tech is somehow a virtue. So I guess if you wait long enough, things will come your way. But right now, the areas where we have great capabilities are the areas where LPs are interested.

Great. And one of the more interesting tensions in recent -- in the recent quarter was strong exit activity, but not necessarily from funds that were yet paying carry. So how should we think about the carry realization pipeline from here? And do you feel the ingredients are in place for a more meaningful pickup over the next couple of quarters? What needs to happen in markets for that to come through on a more consistent basis?

Sure. Carried interest is a really hard thing to predict quarter-to-quarter. There are so many factors that play into when it's realized. At a high level, the way I like to think about it is we've got $2.6 billion of accrued carry on our balance sheet. Generally speaking, that will flow through DE over a 4-year period. I feel pretty good about saying that. Which quarters it will flow through, that's a much harder thing to predict. Now you mentioned in first quarter, CP VII, 2 vintages ago, U.S. buyout, that one is close to carry. It is not our finest piece of art, as we've said in the past, but we do expect it to get to carry in the coming quarters. CP VII, the last vintage is still really too early in the investment cycle, but it's a fund that's doing great. It's a first or second quartile fund depending on the measure. So that one is more just a matter of time.

As the year goes on, we would expect to have realizations in funds like our Japan buyout fund, Europe Technology, U.S. real estate, financial services that are in carry. And so we would expect to see that flow through DE. But I always want to be careful that when I speak with shareholders that it is very difficult to predict this quarter-to-quarter. You need to take the longer-term view, and that really is that $2.6 billion of accrued carry that should come out over the next 4 years.

Okay. Let's shift gears and talk about fundraising. Carlyle laid out a goal to raise over $200 billion over 3 years, which implies a meaningful acceleration versus the prior 3 years. So I guess which pieces of the plan are largely visible today and which require more or the most execution?

Well, when we put together the plan, we wanted it to be something that we felt very confident in, meaning we didn't want to put in placeholders for acquisitions or new businesses, things that we didn't have a line of sight on. So the plan is very much based in our business as it exists today, scaling organically. And we felt great about that in February. We feel great about it today. If you think about that $200 billion of fundraising, about $90 billion of it's credit, which is actually only a very small increase over the $88 billion that we raised in the 3 years prior for credit. If you think about the wealth aspect of it, of that $200 billion, it's $40 billion, so 20%. We've been running at a run rate of about 15% of our inflows being wealth.

So that goes from 15% to 20%, again, not a huge jump. And we also are looking at in this period between now and 2028, really a super cycle for fundraising for us where all of our flagships are going to be in the market, right? U.S. buyout, our opportunistic credit fund. Japan buyout would likely be back. Our AlpInvest funds, which have been growing at a very, very fast rate, either are in the market now or should be in the market soon. So we have some of our best funds with great returns, our largest funds coming to market. And that all makes us feel very confident in that $200 billion number. Will the ultimate composition look exactly like what we put in the model? Probably not. There'll probably be puts and takes here and there, but there are many paths to achieve that number, and we feel really confident about it.

And which contributors to the $200 million do you feel the market misunderstands or is most underappreciated? And if you miss the target, like where is most likely to be the shortfall?

Look, I think what is not in there that people may underestimate are the upsides around doing something new in the insurance space, for instance. We didn't build that in. There -- I mentioned there are no acquisitions in there. There's also no retirement in there in terms of flows from that channel. We just announced a partnership with SEI to do a product that is focused on retirement. We announced a product with AllianceBernstein and Brookfield, we'll be partnering with them to do a retirement product. None of that is in the build. So I think there are multiple areas that could result in us doing even better than what is in the build. And otherwise, it's organic, and we feel really, really good about multiple paths to get to $200 billion.

I wanted to ask about SPV and the structured products that you put together to help fund the $5 billion commitment to help support the next vintage fund for flagship buyout. Maybe you could just describe the transaction, how it came together? And is this something that you think could be more commonplace for you, for others across the industry?

Yes. So this was a transaction that it really started with Harvey getting a bunch of the senior people together and saying, what can we do to differentiate ourselves in the market? What can we do for our LPs that they will appreciate, solve a problem for them and maybe we'll jump start some fundraising for us. And so we went out and we spoke to a number of the largest LPs, and this was the result, less than a handful of very significant LPs for us that have significant existing exposure who also wanted to increase their exposure to Carlyle going forward. And what they did was take our existing LP commitments, put them together into an SPV, also made forward commitments to that, and those were the assets.

On the liability side, we had bank loans, so just bank syndicated borrowing. We had a preferred equity instrument, and we had a common equity instrument. The preferred and the common owned mostly by the LPs that committed to the deal alongside Carlyle, and we placed a little bit of the preferred -- some of the preferred with third parties. So it really was a structure that was a win-win, right? The LPs got some liquidity that they could use to reallocate today. They ultimately, as investors in the structure, retained exposure to the Carlyle funds they had, and they also increased their exposure to future Carlyle funds.

For us, that's $5 billion that's earmarked for the next vintage U.S. buyout fund at full fees and carry. So a solution for the LPs, a great win for us. Do I think it could be replicated? I expect it will be. You need to do it in size. I mean the structure overall was more than $8 billion in size for us. I don't think this would make sense to do with too many smaller LPs. But I think for LPs of significant size that are looking for liquidity that have a long-term relationship with you, then I think it makes a lot of sense. I don't think this is the last time you'll see it in the market.

And that unlocks that $5 billion commitment to the next flagship.

That's right.

Great. Let's shift and talk about FRE growth margins at your Investor Day. Earlier this year, you outlined an FRE target of $1.9 billion for -- or $1.9 billion plus. I should have...

We did put the plus.

You put the plus. In '28, which implies a 15% CAGR. Can you unpack the building blocks to get there? And how durable do you think this growth is? And what are some of the biggest risks, if any?

Yes. Again, our plan is rooted in the business as it exists today and scaling that business. And we felt great about that in February. We feel great about it today. We've said a number of times, if you look at that 15% CAGR, that's not going to be the same every year. 2026, for instance, is it happens to be a year where some of our funds are stepping down in management fees. We're in fundraising mode. It's a year where we're focused on fundraising and deployment and realizations that are great for our LPs. As you get into '27 and '28, you should see us ramp up to that ultimate $1.9 billion plus and 15% CAGR number. But we feel really strongly about the ability to achieve it simply because it's based on organic growth of the flagship funds that are in the super cycle. And I mentioned before, yes, wealth is part of it, but it's 20% of the fundraising. It's not an enormous part of it, and it doesn't include things like retirement.

So I think there's a lot of ways to get there, and we wanted to make sure we put out a number that we felt very confident in and $1.9 billion is something we feel confident.

Credit, insurance central to the next phase of growth at Carlyle. I guess what do you think Carlyle does uniquely well there? How are you leaning into your unique advantages as you drive the next step function growth in credit?

Yes. I think the differentiating factor for our credit platform is really the diversification that we have. We did not build the platform based on one type of strategy. There are many successful monoline credit managers out there. But the vision that Mark Jenkins brought was that we wanted to be a solutions provider. We wanted to be able to go to a company and say, no matter what solution you need, we can -- we have a pocket for that. If you want us to anchor your broadly syndicated loan deal, we can do that. If you want a regular-way vanilla direct lending loan, we can do that. If you need junior capital, if you need something more bespoke, if you want us to lend against a hard asset, if you want us to securitize assets for you, we can do all of that.

And we've been able to, over the last 8 years, build that out, I guess, 10 years now, geez, we've been able to build that out. And now what we need to do is scale. Every part of it, I would say, other than the CLO business, which is quite well scaled, every other part of it is built to be bigger than it is today and is on a path to be bigger than it is today. And really, the goal there is to scale all of those solutions. But I don't think there are many credit platforms out there that truly have that full set of capabilities unified under one leadership group that can face the borrower and say, whatever you need as a solution, we can provide it.

And given some of these newer strategies, not just in credit, but you look across the rest of the platform, if you were to zoom out 5 years from now, what portion of the overall firm earnings do you think could be from businesses that barely existed 5 years ago?

Yes. So when we put together our plan for '28, if you look at where the revenues are coming from, it's about 1/3, 1/3, 1/3 between private equity, private credit and our AlpInvest business. That is a far cry from what we used to be, I think, 5 years ago, it was at least 2/3 private equity. So we've diversified. The firm is much more durable for that. We don't rely on one particular channel of fundraising, right? We have insurance, yes, we have wealth, yes, we have our traditional institutional. And we don't rely any longer on one flagship fund or one strategy, right?

If the market for private equity is not that active, but there's a vibrant secondary market, people need liquidity solutions. Our AlpInvest business is incredibly well positioned to take advantage of that as it has for the past 5 years. So I think wherever the markets move now in the private space, one part or another of our business is well positioned to take advantage of that. And that's going to be the difference between Carlyle going forward and maybe what we were in the past.

You mentioned AlpInvest. I want to dig in there for a moment. It's become one of the firm's clearest growth engines and today, it looks less like a secondaries business and more like a private market solutions platform. So how much larger can that opportunity become? Talk about some of the steps you're taking over the next couple of years to further expand AlpInvest.

AlpInvest has been an enormous success story for us. It's over $100 billion in AUM now. It's grown its FRE. It grew 60% last year. It's grown 4x in the last 4 years. This is really all about the natural evolution of private markets. Any market that starts out as esoteric at first, you can charge high fees, the returns are outsized. Over time, it moves to be more normalized, more people come in, there's pressure on the returns. And then eventually, what happens is people need liquidity. And private markets are now coming to that point where people want liquidity solutions.

And to your point, AlpInvest started out as a primaries allocator, then it went into co-investment, then buying secondaries. But now it also has solutions in portfolio finance. It could do securitizations like we just did for our U.S. buyout franchise. NAV loans, it's moving into the credit space. Again, it's like our credit business, we want to be able to approach GPs and LPs around the world and say, what do you need? What type of solution do you need because we have a pocket that can provide that. And I think that, that will continue to grow with the private markets.

What rate can AlpInvest grow at the rate that the private markets grow because the more capital is out there in private markets, the more participants you have, the more there will be needs for liquidity. And frankly, I will get the question sometimes, well, isn't this a moment in time because private equity has not exited as much perhaps as it has in the past. That's one reason.

But when we talk to LPs, there are many, many other reasons they want liquidity. They want to reallocate within private equity. They want to reallocate to credit. They have liability structure issues. So the fact that private equity maybe hasn't realized as much, we've actually realized quite a bit as a firm, but some others haven't. That's one factor of many. and this need for liquidity and liquidity solutions, it's not going away. The demand is only going to go up.

Let's talk about private wealth, which has been a key priority for Carlyle, for the industry. What lessons has Carlyle learned from building out the wealth platform over the last couple of years, including your recent experience with CTAC and investor behavior?

Yes. Look, we were a little bit later to the wealth process than some others. I think the team has done a phenomenal job catching us up. The brand name has resonated very well in the wealth channel. CTAC was the first thing that we did in the wealth channel, a private credit interval fund. I got to be part of that process and building that and going out into the wealth channel. The investors there are just as sophisticated as they are in the institutional channel. They have different concerns and different questions, but they are very discerning and you have to be ready to provide phenomenal client service for them. We've now built out the private wealth business so that we have a flagship in every one of our strategies, at least one. And that's kind of new in the last 12 months for us. So we're really at the very beginning of being able to offer the full suite of Carlyle Investment products down the wealth channel.

The response so far has been great. It is a different kind of marketing and talking. We entered into a sponsorship agreement with Oracle Red Bull Racing of Formula One. That's been a very fun thing. I don't think we would have done that if we were only in the institutional channel. I'm still waiting for my chance to meet Max Verstappen. But things like that are just a bit of a different world, a different way of thinking. But it is a channel that fully understands the need for exposure to private markets. You just can't create a truly diversified portfolio for a client now if they don't have some exposure to private markets. They're too big. They're too big a part of the economy.

So we have these bumps in the road as you always have in fundraising. Right now, it's private credit. But if you ask me 5 years from now, are wealth investors going to have more or less private markets exposure than they have today? It's going to be more. And it should be more because it has a place in a broadly diversified portfolio. And I know that the advisers in the channel understand that very well.

And how has your experience so far impacted your approach to product development? And what are some of the types of strategies and vehicles we could see from Carlyle in the coming years in the wealth channel?

Yes. I'm pretty happy with the strategies and the structures that we have for the wealth channel now. Our big step was to get at least one product for every one of our investment strategies. I'm sure there will be more, but I'm not sure that we need to have 20. We probably need to have 7 that really encapsulate everything that we do, and I think we'll do that. The most important thing is that they're structured correctly for the underlying assets. There are certain assets where they really are illiquid and you need to put them away for 5 or 6, 7 years and understand that, that's not going to be a source of liquidity for you, let the investors do their job. There are certain ones that fall in kind of the middle bucket, credit probably is there.

You can get some liquidity, but it shouldn't be your first source, and there are some that are fully liquid. The structure has to match that. And I think we made a good choice when back in 2018 for CTAC, we decided to use the interval structure, which provides 5% per quarter liquidity. That's the right structure for private credit. You never want to be a forced seller in credit. I mean if you look back at how people lost money through the great financial crisis.

Generally speaking, it wasn't because they made bad credit decisions, had defaults and poor recoveries. Generally, it was because they were a forced seller at the wrong time. And so when we were designing these products, we designed them that way. That's the future, I think, for these products is that the buyer base needs to understand where they fit in the liquidity spectrum. I think most of the advisers do. If they don't, they will learn. And once they do, then I think you'll see even more uptake because there'll be a greater understanding of how these products work within a broader portfolio.

So while there's a lot of focus on the wealth channel, it seems the retirement channel may emerge as a new channel. Candidly, it's not in your targets for '28. So I guess what still needs to happen for private markets to become mainstream inside defined contribution plans? Talk about the steps you're taking over the next 12, 24 months to capture this opportunity?

Yes. I mean in a lot of ways, if you think about where private markets assets should sit, it's retirement. And really, the first uptake for private markets were pension funds, which are thinking about long-term retirement liabilities. And so it only makes sense now that eventually they make their way into individuals retirement planning. So I think there's a -- just from an asset management standpoint, there is a natural pull there. The difficulties tend to be a little bit more around the regulation, and it is a heavily regulated space. It is a unique space that has a lot of rules that others don't. And so what we're working through as an industry right now is how do you fit there?

And I think, first, it will be part of a broader portfolio of solutions, so a target date fund or something of that nature. I mentioned before, we're partnering with SEI on an interval fund product that will package a variety of private markets investment solutions into kind of one vehicle effectively. Same thing with our partnership with AllianceBernstein and Brookfield, we're doing the private equity. Brookfield is doing real assets, AllianceBernstein is doing some credit, and we're packaging it all as one solution. So that's probably the first step. I think we're -- we may be -- we're probably a ways away from having one-off individual asset solutions for retirement investors. But we'll see over the next few years.

I expect it will be more of an evolution. It's not going to happen overnight. It will likely be a slower uptake. But again, if you think about just intellectually, where these assets should sit and what type of liability they should sit against, retirement just makes a ton of sense. But I expect it will grow consistently over time.

Let's shift and talk about AI. I know it's a focus for you and for Carlyle...

I've heard of it.

Yes. Across the investment process, across portfolio management, firm operations. As we move beyond experimentation, where are you seeing measurable productivity gains today? And when do you expect the benefits to become more visible in the economics of the business?

Yes. It's a great question. And AI is going to revolutionize eventually every industry in one way or another. I will tell you, in our industry today, right now, it is helping us with efficiency. It is able to do things faster than human beings can in certain instances with the proper human oversight. We are finding efficiency gains in all sorts of things, payment processing, putting together slide decks. I think our junior folks are probably very happy to have a lot of the AI tools that we have now. It just allows them to get work done more efficiently and faster than maybe it used to be when I was putting together slide decks.

So there's a lot of that, that really has had an immediate impact on the business. I think the longer-term stuff, we're we are spending an enormous amount of time on, and we are very much believers that AI is going to significantly impact the investment process going forward. But I wouldn't say it's there yet. That's where we're more in the lab. We are working with some of the leaders in the AI industry about how to properly train these models and have them bring more value to decision-making. But at this particular moment, most of the value really is in sort of the efficiency gains and speeding along the processes and decision-making that was already happening. In the next 5 years, you're going to see the decision-making itself start to get impacted, and that will be very interesting.

Any way to quantify the benefits so far?

Boy, I don't think so. It's a really difficult thing to measure. I wouldn't tell you that we have particular measurement of, we save this many hours or we save this many dollars. I mean the other thing that every industry is going to have to grapple with, which people are starting to think about now is that AI is not free, right? There -- you have to pay for this. And I was joking -- half joking with someone the other day like maybe we'll still need to hire junior people.

Of course, we're going to need to hire junior people, right? AI isn't going to do everything for us. But there is going to have to be a balance of what do you use AI for, especially when you're talking about major significant computing power and what can you use maybe lesser technology for or simply have a human do.

How do you think about the implications for talent management?

I think it's something we think a lot about because on the one hand, you want to understand when you're evaluating talent that somebody is doing their own work and that their thoughts are their thoughts and they're not getting them from AI. That said, the moment they come in to do work, you expect them to use AI. So you're really trying to identify people that have that creative thinking aspect of the work that we do, but also can interact with the tools, including AI. I think ultimately, it will change things but we will still have a structure of mentorship. It will really still be about the senior people, training the junior people about what makes a good investment, how do you look at a company, how do you look at an investment process. AI will be a tool and an important part of that, but there still will be that apprenticeship model in the investment industry.

I think, hopefully, what it will do, and I tend to be optimistic about these things. Hopefully, what it will do is reduce the amount of work and really increase the focus that we can have on the key decision-making that goes into an investment.

So if we look out 3 to 5 years, is it primarily an efficiency tool? Or do you think it can become a genuine source of competitive advantage?

I think it's both. I think it's absolutely an efficiency tool. But I also think in terms of decision-making, the technology will get to a place where it can be helpful. I don't think that we will ever fully replace the human element, but I think it can be very, very helpful and a huge part of that. And I would hope that we're at the forefront. -- of using AI in our decision-making process because I think it's a very, very powerful tool.

I will say, though, that some of the predictions of software companies not existing or anything don't strike me as that credible just because somebody can go and vibe code a CRM solution doesn't mean that that's the most efficient thing to do, but you can't imagine every single company vibe coding every single application that they need. This is actually a significant concern in many ways because of the cybersecurity threat that can come from it. But AI will be incorporated in just about everything that we do, and it will simply be sort of like the Internet, right? We don't talk about using the Internet. Every company obviously interacts with the Internet. Today, every company will interact with AI, and it will be embedded in everything that we do.

We're almost up on time. So final question. If you look to the Carlyle of 2030, which of your emerging growth initiatives do you think has the potential to be the most transformational to the firm? And what do you think investors are most underestimating about where Carlyle will be in 5 years?

Well, the theme, I think that AI has the greatest transformational impact, both for our portfolio companies and for the firm. But I would say that's true of just about every company in every industry. I mean it is a revolution we're going through. In terms of Carlyle, look, as I said before, I think we have built the foundation of being a full solutions provider in private markets across AlpInvest, credit, private equity and scale is really what we need to focus on now.

I think what people underestimate about Carlyle is how that diversity and durability will be a huge advantage going forward to not be a monoline to be able to move wherever value is across private markets, that's an enormously valuable thing. And to do that across many, many different geographies around the world. That's something that's hard to replicate. And I think it will serve us well, and it will give us the opportunity to, I think, really be one of the firms that continues on for a very long time in private markets as a very durable brand.

I'll leave it there. Justin, thank you so much.

Appreciate it. Thank you.

Good afternoon. I'm Patrick Davitt, the U.S. Asset Manager Analyst here at Autonomous. It's my pleasure to welcome back Carlyle's CEO, Harvey Schwartz. As a reminder...

That's just my way of making a statement, Patrick. Miss the edge of that. It's okay. I'll take yours.

As a reminder...

It won't be as dramatic after that.

If you have any questions, you can submit them to the Pigeonhole app, and I will come up here on my iPad, and I'll try to work them in if we have time. Harvey, thanks for coming.

Yes. Great to see you.

Great to see you.

Maybe to start, it's been just over 3 years now since you took the seat. So I think it would be a good start to update on your key takeaways after another year. Has there been any significant evolution on your view of the risks and opportunities for Carlyle from here?

Yes. Great. Again, great to see everybody. So I would say to frame it, probably the best way to think about it, Patrick, is we're 3 years into what has turned out to be a 6-year plan. And the first 3 years were really about identifying the strategic priorities, committing to the strategic plan, deemphasizing things that were less important for the firm, establishing the leadership group, overhauling the operating structure of the firm, completely redesigning how we think about capital management. So it was sort of a soup-to-nuts overhaul strategically and then obviously creating a new leadership team, most of whom are internal, but are very activated and it's really come to gather really quite impressively.

If you look at the results at the end of year 3, record FRE, we grew it from the low 800s to $1.2 billion. The margin when I showed up was worse than the industry, 37%. The team did a remarkable job moving that up 1,000 basis points. We overhauled the compensation plan. There was a lot of very discrete steps taken along that path, which put us in a great place at the end of year 3 effectively to come out with our 3-year plan, which we announced in February, that 3-year plan takes us from $1.2 billion to $1.9 billion. Takes the per share from $4 in change to $6 in change, that includes raising $200 million over 3 years, and that was really a plan that was in response to all of the shareholders and the investors who said, okay, you put out 1 year targets. And I wouldn't personally have been comfortable putting out 3-year targets in years 1, 2 and 3.

I just didn't feel like we're in a position yet to have that kind of visibility on the strategic growth plan. But we put out the 1-year target because I thought it was important to give the market some sense of directionality of the firm and obviously, the team, the leadership team did a great job. We beat all those targets pretty meaningfully. So we have a lot of confidence in establishing the targets in a way that makes sense.

The targets we put out, again, which I just went through, I would say, are realistic. It doesn't include any random one-offs. There's no incremental flows for insurance. There's no acquisitions in there. So it's very much a core set of numbers, which are grounded on basically the platform today and our ability to execute that platform as we come into a super cycle of fundraising. We're going to have all the major flagship funds in the market over the next 3 years. This year is a little more muted in terms of that because fundraising is still very good. You saw in the first quarter, $13 billion. But the super cycle really starts to pick up. And so we feel very good about the plan. Nothing about the marketplace has changed my view of the plan other than I would say the geopolitical backdrop while somewhat more volatile maybe than it was 2 months ago, actually, that trend -- it's not like something we wish for, by the way. That trend actually is positive for the firm. And the reason I say that is a lot of the expertise we have at the firm really fits and the structure of the firm fits a global backdrop which is more about geopolitical splintering than it is about geopolitical cooperation. And I'm happy to dive into more of that. We feel great about the plan, the momentum is good. And so yes, so we feel good.

That's helpful. Thanks. And we'll dig in on a lot of that in the conversation. But given we have most of the major alternative CEOs here, I'm going to start with a higher-level question. It feels like a broken record at this point, but we're gathered once again with a lot of volatility and uncertainty. This year, it's in Iran war, private credit concerns -- concerns around sticky inflation, higher for longer rates, pick your poison. So I think it seems like a pretty mixed mix, a pretty toxic mix, I guess, for levered assets. So do you agree with that view, particularly private equity -- and what is your current thinking on inflation rates in the economy?

Okay. I should have gone with bourbon, not water. I don't view it -- well, let me first say, not supposed to be combative with your fireside chat host. I don't know if it was particularly toxic. I would say, again, taking a very, very big step back. Again, what's happening geopolitically, I think is complicated but unsurprising. And why do I say that? We went through a period post the financial crisis where we had very subdued globally manipulated interest rates, but manipulated for very good reasons. So I don't mean manipulation in some bad devious way, I certainly don't mean it in a toxic way. But you had quantitative easing after 2008, you had quantitative easing after the pandemic had a flood of capital that came into the system which definitely distorted yield curves around the world.

I don't think for assets, that's actually the best thing over a long period of time. I think we just want a normal market clearing cost of capital, okay? So -- when I think of the backdrop you described, I think your description is accurate in the sense that geopolitical complexity is very high. I think geopolitical risk changed dramatically today, Russia went into the Ukraine. I don't think that the market is actually really ever priced what that meant. But I can tell you what it's resulted in. What it resulted in is a combination of what you described, sticker inflation, higher rates, which I actually think is a more legitimate cost of capital. And what it's really created is geopolitical splintering has led to economic competition for capital. So everywhere you go in the world, the conversation is the same. It's a conversation first and foremost about national security. But national security has been completely redefined.

It used to be now to find is defense. Now it's defined as energy, defense, data. These are all top of mind issues everywhere in the world. And it's also defined around the cycle we're in around capital. Every country, U.S., Canada, Europe, Middle East, Japan, Korea, Asia, everyone wants economic growth. Economic growth on the heels of the two catastrophic issues we dealt with the financial crisis and the pandemic, it's very difficult for governments to fund that given the size of deficits. The demand for private capital in the -- for the next foreseeable 2 cycles, call it, 5 to 15 years, I think, is enormous. So what you described is right.

However, what that has created is a shortage of capital, high demand for capital and actually the marginal return that can be earned on that capital is more, I think, is more appropriately priced going forward. Now of course, you have to be in the right businesses. So we've talked about this a little bit when I showed up at Carlyle, I did kind of like going around the world tour people said, "Hey, you got a problem in your private equity business, you're not big in software."

And then in credit, they said, "Hey, haven't grown direct lending big enough, everybody grew really fast, and you're not making enough in software." Okay, 3 years later, it turns out that's a virtue, who knew. But what you want to have in today's world is a durable franchise that gives you the ability to execute your plan across a number of verticals. When you look at our verticals, aerospace, defense, by far, we're the market leader. Health care, industrials, all of a sudden, all these what you wouldn't consider old economy industries, these are the industries everyone's focused on, globally.

And so our ability to marginally deploy capital, I think the next -- for the private equity is, I think the next couple of vintages could be extremely attractive. And as you saw, we just announced a cornerstone vehicle for our next buyout fund. We haven't even started capital raising for that fund, and we raised $5 billion of full fees. So I think the opportunity to deploy capital over the next 5 or 10 years will have a complicated backdrop, but I think the marginal risk return will be quite attractive, not because there's just a lot of capital because I think there's less capital available, but the demand is higher, and that's the backdrop we like. And we have the right geographic footprint and the right business mix. So I feel good about the return profile.

That all makes sense, and I want to dig in on that, but you do have assets in the ground. I imagine that, that overlay could complicate the assets the ground. So through that lens, how are you thinking about the realization outlook given that overview? How is that tracking? Has there been any noticeable change since the earnings call?

No. I mean, if you look -- okay, look to take our U.S. buyout business, I think that's a great example. For those of you who don't know, that's our largest flagship private equity fund. In 2025, we returned $6 billion. We returned close to 7% in the first quarter. A lot of people will say, well, there was Medline that's true, but there's also been strategic sales, other IPOs. We -- if you look at just over the past 2 years, we did the largest-ever IPO in Japan. We did the largest-ever IPO in India. We did the third largest 2 years ago with Standard Aero. We did Medline, but there's also been strategic sales. And so if you look at the industry, and actually, again, this is a backdrop that sets up really well for deploying capital. if we look at the industry or the industry, I think we've outperformed the industry by 500 or 600 basis points on capital return as a percent of NAV. So we bucked the trend on capital return, where we had some challenges is in our 2 vintages ago where we're allocating to consumer, and we underperformed in that, but we shut that down. And so if you look at the current vintage fund using U.S. buyout as an example again, it's a first quartile fund. When you look at it against large competitors, if you look at it a broader peer set of like 300, I think it's a second quartile performing fund. It has no assets that are currently challenged, super unusual for a fund that's 70% or so invested. And again, it's already returning capital.

So I think the setup again, for private equity and for private capital is quite robust over the next 5 to 10 years. But mostly, I say that, Patrick, because if you're in the right verticals, the demand for capital is very high. Everywhere you go in the world, people want to talk about investing in their local industries, how do they grow their economies, how do they create employment, how do they address affordability issues? This is a global phenomenon, and you have two forms of capital that can provide a solution to this bank capital and private capital. It's going to require a lot of capital to do these things.

On that point, this is from the audience, actually, there was news today about the new military investment or defense investment platform. Remind us how much AUM you currently have allocated to that theme? And given the spending needs you're alluding to, how big do you think the TAM could be for that platform?

Okay. So let me take a step back. So the way you strategically we're thinking about the firm in terms of areas that we want to deploy capital is the following: We can do this at varying scale. So for example, aerospace, defense, broadly defined, we've invested close to $40 billion alongside an industrials over 40 years. If you really narrowly define it, it's closer to $11 billion. But if you look at it, we're the only large player in the space and the performance of the team is extraordinary, and they've been with the same team for close to 40 years. Bill Conway did its first transaction in defense in -- back when you formed the firm in 1987.

So -- and the recharge something like 4.5x our money and like high-20s, 30s [indiscernible] So the performance is outrageous. What we want to do with the firm is when we see areas where capital demand is very high, what happens is, of course, in a larger fund, the checks are larger. But what we're seeing is so much deal flow that we're saying no to a lot of transactions of a smaller ticket size. By the way, I think you should expect to see us do this as a firm in other verticals when it makes sense. But what do I mean by when it makes sense? What I mean to make sense is when the demand side for the capital is so high that the deal flow is there. And so in this particular case, as an example, I would think of this more as like a sleeve where the check size could be $250 million to $300 million, whereas in the larger fund, the check sizes might be bigger. And so what this does is it gives us leverage across the expertise. So we're not style drifting. We're actually style enhancing in terms of the expertise enhancing. And we can do this in Healthcare. We can do this in Industrials. We can do vertical across the firm, but this is the best way for us to transfer the deep, deep expertise we can to an asset class that's growing. I think the TAM is unlimited because everywhere you got everybody is increasing their defense budgets by 1%, 2%, 5%.

So I think this is a global phenomenon. So -- but I don't think so much about the TAM, I think more about, okay, what's the amount of capital we can deploy and be super effective with our investors, deliver them outstanding returns and all good things will happen from that. It will drive a lot of the flywheel, right? You'll get more capital markets fees, business begets business, it will influence things we can do on the credit side of the shop. Ultimately, the secondary side of the firm, it will have a flywheel effect across the whole platform.

Okay. I want to zoom out on private equity more broadly. You guys keep reminding us that your investor capital return or are among the best of the large sponsors. But I sense a lot of the more cynical investors I talk to kind of are hyper-focused on the IRRs of some of the flagship funds. So could you maybe help us understand or better understand how the LPs view that IRR And to what extent that focus that the been...

I think LPs are very reasonable and very easy to understand. They want a great partner, that's a great manager of their money, takes their money, makes money, returns their money. I don't think anything about LPs changes. I think that's a totally reasonable expectation, and I think it's our obligation to fulfill it. I think when you go across the world in all of our funds, we've had huge success doing that. We have one challenging fund in Europe where I changed the leadership, really one of the best leaders -- one of the best investors in the firm, been with the firm over 25 years. It's now managing that business. But even the historical performance of that fund over a long period of time is quite good. But the last bit news wasn't to our satisfaction. So we changed the leadership. But if you look across the Japan fund, I was just in Japan for a 26th anniversary in Japan. I think the last fund was -- I might get this wrong, so I apologize, but like 44% growth, 28% net. We capped that most recent vintage at roughly $3 billion. We will grow the next vintage, but we're going to be very careful about -- I know that shareholders want to hear just growth, growth, growth. We're going to be very systematic about how we grow these asset bases because we want to protect performance because that will just give us sustained growth over the next 3 years.

We're not trying to grow in the next quarter. But Japan feels good. Our tech business in Europe feels good. Actually, our European business feels quite good now with the new leadership. The U.S. buyout business. The seventh vintage, which is the vintage that came through that big capital wave where people were deploying a lot of capital and had a consumer, that is not our as we like to say, not our best work of art. But as I said, for the current buyout fund, we've already raised effectively $5 billion. We haven't even started fundraising. And so I feel good about the trajectory of the dialogue with the LPs. And I feel good about the LP dialogue because they know the businesses we're in. And they know the steps we take in. They know where we changed leadership, but they know that we're in very, very attractive sectors. And that's why you're seeing the performance of the current Vision U.S. buyout do so well. It's the team, the changes we made and the sectors.

So you've mentioned the structured financing of the next fund a couple of times, which I think has taken some wind out of the sales that there is an issue in the private credit business. So to start, maybe for investors that are less familiar here, could you quickly describe the transaction and how it came together?

Yes, not private credit, but private equity, but yes. So it's okay. So the -- well, it started with a group of us getting together. There's a lot of information, but since you're asked, it started with the group as getting together a bit over a year ago. So we run a balance sheet light firm. There are times when you run a balance sheet like firm, you feel great about it. There are times when you run a balance sheet life firm where you realize, wow, it would be great to have incremental capital. If you have a capital and you run a balance sheet heavy firm, let's just take the other end of the spectrum, you can do things, Patrick, with that capital, you can say, "Oh, I want to launch this business. So I'll put $1 billion into this business. Or I'm going to launch this next fund, and I'll put $2 million, $3 million into that fund as the Cornerstone Capital." And there's an attraction to being able to do that. Of course, the cost of that, if you think it's a cost is that you member the much over your balance sheet.

Okay. I come from a heavy balance sheet world my whole life. So I'm comfortable with a heavy balance sheet world. I happen to like our balance sheet light model. But a group of us got together and said, okay, look, we're balance sheet light, but we want to figure out are there ways to use that balance sheet capital, that light capital in the most efficient way.

And we have a business. Carlyle to invest an extraordinary business. It happens to be an extraordinary business almost in any cycle, but it's a really extraordinary business right now. It's really the fastest-growing part of the firm. And they have a that uses is often Patrick thought of as a secondaries business. That's a narrow definition of the business. It's a good shorthand for the business. But the right way to think about that business is across four verticals. Secondaries, co-invest, primary and solutions. And so they're a manager of effectively fund to funds, picking middle market managers. They obviously can't invest in Carlyle. They manage portfolios, very large-scale portfolios allocating to middle market managers. That's part of their strategy for any connectivity to sponsors. They're obviously one of the 4 or 5 hyperscalers in this industry that have known this for a long period of time. But there's this piece of the business called the solutions business, which is a very fast growing part of the business.

And I think, in some respect, strategically, for the industry, I think the industry will evolve more in this direction, where they can be a strategic partner to GPs, providing liquidity solutions. And actually, it's mostly to very high-performing GPs. We do continuation vehicles. We're very selective about how we do them. But their focus is really on the highest-performing GPs and how can they provide them with thoughtful solutions. And so we brought them into the discussion and we came up with this concept. And basically, the concept is how do we create a win-win for clients who want to be investors in our next vintage who may want liquidity and how can we use our capital simultaneously. And the end solution is not particularly complicated on to drag you through the details. But the end solution is we have some super happy cornerstone LPs for investors. We used a modest component of the balance sheet and ended up creating effectively $5 billion of investment in the fund as a cornerstone before the fund raise.

And this much I can tell you, if you went out and you tried to find $5 billion of capital as Cornerstone investors, you would not get that at full phase. So what does this do for us? This is kind of magical because, a, it helps us get ahead of the fund raise; two, it takes pressure off the team because what we want them really doing is not spending 2 or 3 years running around the world raising money. We'd rather have them focused on actually managing the money and investing the capital. And it makes some LPs super happy, gives a lot of confidence to the business truly is a win-win. It took a little while to put together just because it was creative and innovative. But we've subsequently, as you would imagine, we've gotten a bunch of calls into the Carlyle invest team asking how are they able to do it because there's other GPs that they will now work with to try and replicate this. But this is a way the industry will head because the industry needs innovation around how the industry creates capital and provides liquidity. It's a little clunky today. It hasn't really evolved. And the Carlyle Antonis team is really, I think, doing some incredibly thoughtful work with GPs around the world, and they were helpful to us.

And I imagine your confidence level on raising a larger fund now is significantly higher.

I think the way I would describe -- short answer, yes. What I would say is, again, you might not love this, I don't misunderstand it. I'm much more focused on the aggregate economics versus having the biggest fund. I do think that I do think that there's notion that every fund should be bigger than the next fund leads people to create suboptimal economics and also potentially degradation of returns, I think you have to scale your funds with the market opportunity and you have to protect economics. If you go out the world and you just cut deals to get big checks and you get massive discounts, you can end up with a bigger fund, but I think you want to have the right fund that your team can deploy, but I think in this particular case, this gives us a big head start on all that. So I feel really good about it and the fund.

That's a good segue to deployment. There's obviously a lot of dry powder out there. You have a lot of dry powder. At the same time, it seems like there's still some gap between the bid and ask at the very least and software portfolios. So through that lens, how close do you think we are to seeing a lot more PE deployment? And do you sense any capitulation building from sponsors that have been maybe unwilling to take negative marks in some of those legacy positions?

I don't have a good lens into other sponsors or what they're doing. I do think that the software impact just curing my own view, again, it's not really core to our franchise, as I highlighted. But I do think that, again, these narratives take hold. And I think the narrative when software is considered impenetrable, and you could do ARR loans, and it was the best place to be in because it had repeatable income, and it went from being repeatable income with cash flow, too. You did embed cash flow and you can finance the enterprises. That was too extreme. And my guess is this is two extreme also. Because I think if you had a quadrant of companies, and you laid out the quadrant between good capital structure, bad capital structure, not so well run company, really well-run company. I think if you have a poorly on company with a poor capital structure, I just think it's probably surviving is low.

If you have a really company with a tough capital structure, I suspect that does pretty well. And I think that, obviously, if you have the win-win, if you have a really well-run company with a good capital structure, I think actually you might have excess rents that you're able to extract from the marketplace because the competitive environment will be such that you will accrue income. I think that, again, the issue around software today is the uncertainty. As we've all seen, like job openings for software is actually up, not down. I think there are great brands out there. My own personal opinion again, it's not what we do. There's great brands out there in software, which will do exceptionally well. And I don't think we should be discounting how smart some of these folks are that actually -- some of my competitors have invested in software. I think they're super smart people. They'll have some companies in quadrant. We and they'll have some companies in the extraordinary quadrant. What I find kind of fascinating about this discussion is nobody talks about hardware. So we don't have that many assets in software. We have one fund in Europe, which is a super high-performing fund that does technology investing, mid-market technology investing. We talk as much about any exposure they have to software as we do to hardware because the hardware is exploding in value. And so I think the issue around software is not likely to go away too soon because there's too much uncertainty about how disruptive large language models will be. I think over this time period, again, if you have a tough capital structure and a weak business, yes, I think probably work out so great.

So I guess, moving to Carlyle specifically, like how is your deployment pipeline shaping up? And are there any themes emerging that you would point out as most interesting as that develop?

I think that, well, in private credit, we're -- again, when I showed up, one of the critics was, or feedback was, hey, you're too small and direct lending to small software. We systematically 1.5 years ago, started investing very heavily in the resources in that group. We brought in new leadership actually started in January. It's like perfect timing for us. So what we're seeing is institutional appetite to deploy capital. Because they see this situation where wealth capital at the margin is not coming in. We're already seeing transactions where terms are more generous. You've immediately seen a reaction to the terms that are available, that are better for the lender, competition has already pulled away from the space. So what we're seeing is institutional capital that wants to work with us so we can build. Again, the biggest problem, obviously, about having big software exposure is the possible issue of degradated returns, it's also super distracting. And so if you have a big direct lending book and you have a lot of software, your teams are spending a lot of time focused on that. It's much harder to be front-footed, that's just common sense. And so we feel really good about where we are in that business right now. I suspect we'll systematically be able to grow over the next couple of years.

Great. Any interesting themes on the PE side?

Well, other than what I would say is this hard pivot to what you and I could have referred to as all the economy. Because even, again, just because I was there last week across Asia, if you look at what's happening in Japan, we've been in Japan for 26 years. Japan is an incredible story. After all these years of deflation, where virtually all of our competitors left Japan, we're the only firm that's stated in Japan. We're the only firm that has a dedicated Japan team that David Runsten and the founders started 26 years ago, when you see what's happening in Japan, they have completely flipped the approach from a regulatory perspective, a government policy perspective, to encouraging investment, encouraging growth and encouraging actually, the growth of asset management more broadly. And they're very explicit about this. This is widely understood. We have a 26-year history investing in companies. We've built the relationships. They cover verticals from TMT, consumer, industrials, there are hundreds and hundreds of companies that trade on the exchange that's still trade below book, there are succession challenges that they have to deal with. But the important thing that what's happened there socially and culturally that it's now become much more socially acceptable and culturally welcomed to actually work with a private equity sponsor to take a company public, we actually did 4 transactions. I think we did one a month this year, and the transactions are great. And some of these things are household names like we bought Kentucky Fried Chicken a year ago. And I didn't even know in American. I didn't even know that Kentucky Fried Chicken was the food of choice on Christmas in Japan. By the way, how many people do that show of hands. That was like something I learned right after we wanted. Okay, people -- you knew that?

I'd seen it something.

I call total BS on that. Excuse my language for anybody watching I don't believe it.

I watch one of the documents.

Oh, you do. Okay. Well, I didn't know, but I learned very quickly. So anyway, some of these are household names. We took over a beer public, which you might not know, although maybe you do, but the beer company in Ocean. But I think there's these kinds of opportunities. And again, trying to -- again, we're thinking about investing over 3, 5, 7, 10 years. Again, what is most -- what makes me most enthusiastic is the marginal demand for the capital that we have and the expertise we have in the sectors we have. If software was still hot, you'd be asking me as you rightly should, hey, what's your plan for getting into software, I'd be like, kind of hard to do like you can't just spin up a software team. You can just spin up a Japan team, right? And so that's what gets me enthusiastic. When I think about our energy platform, which is quite unique because we do everything from renewables through the power through upstream energy, there's really nobody in the world that does upstream energy at our scale. Energy security is top of everyone's mind, and the energy demands are only going to increase. And the infrastructure needs around all this and the opportunities around this from private equity to energy directly are only going to be more pronounced after the war where they ran. This is -- again, we've gone from a world where in the '90s, just to age myself, in the '90s, everything was, hey, you have to have just-in-time inventory, if you want to win. And everything was about maximizing efficiency across all supply chains. Now it's about having just enough inventory. This is a fantastic shift. But what really is the shift is it creates needs for infrastructure build, logistics companies across a whole value chain of industries, which we're involved in. And so I feel very good about the ability to deploy capital over the next couple of years. Whether we again, deploy capital next quarter, no, it's not particularly interesting to me.

Great. On AlpInvest, I think you gave a great overview about. It's a lot more than secondaries, but I do want to talk about secondaries a bit because it feels like I think we talked about it being a sweet spot last year, still feels like it's still a sweet spot.

I think based on any estimate, these things can change. This business is going to grow systematically for the foreseeable future.

Yes. Okay. On...

The software issue actually compounds it. If the software issue isn't even an issue in the sense of whatever word you use toxic before. But it actually just delays exits because multiples are so compressed. That's really the issue around software right now is that it's a multiple compression issue, more than it is actually showing up in EBITDA performance yet or capital structure. But if the multiples are so depressed because of the uncertainty, and that cloud was on for a while, that's going to lock up a lot of private equity capital for those people that do that business, okay? That will only add fuel to the growth of, call it, AlpInvest because hyperscale when we're in the room with people, the conversation is, how are you thinking about your portfolio? If part of their portfolio is locked up, they may want to manipulate that portfolio in other areas. And it's just about capital allocation from their perspective, and we can be the capital allocation solution provider.

Last one on secondary is one high-profile CEO has been making a stink about the practice of day one markups, which is standard, to be clear. But I'd like to get your thoughts on.

Standard that -- he makes us think about these?

No, no, I was just a practice.

Yes. But -- not working for you very well today,. I thought that was quite funny, actually. -- that also may be a standard for that.

We'll see.

I think it's pretty clear. We follow GAAP accounting. The rules are pretty explicit. We generally run, I think, as conservative as we can. I've dealt with Level 3 assets, when I was the CFO of Golman Sachs, like, I relied on GAAP accounting. I think that's what the industry has to do. So that's how we treat it.

I'll leave that there. Moving to retail. The wealth channel is obviously a big part of your longer-term targets. You've made a lot of headlines by saying it shouldn't be called -- the product shouldn't be called semiliquid. This is obviously...

It was early to that. I don't really need a lot of bus and feedback, but I'm not should have put it on...

I will give you that.

I should have put a bad now -- the missed opportunity.

Clearly been the episode of the press hysteria this year. So how have your conversations with distributors evolved? Any change you sense through all of this? And has the noise changed your enthusiasm for the opportunity?

So I spent a lot of time with advisers it was a strategic choice in mind to do that when I first shot up at the firm because I didn't really understand that part of the industry, and I felt I needed to be much more educated. And the only way I could really do that, obviously, then the working with my teams was to actually spend time with advisers. What I mean by that is like really in the room with advisers, trying to understand how they thought about the world, what things were important to them. And what I'll tell you about the advisers and the platforms we deal with is they are incredibly sophisticated.

As sophisticated as any institutional platform manager we deal with. And I've sat in rooms in Texas where I met with a group of people, and it was fascinating to me, this is very early on in my tenure. One of them said, I'll never do private equity. I'll never do real estate, but I like secondaries, I like credit. And I was like, okay, why that fits my client. And this is really fundamentally the key, which is you're dealing with very smart advisers who are thinking through the portfolio allocation of their clients, okay?

I think that when you talk to advisers, they're very relaxed about this. And when you talk to the home offices, they're very relaxed about this. I think their view of this is really consistent with ours which is that probably for credit for a little while until we get past this question on does software lead to defaults? And what are the headlines associated around it. I think credits slow for a while. I think it's slow for the industry for a while. I think names that have been doing this for a long time that have the right solution set, which I'll come back to in a second, I think we do very well in the long run. I think for other asset classes for us so far, no material change, doesn't mean that can happen. I think it's been like a global education. If you -- for some reason, you weren't aware that these funds could have periods where they redeem up to the limit that they're allowed to redeem and they cap it at the 5% or whatever the number is, everyone's aware now, which actually is a very good thing. So there's no confusion in the universe. Like how many articles have been written about this.

This is like -- I've never seen so many articles desirous of the systemic event that's just not getting it. Like how long do we wait for it not to be systemic. So we'll see. I do think a lot of it will hinge around software. The way we have approached wealth, I think the team has done an amazingly thoughtful job around this is we like diversification. So if you take a look at for example, which is our wealth interval fund, I think there's 900 different credits in that. We don't want to be overweight in one particular sector.

We don't want to be in a situation where a sector could have liquidity challenges, like one very narrowly defined sector, that can be problematic because, of course, in a world with disruption, you could just -- they could be great assets one day and then 3 years later, you could have a situation like escapes. So anyway, so we've been very thoughtful how the team has launched these vehicles over the last couple of years in our private equity vehicle, even that has, I think, a 20% component of Carlyle AlpInvest because it actually adds to the liquidity function and the diversification. And so that's our approach to this.

We're hugely committed to this I think the wealth channel will systematically grow, but it's not going to be up and to the right like it was directionally certainly for certain sectors. I think what's next and super interesting is what happens in retirement. We'll see the final rules on retirement. I think these asset classes make perfect sense in retirement. Pension funds across the United States have been managing 60-40 allocations to private and public capital for decades with huge success. I think it's the perfect channel for all the kind of assets that we have at Carlyle. We hired a triple black belt to head our retirement practice. So we may have seen, we were selected by line Bernstein to be a partnership with them. That's our first foray into this in terms of a partnership.

Again, I don't think that's going to be explosive. I don't think it should be exclusive. I think you're going to see steady adoption. So -- when I think about the channel mix in terms of how we view the firm, I don't want to be overweight any one particular channel. I don't want to overweight any one particular geography. So I have no favorite kids. I love my wealth clients. I love my future retirement clients. I like my current requirement cores. I love my pension funds, I love my sovereign wealth funds. And I love my insurance companies. Ideally, I could construct some efficient frontier around that, that yielded the best optimal results in terms of performance and continuity of fundraising, which I think we've demonstrated. I mean, last year, the wealth funds were 15% of all the capital we raised, that's kind of like from a standing start of almost nothing a couple of years ago. That speaks to the team and the brand have done an amazing job. And I think in the model we put out or I should say, I think the model we put out with the $200 billion of super cycle flows, it rose to 20%. But that included nothing for retirement, nothing marginal for insurance. We don't have an insurance and annuity solution. There's none of that in the model, but that's -- I consider that a wealth retail product. So there's lots of optionality for us in terms of how we use the brand and the platform. So I think the sector will systematically grow. But I don't think it will grow straight up into the right and it probably shouldn't have. But thank you for remembering that I said that a couple of years ago about it shouldn't be semiliquid should be sometimes not liquid at all I should have written not bad to really not.

On insurance, last year, your results were held by two big block transactions at your insurance affiliate. So maybe update us on the growth outlook for that side of the business, to what extent we can expect or there's a pipeline of more chunky transactions...

Is this where I think the investor community probably doesn't value that relationship properly, but I totally get it, okay? It's a very, very hard thing for you because if you and I have a conversation around insurance, you'll say to me, hey, what are the flows this year? And I get it, you want to be able to model those flows, and we're in the block business. So it feels more opportunistic, and it is because it's based on the pipeline, whereas if I was at an annuity writer, I would say, okay, this year, we're going to write $20 billion, $30 billion, $10 billion, and you can model that. And I think that is completely understandable by the way.

So the way we approached the 3-year plan was we said, okay, it too hard for us to predict with certainty what the block business will yield so we didn't really include it, right? We just said, okay, that can just be optionality, which is better for your modeling, right, because it just gives you upside. And also, I think a reason way for us to think of a 3-year core plan. Now -- the pipeline, I think, for blocks looks pretty good over the next several years.

Competition got very fierce, sort of middle of last year, second half of last year. It could get fierce again where we really kind of felt like people were mispricing the risk. There's a little bit sometimes of mispricing the risk because they're just chasing the asset flows. I kind of felt like, to me at least like we're past that point of, I would say, mispricing just to get assets like we won't do that. And the team is quite good. The real flywheel effect of that, of course, is what it's done, the team who created that going back to 2020, what it's done is -- it's created the internal IQ and intelligence to build our asset-backed business. And you saw we just launched our first institutional asset-backed Evergreen Fund. That, again, is a team that has grown alongside Fortitude. So we understand the asset-backed business, and we understand what insurance clients need. I think it's a pretty steady growth area for us, Fortitude and the insurance clients globally. Because again of the breadth of the platform because we can do asset back, we can do direct lending, we do opportunistic credit, we can do secondaries. We can do primary. These are all things that insurance companies want because there's a lot of competition to optimize capital and to optimize asset performance in insurance companies globally. So I feel good about the entire sector, and I feel good about Fortitude. I think they're doing a nice job and a disciplined job.

So let's move to taking everything we've talked about together, the fundraising and growth outlook. You stuck with kind of mid- to high single-digit 2026 FRE guidance on the 1Q call, which is above the 1Q runway. So what are the specific building blocks that you see driving kind of the catch up to get to the guide through the remainder of the year?

I feel pretty comfortable about that guide still. Nothing's changed since the call. I think that will be fine. I think it gets more exciting for all of you when we come into the end of this year, '27, '28, when we come into the super cycle, and that's where you see management fees really pick up momentum. And then, of course, you'll see the flywheel effect of capital markets. And I think all this business development and business growth now, the linkage between all that and actually having a capital markets business, like I think the year I showed up the Capital Markets business was like a $50 million business. I think you'll see sequential growth on that. Again, we're not using our balance sheet to compete in that space. So what you're talking about is super high-quality revenue that really is just, again, the function of the flywheel and the growth of the business. But you'll see that in our new U.S. bio fund, you'll see it in the European tech fund that we launch, you'll see the which we'll launch. You'll see it in the Japanese fund, which we'll launch. You'll see all the flagship funds, and they're all now you'll see AlpInvest come back to the market again. And you'll see all of the effect of that really across the platform. So I feel good about the plan. Again, the plan was structured in a way that we could galvanize everyone in the firm strategically around it, but we wanted it to be achievable. And -- yes, we want to beat the plan. So that's how we structured it.

Staying on this topic, how are fundraising conversations with institutional LPs evolving through all the volatility, particularly Middle Eastern clients? And are you noticing any meaningful shift in allocation priorities?

Well, first of all, in the Middle East, I got to say the resilience that our Middle East partners show is like remarkable. I'm on conference calls in the morning with people and their missiles are going over their heads and they're talking about allocating to our funds. I don't even quite understand it. Like if the weather is a little too hot or a little too cold in New York, we all have a meltdown. And so I think the resilience is incredible. And obviously, we should take a moment to hope for the safe return of all of our men and women that are here representing in the United States right now.

The long term, I think, no impact. I think short term, you could see some capital obviously have to be redeployed. But these are incredibly well-run professional institutions, the momentum in terms of fundraising. If anything, all these issues around the world, collectively, if you want to look for a negative, I would say if there's a negative. It's not clear to me there is yet that it delays fundraising a bit for the industry, but it actually contributes to a lot of the deployment of capital over time because all this rebuilding around the world, all the focus on supply chains, everything everybody wants to do is just going to accelerate as we get past some of these challenges. And so -- but no, no material change just if it's so impressive how they operate through this period. I actually don't think we -- I mean, maybe all of you could -- I think I don't think. I could be on a conference call and be like, hey, they don't miss it on over my kid's school. I don't really understand how they do it.

And any shift in kind of the traditional U.S. space in terms of what they're looking at or changes in allocation for...

No. But I will say I'm super grateful to be at Carlyle. One of the things that is extraordinary about the platform is the diversification of the platform. There are times when being a mono line is incredibly rewarding. Again, 3 years ago, what people were saying to me when they were giving that feedback, Patrick was, hey, you'd be better off to be a regulating model line. That's where the hot growth is. That was true. I don't know if that's where the hot word is today, not, okay? So today, what is most relevant for this environment for the foreseeable future is having a durable, diversified asset footing.

We have that because we have Carlyle AlpInvest which is a solution provider to GPs all over the world and LPs all over the world who actually want to modify their portfolios. The flip side of that barbell is our core private equity business. So it's no surprise that the core private equity business over the last couple of years has been more challenged because capital is flowing less there, but Carlyle AlpInvest has exploded.

Now that's a little bit unfair to the teams because the private equity team has done an extraordinary job and that Carlyle AlpInvest team has done an extraordinary job. So they're both capturing their opportunity set. But if you actually look at it, I think the firm is performing in a way you would want it to perform or expect it to perform, which is AlpInvest is growing, credit is growing. Private equity has been slower and flatter. Now we'll go through a period where we think private equity is going to grow, but I don't think we're going to see any deterioration in the growth of the other two verticals. So we have the diversity of the platform. We have the global footprint. And that's why we feel confident about the next couple of years and this year.

We'll leave it there. Thank you very much.

Great, Patrick. Great to see everybody. Thanks so much.

Good day, ladies and gentlemen, and welcome to The Carlyle Group First Quarter 2026 Earnings Call. [Operator Instructions]

At this time, it is my pleasure to turn the floor over to your host, Daniel Harris, Head of Investor Relations. Sir, the floor is yours.

Thank you, operator. Good morning, and welcome to Carlyle's First 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 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. 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. In order to ensure participation by all those on the line today, please limit yourself to one question and then 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.

Thanks, Dan. Good morning, everyone, and thank you for joining us. We wrapped up another strong quarter, headlined by record U.S. buyout realizations, high level of inflows, fee-related earnings of $300 million and a 47% margin. Momentum across the platform continues to accelerate and performance remains strong, reinforcing our confidence in our strategic plan. These results came against a complex global backdrop.

Before we go deeper into the quarter, I want to spend a few minutes on the environment and the global macro trends. Geopolitical uncertainty and splintering are front of mind for investors and are influencing capital allocation and investment decisions. But of course, this is not new. Over the past 5 years, we've navigated COVID, the ongoing Ukraine-Russia war and now the war in the Middle East. As a result, there are two subjects that every government official I meet with wants to discuss, national security and stimulating economic growth. By national security, I mean both investment in traditional defense but also energy security. The focus on economic growth and competition across regions is intense with a focus on reindustrialization and onshoring top of mind.

Underpinning all of this change is an increasing need for capital and innovative client solutions. Everywhere I go in the world, the message is the same, the demand for private capital continues to grow.

Our team and the breadth of our platform is well positioned in this environment. Our diversified set of businesses span private equity, real assets, private and liquid credit and Carlyle AlpInvest. In today's environment, diversification is a distinct advantage. Our deep sector expertise in aerospace and defense, industrial, energy and healthcare, maps directly towards a growing investment opportunity set, and we've been doing this at scale for decades.

Now before Justin and I run through the quarter's financial performance, I would like to highlight an important milestone from earlier this week. We closed a first-of-its-kind investment solution anchored by a $5 billion commitment secured for our next vintage U.S. buyout fund. This innovation provides a capital-efficient way to address our clients' needs. It's a solution that provides both access to our next U.S. Buyout Fund and simultaneously offers them a tailored solution to provide liquidity. This solution underscores how we are leveraging Carlyle AlpInvest capabilities in portfolio finance and secondaries alongside our private equity platform to deliver differentiated outcomes for our investors.

It was truly a win-win for our investors and for Carlyle. Through this structure, several cornerstone investors have increased their exposure to U.S. Buyout, further demonstrating our confidence in our platform and continued interest in the core sectors we focus on. Also, it's important to note that we haven't launched fundraising for the next U.S. Buyout Fund that will come later this year.

Let me move on to some of the strong activity trends we saw in the quarter. As you have seen in prior quarters, we continue to return capital to investors at a faster pace than the industry. Realizations were more than $12 billion, reflecting the high quality of our portfolio and continued prioritization of returning capital to our fund investors. It is also worth noting that we returned a record amount of capital to U.S. Buyout Fund investors this quarter, a rate which is more than 40% higher than our prior record set in 2021. We continue to have a deep set of assets to monetize for our investors.

Deployment was $10 billion in the quarter, and we also announced 2 large transactions that will close in the coming months, the $8 billion carve-out of the coatings business from BASF and a $3 billion acquisition of MAI Capital Management. We also invested $4 billion in private credit and nearly $4 billion across a diverse set of strategies in Carlyle AlpInvest. These transactions should also contribute to a pickup in transaction fee revenue in the coming quarters.

On inflows, we had a great start to the year, attracting $13 billion of new capital. In Carlyle AlpInvest, we raised nearly $7 billion in the quarter, reflecting strong demand for our broad set of secondaries, co-investment and portfolio finance strategies. We also saw sustained inflows in our wealth vehicles, including CAPM and CAPs. AlpInvest is benefiting from both favorable market dynamics and strong performance.

In Global Credit, we raised $4 billion in the quarter. Demand remains strong across our diversified platform. We had a first close on a new closed-end asset-backed finance strategy, that strategy now tops $12 billion, up more than 30% compared to last year.

In summary, Carlyle continues to benefit from a diversified platform that can provide durable results across dynamic changes in geopolitics and market environments. As you would expect, 2 months after the shareholder update, we remain quite confident that we will reach or exceed the targets we laid out for you in February.

With that, let me turn the call over to Justin.

Thanks, Harvey. Good morning, everyone. In the first quarter, we generated distributable earnings of $327 million or $0.89 per share. Fee-related earnings were $300 million at a 47% margin compared to $290 million in Q4. Fund management fees were $545 million, up 4% year-over-year, driven by continued growth in Carlyle AlpInvest and Global Credit. Carlyle AlpInvest continues to be a great growth story with a record level of AUM and record inflows during the quarter.

Our underlying recurring fee base continues to grow, and we expect to see management fees accelerate over the next 2 years, consistent with the path we laid out at our shareholder update. Fee-related performance revenues of $45 million in the quarter were 15% higher year-over-year, driven by growth in our Evergreen wealth strategies, where AUM now stands at $19 billion. That's 4x the level from just 3 years ago.

We produced $54 million in transaction fees in Q1, and we expect this to increase next quarter driven by the completion of several transactions that have already signed or closed. In Q1, we generated $12 billion of realized proceeds, our third best quarter ever. Net realized performance revenue of $21 million this quarter was lower year-over-year, but this was simply a matter of composition. Most of the first quarter exits were in funds not yet realizing carry, notably CP VII and CP VIII.

As we continue to return capital to fund investors and drive value creation, we expect our level of NRPR to increase. We have several transactions that should drive realized carry over the remainder of 2026, notably in our fourth Japan buyout fund, third financial services fund and fourth European technology fund.

Now let me turn to some details on our individual segments. In Carlyle AlpInvest, FRE was $68 million in Q1, higher year-over-year despite having $13 million less in catch-up fees for the quarter. Total AUM reached a record $107 billion, up 20% year-over-year. Record quarterly inflows of $6.8 billion were driven by broad-based institutional and wealth activity across the platform. Net accrued performance revenues reached $643 million, a 13% increase year-over-year. Carlyle AlpInvest continues to show great momentum with our next vintage funds expected to have first closings later this year.

In Global Credit, FRE was $93 million in the quarter. Management fees of $147 million increased 6%, while transaction fees were modestly lower. Total AUM of $209 billion was up 5% from a year ago and inflows of $3.9 billion in the quarter were led by the $1.5 billion first close of our new asset-backed finance fund. For the last 12 months, credit inflows totaled $25 billion.

We continue to see strength in the credit metrics of our underlying portfolio across our diversified credit platform. In direct lending, our current nonaccrual rate is only 1%, and our inception-to-date loss rate over 13 years is just 8 basis points per annum. In structured credit, our default rate of about 50 basis points remains at half the industry average. We continue to actively manage the entire portfolio, and we feel well positioned to take advantage if credit markets experience increased volatility over the rest of 2026.

In Global Private Equity, FRE of $140 million in the first quarter was in line with Q1 last year. But the key operating metrics for this business, notably fundraising and realizations show strong momentum. As Harvey noted, we already have earmarked $5 billion in commitments for our next vintage U.S. buyout strategy. This was a fantastic outcome. The solution broadly leveraged the entire firm and highlights our differentiated ability to deliver tailored solutions for our LPs.

We returned a record $7 billion in proceeds to U.S. buyout investors this quarter. CP VII alone returned nearly $5 billion of proceeds, driving DPI in the fund to more than 70% with nearly $17 billion in remaining fair value. We've made great progress for CP VII investors over the past 2 years and expect to continue returning capital for at least the next several quarters before we start realizing carry from this fund.

Shifting to the balance sheet. We ended the quarter in a strong position. Balance sheet assets attributable to Carlyle shareholders, including cash, net accrued performance revenues and investments net of debt totaled approximately $5 billion or roughly $14 per share. We declared a quarterly dividend of $0.35 per common share, in line with the quarterly level in 2025. We repurchased or withheld 3.8 million shares totaling $205 million in the quarter, and we have $1.9 billion remaining on our $2 billion repurchase authorization.

Our diluted share count of 360 million is down over the past year. We remain disciplined and opportunistic in how we think about capital allocation. Investing in growth remains the priority, but share repurchases are an important part of the equation as well, and we will continue to be active on that front.

Looking ahead, we entered the second quarter with strong momentum. Dry powder of $96 billion is a record and up 13% year-over-year. Our platform is diversified across strategies, geographies and client channels, making us extremely well positioned to navigate the current market and continue creating value for our investors and shareholders. As we said at our February shareholder update, our growth plan is grounded in a bottoms-up organic strategy for each of our businesses. We see a clear path to $200 billion of inflows, $1.9 billion in fee-related earnings and $6 or more per share in DE by the end of 2028. We fully expect to achieve or exceed each of these goals.

With that, let me turn it back to the operator to take your questions.

[Operator Instructions] And we'll take our first question from Alex Blostein from Goldman Sachs.

I was hoping we could start with a couple of questions just around the structure that you announced earlier this week. Obviously, quite unique and a creative way to move the franchise forward. I was hoping, Harvey, you could expand on how this solution was originated, just maybe spend a couple of minutes on the actual dynamics within the structure. There's a couple of things going on, but how the assets will be coming in into the SPV and how it's ultimately funded? Curious also on the response from other LPs. And then ultimately, when it comes to financial implications for Carlyle, anything we need to think about with respect to changes in economics, either to Fund VII or VIII or how the fee structure will work for Fund IX?

Great. Thanks for the question, Alex. So -- maybe take a step back for a minute. The Carlyle AlpInvest platform, often sort of secondhand is thought of by people as a secondaries business. And as you're seeing for the last couple of years as we've strategically repositioned the platform, it really is obviously much more than that. It's secondaries co-invest, primary business, and it's a solutions business. And one of the most important parts of that business is this growing solutions business which really is about providing GPs with thoughtful solutions when they want to take incremental exposure or LPs where LPs want to dynamically manage their portfolios. And they've had huge success providing LPs with that value.

The genesis of this was really thinking about how Carlyle could -- as a very capital-light firm, optimize the use of our capital. We knew of strategic LPs that wanted to reposition their portfolios in ways that make sense for them. They also wanted increased exposure to U.S. buyout. And we were able to come up with this solution, which is not particularly complicated, but I would say for this industry is innovative, creative and again, solves our clients' objectives.

For the firm, obviously, and the team, it's a good outcome because it's a cornerstone financing of $5-plus billion at full fees. There's no impact. The most important thing about putting this together was obviously solving for our LPs needs, but also ensuring that there was perfect alignment with the fund and the future fund raise. And so all of that was really critical to how we brought this together. In terms of the firm and alignment, there's a subordinated portion of equity where the firm is aligned there to supporting, which obviously, our LPs love. But I think this really reflects where this industry is going. And I can tell you, the solutions business already had huge momentum because of what they're able to provide LPs and GPs. But since announcing this, the phone has been ringing off the hook with people looking to engage in terms of how they can either replicate this and create value for their LPs or their GPs. And so I just think this is a direction of travel for the industry, but you really have to have the thoughtful experience of a Carlyle AlpInvest team to actually bring this together.

And we'll take our next question from Ken Worthington from JPMorgan.

I wanted to dig into the outlook for carry in private equity and AlpInvest. For private equity, can you talk us through cash carry in Japan IV and Financial Services II and III, while we wait for CP VII and VIII to kind of come into cash carry. And for AlpInvest, carry comp was the lowest level, I think, we've seen on record. Are we sort of at the point where carry is coming from funds and AlpInvest with really better economics for shareholders?

Yes. So let me take the AlpInvest side first. As you probably know, AlpInvest has a European-style waterfall. So a little bit more difficult to predict. I think the most important thing for AlpInvest is the returns continue to be really great. So tremendous momentum in that business admittedly hard to predict the timing of carry. But as long as the returns continue to be strong, then ultimately, that's going to be a great outcome. We've got a variety of deals that are already signed, closed or deeply in process in some of our other funds. You noted Japan buyout, you noted Europe Tech. So those are all going to come through, we would expect in the next few quarters. Again, I'm hesitant to give specifics on timing and amounts because some of those are public, and it will depend on pricing and market environment over the next few quarters. But those are very near term. They're well along the way. In the rest of 2026, they will definitely come through. So we're pretty optimistic about the future, the next few quarters of carrier realizations. A lot of activity going on around the firm, a lot of great returns for shareholders.

And we'll take our next question from Steve Chubak from Wolfe Research.

This is Brendan O'Brien filling in for Steven. Just wanted to touch on the invest -- the AlpInvest business. You guys have had a lot of success in the wealth channel with your CAPs and CAPM products. However, the practice of day 1 markups has come under increased scrutiny of late with one of your competitors seeing pretty meaningful outflows in their retail product as a result. I understand you may not want to overreact to the headlines, but just given what we're seeing in some of the other asset classes within the retail space, it does seem reasonable to be a bit more front-footed here. So I just wanted to give you an opportunity to respond to this criticism whether you're considering any changes to your approach and if you're seeing this have an impact on your conversations with advisers.

So look, conversation with advisers remains very robust, and you see that obviously in the inflows. In terms of any practices, we're not changing any of our practices. The industry participates in different types of asset pools. The team has always, for the most part, purchased asset pools that are much closer to par. Historically, where we've had our best performance in this business for 25 years is actually buying higher performing assets. So we don't -- the team doesn't really historically buy deep discounted very aged assets. But the reception continues to be very strong. As Justin pointed out, the performance has been very strong. And so we feel really quite good about our partnerships and the platform and the engagement from advisers.

And we'll take our next call from Brennan Hawken from BMO Capital Markets.

Base fees were relatively flat year-over-year, although they didn't benefit from catch ups here this quarter, clearly. You guys have spoken a lot about how active the back half of the year, in particular, is going to be for fundraising with the super cycle coming up. But could you maybe walk us through your expectations for what the profile of the base fee growth will look like as we progress through that fundraising and it starts to hit the top line?

Yes. Sure, Brennan, thanks for the question. Look, the base fees were up 4% year-over-year. They're up 7% on an LTM to LTM basis. We expect that to accelerate. You mentioned the super cycle in fundraising. We're just really starting that for AlpInvest, for private equity. We're going to have opportunistic credit out for the credit business. So we're entering a period where we think our fundraising will really accelerate. We had, as you know, a couple of funds step down. We're past that now. So that rate that you see today, 7%, LTM over LTM, I expect that to accelerate as we go into the super cycle because we're getting really great feedback from LPs and that bodes well for the next few quarters of fundraising.

And we'll take our next question from Mike Brown.

I wanted to ask another question on the wealth channel. So CTAC is a diversified credit fund. You have a small portion of direct lending exposure in there, yet it still saw elevated redemptions last quarter. Why do you think that's the case? And was it just kind of caught up more in the private credit direct lending fears? And when you think about maybe the coming quarters, do you think the redemption requests and gross sales could differentiate going forward? And maybe how are you messaging that kind of or different aspect to the wealth channel? And do you think that message is kind of getting through to the channel?

Yes. I spent a lot of time with advisers. I think that the message is getting through. CTAC is quite diversified, as you know, there's over 900 names. It's across the platform. It's marked Daily. It's one of the few solutions, maybe the only solution out there that's marked Daily. I think we've been marking at Daily for over 5 years. I think going back to 2020. And so advisers respond really well to that. I think when you have an environment like we've seen in the last quarter where you -- and remember, we were later in the queue for redemptions and so they were building through the course of the quarter. And so sort of going from one fund to the next fund, I think that was to be expected. There was no surprise for us in that.

The performance remains strong in the adviser engagement. I think we probably will likely just given what you see across the industry, if I had to guess, it's a bit of a guess, I think this period of redemptions may persist for a little while. Some of the analysts have come out with their forecast. I think that's reasonable. But CTAC as a diversified marked Daily credit solution offers a lot of benefits. So the long-term trajectory, we feel quite good about.

And next, we'll go to Bill Katz from TD Cowen.

I'd like to sort of maybe click into the credit portfolio a little bit. If I look at the AUM, they've been -- fee-paying AUM has been relatively stable now for a better part of a year or so. I was wondering if you can maybe speak to the opportunity. I think you were sort of talking about direct lending, what you're seeing in the insurance channel. And then curiously, yesterday, one of your peers had some very pointed commentary about the efficacy of CLOs. And I was also wondering if you could talk about maybe the durability of that business as well.

Sure. Well, we're seeing good fundraising momentum in credit. We raised nearly $4 billion in the quarter really in a broad-based basis. As you know, Bill, we've been resetting many of our CLOs over the past few years. So that's really stabilized the CLO base fees going forward. CLOs went through the financial crisis, and they did incredibly well. There is a very well-established investor base for CLOs. So we actually feel great about that business. Importantly, the most important thing, our investment performance in credit has been really strong. We've been managing CLOs for 25 years. We've got half the level of defaults as the industry does in direct lending. We have a fantastic track record that I think investors have been very responsive to as we continue to grow that business. So private credit, CLOs, these have reached exit velocity in terms of being asset classes that have a place in the financial system. They're not going anywhere. And with the track record that we have, we think we're incredibly well positioned to continue to grow in both areas, frankly.

The only thing I'd add to that, Bill, is that in conversations with institutional investors, a lot of the headlines that have been coming around about the wealth channel and direct lending have really piqued the interest of institutional investors. And as you know, we added significant resources to our team over the past 6 months. So we feel really well positioned with the new team to build market share across the platform. So actually, the momentum feels quite good. And obviously, we don't have some of the challenges that some of the other market participants have in our portfolio. So we feel very well positioned and feel really good about the CLO business.

And our next question comes from Dan Fannon from Jefferies.

I wanted to follow up on credit one more time here. Just in terms of the management fee growth, and it's been a bit more stagnant in recent quarters. So curious about the ins and outs in terms of what's your fundraising versus what's leaving and maybe the mix and change in fees as we think about the products as we go through the rest of this year?

Sure. Well, I'll note credit management fee is up 10% LTM basis. So -- we are seeing good momentum there. For a bit, there was some CLO runoff, which has now been stabilized as we've gone through so many resets in the past couple of years. The other thing I'd note is we're coming to market hopefully soon with our opportunistic fund. That's a higher fee product. We're raising capital in direct lending, having good success with our private BDC there. That's another product that would have higher fees than CLOs. So I think you'll continue to see the mix improve. And again, tremendous momentum in that platform. If you think back 7, 8 years ago, it was really only a CLO business. Now it is incredibly diversified and durable. No matter what's going on in the market, we have a strategy that can take advantage of it. So that's going to lead to, I think, great fundraising as we go through and navigate these different cycles where maybe a direct only shop isn't so well positioned to take advantage.

And our next question comes from Michael Davitt from Autonomous Research.

It's Patrick Davitt, I go by the middle name. I have a follow-up on Brennan's fee growth questions. I know it wasn't an explicit part of the Investor Day deck guidance, but during the Q&A, you suggested a path to mid- to high single-digit FRE growth this year. Do you still think that's achievable? And if so, what are the big levers that get you there after the slower 1Q?

Yes. We feel confident about that -- those numbers. If there was a change in that, we would update you. In Q1, again, I feel really good about the momentum given the fundraising and we expect things to accelerate. Obviously, we can't predict the environment. The world has been a little bit complex. But yes, we feel confident about the trajectory.

Excellent. And our next question comes from Michael Cyprys from Morgan Stanley.

I wanted to ask about AI deployment across the portfolio of companies. Just curious where you're seeing any sort of AI-driven revenue uplift versus cost savings in the portfolio, how you might quantify any of the benefits you're seeing so far? And your expectations as you look out in terms of AI as a source of value creation. Maybe you could talk about how easy it is, what's hard and any sort of lessons learned from adoption so far?

I would say that I would say the adoption is steady. I think where obviously you've seen it is where sectors where we're not as exposed, obviously, in software and things like that, I think, obviously, in high-scale automated functions like accounting, lots of processing, rule-based systems, you're starting to see the adoption rate. I would say across the firm taking a step back, we're leaning in very, very heavily into the data science and AI, and I would call sort of what's becoming table stakes in terms of how to think about the point of investment, the 360-degree review of where the opportunity set relates to deploying AI, how to think about disruption, how to drive revenues. And so all that's becoming table stakes. I don't have any specific story to share with you that I would call sort of earth shattering, but I would say the momentum is meaningful.

The CEO buy-in at the portfolio level is quite high. And obviously, with the advances that the models are coming out with, literally almost feels weekly it gives you the opportunity to obviously engage a level where you're really starting to begin to see efficiencies and productivity gains. But I think it's going to overall take a little longer than people might expect, but it's still a step function change in the way things will operate.

And our next question comes from Ben Rubin from Evercore.

I wanted to ask another one on your secondaries business, maybe from a different angle. On last quarter's call, you noted that the software represents a relatively small proportion of overall firm-wide AUM. But is it fair to assume that exposure to software for AlpInvest and for the secondaries industry more broadly, is probably higher just given the timing of when capital was raised and the type of companies that were coming to market for liquidity at the time. So I was hoping you could just touch on your approach to risk management for your secondaries platform? And how do you manage concentration risk as it relates to certain industries or even vintage years where entry multiples were probably higher than they've been historically?

Yes. Thanks for the question. The AlpInvest team is incredibly thoughtful about managing diversification, not just on a manager basis or a position basis but also on a vintage basis. Their software exposure is low to mid-teens across different portfolios. I would characterize that as market weight or below market weight. But the vintage question that you asked about, that is incredibly important. And I think one of the great values that AlpInvest brings to the table is that they create portfolios that are diversified in vintage exposure. They've been doing this for 25 years, have gone through multiple cycles and are thoughtful about that. So I expect that, that will serve them well as we find out what some of these '22 and '23 vintage deals really end up looking like.

And our final question comes from Brian Bedell from Deutsche Bank.

Maybe just to talk about transaction fees. So the long-term growth trajectory here and also the short term, you mentioned, I think, some transactions you expect a pickup in 2Q. Just wondering if you could comment whether you think that could approach a record on a quarterly basis. But then more importantly, that growth trajectory over the long term and the efforts that you guys have been making in enhancing that business. We've seen good growth, obviously, over the last 2 years. Is that effort getting more mature? Or do you still think you're in early innings in this process?

Well, we definitely do like records around here. I don't know if Q2 will be a record, but we do feel good about the trajectory because we already have seen a lot of activity in the first month of Q2. So that's why I said I expect that number will go up. Look, remember, our capital markets business really is derived from deals that Carlyle is doing across our broader platform. So it's a natural expansion of that business that you'd expect to see as we build the rest of the business out. So quarter-to-quarter, it will depend, obviously, on what's happening in the market. But just over the last couple of years, we've really started to capture all the work that we were doing across the entire platform. And as you continue to see all of our businesses grow, you'll continue to see the capital markets business grow alongside of it.

Excellent. And that will conclude our Q&A session. I'd like to turn the floor back to Daniel Harris for closing remarks.

Thank you, everyone, for your time today. If you have any follow-up questions, please reach out to Investor Relations after the call. We look forward to speaking with you again next quarter.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.

Please welcome Daniel Harris.

As you heard, my name is Daniel Harris. I'm Head of Shareholder Relations here at Carlyle. It is so great to see all of you here. Thank you for joining us today. We appreciate your efforts to get here through the weather, obviously. And to everyone around the webcast around the world, we appreciate your time today and your interest in Carlyle.

Before we begin, I have the pleasure of going over some legal disclosures. So, earlier this morning, we issued a press release and a detailed presentation, which are also available on our IR website. This event is being webcast, and a replay will be available.

We will refer to certain non-GAAP financial metrics today. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with GAAP. We have provided reconciliation of these measures to GAAP in our 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 in our Form 10-K that could cause actual results to differ from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time. Lastly, today's presentation does not constitute an offer to sell or a solicitation of an offer to purchase an interest in any Carlyle product.

So, with that, we're really excited to get started today. It's been a really great experience for us preparing for this event. As you've heard us say, we have enormous positive momentum at the firm, which has really made preparing for this event so exciting. And it's given all of us here at Carlyle the opportunity to reflect on the transformation and growth and substantial opportunities that we have in front of us. Our business today is exceptionally diversified across strategies, geographies and distribution channels. We're incredibly proud of what we've been delivering for our shareholders over the past few years. And what's most compelling to me is that we are far from done.

Today's program is designed to give you a clear view of our priorities and our long-term outlook and how we plan to execute on those priorities over the coming years. We have a targeted agenda, which you'll see on the screen for today's meeting. Our CEO, Harvey Schwartz, will kick off our presentation, followed by a deep dive into our client -- Global Client business, led by our Co-President and Head of Client Business, Jeff Nedelman. We'll then shift into a discussion of each of our segments. Global Credit, led by Mark Jenkins; and then the Global Private Equity and Carlyle AlpInvest business led by President, John Redett. After a quick break, we're going to shift into a few topical panels that I think you'll find really interesting on AI and then some high conviction opportunities that we see here at Carlyle. And then our newly appointed CFO, Justin Plouffe, will go through our performance and multiyear financial outlook, which I know you're all very focused on.

I'm going to ask that you keep track and hold all of your questions until the end, and we'll address them during our Q&A session when all the presentations have completed today. All this is going to wrap up later this morning, at which point we'll break for lunch.

So, before we kick off with Harvey's presentation, we have a brief video that we want to share with you. We all hope here at Carlyle that you leave today as excited as we are about what lies ahead for Carlyle. Thank you. Good morning, everybody.

[Presentation]

Hey, good morning everybody. On behalf of the whole team, I truly appreciate all of you being here. We know you're super busy. You electing to spend the time with us. We're very grateful. I also want to say for all of you who engaged with us over the last couple of years, we really -- we're grateful for you covering us, your engagement, your feedback.

So, just over three years ago, as all of you know, I had the privilege of joining the firm as the Chief Executive Officer. And when I showed up, it was immediately obvious to me all the incredible strengths of the firm, global iconic brand, recognizable everywhere in the world, extraordinary talent, deep client relationships and a culture that was inspired by the founders when they launched private capital on the firm nearly 40 years ago. But of course, we also had some work to do. And we did this work not through a single initiative, but through a thoughtful decision-making process, really designed to build a more diversified, more durable firm, and it was a very systematic decision-making process.

So let me summarize that for you a bit. We basically distilled this process across three guiding principles. The first, creating a strategic growth plan. And we identified areas really where our strengths best fit our client needs. And you'll hear from Jeff later how we put the client at the center of everything we do because that is most critical. So we launched a series of growth initiatives, and then we invested heavily in those areas. You know many of them, but they included and not limited to creating a well-defined wealth strategy for our wealth clients, establishing an integrated credit and insurance strategy that levered our partnership with Fortitude and our long history in private credit. We invested significantly and strategically in Carlyle AlpInvest. Was very clear when we got here. That was a power alley that could really delevered. The strength in secondaries, co-invest, financial solutions, really critical for the marketplace. We also drove growth in our capital markets business and systematically integrated data science into the platform.

Second, we did a really thorough and rigorous evaluation of the operating business model. This included a review of the expense base, identifying expense savings. We needed that to fund scalable growth initiatives. And when we had to, we deemphasized or just eliminated underperforming business lines. We overhauled the compensation plan to better align our teams with all of our stakeholders. And we created a capital allocation strategy that balanced investment in growth with the return of capital to our shareholders.

Now the third thing and maybe the most important thing is really the leadership and organizational design changes we made because you can't drive significant change without change. You certainly can't drive this much change in three years unless you have a world-class leadership team. And you have to be able to mobilize the firm effectively. And so since my arrival, we made a number of senior leadership changes, each one very much designed to build the institutional management infrastructure that a firm of Carlyle's scale requires.

Most recently, as you can see on the slide, we appointed three co-Presidents. Actually, for the first time I just noticed, I'm the only ball part of the leadership team. We have a great -- our team has great hair actually. Most recently, we appointed these three co-presidents, Mark Jenkins, Jeff Nedelman, John Redett, proven veterans who partner with me to drive overall firm-wide strategy, investment performance and client strategy across the platform.

Lindsay LoBue, not to leave Lindsay, great hair, Lindsay. Lindsay LoBue joined as our Chief Operating Officer. She brings more than two decades of experience building and scaling businesses. And as of January, Justin Plouffe stepped into the Chief Financial Officer role, been in the firm for nearly 20 years. And these changes are just part of more than a dozen senior leadership changes made across the firm in the past three years. And of course, this cascades down through the organization because they all bring their unique strengths and change to the firm. And again, they mobilize all this change. You'll hear all from them during the course of the day, but they really drive the team and our success in everything we're doing.

When Carlyle was founded by David, Bill and Dan, they set the foundation for our firm's culture. And it's 1987, it's not 2026. If you're doing a start-up in 2026, maybe you hire some consultants, you use an LLM, you craft your principles. They didn't do this through elaborate studies or hiring consultants. They just lived it. They just started it. They walked the walk, they set the tone. And we've all talked quite a bit about this. I certainly have since I got here. And what really became quite clear as they really pioneered private capital is that they focused on two fundamental values. The first is around care. The second is around excellence, care for fellow colleagues, our clients, how we interact with our strategic partners and our portfolio companies. It's really centered around kindness. And of course, performance in all aspects of everything we do.

So, our leadership team, what do we do with respect to that? We feel the great burden and responsibility to enhance these principles and reinforce them in everything that we do. And you hear a lot about strategy today, but I really hope you get a sense for how deeply we care as a management team about the success of our firm and the success of our people on everything we do. We do really take the responsibility of protecting and promoting this culture quite seriously.

All right. So where are we today? I don't know if I have a favorite slide, it's a pretty good slide, okay? This team and everybody out there working globally for Carlyle has done an amazing job. As you can see on the slide, we come into 2026 off a super strong '25. Lots of records on this page. Record FRE, record margin, realizations, not an accident. This is really reflective of everybody's hard work over three years, and we are super grateful, maybe me more than anyone of the collective effort of the 2,500 people at Carlyle that come to work every day and the effort of our global team.

Let's take a second and let's just dig into some of the financial performance more specifically. On this slide, you'll see fee-related earnings, FRE margin, DE per share. Record fee-related earnings of $1.24 billion. That's up 50% from 2023. That's a 20% compound organic growth rate. FRE margin in the middle of the page, 47%. That's a record, up 1,000 basis points, not easily achieved. And distributable earnings, $1.7 billion, $4 plus a share, up 11%.

Fee revenues, $2.6 billion, a record, reflecting 7% organic growth. Obviously, everything we've done over the last three years has been 100% organic. Transaction fees in the middle of the slide, hit a record $225 million. That's almost triple the level from two years ago. Over the last several years, we have to increase the amount of capital returned to shareholders by 70% through a combination of share repurchase and dividends. And at the same time, we invested in the growth initiatives, and you can see the capital return on the far right.

So I got in Carlyle -- all of you were great. Sometimes a little intense. I'm not going to -- I'm a big guy, but a little intense. And you were very, very focused on financial targets. And so we set them. And you wanted them, and of course, you should have them. And given the team's performance, it's really no surprise. They set the targets, they exceeded the targets, both in '24 and '25. And I will say it's a real testament. You can see it on the slide, whether it's FRE growth, FRE margin, inflows. Again, it's really evidence of this team's ability to set a strategy, execute a strategy, exceed a target. And this discipline that this team has brought to the entire organization and drove these results is now really fundamental to this next phase of growth.

So, here are the targets. It's very clear to us, we see a path to scaling the platform and the targets reflect that. Let's just quickly walk through them on the slide. So by the end of '28, we're targeting fee-related earnings of $1.9 billion. That's a 15% compound growth rate, $2.8 billion plus in management fees. FRE margin, excuse me, targeting 50% cumulative inflows, $200 billion from '26 to '28 and distributable earnings per share of $6 or more.

Now the question you're all asking, of course, is the question you asked me when we put out the first targets, which is, how do you come up with these numbers? How do we set the targets? Super straightforward, bottoms-up build. We don't assume any organic -- inorganic growth in these targets, 100% organic. We don't assume any significant strategic transactions. We don't assume any strategic partnerships. So this is the fundamental model that we believe we can execute over the next three years. There are no magical surprises that we're hoping occur that we can't identify as we sit here today.

So how would I describe it? I'd say there's a lot of operational leverage in the plan and upside to what we've laid out today. And as you can feel the momentum of what we're doing, I don't think the firm has ever been as well positioned as it is today and certainly with this extraordinary team.

So, when I showed up at Carlyle, I spent a lot of time externally, a lot of time internally, obviously, and getting know our teams, and I would speak to our investment professionals. And when I asked them about when they were investing, kind of like to give me a sense of their process. Obviously, it's quite intricate from diligence to execution. But there was one thing that really resonated with me. And they said, every time you look at a company, obviously, do all the mathematical work and the analytics and everything else, but they come back to a fundamental question, which is what is this company's right to win? What is their right to win? And when we think about deploying capital on behalf of our clients, we have to ask ourselves, the people that are getting that capital, what's the right to win? So obvious common sense applies. We apply that same lens to ourselves.

So let me walk you through why we believe these targets are achievable and why we believe we're uniquely positioned to win. All right. We win because we're global, but have local expertise. In a deglobalizing, somewhat globally splintering world, this is incredibly powerful. We operate across four continents, deep local knowledge, dedicated funds across global regions. It gives us a lot of advantages. structural advantages in sourcing, building management team relationships and accessing opportunities. Again, I mentioned before, we have 2,500 employees, 27 offices around the world, but it's not about just the offices and being in the regions. It's how long they've been in the region and the commitment to the region. So, 39 years, obviously, in the Americas with the launch of the firm, but 29 years in EMEA, 28 years in APAC. Japan just got exciting for everybody in the world. We've been excited about Japan for 25 years since we launched the office. Stayed, committed, grew, built relationships, built networks. This is a talent-driven business. The whole firm is about the people. It's also a business like all of you and the work you do, it's an experiential business. Reps matter. And just to give you a sense, of the partners at Carlyle, the average tenure is 15 years. They have experience. They've seen cycles. They know how to deploy capital. They know how to work with relationships and they know how to build value.

Why else do we win? We win because connectivity is embedded in our model. Since the founding of the firm, we've built one of the most recognized and trusted brands in global finance and trust is critical. The team has built this over 40 years by creating deep, enduring connections with investors, companies and stakeholders. We have CEOs that continually come back to the firm to lead portfolio companies because they like Carlyle and our investing teams. It's about trust and the experience they have. What else makes us somewhat unique, our Washington, D.C. roots. They just differentiate us. It's a distinctive insight into policy, regulation, geopolitical dynamics. And obviously, in the current environment and the foreseeable environment, all these factors increasingly shape capital flows and markets and how capital has to be deployed. A bit of an accident, David grew up in Baltimore, lived in D.C., started the firm, but ended up being a unique advantage. And global connectivity, for lack of better language, it's not just like part of the story, as I just described it. It's a structural competitive advantage for Carlyle, and it helps support our sustained growth.

All right. Why else do we win? We win because we operate at scale, and we have a diverse revenue stream. There are certainly times when you want to be more monoline focused. There are times you want to be more diversified. I would argue the current environment, the foreseeable environment really plays to diversification. You can see this on this slide. We offer a full range of solutions across the platform. We're not wholly dependent on one solution set. From private equity to Carlyle AlpInvest to credit, we have a really diverse set of clients. And the combination allows us when we go in a room to talk to the client and help them solve their problem. It's a broad set of solutions that allows us to fit their priorities. The geographic footprint, the breadth of the business lines and the global client base is diversified. Diversification creates durable earnings across cycles.

Today, the discussion is about -- we don't happen to be a big SaaS player. But when I showed up, everybody told me, you should have been way bigger in direct lending before you got your army, you should have been way bigger in SaaS. Okay. Three years later, now it's a virtue to be smaller in SaaS and still have a great direct lending business, which we can now grow as others retreat. Okay. The world evolves, okay? But diversity underpins the financial architecture of this plan and why we feel confident about the targets.

Okay. Why else do we feel good? We feel good about this because expression, you want to be -- you go -- what is it we want to be where the puck goes. The puck is coming to us. What do I mean by that? The markets today map pretty directly onto our distinctive footprint. A global focus on national security, rising global defense budgets, increasing geopolitical complexity, that's like home turf for our nearly four-decade track record in aerospace, defense, government services. There is not a country in the world that is not prioritizing national security. We're the only ones that do this at scale for 40 years, nearly 40 years.

Now everywhere I travel in the world, the discussion is about economic growth. It's not just a U.S. phenomenon. It's everywhere in the world, Japan, Europe, Middle East, Southeast Asia, Canada, Everyone, every Prime Minister, every official, every company CEO wants to create economic growth. And the capital that these companies and governments need, it can't come from the government exclusively. Deficits are too high. So there is a unique demand for capital of all forms, by the way, not just private capital, bank capital, wherever that capital can be sourced, there is a unique demand for capital.

It happens to map with our expertise, along with aerospace, defense and government services, this cuts across all key industries for us. Industrial, financial services, all the real assets that we have decades of experience in. This fits us really, really well. I said this to some reporters, I said, who knew the old economy was the new economy. But there's some real traction to that. I also happen to think the new economy is the new economy. But all this plays to our power alleys, health care, industrials, financial services. This is where we have decades of experience deploying capital. And it's exciting. It cuts across industries, geographies, again, the capital structure from equity to debt. And again, it's this diversification that makes the earnings stream durable and gives us confidence. If one thing is not firing, we're not wholly dependent on it. And the structure of the firm gives it a lot of ballast. The secondaries business, the primary private equity business, they can both fire at the same time, but there's ballast in that mix, and it's pretty fantastic for us.

So, as we look ahead, we've organized around three firm-wide priorities: delivering exceptional investment performance, scaling the platform advantages that we have and accelerating high-growth opportunities. These priorities -- they're not independent of each other. They reinforce each other, and they compound over time. And look, you're going to hear a lot more about each of them today from Mark, Jeff, John, Lindsay and Justin and from the panels. They'll take you through deeper how we plan to execute. But again, most importantly, we truly appreciate you being here. We truly appreciate you supporting Carlyle. We appreciate you challenging Carlyle. Again, never hurts my feelings. We love your feedback. It's actually been quite helpful to me over the last three years, joining Carlyle and hearing all your thoughts. But mostly, we appreciate you being here today and engaging us. Everybody, thanks so much.

Please welcome Jeff Nedelman.

Thank you, Harvey. And by the way, before I start, I worked with Harvey for 20 years. And so you know that puck analogy, that was going to be my analogy in my presentation, just to let you know. But -- and by the way, for those of you who don't know, that's Wayne Gretzky on where the puck is going to go. But again, thank you very much, Harvey, and thanks to everybody in the room. I am Jeff Nedelman. I'm Co-President of Carlyle, and I lead the Global Client business.

Our strategy is simple. It begins and ends with our clients and the solutions we create on their behalf. This really isn't a tagline. It's an operating principle. It's what I think of as our Rosetta Stone, the lens through which every decision in the business gets made. So everything I'm going to walk you through today, the organizational changes, the talent we brought in, the products we've built, the channels we're targeting, it all flows from the single commitment of our clients and solutions.

You've got an essence of this when Harvey spoke. And you see a lot of our intellectual capital in this slide. But what connected me to an institution like Carlyle is the power of this brand. What does that mean? It's long-term track record, its diversified and durable client base and the ability to convene and connect on a global scale. So whether we're in Davos meeting thought leaders or in Singapore with a sovereign wealth fund or in a wealth adviser's office in Texas or California, our brand is consistent and our partners always lean in.

A lot has happened in the last three years, and the power of the brand allowed me to optimize our client business strategy. This is really almost a three-year look back on some of the things that have happened in the milestones or redesign, prioritizing talent, solution focused, advanced analytics. And just very quickly on advanced analytics, Harvey uses a term called clever. We want our salespeople to be clever how we use data science and AI, and Lucia will talk about that later today. But really on org design, we transitioned from a single product mentality to a generally client-centric multiproduct model, not in name, but how we're structured, how we're incentivized and how we show for clients every day. Also, as importantly, we integrated global wealth into the heart of the platform.

On talent acquisition, the people behind this transformation, our goal always and will be to find the best talent, whether within our organization or externally. Internally, we did that with new leadership in AlpInvest, credit sales and the U.S. institutional business, but we also made several senior hires aligned with our strategic priorities. Shane will talk later, be part of a panel, so I'll mention him by name, but we hired Shane in 2023 to redesign our wealth business. In a short time, he and his team and us created a durable, diversified business, which gives us the right to win in wealth. In the last six months, we hired an exceptional person from Goldman Sachs to head our North American client business. We leveraged her dual fluency in both the institutional and wealth businesses to deepen our presence in both channels and manage our people. She's got an exceptional EQ. Finally, in the last few months, we hired a 25-year thought leader to actually lead our retirement business, building solutions for the 401(k) channel, defined contribution and plan sponsor community.

Let me walk you through the key goals for the client business and the way we think about this. Priority one, grow a diversified and durable client base, deliver exceptional performance, be a solutions-first partner, invest in talent. Priority two, scale and expand our client solutions, exceed $200 billion of inflows over the next three years, scale our flagship strategies, deepen partnerships and expand into key channels. Priority three, drive excellence in wealth, expand and innovate our product suite, strengthen RIA channel penetration and engage and educate our client base. The wealth opportunity is generational. We are built for it.

You're going to hear a lot about performance and exceptional performance. Before I talk about these goals in detail, I want to state the obvious. Any client conversation starts with exceptional performance. Performance is the price of admission in our business. It's purely just table stakes.

So the foundation of everything we do is rooted in the client relationship. Let me share a dashboard about our clients and our team. I do love this slide, too. We have 32 limited partners across 87 countries. That's not a client list. That's a relationship map built over 40 years. In the last three years, we've added 450 new limited partners while simultaneously seeing 250 existing LPs expand into multiple Carlyle strategies. That's simply cross-selling. Our clients average 11 years with Carlyle. In wealth alone, we've developed over 200 distribution relationships. I'll talk about that in a bit. And today, our sales team is 274 people strong, operating across 27 global offices, and our Investor Relations partners average 11 years at the firm. This is something we're exceptionally proud of.

So how do we source capital globally? And this is a '23 to '25 chart. Since 2023, we've sourced capital in every major continent, $110 billion from the Americas, $24 billion from APAC and $15 billion from Europe, $9 billion from MENA. Our clients are everywhere their capital is deployed, and our team is structured to meet them where they are in their language and the content that matters to them. So, again, local to local.

Okay. Harvey did it, but everyone gets to at least use one sports analogy in their presentation. And when we think about Wayne Gretzky and where the puck is going, this is where I think the puck is going and we think the puck is going. Of course, the puck is going to retirement. That's a $44 trillion TAM. It's the largest pool of capital in the world and will increase its allocation to private markets. Our goal is to build a focused business around the defined contribution and 401(k) opportunity. What does that mean? We plan to be key to the ecosystem of plan sponsors, financial advisers, managed account providers and record keepers. The puck also goes to the RIAs, the fastest-growing distribution channel in wealth management. I call them the hyperscalers, gaining market share and massive asset flows. They are a key distribution channel for the next generation of products, but also our next generation of model portfolios. And lastly, the puck is going to family offices, $5 trillion TAM. Sophisticated investors want institutional quality access. Carlyle's brand, track record and intellectual capital resonates deeply here. So we've built a team. We've deepened our client relationships.

Now let me share some key financial results. This is our 2025 scorecard. In 2025, we raised $54 billion, and we beat our internal $40 billion target by 35%. What's nice is we source capital from a diverse, durable client base, pensions, sovereign wealth funds, family offices, private wealth partners, foundations and endowments and insurance clients. Also, over the last two years, we raised capital across 30 different strategies.

This is exceptionally important for a variety of reasons. The first thing is our clients tell us repeatedly, they want a solutions provider. They don't want a vendor, a partner who can meet them across their portfolios, across asset classes, geographies and risk profiles. When I look at this, I see, yes, U.S. Buyout 9, I see Japan partners, I see U.S. Real Estate 10, I see CCAF 4, I see secondaries 9. But here's why this breadth matters so much right now. Almost every solution on our platform will be in the market in the next three years. This is what powers the multiyear super cycle. It's not about macroeconomic tailwinds. It's about our calendar, our platform and our client relationships conversion exactly the right moment. And running across all of it, global wealth, bringing evergreen access to this entire platform.

You heard this from Harvey, but this brings us to our new target of $200 billion plus of inflows by 2028, and we intend to exceed it. The composition tells the story. $50 billion from global private equity, $90 billion from global credit and insurance and $60 billion from Carlyle AlpInvest. Every business contributes, every channel is activated. $40 billion of that or 20% will come from wealth Evergreen Solutions alone, a business that barely existed here three years ago.

Again, slightly repetitive, but I want to do this again. I want to connect this back to what I said on the last slide. The reason $200 billion is achievable. The reason it's not aspirational, but structural because every key Carlyle strategy comes back to the market in this window. The demand is built into the cadence of our platform.

Now I want to talk about where the biggest client opportunity is and how Carlyle is positioned to win it. And this is what I think about in the long game. The adoption of private markets and wealth. I intellectually call this the direction of travel. Obviously, it's topical right now and well disseminated. It's hard to predict if the direction of travel is linear growth, geometric growth, parabolic growth, and it's also hard to predict the timing. But I'm going to reiterate something that everybody knows, the pure opportunity set in wealth. If you look at this, alternatives represent only 3% of high net worth portfolios. That's a $4.5 trillion against $150 trillion individual wealth market. In 10 years, depending on what third party you believe, that allocation is projected to nearly triple, reaching $12 trillion. Again, the direction of travel is robust.

I also, in my own mind, think about this as a super highway. So what specific lane do you choose to play in? Carlyle will continue to be product quality, structural integrity, client education and client trust. And lastly, we'll play the systematic long game as we continue to scale and build new and diversified solutions for the wealth channel.

Again, this is a bucket list of almost success. So let me spend a minute on the success of our wealth management business in the last three years. And congratulations to Shane and his team. On evergreen products from 3 to 9, a threefold expansion of the solutions we can put in front of wealth clients. On dedicated professionals, 46 to over 110, more than double because you can't serve a growing client base without growing the team to match. And on evergreen AUMs, 3x growth in three years. That's the market responding to what we're building or what I think of as proof of concept. And then lastly, and this is very key, distribution relationships from 120 to 200 because the best products mean nothing if it can't reach the client. We've invested in distribution the same way we've invested in everything else, deliberately and at scale.

Our wealth strategy has two big gears, scale what's working and build what's next. Today, we're scaling our platform strategies, and we have acronyms from everything, CTAC, CAPM and CPEP, the flagship evergreen vehicles that have already earned client trust and capital. These are the engines of our current wealth growth. And then on a three-year look, '26 to '28, we have a clear build-out agenda. Our asset-backed finance and our CIT build on the retirement channel are closest in scope. Again, every product we build starts with the same question, what does the client need that they can't get today? That's the filter, that's the absolute discipline.

Again, I'm very proud of this. This is a lot of time and effort for many people here. But in wealth product is only half the equation. The other half is something we call reach, getting our solutions in front of the right clients through the right advisers at the right moment. Our collaboration with UBS on what we call CAPS is a perfect example. On one side, you see Carlyle Alpinvest, 25 years of experience executing complex secondary transactions globally, $46 billion in secondaries, 250 unique investments since inception, deep expertise, proven track record. On the other hand, UBS, $330 billion combined of invested assets, a global network drives a robust deal funnel and one of the most powerful distribution platforms in wealth management. If you look at this, the result is a product called CAPS, a vehicle designed specifically around wealth clients, what wealth clients need, institutional quality secondaries exposure with the accessibility and structure that the wealth channel requires. Simply, this is where expertise meets reach.

For all you possible F1 gearheads, that is the new car for next year, okay? Just to be clear. But again, to emphasize expertise and reach, this is the new Oracle Red Bull car and it's where we partner with a technology forward performance-driven organization, Oracle Red Bull. As it relates to F1 and demographics, it's pretty extraordinary, 827 million fans with exceptional age and gender demographics. The partnership alone has generated 325 million total media reach and 72 million in equivalent advertising exposure. For instance, when Harvey appears on CNBC with the Oracle Red Bull team manager, Laurent Mekies, we're able to connect to a vast audience, 500,000 strong. Again, this is where expertise meets reach, which brings me to our targets for the wealth business. We're targeting $40 billion in wealth evergreen inflows from 2026 to 2028, more than 3x the $12 billion we raised in the prior three-year period. The growth will benefit from the same super cycle effect I mentioned earlier. Each business segment will contribute to enhancing our wealth platform to meet client demand.

So the three things I want to leave you with today. One, performance first and solutions-first approach. Two, we will continue to grow our wealth franchise methodically. The long-term structural shift into alternatives is underway. We built our wealth business the right way, the right products, the right team and the right partners. Three, most importantly, deliver $200 billion of inflows by 2028. And I want to be specific about why this is achievable. Again, every major Carlyle solution across every business segment comes back to market in the next three years. The super cycle isn't a vision. It's our fundraising calendar, and it points directly to $200 billion plus.

Again, I'm going to end where I began, which is clients and solutions, relentless and methodical. The team we built, the channels we're targeting, the partnerships we're forming, the products we're creating, all of it exists to serve one purpose to be the best partner. Thank you very much.

Please welcome Mark Jenkins.

Okay. Well, thank you, Jeff. I'm Mark Jenkins. I'm responsible for global credit insurance, two areas I'm happy to see is not getting much focus on in the news lately.

As Harvey mentioned in his opening remarks, Carlyle's global credit platform really represents a continuation of a strategy that -- and a growth story whose foundation and differentiated strategy, we started almost 10 years ago today. Today, I want to provide you with an overview of our global credit business, how we've built a differentiated platform and why we have extremely strong conviction in our continued growth opportunities going forward.

Global Credit is a purpose-built platform that delivers solutions to both our borrowers and investors. It's a scale diversified platform with over $211 billion of AUM and continues to grow. Nearly half of our capital, as you can see, is perpetual, giving us the benefit of semipermanent capital. I'm sure we'll talk about that in Q&A with greater visibility into management fee streams going forward and obviously, compounding value for our shareholders. Now we combine that with scale in a highly active and differentiated origination, which has allowed us in the past year to deploy over $30 billion of loan, underscoring really the strength of our origination platform and our ability to generate management fees at scale.

Credit, as you all know, is not a monolithic asset class, right? It does span a wide risk/return spectrum. So we've built a platform that covers that full spectrum of credit, okay? So, from liquid corporate credit, which is all of our CLOs, BSLs to private credit, direct lending, which I know is in vogue right now, opportunistic hybrid capital, real asset credit, which for us is infrastructure credit, aviation finance and real estate, all the way through to and including asset-backed finance. This purpose-built platform provides a broad array of expected returns that allows us to invest at various points through the cycle and more importantly, move capital to where we see the most attractive risk-adjusted returns for our investors. So it's that breadth of product that creates one of the industry's broadest origination funnels, and it generates a vast amount of information flow for us to make investment decisions, obviously, and allows us to deliver very differentiated and direct outcomes for our borrowers and investors.

Now over the past three years, we had significant strong growth. As you can see, fee revenue has grown at a 17% CAGR, but probably more importantly, fee-related earnings have nearly doubled over that same period of time. So it's grown at about a 34% CAGR. That really demonstrates the meaningful operating leverage that we have in that platform and allows us to expand margins in our business as we grow.

Margin expansion for us really reflects all of the prior investment that we've made in infrastructure and technology and most importantly, talent as we built out that broad array of product expertise that allows us for each incremental dollar of AUM is increasingly profitable, okay? That growth has been deliberate. We set out a very deliberate growth pattern. We scaled high-performing strategies. We've expanded into fast-growing areas of the credit segment, and we've launched evergreen vehicles, as Jeff talked about, which is bolstering our capital formation. But at the end of the day, sustainable growth requires quality. Quality growth requires persistent and consistent investment returns for our investors within a very defined expected range of opportunities. And we have to provide compelling solutions for our borrowers as well, and that all translates into strong durable AUM growth, which Harvey talked about.

Now I'd like to frame, and I'm sure you've heard a lot of presentations on how people frame the private credit market. And I think the traditional view has always been this $2 trillion market of what I would call leveraged private credit, more than half of which, by the way, is in direct lending to sponsors. For us, private credit is a much broader opportunity set that exceeds $25 trillion. It's 12x that traditional view, as you can see here, and it spans all these multiple assets, classes and structures that our platform is built and designed to focus on. So our $211 billion of AUM represents actually less than 1% penetration of that addressable market. So we have plenty of room to grow. And capital, as you know, is increasingly consolidating with scaled managers like Carlyle. And we know our diversified differentiated platform positions us extremely well to capture our share of that market. But more importantly or as importantly, I would say, depending on how you want to look at it, I think as an investor, it allows us to maintain that investment discipline, right, and take advantage of that underlying operating leverage that we have in our platform. And I think we've talked about it throughout that performance matters because nobody wants your products if you're not performing.

So how do we capture that market share? Well, we're going to scale into what is already working, right? We're going to continue to expand in already proven strategies like asset-backed finance. Yes, direct lending, where we are probably underscaled relative to some of our peers, opportunistic credit and cross-platform accounts. Secondly, we're going to move into adjacent markets and geographies. So we see a lot of white space in select regions. Let's think about Asia, Korea, Japan, Australia, India. We've been doing more in Europe recently. And we think there are specific sectors like sports, media and entertainment that are attractive from an investment perspective. And then we want to optimize our distribution. So each of the institutional, insurance and wealth channels have very distinct needs as to how we deliver what they want and how we deliver it. And we're well positioned to meet them through our broad product array and the multiple access points that we have as a firm.

So we're targeting just over $90 billion of inflows over the next three years, a goal that's well grounded in our historical flows, which in the past three years were around $80 billion plus with potential upside from insurance solutions, which I'll talk about and other new product launches that we're considering as I stand here today.

So how are we executing against our firm-wide priorities that Harvey laid out upfront? Well, first, we have to deliver exceptional performance, right? Without strong consistent performance, nothing else matters. Second, we're scaling our platform advantages, reinforcing that flywheel effect that compounds the benefits of the business as we continue to grow. And then third, we're going to accelerate in high-growth opportunities, right? Insurance, as I mentioned, asset-backed finance, cross-platform credit, they're all scalable things that are going to drive our next phase of growth.

Now let's talk about performance. So across our platform, we have delivered exceptional performance, and that is defined as consistent and persistent returns through cycles. Our track record spans multiple market cycles. Think of the GFC, think of COVID, think of like the interest rate increases in '22, '23 and a lot of other minor little dislocations along the way. In liquid credit, our CLO management equity returns of 13% reflect 26 years of investment experience and underscore our history of outperformance. We have driven double-digit performance in private credit, and we've made and delivered a premium to the index benchmarks that we use in asset-backed finance.

Now just looking at CTAC for a minute, which is our flagship cross-platform vehicle, which provides investors with really exposure across all of our credit capabilities within global credit in one single allocation. It's delivering double-digit returns over the past three years. Now we're able to drive these outcomes across our platform of $211 billion through proprietary originations, rigorous underwriting, which everybody talks about, but it only comes out of the other end when you get your money back and a focus on downside protection, right? And the integrated benefits of being in a scale provider, but not just scaled within global credit, but scaled within that broad context of Carlyle overall, that's our 40 years of operating history of dealing with clients and dealing with industries on a global basis.

Now Harvey has a favorite slide, and I have a favorite one because I've been in credit -- I've been a credit analyst for over 35 years. And for me, it's not -- how you generate the returns is really important. And to me, it is if you generate these returns with a lot of volatility, that's not a great outcome in credit. So, ultimately, our objective is not just to generate returns, but protect capital. So over 26 years, if you take a look here, our historical bank syndicated loss rate has been about 1/3 of the broad industry loss rate. And in direct lending, which I know people are focused on right now for different reasons, our default rate is roughly 1/9 of the industry average. But importantly, our loss rate has been 10 basis points. And translate that into what does that mean? That's about -- if you make 10% 12 basis points or you'd be making 9.88% versus 10%. That has been our loss rate. And it underscores not just the underwriting discipline because that's part of it, right, putting that investment in your portfolio, but it also underscores what we do after we put it in our portfolio and what our asset management capabilities are. And when something goes wrong, how do we recover that capital? So why is that -- why does that matter for shareholders? Because we have durable earnings are built, I think, on a disciplined credit culture, right, the rigorous underwriting that we go through, that consistent focus on downside protection and that investors trust us with their capital when we invest it for them.

So let's talk about how the platform is designed to compound growth and reinforce, let's call it, a flywheel. At the core, you can see here, of the flywheel is really that integrated platform engine I talked about, right? It's the breadth of our capabilities, all of our product knowledge. It's the scale of our capital. It's the industry expertise. It's our sourcing relationships. It's our proprietary sourcing relationships. It's the investment we'll talk about in AI and technology, which helps us drive these decisions. It's the engine that powers everything that we do as a platform. And that middle layer right there, that's our credit foundation. It spans all of those products, all that content, if you will, that our investors are looking for. And frankly, our borrowers are looking for solutions. So that is the content of how we deliver that, right? From liquid credit, private credit, real asset and asset-backed, don't think of them as individual products. We think of them as a universe source of capital for solutions and for investors. And each of these strategies generates its own deal flow and market intelligence and borrower relationships, right, that inform investment decisions and help us create new investment opportunities for investors.

So this allows us to scale and compound solutions for both investors and borrowers, right? Capital markets helps us enhance execution. It generates fees that we deliver to the firm and revenue for Carlyle, cross-platform accounts deploy capital across that whole platform of strategies at scale and give us that meaningful operating leverage where we don't have to hire more people to put something into a cross-platform account. Insurance solutions leverage that diversified credit complex, if you will, so we can deliver capital-efficient solutions to insurance clients. So again, at our core, we are solution providers to investors and borrowers. There's an engine. We have a diversified credit foundation and scale that allows us to compound over time. So we're just building and continuing to build on what we already have in place.

So let's talk about some of the flywheel in action. I know Harvey showed part of this chart before. But really, when Harvey came in, we made a very deliberate focus on capital markets. And over the past three years, you can see it's driven -- that focus has driven significant growth. But importantly, what you can see is we've diversified the sources of capital markets fees. And we expect to see much further growth in Global Credit and AlpInvest going forward where we think there's meaningful fee growth going forward for the firm.

Okay. Talk about insurance. Really, there's three pillars to our insurance strategy, if you will. And we see significant opportunity to further accelerate the growth in the insurance channel. And there's three key things I'd focus on. One, it's our investment in Fortitude Re. We have a 10.5% interest in them. It was the catalyst, if you will, for our Insurance Solutions business.

Now this partnership, which continues to grow and Fortitude Re continues to grow, enabled us to deepen our understanding of insurer asset management needs and ultimately build purpose-built solutions for insurance companies. So think about we have built the product array in our platform that allows us to deliver that to third-party insurers. So that expertise and our capital-light approach to the channel has made us much more relevant to third parties. Why is that? Because we don't have a captive that we're feeding all the time, and our relationship with Fortitude is really based on an open architecture. And that open architecture approach has allowed us to penetrate more down the third-party channel.

And then lastly, we are selectively exploring strategic relationships where we can use our capital-light approach, but use our -- judiciously use our capital to expand our insurance AUM. So the growth of our insurance capabilities, both in structuring and in distribution has also allowed us to generate more fees, if you will, from a capital markets perspective. So it's really a comprehensive approach, again, that's going to provide solutions to insurers and also the growth of Fortitude that will continue to drive revenue there.

Asset-backed finance. It's one of our fastest-growing verticals right now. It's supported by strong secular tailwinds, I'm sure you've all heard about, and we think there's significant runway for expansion. As we highlighted in our market opportunity slide, the addressable market for asset-backed is substantial, and we're moving very decisively, and you'll hear from some of my colleagues today about how we're seizing on that opportunity. But since 2021, we've actually scaled that business from virtually nothing to over $10 billion. And as I mentioned, our partnership with Fortitude Re really was a catalyst, right?

But looking ahead, we have the launch of evergreen vehicles in 2026 and beyond that we're going to lead to our next phase of growth in ABF. These vehicles, evergreen vehicles will open up additional distribution channels, which will include noninsurance institutional and high net worth. But importantly, the growth drivers for asset-backed finance are really structural versus cyclical. I'm sure you've heard it from my peers, but basically, banks are retrenching from asset-backed lending due to mostly regulatory accounting and other regulatory events. And then capital market volatility has constrained financing and pushed it into the private markets where there's more durability, if you will, of providing that. And that trend has created a sustained opportunity for private credit across hard assets, consumer, corporate and intangible assets that traditionally have been held on bank balance sheet. So we're not really investing in anything that hasn't been held in the market for 50-plus years probably by banks. And so these are relatively good secure assets that have been held by different constituents. So we believe our asset-backed finance strategy has potential to be multiples of what you see on the screen here in the next coming years.

Evergreen vehicles. Jeff addressed these and talked about them. They have been one aspect of our growth, and they're very scalable and recurring. They provide semipermanent capital. Again, we'll talk about that with more visible fee streams. And we've grown our evergreen vehicles from AUM from $12 billion to $19 billion. So in a very deliberate steady way over the past three years, but it really does reflect the scalability that we have of these vehicles. So as you know, which are continuously fundraising and reinvesting. So it allows that AUM to compound over time for investors and for us and reduces the reliance on going back to market with these drawdown funds.

So we've got a comprehensive set of products that allows us to serve the institutional market and the wealth channels, and it does position us extremely well for the retirement flows that we anticipate down the road where the demand for private market exposure continues to increase. And I argue probably they'll look to credit as their first step, if you will. So again, we're leveraging the full breadth of the platform, differentiated exposures, that might be my time, making us highly relevant across all distribution channels, and we think we've got meaningful runway, okay?

CTAC, which you've heard about, I think, is proof of our platform creating a differentiated product for the wealth channel. Really, it's a multi-asset solution of credit that draws across that full breadth of global credit. It has grown at about a 44% CAGR over the past three years and represents roughly $7 billion in AUM for our platform, and as I said, delivering 10% returns over the past three years.

What's the key to it? The performance is really driven by a dynamic asset allocation model that occurs through time. And what that means by that, we have a top-down asset allocation model that allows us, again, to move capital where we see the opportunities and we can -- the most compelling risk-adjusted opportunities, but rather relying on one single strategy like direct lending, for instance. So today, that portfolio holds over 950 positions. I'll say it again, 950 positions. They're marked daily, so it provides significant diversification, but importantly, in this market, transparency to our investors.

So, again, this just allows us to invest through cycles and lean in where we see the opportunities. So we built the global credit platform intentionally to enable this type of cross-strategy approach, which goes both institutional and high net worth. It's a key differentiator for our platform, and it represents really the best of Carlyle Global Credit in a single semi-liquid vehicle with continued, we think, enormous runway for growth in a methodical way.

So let me just finish by saying we have a purpose-built diversified global credit platform, and it's differentiated by the breadth of that platform, which enables us, again, to deliver tailored solutions to both our borrowers, which we need on one side and our investors on the other side. We operate across an opportunity set that exceeds $25 trillion. So we think we have a huge amount of runway for growth. And our target of more than $90 billion of inflows is highly achievable, and we think we have meaningful upside from there. Don't hold that to me too much, but we think we have upside there. And we have strong conviction, if you will, in Global Credit's ability to drive sustained AUM and earnings growth as we have demonstrated over the past 10 years of our platform's growth.

So, with that, I'll thank you, and I'll pass it on to my colleague, John Redett.

Please welcome John Redett.

Good morning, everyone. Great to see some familiar faces. So I'm John Redett. I've been with the firm for nearly 20 years. Up until my recent new role as Co-President, I was Chief Financial Officer for several years. But I spent the vast majority of my career at Carlyle on the global private equity side of the business. This is a business I know really well. This is a business I really love. For us at Carlyle Global Private Equity consists of corporate private equity and real assets. We have a 35-year track record in global private equity. I mean this is where it all began for Carlyle 35-plus years ago. We have an incredibly strong brand, a very well-respected brand. I think Harvey used the term iconic. It's very much an iconic brand.

The global private equity business, it's scaled. It's a global business, and it's also a very profitable business for Carlyle. We manage roughly $165 billion of AUM. In our portfolio companies globally, we employ 700,000 employees. That would be -- that would rank us a top 10 employer in the U.S. And what does this give us? This gives us a tremendous amount of data. It also gives us great visibility into the global economy, which is a real advantage when you're investing.

Kind of -- Harvey touched on a little bit of this earlier. When I think about this business looking forward, and I think it's going to be a great business. It's really going to come down to what I call kind of the traditional private equity approach. You're going to have to be a disciplined buyer. You're going to have to be incredibly focused on driving returns through value creation. And you're going to have to monetize assets earlier in the fund life like we've done in CP VIII. I think the days of multiple expansion-driven returns are largely behind us. When we look at our returns in global private equity, nearly 80% of the return is driven by value creation. And what do I mean by value creation, improving the technology, the efficiency, expanding the business, focused on pricing, growing the business. These are just a few areas we focus on.

Look, AI has been something we have been using in global private equity for years. It is obviously, probably a topic that's top of mind for everyone in this room. It seems to be in every single article. And again, we've been focused on this for years. When we take an investment to the investment committee, AI is topics 1 through 5. We spend the vast majority of the time talking about AI, how it benefits this investment, what are perhaps some of the risks of AI. But I'm not going to spend a lot of time on it. I don't want to minimize it, but we have a panel later today specifically dedicated to AI.

As I said, this is a diversified business. It's a very durable business. As you can see here, we're not overly reliant on any particular fund. You can see corporate private equity is the cornerstone, not surprising given our 35-year history and track record in corporate private equity. This business really helps drive the Carlyle brand. When we buy a company like Vantive, we get tremendous coverage. When we monetize like the highly successful Medline IPO, we get even more coverage. The business is a big driver of capital markets revenues. You saw that on Mark's slide. This has been a key focus area for the management team for the last few years, and we've had a lot of success in global private equity driving capital market fees. So this is an incredibly important business to Carlyle.

In terms of firm-wide priorities as it relates to global private equity, look, investment performance, we are laser-like focused on investment performance. It's core to what we do. We're incredibly focused on scaling -- continuing to scale the business, and we're looking for ways to find new areas to accelerate growth in this business.

Investment performance in the global private equity business has really been strong across the board. You can see on this slide. In our U.S. corporate private equity business in the U.S., a 29% gross IRR. We have strong performance in Europe, in Asia, in Japan. When you look at corporate private equity across the globe, that's a 26% IRR. In our real asset business, real estate, a 17% IRR. And if you actually look at the real estate business and look at it kind of post the great financial crisis, that 17% is closer to 25%. So very good performance there. Look, I think it's very clear. The management team and our investment professionals are very focused on investment performance.

When you look at the corporate private equity business, we could not be more pleased with where it sits today. I actually do have favorite slides, and this is probably within the global private equity, my favorite slide. The business is clearly showing real momentum. When you look at CP VIII, that's the current fund we're investing out of in the U.S., it's around 80% committed. It's looking like a great fund. CP VIII is first quartile on net IRR, second quartile on other metrics. It appreciated 17% in 2025. DPI is already 0.3, okay? DPI is 0.3 and it's only 80% committed or invested. So we are returning capital to our LPs in CP VIII and the fund is not fully invested.

CP VI is progressing and it's improving. When you look at CP VI relative to previous vintage funds on the left of this slide, CP VI's performance is generally in line at a similar point of those previous vintage fund lives. I'd also point out for CP VI, DPI has improved to 0.7. So very -- we are very pleased with how the U.S. corporate private equity business is performing. I think when you think about this extraordinary performance and you add in the tremendous realization activity we've had, it really shows the momentum we have in this business, and we're very happy with where this business is today.

This is another great slide. So actually, I guess I have two favorite slides. This is my second one. Maybe this is my first one. Look, in terms of realizations, and we've been talking about this for quite a while, we're an outlier. We are returning more capital to our investors than the industry. In 2025, we returned $18 billion of capital to our investors. It's continued in 2026. We're two months in, and we have already closed or pending closed $7.5 billion, which is largely in our U.S. corporate private equity business. In U.S. corporate private equity, which is, again, largely seven and eight, we returned $11 billion the last 12 months. That is a 100% increase year-over-year.

How have we done this? It's been a mix of IPOs, trade sales, but it's driven by the great companies we own in CP VI and CP VIII. We basically opened the IPO market with StandardAero in October of 2024. We followed that with several more high-profile successful IPOs. We did Rigaku in Japan. We did Hexaware in India. And I think everyone in this room is fully aware of the highly successful Medline IPO we recently completed. Medline was the largest ever sponsor-backed IPO, the largest ever health care IPO, and we are the #1 sponsor by global IPO proceeds, over $10 billion of issuance. So clearly, our investment teams are focused on returning capital back to our LPs.

I mentioned this is a global business, and Harvey touched on this. Look, we're able to take on a very complex global company and work across the globe together and make that investment. Some of our better investments that we've done in our 35-plus year history, they span the globe with teams working together across multiple geographies, like our recently announced BASF transaction. I would just say collaboration is just part of the Carlyle culture. Harvey touched on this as well. We invest out of regional funds, which we think today is a real strength, and we've been doing this for decades. We've been in Japan for 25 years, amazing brand, amazing leadership in that business, really a deep investment bench. We've been investing in Asia and Europe for 25-plus years, long-tenured leadership. So very pleased with where we are in each of the regions we invest.

We've always had an investment focus that I would describe as highly specialized. It's sector focused. It's always been sector focused. Our power alleys include industrials, financial services, health care and aerospace and defense. We have never been a big software investor. We think our sector focus is perfectly matched for today's market and the opportunity set we're seeing today. We have a very deep bench of investors. I'm very pleased with that. That's a great thing to see. And our senior investors are long tenured. The average time at Carlyle for senior investors is 16 years.

One of our real power allies or real strength is just global corporate carve-outs. We are a leader in corporate carve-outs. We've done over 80 corporate carve-outs. We've invested $30 billion in corporate carve-outs and the returns are really strong. We recently announced the BASF carve-out. That was a complex multi-geography carve-out. Asia, U.S., Europe working together and really leveraging that local market expertise that having local regional funds provides us. We announced Vantive before the BASF, and we also announced another carve-out Worldpac. So, look, we think carve-out activity is going to accelerate, and we think we're perfectly positioned to capture that opportunity set.

Okay. Aerospace and defense. This is a real core strength at Carlyle. Any stat you look at or any projection you see, they all call for a substantial increase in global defense government spending. The increases are in the trillions of dollars. This will go well beyond just defense. This will be a reindustrialization of certain countries and it will require a massive upgrade in infrastructure.

Aerospace and defense is actually where it started at Carlyle in corporate private equity. We are the only large global alts firm with a dedicated aerospace and defense team. I think being a DC-based firm, we just have an edge in this space. We've invested $14 billion in A&D, and you can see the returns at 3.3x, MOIC, they're just fantastic. We have a really good A&D team. The leader of that team has been at Carlyle for 25-plus years. The bench is deep. But we see this as an enormous opportunity that's approaching us.

Real assets. For us, that is real estate. We have a great real estate business, energy and infrastructure. We've been in the energy space for 25 years. We invest in energy globally. Real estate, we've been doing real estate for 30 years, and the returns are actually very, very strong. We were able to raise our 10th vintage real estate fund in the 2024, 2025 time frame, we raised $9 billion. This was in a time frame where no one was raising real estate money. So how did we do that? I think it just comes down to returns. We have outperformed the market and our returns are durable and consistent.

In our infrastructure business, look, we have very good performance in infrastructure. I think this is going to be a big growth area for us going forward.

Jeff touched a little bit on the flow -- our views on flows for the next three years. We're expecting $50 billion of flows over the next three years. That is up 70% from the prior three years. What is it driven by? Our existing core business, all flagship strategies will be in the market over the next three years. Really, Jeff used the term super fundraising cycle. It is a super fundraising cycle for global private equity. We're leaning into areas where we clearly have an edge like carve-outs and aerospace, defense, national security. And lastly, we're going to scale our private equity wealth product, which we just launched in the fall of 2025. And this product really benefits from the best of Carlyle across the private equity product -- or platform, sorry.

All right. So leave you with a couple of thoughts. only have a couple of seconds left. We are incredibly focused on delivering performance excellence, investment performance excellence. We think the business is incredibly well positioned, particularly for the opportunity set we're looking at today. We have an incredibly strong brand in global private equity, and we've got a great long-term track record. We are delivering beyond what we have conveyed to our LPs. Business is really showing momentum, targeting $50 billion of flows. It's a super cycle for global private equity as well.

And now I'm going to shift gears and talk about AlpInvest. So we don't need the voice of God. I'm still John Redett. I'm going to just -- I'm going to start by just stating the obvious. This is a great business. This is a high-growth scale business with over $100 billion of AUM, high growth, 100% organic. We didn't buy this growth. The business is diversified. We have a 25-year track record. The easiest way to describe this business, and I'd like to simplify things, it's a liquidity solutions provider to the private markets. Harvey touched on this a bit earlier. We really focused on integrating this business several years ago into the Carlyle, the broader Carlyle platform, and the results are clearly positive. I think the integration actually accelerated this high growth we've seen. AlpInvest benefits from being part of Carlyle and Carlyle benefits from AlpInvest. Again, this is just an amazing business. As a PE investor, it has all the attributes one looks for when you buy a company. High growth, scale, strong margins, industry leader and the last one I love, high barriers to entry.

I think most people think of AlpInvest, and I would have put myself in this camp several years ago before I became CFO as a secondaries business. And we have a great secondaries business. but it's a very diversified business. And we have a great co-investment business, a primary business and a portfolio finance business. We have a 25-year track record. The returns are strong and consistent, high barriers to entry. I touched on that. I'm not sure how you replicate 25 years of data on 30,000 companies and long-standing GP relationships. There are only a handful of scaled industry participants. You have really strong industry tailwinds that are both secular and cyclical. Supply, investment supply exceeds capital formation. That's a healthy dynamic. In the wealth opportunity set, it's real, Wealth, I should say, wealth and retirement. It's basically diversified PE exposure with limited J curve. And we've had great success scaling CAPM. Flows are up almost 3x over the last 12 months.

This business is certainly benefiting from cyclical tailwinds. But more fundamentally, it's structural. We are in the middle of reshaping how the traditional private equity model works. For LPs, we buy exposure, we lend against exposure, help rebalance portfolios, unlock new capital, and we create liquidity. For GPs, we touch GPs at literally every point of their life cycle. We optimize every dollar of capital. We provide GP financings, midlife co-investment, continuation vehicles and fund financing. We go incredibly deep in the sponsor ecosystem, positioned to be a winner in both private equity and credit. You can really see how the businesses are connected. Over -- around 60% of our GPs use multiple AlpInvest strategies or products. So we're really a real solutions provider.

I mentioned earlier, this is a diversified business, but the businesses are incredibly connected. They're not just funds. Each business helps drive activity across the broader platform. So the primary business, that very much drives a lot of activity in the secondary business because of the connectivity with the GPs. Secondaries and portfolio finance are roughly 50% of the business. Primary is around 25% of the business and co-investment, 25% of the business. I don't have wealth on the pie chart, but wealth is roughly 7% of the AUM, but that's cross platform. So that would be embedded into these percentages.

I think this business is a scaled liquidity solutions provider, but -- it's also a data-driven business. There are only a handful of scaled competitors. We have 375 GP relationships, over 700 LP relationships. The scale and depth of these GP relationships, long track record really enable us to capture new areas of growth like credit secondaries. Data. This is a data-driven business. We have data on 30,000 companies. That's 11 million data points. This massive amount of data, it puts a moat around this business, and it really gives us tremendous leverage in this business.

All right. I guess I have a lot of favorite slides because this is my absolute favorite slide. I probably don't even need to say much. But you can see we are able to drive management fee growth by nearly a 40% CAGR over the last three years in this business. FRE is up nearly 4x over the last three years. It's important to note again, this was 100% organic. We did not buy this growth. Three years ago, this business was 8% of Carlyle FRE. Today, that number is 22% of firm-wide FRE. Very, very pleased with that. We are also able to drive real margin improvement in this business. FRE margins have improved 2,000 basis points over the last three years. The margin now better reflects the scale of this business. And these margins were achieved through growth and scale. We did not cut our way to these margins. And we had $40 billion of inflows in the last three years in this business.

Okay. So the priorities for the firm relating to this business. Look, investment performance is key to any investment business we have. It's been strong across the business. It's been consistent. We're really focusing on leveraging our current scale in this business. It's an advantage, and we're looking for ways to accelerate already a high growth rate. How are we doing that? Well, wealth, retirement, credit secondaries, portfolio finance and insurance. But again, the core of the business will continue to be a very high-growth business as well, real tailwinds in this industry.

Since inception, this slide is fairly self-explanatory, but since inception, the returns have been strong across the platform. Secondaries gross IRR, 19% co-investment around 18%. Our investment professionals take a view on the assets, the quality of the assets and the quality of the GP. We don't approach the market like a big index buyer or a top-down buyer. We also don't play in the deep discount space. That's just never been a focus area for Carlyle AlpInvest. Again, we transact on 5% of what we see. So we can be incredibly selective, which is a real advantage.

Look, I've said that this business has a lot of tailwinds. They're both secular and cyclical. In the secondaries market, that's a big market. Let's use that one as an example. The secondaries market is doubling in size every four to five years. It's an incredible tailwind. And this is creating a real shortfall in capital versus supply. And I think this trend will continue for the foreseeable future. When we talk to GPs today, 75% of the GPs we talk to are going to use the secondary market over the next two years. Five years ago, I think this number would have been closer to 25%. So real pickup in penetration of the secondary product.

All right. Let's talk about the forward-looking flows. Look, we expect this business to continue to be a high-growth business. That growth is going to be driven by the existing business, secondaries, co-investment, they're key growth drivers. Again, supply exceeds capital formation. There's only enough capital that's been raised to last -- to meet supply for a little over one year. And if you look at over time, that has been coming down for the last five years. Five years ago, it was about three years. Today, that's one year. This is a huge tailwind. But again, it's not a constraint to us deploying capital. It enables us to be very selective. Again, we transact in only 5% of what we see.

The current secondaries platform is 80% committed. Deployment pace was similar to the previous vintage. So I like our pacing on that. And as we think about scaling some of the newer businesses, we think that will further accelerate what we think will be already strong growth from our core business. So, credit secondaries, portfolio finance and insurance should further accelerate growth when we look forward. And again, wealth, we expect wealth to continue to be a driver. Maybe it's not linear, but long term, we think it's a great wealth product.

We expect $60 billion of flows over the next three years. To put it in perspective, we had $40 billion of flows the last three years. So we're looking for a 50% increase of flows in the next three years. And like credit, like global private equity, this is a super cycle for Carlyle AlpInvest. Every single strategy will be in the market in the next three years.

All right. So, a couple of key takeaways. We've proven this is a high-growth business, and we expect it to continue. The industry has real tailwinds. Our growth has been 100% organic. This business is driven by deep, long-standing GP relationships and proprietary data we've collected over the last 25 years. We touch the GP at every part of their life cycle, and you can't really replicate 25 years of data on 30,000 companies. There are only a handful of scaled industry participants, and there are real barriers to entry in this industry. And you read a lot about new industry participants. I think they're highly specialized and they're small. They completely lack the depth and breadth of GP relationships, and we have the ability to tack them when we want. In this business, I think we have a clear right to win.

We will now take a brief break. The session will resume momentarily with leveraging AI across Carlyle.

[Break]

We will now resume the session with leveraging AI across Carlyle.

Hi, everyone. I am Lindsay LoBue, the Chief Operating Officer at Carlyle. This morning, we've been talking about how Carlyle has continued to evolve and grow across the firm. And as part of my job as the Chief Operating Officer is actually to create an operating model that allows our businesses to scale and to build. And AI is a core part of our operating model. So today, I'm here with two of my colleagues to actually talk about how we're putting AI in the works of everybody's hands across the firm and actually how we're using it to scale our business.

So here, I have Lucia Soares, who is our Chief Information Officer and Head of Transformation; and Matt Anderson, who is our Chief Digital Officer and Head of Data Science. So with that, we're just going to get started.

So, Lucia, can you walk us through Carlyle's AI journey?

Our journey with AI started years before the AI hype and infused every boardroom. Six years ago, our data science team, led by Matt, posited that machine learning could actually help us drive superior investment outcomes. And they started seeing some early results even before foundational models came on to the scene. Then in 2023, when generative AI became big news, we immediately recognized that democratizing this AI across the firm would have transformational power. And so as a result of that, we decided to lean in early and very quickly. We were the first private markets asset management firm to deploy ChatGPT enterprise for our employees. And we didn't just deploy one tool. We deployed multiple tools because the size of our firm actually allows us to be more nimble and agile versus larger enterprises. We can play around with more things. We achieved 90% adoption in nine months with these tools at employees' hands. They started to experiment with them, put them into their everyday work. And we saw recently an increase of about 213% usage of these tools. So the breadth and the depth of what we're doing is really transformational for how our employees are engaged.

It's important to think about these numbers. But really, what we're seeing is that AI is being embedded into the DNA of the firm, and it's transforming how people work. And because of that, our people are working alongside our engineers developing AI solutions with us. We have more than 50 AI solutions today deployed across the firm. 65% of our technology investments are focused at the tip of the spear, transforming how our deal teams and how our sales teams are operating.

We're also scaling our engineering platform. So we grew our generative AI talent by 180% since 2023. And we also have deployed since April 10 million lines of code into our environment, leveraging AI, which we would not have been able to do pre-AI period. And more recently, one of our LLM providers indicated to us that we're in the top percentile of token usage, which means that we're actually leaning in meaningfully developing solutions in our organization. Carlyle was really made for this moment. We saw the opportunity early, we leaned in and we were able to execute with AI embedded across the firm.

Okay. So, clearly, we were fast and we were early, but AI is only as good as the data that drives it. So, Matt, can you talk a little bit about how data at Carlyle and does it give us a little bit of a competitive edge?

Yes. We quietly entered the AI space about six years ago. And for actually many years before that, 5, 10 years before that, we've actually been accumulating the data into a database that was structured and organized from all of our investing. So there have been a lot of work that went on really before even I arrived here.

And I think we've really emerged as a force. The reason for that is because Carlyle has a huge and rich history of investing and the data around that. And we've been capturing that data, right? Sometimes a long, long ago before computers, it's been in notebooks, but really PDFs and other kinds of things. And so we've taken a very concerted effort to extract all that information out of what we call unstructured information and put it in a database where it's structured.

And so now if you look at our statistics, when I arrived in 2020, we had -- it was about 72 terabytes of data, and it covered about 11,000 companies at the time. Over the last five, six years, so as of basically last month, we've grown that almost 800%. It's around 790%, 200% a year. If you want to figure out like how much we've been adding, we've been adding the equivalent of 10 petabytes per year. Harvey asked me yesterday, what is a petabyte. So I'll tell you what a petabyte is. 10 petabytes is basically equal to 100,000 4K high-definition movies or if you were just to divide that by our employee count, it basically means we have hundreds of hours of movies per employee. It's really a lot of data about what we've been doing and how we've been working and that kind of thing.

And so now our data set is actually 62,770 terabytes or 62 petabytes, and when you think about what that means, it means that we effectively have unstructured, structured information, context around where companies are, employees, technology. We really understand a lot of the ecosystem around the company. And then we have some very highly proprietary data, about 30,000 companies you heard John refer to it yesterday -- or sorry, earlier today. And that corresponds to about 11 million data points.

Why does all this matter? It all matters because one day, all of these great foundational models are all going to converge around basically the same capability. They're all going to be able to do something very similar to each other. And what's going to matter is how your data unlocks incremental insights in the middle of a deal process. And that's what we've really been working on unleashing. So our data is all organized. It's stored. We have in Snowflake and Databricks, a whole host of different solutions. And that means that we can sort of bring that data to our investors in days when we get new data sets or new models. And we've really been working on our agility around that data because it's going to be the source of differentiation in our industry, and we have one of the largest data sets that I know of in this industry.

Well, clearly, we've led when it comes to adoption and scale and organizing our data. But how do we actually measure the value AI is creating and delivering into the firm?

Yes. Early on, experimentation is key moving fast. We don't get tied down by bureaucracy. But because we already had hypothesis of where we could drive value with AI, we created a framework early on to measure that value. And what that means is you have accountable owners, you have targeted ROI for the different initiatives and then you measure the value of those initiatives.

As an example, we defined a BHAG, a big, hairy, audacious goal for ourselves. We said in three years, we want to drive a certain level of soft hard cost savings across the firm with the use of AI. We're about 1/3 of the way into that journey. We've already achieved 30% of our value realization target with line of sight to get to the end. And that translates into roughly 217,000 hours of gained productivity already that is infused in the front office and the back office and the middle office of everything that we're doing. That being said, we're not here to just use AI to automate the same processes we have today because that would kind of be a waste of time. We're here to look at how we reinvent how we work, how we change the fabric, the DNA of the firm with a competitive advantage using AI.

Let me give you an example of what that looks like. Earlier today, you heard Mark talk about our asset-backed finance business and how it's growing very quickly. It's an important area for us. While our deal analysts in that area in the past, they would have a very manual process to do deal screening and deal modeling. It would involve lots of spreadsheets, lots of time and lots of complexity and calculations. We decided to reimagine that process using AI. Using AI, our solution that we custom built basically ingests and analyzes more than 100,000 of loans per tape. It then builds hundreds of rep lines across multiple dimensions, and it performs interactive loan stratification. That's really cool. You can do that with generative AI. But as we know, generative AI is not always 100% accurate and quantitative. So taking that base model, we then built proprietary Python code where we can drive accuracy. And then our solution delivers results across the full loan pool at each rep line in seconds, and it calculates millions of cash flow statements. So our deal teams get the projected IRR, projected MOIC and other outputs.

This speed, of course, is transformational because we've taken something that the deal teams were doing one to two days, and now they can do it in 15 minutes. But besides it being faster, we've transformed the actual process. We've strengthened our underwriting accuracy, and we have built more deal velocity, making us more competitive. Having all of that data now in one cloud repository with AI on top of it, we can use it after the transaction and to build better models for the future. And we're doing these solutions across multiple of our segments in private equity and in AlpInvest as well.

And maybe I can jump in and sort of take a real-life example. So when we talk about all this data being in our AI platform, this is not like experimentation. We certainly have things in proof of concept in pilot mode. But we've done hundreds of these diligences in private equity since 2024 and 3,700, what I would call, light screens of companies since that date.

And one of my favorite stories is there's a health care company. It basically is a contract manufacturer, they put out raw materials and medical devices. And the deal team was looking at the deal and said, hey, we noticed the revenue is slowing down a little bit. We wonder if that's from demand pull forward or destocking or maybe there's something structural inside the company that's a little weak. So they asked us to help take a look at it with our AI platform. Our AI platform ingested thousands of documents, databases, Excel files. And in basically two to three days, it had found another set of data sources that are industry specific. Now this is true, right? Every time you do a diligence, you're interested in companies in general, but you're also interested in what are the data sets that say what they're doing. For instance, a hospital is nowhere near like a biotech company, right? They are two totally different data sets.

So our actual platform grabs those data sets, connects it into the core data set and links it in real time. And so what we're able then to do is to gain much more incremental insight. This case, we found a data set around the FDA sort of certification, type 1, 2, 3 that you get when your medical device is granted its ability to sell to consumers. And ultimately, the AI platform went and it took the SKU file. If you've ever seen a SKU file, they're just complete gibberish. It's 20 lines of As and Bs and 1s and 2s, you can't really understand it. And then it was able to actually tag that to the description, go back to that data set. So we're talking multi-hop connections in real time across the data sets and figure out that what had been going on at the company was that their material was going into more and more what's called a type 1 certification, which is the least protected by the FDA. You can substitute for that more easily versus type 3 where they had traditionally been -- those are things like pacemakers, kind of mission-critical. We were kind of the core bread and butter. And what's really interesting about this is we actually had consultants working on this with us because we use them occasionally for our diligence. And they were able to look at the top 10 customers. And when you looked at that revenue, the revenue looked relatively stable.

Our AI platform went and looked at every single customer, every single SKU, every single sale, every single day, and it calculated sort of that the revenue had, in fact, been declining in the middle and the long tail of that business. The reason was because that part of the business had weakened its position around those FDA certifications. And so this kind of insight, it would take months, if not years, in order to get that kind of insight out with the types of data sets we're talking about. And we generated that in three days, and then we iterated on a once or twice with the deal team. It's an incredible competitive advantage. It's a real flywheel.

I mean the work that's been going on internally has been pretty amazing. And that's what we've been focusing on right now. But I want to actually just broaden the lens a little bit and talk about how we're actually adding value across our portfolio. Lucia, do you want to talk.

Yes. Across our portfolio, we drive AI value creation with the same aggressiveness and passion that we do inside. Our deal teams work with our global portfolio solutions teams, and they look at the portfolio companies in three ways. They look at AI risk and exposure, how can AI change this industry or this market in the next three to five years. The other side of the coin is what are the AI opportunities? How can AI drive more strategic opportunities for the company? And then finally, we look at AI readiness and capabilities. Does the company have the right talent and the right resources to prioritize against the actions that they need to take.

Sometimes, by the way, we use AI to help to deliver some of these value creation plans. As an example, one of our AI tools help to unearth new acquisition targets for highly acquisitive portfolio companies. But at the end of the day, we have these models in place, and then we offer our portfolio companies two channels to accelerate AI value creation. The first channel is our strategic partnerships around technology and AI that we offer our portfolio companies. We've built this platform over eight years of over 60 enterprise AI native companies that we have partnerships with for preferred pricing, for access to strategic talent. And we have leaned in early to build deep relationships that allow our portfolio companies to work with these companies with the same Carlyle AUM power and leverage. The second channel that we offer our portfolio companies is access to AI leadership forums. We have over 200 technology portfolio leaders across our business. And we offer multiple webinars on different topics. As you know, technology, cybersecurity, AI, these are all interrelated topics. It's important for leaders to learn from each other what's happening to share best practices.

One example that we did last year was we launched AI Innovation Day. We had more than 300 people attend AI Innovation Day, including CEOs from our portfolio companies. We curated some AI start-ups, and we got to listen to their stories, how they're approaching disruptive business models. And it gave our portfolio companies ideas about the art of the possible with how this is happening.

Across our portfolio, we're seeing AI value creation materialize. We're seeing, for example, profitability gains driven by AI-powered pricing. In one company, we've seen that AI has helped to drive a double-digit EBITDA increase for that company. We're also seeing productivity gains. The productivity gains are not just manual work hours saved, productivity gains are translating into higher customer satisfaction into better products that our companies are delivering with higher accuracy and better quality.

The overall theme that we're seeing is that when a company leans into AI, it unlocks new product ideas and it releases more competitive energy inside of the market.

I'll say also what was true is still true today, meaning the way we approach value creation with our portfolio companies is to look at putting the right executive leadership team in place, driving disciplined execution and making sure our companies have the ability to embrace innovation. Those three things are true, whether it's a digital transformation, a cloud transformation, AI transformation, that's where we're really focused on driving value in our portfolio companies.

Well, clearly, our portfolio companies are using innovation to create value, just to reiterate your point because I think it's critically important. And so if we think about -- we take that same lens, but we actually turn it internally, Matt. How are we actually embedding AI within our investment teams to enhance performance and returns?

Yes. I think one of our real advantages, Harvey says this a lot, is that we can make our firm very small in the sense that we can work really closely with each other in a very agile and nimble way. I can't tell you the number of times Harvey or Lindsay connect me with the business leader, and I have a team of specialists I can embed in a business, right, to solve a problem. So we actually, inside of AlpInvest, Carlyle AlpInvest, we embedded about four or five of our team. These are AI engineers, LLM engineers data scientists, really the gamut of how you deliver solution. And we co-created, we envisioned a tool that would really unleash something new inside of the business because it has a massive growing TAM. You heard John share that a little earlier. This is a market that if you could get a bigger net, you could catch more fish is the idea, right?

And so as we sort of step back, we said, okay, we need our people to be able to do more because a human capital business, it's hard to produce more and more humans of quality every single year. You can, right? But ultimately, that's an apprenticeship model, and this market is scaling really quickly. So we needed to bend our leverage curve, right? We needed to bend the leverage of our people. What we developed was a platform that could ingest locate and structured databases, build automatically LBOs for hundreds of companies at a time, roll those up and put a valuation. What that lets our very talented investors do is not do any of that work. That is very manual. It's usually done in spreadsheets. Instead what they now do is they spend their time running scenarios, running sensitivities, thinking about money carloads, having discussions with IC that are very robust because on the fly, they can basically say, what if this one variable changes and see the impact to that underlying investment.

It's a real capability now that AlpInvest has been leveraging. And through a lot of the operational work they've done, the strategic work they've done and this platform sort of working hand in hand, again, this idea that we can make ourselves very nimble. That business has doubled its deployments, not just on an overall basis, but in the secondary space, but actually per headcount. So there's a real gain here right now in our ability to evaluate more opportunities.

Great. So one last question and sort of a lightning round for both of you. So in one minute or less, AI is going to continue to evolve and our industry is going to continue to evolve with it. So what do we actually think when it comes to why are we positioned not only to adapt but to win?

I think we're positioned to win because we've combined early conviction with operational excellence. We've been able to scale quickly across the firm. And we've matched that speed, by the way, with strong governance with cybersecurity and data privacy and compliance, which are really critical to ensure we can use these solutions with trust and confidence. We also have the strategic access to the partners, as we mentioned earlier, that has given us early insights around the AI corner. And because of that, we're more nimble and agile than people who started after us.

And then finally, I think that's really important that AI has become a talent magnet for us. We're getting innovative employees wanting to work at Carlyle coming to Carlyle because they're seeing that they can innovate meaningfully and drive superior customer results.

Part of the reason that we get a lot of really innovative AI employees is because we've been very well positioned from the very beginning with some of the most important foundational model players. If you -- I won't to home, but if you want to go watch dev days for some of these people, you'll see some of our work and our name featured in there. And that lets us see around the corner. It lets us build a reputation in the market around talent. And when you can see around the corner, you can do some really important work. And what I mean by that is this, in AI, there's a lot of people talking about, hey, I use AI to write an IC memo or I use it to drive efficiencies. And our industry definitely needs to adopt more technology to become more efficient.

But that isn't core to what we do. What we do fundamentally is we invest, right? And we need to use our capabilities in AI to invest better, to pick better investments to manage those better and to make our people be able to do more faster because we have this growing market. And so when you step back and you say, how are we going to have enduring advantage? It's really that, number one, we see what's coming. We can focus on the areas that are really going to matter. And we're right now not just trying to pick out efficiency. We're definitely doing that work. But we're trying to make our investors better by being able to handle these amounts of big data and not just external data, but we talked about it before.

If you want to win in AI, you have to have a large data set. It's that simple. And if you woke up four or five years ago when GPT started to come out, you said, oh, wow, we should start capturing our data. That's water in the bridge. You can't go back and get it, right? We've been capturing it, structuring it. It's not like theoretical. It's in structured environments so we can turn on, basically present to an investor in a matter of days. And that kind of capability is the agility. And what it means is this, Lindsay. If an investor has more time to look at more deals, it spits off more data. More data gives you a better perspective on the deals and vice versa. That's a flywheel. It's a real advantage, right? And the faster you go, the more and more you start to pull away.

Well, I appreciate everybody's insights here. I know it's a lot of content. So I'll leave you with three sort of core messages that we'd love you to take away with. One is we moved early and we moved fast, which is rare in this industry, especially when it comes to tech adoption. Two, we're cutting through the hype and we're focusing on real value for the firm and for our stakeholders. And then three, we've unlocked a differentiated data set that gives us a level of precision that is hard to replicate. Data is our skilled advantage. So thank you. Appreciate everybody's time today.

Please welcome the High-Conviction Opportunities panel.

Good morning, everyone. I'm Meg Starr, Chief People Officer at Carlyle. My job is about talent, identifying it, developing it and putting it behind our highest conviction opportunities. Because as Harvey said, our strategy is only as good as the teams that are executing it. Today, we're profiling four high-conviction businesses across Carlyle. This is not the fullest, but these are really important examples of where we see structural growth, differentiated access and a real right to win advantage. Each of these leaders oversees high-performing teams that are operating in markets that we think are compelling today and far into the future. We're going to explore why these markets matter, how Carlyle is positioned to capitalize on these opportunities and what makes each of these leaders so confident in the forward trajectory.

So let's dive in. We're going to start with asset-backed finance, Global Liquidity Solutions, aerospace and defense and the bell of the ball, Global Wealth to close this out. So, first, Akhil Bansal, Head of Asset-backed finance for Carlyle. So, Akhil, asset-backed finance is one of the most attractive areas in private markets right now. What do you think the structural reasons are for that growth? And what makes us well positioned in that market?

Yes, absolutely. When many people talk about the structural growth in asset-backed finance, they tend to focus on the accounting, regulatory capital frameworks that are driving a lot of this real economy lending into the private markets. And that's certainly important. But we think there's actually a more fundamental driver. And frankly, all of you in the room are driving it, which is your love for capital-light recurring revenue businesses.

When you look into the public markets and when you see what businesses get the highest multiples, it's those capital-light recurring revenue businesses. And what we see is banks finance companies, corporates, they're looking to reduce their capital intensity and they're looking to bring up their return on equity. And they're doing that by partnering with players like Carlyle to buy their loans, to buy their assets, but where they can still contain control of their business, retain control of their customers and still drive growth. And we think that, that dynamic is not structural. It is beyond regulatory or accounting. And as long as the public markets continue valuing and rewarding businesses that are capital-light and that have a recurring revenue that this phenomenon will continue.

The second element of it is what's happening on the capital side. We are increasingly seeing investors wanting to diversify away from their leveraged lending exposures and complement those exposures with real economy exposures. When you look at what we're doing in asset-backed finance, we're financing the consumption of goods and services. And that's an exposure many investors are underweight in. So we're seeing that be the other durable driver in the growth of private asset-backed finance.

I can feel the high conviction Akhil. So you've built a really interesting platform. What about the platform is differentiated? How does that set up your right to win?

Yes. I really think that comes across four dimensions. First is that we have an agile, nimble, flexible investment strategy. We invest up and down the capital structure. We invest across asset classes. We invest across duration spectrums. The idea is that by having such a flexible investment strategy, we can find the areas with the best risk-adjusted returns. But importantly, we can find the areas where Carlyle has a competitive advantage because of its multi-asset platform and its global reach. And those are the areas where we have a right to win.

Second is our balanced origination model. I think you've seen some market participants who have decided to focus solely on owning origination platforms. You've seen others who have gone and said, I really want to own just be partners. We think the right answer for Carlyle is a balanced model. Take stakes in origination platforms where there is a moat around them. There's a scalable, durable competitive advantage where others can come in.

In other areas, partner with folks, where Carlyle's platform can add value, where we can bring value beyond capital, which brings me to my third point, which is bringing that value beyond capital. Money is a commodity. And as ABF gets more competitive, what we look to bring to our companies is not only being a capital provider, but being a strategic partner by helping them with their growth initiatives, their capital structures, capital markets expertise. By bringing a value proposition beyond capital, we believe we're bringing a more durable relationship, a stickier relationship while not necessarily having to own the platform. And we think that balanced approach allows us to best attack the market.

And then the final thing that I talk about is our diversifying our capital base. Insurance has certainly been an important part of our asset-backed finance platform and will continue to be. But increasingly, what we're doing and investing in is diversifying into other noninsurance institutional investors. Very sticky capital still, but trying to attack other areas when we think a more diversified capital base allows our strategy once and our platform to have more durability by not being relying on one customer segment, but by having a diverse client base.

So we're in a room of public market investors and analysts. So let's talk about what's most relevant. How do you see ABF contributing to Carlyle's long-term earnings growth?

Yes. I think there's a couple of elements to that. I think it first starts with a multidimensional revenue model. As we scale our insurance mandates, our SMAs and funds, we are definitely going to be generating recurring management fee revenue streams. But in addition to that, when we're doing ABF deals, we are bringing our capital markets capabilities. Many of those deals require financing. And we're arranging that financing ourselves. And partnering with Jeff Nedelman's team and the distribution network he's created, we are now distributing those financings directly to investors, which has a flywheel effect. They get co-invest, they get access directly from Carlyle, which helps feed back into the driving of insurance mandates and SMA and fund capital.

I think the second big driver is that ABF investing is not transactional. It's programmatic. When we do a transaction with a finance company or a bank, that can lead to multiple repeat transactions that stack upon one another. We are not chasing one-off transactions. So what that means from a resourcing perspective is that we think this business has the potential to generate really attractive margins because that origination, once again, is not one-off transactions. It's repeatable programmatic deal flow. And so that's why we're excited that with that scale that we have, with the multidimensional revenue model, the [indiscernible] origination, we can build a very accretive business for Carlyle.

Amazing. Thank you, Akhil. All right. Mike Hacker, over to you, Global Head of Portfolio Finance for Carlyle AlpInvest. So as John mentioned, AlpInvest has an incredible secondaries business. We're known for it, but we also have a much more diversified business. You look after a segment called portfolio finance. Can we start with the basics? Like what is portfolio finance? What does that market look like? Why are we excited about it?

Everyone doesn't know that already. So portfolio finance, I think the easiest way to think about it, it's really the credit side of our secondaries business. So you can think of that in two different parts. One is think about that as lending to the private equity market. So everything we're doing in secondaries where we're buying assets from LPs and from GPs, well, think about that on the credit side. We're lending to LPs, we're lending to GPs, we're lending to funds. So things like NAV lending to funds, that's a big part of that. But actually, the part that I think is really sort of unknown is really lending to LPs. This is a part of the market that we've really been pioneering in the last few years. So there's huge amounts of growth. We'll talk about that in just a minute.

But -- if you think about the other side of portfolio finance or credit secondaries. And so in some ways, that's kind of buried in the name, but that market has really achieved scale. I think it's gotten a lot of attention, especially with the continuous talk about what's going on in private credit more generally. We hope that credit secondaries will be part of the solution there. And we've had a lot of activity in the last few years. That market has really achieved scale. Think about $20 billion of activity in 2025. That's up from less than $10 billion two years ago. So that market is sort of doubling every year. And we think there's sort of runway for that market to reach something like $80 billion by the end of the decade. So 4x opportunity for growth there.

So if you think about what that is, it's really building out a business that, in some ways, we think we can scale to be as large as where the secondaries business is today. So if you think about there's a whole opportunity to continue to grow that business in real scale and really complement what we're doing on the traditional equity side.

So pretty tremendous upside to the current opportunity. So liquidity has been a big focus in private markets recently, particularly noise around exits, which Carlyle has been a notable outlier to. But growth in AlpInvest secondaries and portfolio businesses really has predated that. Do you see this as more of a cyclical moment? Or is this more of a secular shift in terms of what types of solutions private markets need?

So, look, we've been through -- and I've been doing secondaries for over 20 years now, and we've been through multiple cycles. And so what I think is interesting is that -- and there certainly is an element of cyclicality to what's going on today. But what's very interesting when you look at the secondaries market, each time there's been a cycle, when that cycle turns and recedes, the market stays larger than it was before the cycle. And so what you're finding is that a couple of things are happening. Each time there's a cycle, we and the secondaries and portfolio finance world, we're innovating. And so what we're trying to do is find interesting transactions that solve the problems of our counterparties, be they LPs or GPs.

If you go back to how we define secondaries when I first started the business, it was a very niche sort of liquidity for LPs, buying LP interest. It was really a small market and not used broadly. And I think as you sort of saw the GFC and Brexit and COVID and obviously, whatever the cycle that we've been in the last few years, each time you've gone through one of those cycles, we've innovated, and that's first thinking about the continuation fund market, which is now really representing 10% to 15% of exits in private equity as an asset class, right? That's a massive part of what's going on in the private equity ecosystem.

That's not cyclical, that's structural. And what we're really doing, and John touched on it in his talk, we're hitting the private equity firm and the private equity funds at every point along its life cycle. And so what we've really been thinking about is think about the traditional private equity fund structure in some ways, very inefficient for what private equity is today. And what we've been doing, whether it's lending to funds, buying assets, buying LP interest, what we're trying to do is create liquidity in the market that fundamentally wasn't.

So I think the answer is it's structural. I think what's also interesting is we talked about credit for just a minute. If you think about one of the reasons why we're building portfolio finance and credit secondaries is we want the business to be more diversified. We right now are clicking on every cylinder. So LP market is very active. The GP market is very active. So we want to have more diverse sort of parts of the market so that we're not under any illusion that all things will always be operating at full speed. And so for our business, we think that we're very well positioned, the AlpInvest platform and how the different parts of the business together, huge competitive moats. We talked about that earlier today. And what we're really trying to do is make sure that we're a leader in each one of the segments. So we'll be ready for whatever cycle we do face.

It gets back to those points of durable and diversified and providing solutions across there. Amazing, Mike. Okay. Brian Bernasek, Co-Head of Americas Corporate Private equity, 25-year Carlyle veteran and Head of our Washington, D.C. office. So, Brian, I want to talk about aerospace and defense, one of the core power alleys for Carlyle has been since the very beginning.

Can you talk to us how does that sector fit into our corporate private equity business? And given the massive amount of geopolitical turbulence in the world, how do you see the go-forward market opportunity?

Sure. No, happy to do that and very grateful to be here with everyone. This is -- our aerospace and defense practice is core to our overall practice, our private equity practice. It fits firmly into the power alley theme that's been mentioned a couple of times in the presentation today. We have other key power alleys as well. All of them share a few characteristics. Key among them is that we're going to have a unique edge and angle in how we approach a segment and an opportunity. And we certainly have that in aerospace and defense.

We take that edge, that angle, and we're assessing every opportunity to say, hey, is this a business that's unique, that's special, that we know it's special because of our edge? Is there something that we can do to drive value in this company that's unique and special? And are we able to attract world-class management teams because of those capabilities. And this -- as I said, we have it in spades and aerospace and defense. And it had been articulated very well early in the conversation, and I think very well publicized, massive spending trends heading towards the defense industry, around $1 trillion in the U.S. on the spend, on the budget, expectations that it could go to $1.5 trillion, even $1 trillion is an awful lot of money to spend. You see it in Europe, where 3.5% GDP targets on spend. And as Harvey mentioned earlier, there isn't a country in the world that's not thinking about national security. So really massive trends.

Also underneath that, importantly, there's a real push towards innovation and modernization within this spend, where if you're well positioned, you can really benefit from that as well. Also, look, we shouldn't lose sight of aerospace. It's a very interesting area for our team, very strong team focused in that area as well. Passenger miles, as you all know well, continue to increase year-over-year. Big aftermarket opportunity, big OE opportunity, big supply opportunity. So a lot to do in this sector.

And then when I look at the team that we have and our position that we have, I mean, I'm just thrilled with what we've got. We have a fantastic unit that's been doing this for a long time. As mentioned earlier, 40 years of investing in the sector was the beginnings of the firm in many ways in Washington. That team that we have leading that group today has over 125 years of collective service and focus on the A&D effort. They've invested in 40 different companies and over 100 different deals and platforms. Deals beget deals, opportunities beget opportunities. We have great relationships with CEOs, with advisers, with folks in town that you make it unique for us. I can't tell you how many government services and defense businesses are located between our offices on 10th in Pennsylvania and Washington and Dulles Airport, there are a lot. So it's a really good target-rich opportunity for the team. They do a great job in finding those opportunities, no question.

They're also able to leverage huge firm resources, right? We have David Rubenstein, who I would argue is the most well-connected person in the world. I'd love to see somebody more connected than David. You have the Admiral Stavridis, who is the Supreme Allied Commander and NATO, really powerful man in many ways, very well networked, helps us tremendously. Great government affairs team. I mentioned those Board members, those CEOs, that connectivity in town. It is differentiating in our practice. Now we seek that in every business that we have, every power alley that we have. This one, we're really bullish on going forward.

Team also has some wild security clearances, too. So our business is really well positioned for the current moment and clearly far into the future. Can you just give us a couple of examples of what are the types of investments that we're really interested in at this moment in time?

Sure, sure. So we -- the nice thing about our practice is we're able to punch in the middle market. We're able to punch in large scale. We can punch in defense. We can bunch in aerospace. It's a broad swath of opportunities. I'll mention a couple of deals that we've done that might give you a sense of the kind of opportunities that we've seen and what we expect to see going forward. II-VI Technologies is a good example. This is a cyber tools business. that plays right in the center of national security. We bought that in 2020, had about $10 million of EBITDA after seven acquisitions, really good organic growth. We're pushing 80 plus. So we can play that middle market and grow buy and build. That will be a very interesting asset for strategics or for a public offering at some point.

And then StandardAero, has been mentioned previously, very well-known business for sure. This is an aerospace company that's in the MRO side of the equation. So they're repairing aircraft engines. We bought this in 2019. Interestingly, I think this highlights as much as anything, well, the sector is one we really like, but we're going to load up and really help businesses to grow regardless of what's happening on the outside.

You can imagine we bought in 2019. They manufacture or they repair aircraft engines. COVID comes through not a lot of folks are flying. So we were managing that business in a tough environment. The team did a great job on managing efficiencies, got a bunch of new contracts that we had long lead times, did a bunch of acquisitions as well, seven acquisitions in this business as well. $350 million of EBITDA in the depths of COVID, and it's well over $800 million today. As you all know, it's a public company, trading very well. It's a very nice win for both our -- both our Fund VII investors there.

Very successful IPO. Congrats Brian and the team.

Thanks, Meg.

All right. Shane Clifford, to close it out. So, Shane, Head of Global Wealth for Carlyle. You have the privilege of looking after a business that actually enables access to all of these high conviction areas to our wealth clients. There's been a lot of emphasis today on global wealth being a major driver of growth going forward for Carlyle. It's a competitive landscape. So what is the Carlyle advantage? And how does that translate to where you see our right to win in the wealth space?

I think broadly, first of all, hopefully, you got a sense here from the excitement of this panel. And really for the folks on the webcast and here in the room, from the analysts on up to the C-suite, there's a lot of excitement and energy right now at Carlyle. And when I think about why that is the case, it really is because of the expansion and growth journey that we're on right now.

It's really a fun place. I don't know that, that always comes across when you're up on the stage, but it's an incredibly fun place to work right now. It's hard, hard yards at times, but a ton of excitement, a ton of fun because we're growing, and there's a lot of great talent that wants to come work with us.

From my seat, I was thinking a little about what Harvey and Jeff had said about where the puck is going. And I think from my seat today, the puck is wealth. And what I mean by that is really the opportunity for us just grows exponentially year-over-year. Why do people want to come work with Carlyle in the wealth space?

I think it's straightforward. I think at the moment, particularly, it's the institutional rigor of Carlyle. It's around things like our risk management, our liquidity management. It's what we do there in a very durable manner that institutional LPs have had access to for many, many years. Finally, we're offering that to our wealth clients and their advisers here at the firm. So that DNA is something that globally, our distribution partners want from us these days.

Secondly, it was a comment that Harvey made earlier in his presentation around that concept of global and local. I will tell you that wealth is a relationship business. No doubt about it. It is hand-to-hand combat, and it is all about the day-to-day wholesaling of the business and telling people the story of Carlyle. That is a local effort. So I would say from my seat right now, it's having the local trust with the global platform is something that's very unique to Carlyle and I think sets us apart from many of our peers.

And then thirdly, when I look at it, from my seat, we've got to be vehicle agnostic and really focused on solutions, right? So the first question that always comes up when we're thinking about a new idea, what does that solve for in the client's portfolio? Is that something that they actually need? So that solutions-based thought process is where we start every conversation.

So when I think about what we've got up on this panel today, these are all great investment solutions, but are they appropriate in the wealth channel? And do they solve for something for our end clients, right? So those are all the component parts broadly that kind of get us to the outcome that we need. So I would say we're going to be disciplined. We're going to scale in a very durable manner and ultimately do this over multiple investment cycles. So this is a multiyear trending cycle that we're on, and we're quite excited about it.

I think that brand point is an important one. We talk a lot about the Carlyle brand and why is it so important? I think the wealth market is a key example. What -- our brand is one of the most widely recognized in private markets. And when people know our brand, they associate it with a trusted partner, a safe pair of hands, well-connected performance. That's a huge advantage when we think about going in the door and talking about our wealth products. And so I think that's the kind of full circle of why that brand matters so much.

I want to go back to Jeff Nedelman when he was talking about our distribution business, our client business, had that great side of all the Carlyle strategies that are in the market in the next 3 years. We obviously have a very broad platform. How do you decide which strategies are appropriate to bring into the wealth market? And how do you think about adding new strategies and doing it in a responsible, scaled way?

Yes. So I think Jeff brought up a great point when he said, we're not looking to push a product. That's not the business we're in. The great news for us today is we really have a deep breadth of investment capabilities that really allow us to talk about portfolio construction when we're with our wealth partners. So what does that mean for me in my seat? That means that I have the opportunity to get out in front of folks and discuss that investment solution, and then come back inside and see what capabilities do we have in-house that can match that.

So for example, on this panel, here are 3 great examples, whether it be ABF, portfolio finance, defense and aerospace in the industrials. And really, when I said earlier that I'm vehicle agnostic, what do I mean by that? Well, maybe we do an interval fund with Akhil. Maybe we're doing an ELTIF structure in a CTAC vehicle for what we do at Mike on the portfolio finance side. And by the way, perhaps it's a drawdown vehicle for our defense fund, potentially, right?

These are all things that you're kind of thinking about in real time. Because at the end of the day, we've got to be very thoughtful and careful. We're sometimes, I think, a fast follower in the space, and I'm okay with that because ultimately, we're going to play the long game, and we're going to be very thoughtful and we're going to sequence out how we do these things. I do think today, as a firm, we've done a great job of putting our flagship funds in place. And now I think it's about what do we add along -- what is additive to our wealth clients in addition to those capabilities. I think CAPS was a great example in '25 of that.

Great. So the money question, Shane. As Carlyle continues to build a scaled, high-conviction investment platform, how does the expansion of global wealth contribute to that growth? And just how significant do you think it can be over time?

Yes. At times, I looked at the numbers earlier, and they actually excite me because I think they're quite achievable for us as a firm. One, because 1.0 is the banking platform. And let me just use that in a very generic way for you, right? So that is globally working with a wirehouse IBD or RIA in the U.S., or it's working with a global bank across Europe, the Middle East and Asia. Or perhaps it's a regional or country-specific banking platform. We're in that business today, and we're damn good at that business.

But quite frankly, we're still only in the second or third inning of that. So for my seat, we still have significant scaling there to do. Now we've got retirement coming here. Now we'll see how it plays out. And it's going to be very interesting to see kind of how it evolves over the next 2, 3 years, but that's going to be a new lane for us as well. So I actually think the opportunity only grows from here. So what we define as wealth today, that umbrella has kind of the banking channel in it right now. Retirement is going to show up, and we'll see what happens with insurance ultimately as well, question mark.

So I suspect first or second inning here, tremendous, tremendous growth for us going forward. I just think we need to be thoughtful about how we do it and not get ahead of ourselves, and really make sure that we keep the client at the center of everything we're doing. And as long as we do that as a firm, we're always going to be okay, coupled with the great investment performance that I know these guys are going to deliver.

Perfect. Thank you, Shane. Thank you to our panelists. And with that, we will turn it over to our CFO, Justin Pluff.

Please welcome Justin Pluff.

Good morning, everyone. I'm Justin Plouffe. I'm the CFO. And what I want to do is take everything you've heard today and tie it together into a comprehensive vision of our financial goals for the next 3 years. I want to do that first by talking about the tremendous momentum that we have as a firm coming out of 2025. I want to talk about how we positioned the firm today and how that's going to lead to growth in the future. And then exactly how we're going to unlock shareholder value over the next 3 years. So we'll start with the momentum.

We've got fantastic top line momentum. We grew our fee revenues by 10% last year, and we grew them really with every part of the fee revenue mix. So our management fees grew, especially in Global Credit, they grew 9%. In AlpInvest, they grew 37%. Our transaction fees grew. A lot of that is coming out of global private equity. All of that great transaction volume John spoke about, when we buy a company, we refinance a company, when we IPO a company, those are all opportunities for us to generate transaction fees. Those have nearly tripled over the last couple of years.

And then our fee-related performance revenue, our incentive fees, those are growing. That's largely due to our increased presence in the wealth space. So tremendous momentum here on the top line, and that's driving our FRE growth. As Harvey hit right upfront, we've grown FRE at a 20% CAGR over the last 3 years. While we've grown our CAGR, we've also been able to grow the margin. We've gone up 1,000 basis points in margin. This is from operating discipline, but it's also because we have scalable strategies where we can take in capital without adding significantly more costs. And then it's also due to the fact that we realigned our compensation system a couple of years ago, which has had tremendous benefits.

And our FRE mix is also becoming more diversified. So 3 years ago, only 34% of our FRE came from Global Credit and AlpInvest. And today, it's 55%. And this top line growth down to FRE is what's driving our DE growth. We've gone up 24% since 2023. We're now over $4 a share in DE. And 3 years ago, about 50% of that DE came from, top line, came down through FRE. Now it's 70%. So our DE is even more repeatable.

And then finally, I think something that's a little bit overlooked about how we've done over the past few years is that our balance sheet has now become a real source of strength. We've got a fantastic amount of liquidity and flexibility in our balance sheet, $2 billion of cash versus just $2.6 billion of debt. We've got over $3 billion of investments. And mostly what those investments are, are things that are helping to fuel the growth of our business.

So for example, our private equity wealth product, CPEP, we warehouse investments for that so that as we raise capital, can immediately be deployed. And then we've got $2.9 billion of net accrued performance fees -- performance revenues, excuse me, that will flow through the balance sheet over the next 3 to 4 years. That's a tremendous amount of value that will eventually come through DE for shareholders. And if you add all of that up, just the balance sheet, just the balance sheet is worth $15 per share of value to our investors.

So we're in an incredibly strong position. And Harvey showed this slide before, but I'll show it again because it's so important. record FRE, record FRE margin, record AUM, global wealth. Carlyle AlpInvest in credit. We had our third best year in inflows last year, leading realization activity. It's not on the slide. We actually had our best ever year of deployment last year with over $54 billion across the firm.

So really every part of our business is working incredibly well as we head into this 3-year period, right? So why do we believe that we're positioned for growth? Well, we've built an incredibly diversified and durable business. If you look at all those strategies at the top, we are diversified by geography, by asset class and by channel that we're raising money in. So we have many paths to success. We're not tied to just one fund or one channel, right? We have many different ways that we can raise capital and deploy capital across the firm.

I'm really excited that Global Wealth now actually has a product in every segment that's open. I have the good fortune to be part of the team that built our CTAC product. And when we did that, that was the only product we had for private wealth. It was a credit product, and it was in that channel. Now we have CPEP and private equity. We have multiple products in credit and multiple products in AlpInvest. So as we grow our presence, many, many ways to take in capital from that channel.

And then as Jeff mentioned, we're entering a super cycle for some of our largest vintage funds in the next 18 months, buyout from U.S., secondaries. Opportunistic credit, all will be in the market raising capital. I mean if you think about the fact that we had our third best inflow year ever last year without really any of those large vintage funds in the market, it's really impressive, and it gives us a lot of confidence in our ability to continue to build on that momentum going forward.

I think you've heard from every presenter today how important performance is for our business. If you look at the funds that we will be marketing over the next 3 years that are going to drive our growth, the performance is outstanding. Private equity, as John mentioned, that's a 35-year track record. And by the way, those real estate returns are outstanding compared to what the market has been like for real estate in the last few years. Global Credit, Mark started the opportunistic business back in 2018. It's provided great returns. And then those returns for CTAC and direct lending, those are the consistent yielding returns that people want in the private wealth space. This is exactly what they're looking for, that consistent yield with very low risk. It's very attractive returns. And then in AlpInvest, fantastic total returns, but maybe even more important than that, that's a 25-year track record.

For all the people that are now seeing secondaries and now trying to get into that space, that's not something that they can replicate. So we will be marketing on the back of really strong track records for all the funds that we're going to need to raise capital for to meet our goals.

We've had tremendous momentum over the last 3 years, and we've improved our margins materially, but it has not come at the expense of investing back into the business. And that's a really important thing to understand. We've moved our margins up, but we're also hiring people. That's not the only way that we do. We also invest in technology, data science. You heard all the great things that are going on, on the panel earlier today. But this is incredibly important. Harvey said, this is a talent business. I'll call out private wealth. We've made significant investment there, and we're going to continue to do that. We could actually today run this business at a higher margin than we do. We don't. Why? Because it will come at the expense of future growth, we're not going to do that. We've been investing in the business, and we're going to continue to.

So as we start this 3-year period, we really come from an incredible position of strength. We have scalable investment strategies. We don't have to worry that our strategies will exhaust the opportunity set or that we have to add a tremendous amount of cost in order to continue doing what we're doing. We have scalable strategies. The fund performance that we're going to be marketing over the next 3 years, it's excellent. Our balance sheet is in great position. We run a balance sheet-light strategy. We've always done that. We will continue to do it going forward, but it gives us a tremendous amount of flexibility to pursue whatever the best opportunity is to generate value for the firm. And then we have a durable and diversified set of strategies. We're not tied to one channel. We're not tied to one fund. We're not tied to one geography. We have many different ways that we can reach our goals.

All right. So how are we going to unlock shareholder value over the next 3 years? Well, here are the goals. $1.9 billion in FRE. That's 50% more than 2025. It's a 15% CAGR over the next 3 years. $200 billion in fundraising, $2.8 billion in management fees, and we expect to grow management fees and every other part of the top line like we've been doing over the past 3 years. We think we can run the business at a greater than 50% margin while still investing back in the business, as I just mentioned. And then all of this adds up to a 50% growth in DE per share. We expect to be over $6, which would be the best ever for Carlyle by 2028. So let's unpack that a little bit.

The inflows are going to come from a variety of sources, a diversified set of sources. You can see here, every one of our segments, we expect will have inflows of at least $50 billion over the next 3 years. 20% of those inflows, we expect to come from the wealth strategy. That's an increase for us. But as Shane said, this is a massive opportunity here. I think we're being very realistic about the level of inflows that we can get from wealth and retirement over time. This is 27% growth, and it's all organic. This fundraising is all organic. This does not assume we acquire something. This does not assume a major insurance transaction. This is organic scaling of our existing strategies.

We expect to grow fee revenues by about 12% CAGR between now and 2028. Again, that's going to come from all 3 aspects of fee revenues. It's going to come from management fees, raising capital organically. It's going to come from fee-related performance revenue, those incentive fees we get as we expand in wealth. It's going to come from transaction fees. If you think about the capital that will come in through this super cycle into U.S. buyout, into credit opportunities, all this capital has to be deployed when we deploy it. Those are transaction fee opportunities for us, right? Our transaction fee income is really a direct derivative of all of the activity that we do across the firm and investing capital. So the more capital we bring in, this is the flywheel, the more transaction fee opportunity we have.

I want to be clear about something though. This is not going to be linear. Our growth on the top line will be more muted in 2026. It will accelerate into '27. It will accelerate further into '28. Why is that? Basic math of fundraising. We have to go out and raise the capital. We will then deploy it. We will start to see that increase in top line likely in the second half of '26 into '27 into '28. We are very confident about this 3-year plan, but I want to be clear about the timing there.

So we expect this top line growth to be the main driver of FRE. We expect to go up 50% over the next 3 years, $1.2 billion to $1.9 billion. But again, even though we're going to run this business, we believe, at higher than 50%, that's also with investing back into the business, right? So you can -- we can always run this business at a higher margin if we want to, but the number one goal right now is to invest back in to continue to drive that top line growth. And these projections take that into account. Operational discipline and scaled investment strategies will be core to this, scaling what we have.

And this ultimately, we believe, will drive a 50% increase in DE. I mentioned before, today, about 70% of our DE is coming from the top line. Expect that to continue. I think that ratio will continue. Today, we're generating about $350 million a year of net realized performance revenues. I expect that to double by 2028. We'll be closer to $700 million. And again, we have $2.9 billion already accrued on the balance sheet that should flow through over the next 3 years. So a large chunk of that is already there. But I think there's upside to it. And I'll give you an example.

If you take just our U.S. buyout funds, so CP VII and VIII, and you assume that they get to 2x multiple, just a 2x multiple, they're well on track to do that. If you assume they get there, that's an extra $1 billion of net realized performance revenue, just right there, over and above the $2.9 billion that's already on the balance sheet. So we feel really good about our ability to hit these DE targets.

I mentioned our balance sheet is a source of strength, and we're going to use it in a number of different ways to drive growth. The first and foremost, always invest back in the business to drive growth. However, our Board of Directors just this week actually approved a new $2 billion share repurchase authorization over and above the one that we had existing, and this gives us an enormous ability to take advantage of any volatility in our stock price. And I would go so far as to say that at the current market, you should expect us to be very active in using this repurchase authorization. This is a tool in our toolkit to return capital to shareholders to generate value for our investors, and we are going to use it. I think this is a big statement by our Board about what we think the true value of this firm is.

So I'm going to leave you with these targets and with a couple of thoughts. Number one, Harvey hit this right at the top. We did a bottoms-up build, right? These aren't -- we didn't back into these numbers. We looked at our business on a granular level. We built it up. We feel incredibly confident in these numbers. They're all organic. And this is us taking the business that we have and scaling it. No inorganic M&A, no unforeseen giant block insurance transactions. This is organic.

Second thing is we've put out a number of financial targets over the last few years since Harvey arrived. We beat every single one of them, every single one of them. And I would tell you, we are highly confident that we will meet or beat these projections. We feel great about them.

And then maybe lastly, I'll pick up on something that Shane said in the prior panel. Carlyle is a really fun place to work right now. I've been here for almost 20 years. There's never been a time when we had so many interesting things going on here. From our normal investment strategies to AI, to entering new channels, there is so much going on that is hard to capture in the numbers. But I can tell you from my perspective, I have never been more excited to be part of Carlyle, never been more excited for our future and our growth prospects over the next 3 years.

So thanks, everybody, for taking some time. We need to do a little bit of reshuffling here on the stage, and then we're going to immediately move into your questions. All right. Thank you very much.

Attention today. As Justin said, we're going to move to Q&A. So as we reset the stage and we get all our speakers back on stage, I hope you could hear what we started with today earlier. There's incredible momentum at the firm. There's incredible excitement at the firm. As you heard from the key priorities that were really weave throughout all of our presentations, there's enormous focus on investment excellence across all geographies and all assets. There's enormous focus on scale and how we use data to our advantage. And you saw that through multiple presentations, including the great AI panel.

And then lastly, as we think about high-growth opportunities, and you heard from a number of our people, there's just enormous ways for us to continue to grow. So all of our guys are on stage now. We're ready to take your questions.

We're going to have mic runners in each area. So I'd ask for you to raise your hands when you're ready for a question, wait for the mic and introduce yourself and your firm and we're ready to take your questions. So first question right here in the middle, Brennan?

Brennan Hawken from BMO. Harvey, you spoke to our collective intensity on targets, so I don't want to disappoint you. The $1.9 billion, can you speak to -- you guys use a lot of pluses on that slide. But could you speak to maybe how you view it, whether it's conservative, aggressive? And maybe give us some texture around some of the parts -- the major parts of that?

Yes. Well, again, everybody, thanks for here, Brennan, and thanks for the question. So the reason we have the pluses is the point that Justin just made, which is we haven't incorporated any, what I'll call, upside surprises. So when Justin was saying any large insurance transactions, we haven't modeled in that over a likely 3-year period, there'll be a large block transaction that Fortitude would do, or a partnership we would do with Fortitude in some particular way that would enable a large insurance transaction. So we haven't modeled in anything like that.

We haven't modeled in any, I'll call it, excessive effect of the flywheel effect of what everybody talked about in terms of capital raising on transaction fees. So we haven't done any of that. And so when we looked at it, we really wanted to put together a case that you could hold us accountable to and we could hold ourselves accountable to. And so that's how we built the model. But I think there are obviously things that can go wrong in the world. There are a lot of things that can go right with this plan. Things can grow faster. We can deploy capital more effectively.

When you heard Shane earlier, he made a really, really important point. I'm sure there'll be some discussion around wealth. We're agnostic. It's not our job to tell wealth advisers how they should use private capital, how they should think about a particular structure. It's our job to figure out the vehicle that they want. So it could be a drawdown fund, could be an evergreen fund. Our job is to create these vehicles in a way that capture the investment talent of the firm and distribute it globally in the way that people need it.

And so I think over the next 3 years, the trends in our business for the industry are quite good because the demand for capital is so high. And then it's just a question of how do we create the flywheel effect? And I just think the firm is well positioned for it. So hey, now I feel like the need to hedge myself. I make a little plus. Now, I'm just kidding. And I would just reiterate the point that Justin said, I mean, this year, we've been pretty clear about this. I think you're going to see sort of mid- to upper single digits in the base model, but then it accelerates pretty quickly. And it's all driven by Jeff's super cycle of fundraising. But I think there's upside in the model.

Great. Next question here, Bill Katz.

Bill Katz, TD Cowen. Great presentation.

Maybe pick up where Justin left off. So Harvey, on one hand, the stock is cheap. You're buying it. It's great to hear. We agree. On the other hand, and a lot of de novo growth. But also you mentioned at the beginning of your commentary about the possibility that there could be other things to do.

So I'm wondering if you can maybe prioritize how we should think about capital return and how quickly you might go through the $2 billion? Or what kind of deals you might be looking at and how we should think about maybe framing that out?

Okay. So the first -- the most important thing about the model, and we have a strong preference for it is staying capital light. There are certainly days where I come from -- you all know my background, I come from a very capital-intensive big balance sheet world. There are certainly days where I think it'd be great to have an extra couple of billion dollars because we could fuel the business faster. But the reality is we really like the capital-light model. And we want to stick with that.

And I will say the benefit of having a capital-light model, all the things that Justin articulated, there's also no distraction when you have velocity. When you have volatility in the marketplace, we can focus on our portfolios and our investment and our clients. We don't have that third aspect of a distraction. That's just my personal bias. It's the bias of our Board and it's the bias of the team. So we are in a great capital position. We are going to continuously balance capital invested in the business and capital return to the shareholders, and we'll do it methodically.

So this $2 billion is obviously a big step up from the first plan. When I arrived, John and I spent a lot of time on this when he was the CFO, the firm had systematically diluted shareholders really since the firm went public. And we just decided that didn't make any sense, certainly didn't make any sense at that valuation, and we don't think it makes sense at this valuation. And so -- but again, growth first, and then returning capital to shareholders is a big priority. And that's why we wanted this flexibility and the Board want us to have this flexibility.

Now how will we use our capital? We really want to use our capital very surgically to fuel new businesses. And so the way we do that is trying to be as thoughtful as possible and sometimes working with Mike Hacker and his team to figure out, hey, what's the most creative way like we have all this expertise in the firm that works with GPs everywhere. We'd be pretty foolish I could be using that. And so we work with our teams to basically figure out how to most optimize, and we really think of our capital is quite precious.

I mean like every dollar is -- if you want $1, you got to beg for $1 here, okay? We want to be very disciplined about capital return. And so when we give it to the businesses, we want them to optimize how to use that, we want them to use that to grow businesses, and we want them to use that to grow businesses that have repeatable streams of revenue where we can provide value to the clients. So that's the thinking.

Justin even mentioned you had it on the slide, opportunistic M&A. We don't need opportunistic M&A to drive value in this platform. We're certainly open to it. I would say it's a very high bar also for us. It has to meet the screening of the industrial logic, culture, really, really important at Carlyle. And obviously, the economics got to make a ton of sense.

Chris Kotowski?

Chris Kotowski from Oppenheimer. If I disaggregate your $200 billion fundraising target a bit, if I've done my math right, it like shows a 6% pickup in credit fundraising, but a 72% pickup in private equity fundraising, which seems to also probably be a key revenue driver towards that $1.9 billion, right? And I understand you've got CP IX coming in. But on the other hand, you had the real estate fund in the last year. So can you disaggregate kind of the building blocks to get to that $50 billion?

Yes. We can certainly go through in a lot of detail offline with you, Chris. I think the way to think about it is you're going to have real estate come back in a couple of years. You'll have AlpInvest come in. You have CP IX, you'll have the Japanese fund come back in. And then, of course, you have, as I mentioned, the flagship fund and CCOF, all coming in over the next 3 years. Remember, this is not everything being launched in March of 2026. This is going to come across a 3-year period of fundraising.

And the other thing -- and you didn't ask about this, but I think it's worth really noting. Last year, of the $54 billion, I guess, about 15%, Jeff, came from what we'll call the wealth channel broadly. That represents about $40 billion across the entire platform. That's really moving it from 15% to 20%. So wealth is important, but we don't really see it growing to more than 20% of the aggregate fundraising, but that's how you get it wrapped around the whole platform.

Can I just add one simple thing as well? Can I said this earlier. It's just embedded in the cadence of our fundraising. It was organic. It was bottoms-up built, and you touched it, but it's just basically embedded in the cadence.

Yes. I mean just quickly, in the global private equity business, every single fund will be in the market at some point in this 3-year period. So those are basically the building blocks.

I'll go over here, Patrick Davitt in front.

Patrick Davitt, Autonomous Research. I have a question on the wealth channel. Obviously, a lot of misleading noise out there. So I'd like to get a real-time update on what you're hearing from the big distributors and advisers to the extent all this direct lending news flow is potentially impacting their demand for private credit products specifically? And also any comfort that you can provide that it doesn't infect the demand algorithm for all retail alternative products?

Yes. Patrick, good question. So when I got to Carlyle, the wealth channel was already in motion. And I knew the -- immediately, as I said before, I knew the power of our brand and our reach and our scale. We didn't have a well-defined wealth strategy. Mark and Justin had designed CTAC, but we didn't have other vehicles, and we didn't have a well-articulated strategy. And one of the things I did, obviously, the team drove all this and Shane coming on board and all the people he's brought on board drove all this. But one of the things that was really critical to me was to spend a lot of time with the end client, Patrick. So I spent a lot of time with advisers, and I continue to spend a lot of time with advisers. And as soon as I showed up, this notion of liquidity in the vehicles was something that I thought a lot about.

So really from the day I've shown up, I've been saying to advisers in small rooms, big rooms, presentations, I've said it publicly, I think the industry did itself a bit of a disservice calling the vehicles semi-liquid, and we just could have called them sometimes not liquid at all. And it's really -- these advisers are quite smart people. And they're managing very sophisticated portfolios. So again, we don't show up and say, oh, you need to have Carlyle AlpInvest in your portfolio. You don't need to have CTAC. It's really the decision of the adviser to understand what their end client needs.

Now your -- I took your question sort of down the liquidity path. Your question really started with direct lending. And in direct lending, a lot of that discussion today is around what's happening in SaaS. And I'm just going to touch on that for a minute. And I realize it's a very long answer, Patrick, but I think it's an important question.

What's happening in direct lending today as it relates to SaaS and everybody knows we're not -- SaaS as I sort of made a joke about earlier, SaaS was not sort of the core competency that was built out of our private equity business. But this is not about direct lending. This is about businesses being bought at really, really high multiples. So in '21, '22, you had companies that were perceived at very stable recurring revenue, that were bought at very high multiples. Those multiples have systematically come down a bit before this new concern around AI disrupting all the businesses. And it's the collision of those multiples with leverage that is actually -- it's actually an equity problem, which is then transferring up the capital structure potentially to a direct lending problem.

Now in wealth, we have a very strong bias that diversification is a real advantage for the client. So there's many, many times, I'll meet with a group of advisers and they'll say, hey, we'd really like to have like co-invest in this one asset, or whatever you think is the best thing, and I completely understand that. I don't love that. I understand why some clients would like that. John, one of our best investors, Brian, one of our best investors in the world. If they make 100 investments, one might not be great. And so I think in the wealth channel, you want diversification. And so one of the great things about CTAC that Mark built is that it has that diversification across the whole platform.

And so yes, if you're dependent on direct lending, monoline, you probably ended up with a meaningful part of SaaS exposure just because of the cycle during '21, '22. And now those multiples are a problem. But this is a complicated convergence of factors, which is really getting extrapolated in a whole host of different ways. But -- so that's the long answer. I hope that sort of satisfied your question.

Feedback from platform so far is that interest remains high. And I think to Jeff's point, it may not be linear. But when you think of the size of the wealth opportunity, when you think of retirement where millions of people have already -- teachers, municipal employees already are having the benefit of private markets in their portfolios through pension plans. It's just a question of the industry needs to do it right. We need to do it thoughtfully. We need to do it at pace. And we really have to work on thoughtful solutions, particularly as retirement comes into play. The industry has a great obligation to get -- most importantly, get it right, not rush to market.

Up here in front, Mike Brown.

Mike Brown, UBS. Kind of a related question. There's certainly a lot more volatility in the market lately. The last 6 quarters have been very active for Carlyle on the exit front. Can you maybe just give us an update on the IPO and M&A exit opportunities now? Is it still business as usual? Like what are you kind of hearing from the investment teams?

Well, I'll kick it off, and then I'll ask John to talk a bit about it, and then to extend Mark should add some color. But our exit is not an accident. So 2 years ago, we looked at the world and we basically said credit spreads are very tight. Markets were doing quite well. We knew that our clients broadly in the private equity world, and I'm talking across the whole industry. So our clients are also clients of the whole industry that DPI was lagging. And in part, it was lagging because of that multiple problem from '21 and '22, where assets were bought at higher multiples. And we just strategically decided we were not going to let that window.

We don't know how long those windows will stay open. So a lot of credit to Brian and Steve in the U.S., our teams in Japan, all around the world. They made a decision to very actively prepare to monetize. And so, as John said, we did the largest ever owned private equity IPO in India, Japan, the United States. We opened the market with StandardAero. So this was a very strategic decision. And it was about creating value for all of our clients, returning capital when they wanted capital, and others weren't doing it. And at the same time, again, we're not waiting for the market to go up another 5% or 10% for every last dollar. That's not what we want to do.

We want to create value, and we want to hit these windows we can because the world can be a vulnerable place, as you said, it can be somewhat volatile. And as much as we have a very good look into the economy because of our platform, there's a lot of stuff happening out there.

I don't know, John, you can give a better sense of the forward view.

Yes. I mean, look, when you look at the ingredients you want to have a conducive, healthy monetization environment, I mean, they're all in place, right? The economy is strong. The IPO markets are -- I mean, investment bankers would tell you they're opening -- they're open. I think they're opening and they're definitely open for great companies like Medline. M&A activity is accelerating. Spreads are tight. CEO confidence is improving. You're seeing trade buyers more present. The regulatory environment is getting more favorable.

So like all the ingredients are there to have a lot of activity. I think people were a little surprised industry-wise, 2025 was not as active for us is incredibly active. But for the industry, it wasn't as active. I think we would have had an even better year, but we had Liberation Day in 2025, and we had an extended government shutdown. So when I look at those 2 factors and look at what we did in 2025, I think it's actually amazing. And when you look at kind of where we are year-to-date, and let's just talk about the U.S., we have $7.5 billion of realizations closed or pending in 2026. So I think it will be a very active year.

Anybody else? Or is it just to lunch?

One in the back, Glenn Schorr.

I guess I want to follow up on the AI conversation. So I appreciate that, that wasn't your strong point in software and you didn't overpay on some names that are at risk. But I think a lot of discussion in the market is bigger, broader and that AI is having potential, massive implications across many industries. So I'm curious to see how you think about what's left in your existing portfolios, and then more importantly, how you underwrite new assets for what we now know? You're using it. A lot of your presentation was how you use it to make your systems and your processes better. But I would think it has a pretty big implication on how we underwrite going forward? And just little more color on that would be great.

Yes. So in 2010, a little bit of history here, I think, is an important one because some of this is just people doing really thoughtful things that ultimately end up being really brilliant things. So in 2010, Bill Conway decided that he really want to understand what the KPIs were in the portfolio of companies. Obviously, you know Bill, one of the greatest investors ever existed in private markets and become a great friend and co-chair of our Board. And he sought out to start organizing data around all those companies to see what kind of proprietary advantage we have.

That started in 2010. Nobody even knew Chat was coming in 2023 and the launch of LLMs. That was the beginning of the journey of harnessing our proprietary data. Then the team comes along and says, hey, is there any way we can use this data to use machine learning to be better investors? Then LLMs come on the scene 3 years ago and have this great step function change in technological capability and a lot of promise. And the reason we walked you through that panel is there is a lot of, I think -- It may sound a little a little parlor trick stuff going on like, oh, we write our IC memos. Personally, I don't know if 7 creators can get their term papers written in an LLM. I don't think it should be that hard to write IC. I don't actually think it's great for people to write IC memos with a large language model. I think they should just be writing themselves. I think it's really good for young people. So that's like not our focus, right?

Because we have a data advantage, the team started organizing all the data. And they organize the data, not knowing LLMs were coming, but then LLMs come. So that's the convenient cross-section of when these things intersect. And I luckily -- this all happens before I get here. I show up literally almost 3 years worth of today and the LLMs come a couple of months ago, Chat launches a couple of months before I get here. And it's this perfect convergence of data with technological capability, which has only continued to accelerate.

So to your point, let's get to the fundamental question. Immediately, we started saying ourselves, how can we use these tools to be better investors. Matt gave you what we wanted to do today, and I hope it was helpful, was kind of really give you a look under the hood at how we use things because there's too much general discussion out there and not enough explicit discussion. And so the example that Matt gave you about that health care company is really critical because -- if you avoid investments that somehow underperform because you just have better data advantage and you can inform your teams, you get outperformance. And it's all about outperformance. It's all about investment performance.

You can get an extra 100 basis points, 200 basis points, 300 basis points, you're talking about remarkable outcomes over a 10-, 20-, 30-year period. So our whole focus is on use cases. And how do we fund the investment in the team, the talent using the models because we want use cases, like I'm obsessed with use cases. And I spend a lot of -- this whole team spends a lot of time with that team. And what we want to do is we want to identify where can we better enhance our team's performance the day they commit the capital? Once we commit the capital, we've made the decision.

So first and foremost, how do we most inform our teams? How do we make our teams better? And by the way, Lucia did an amazing job describing all the things we're doing in productivity. It is not a headcount thing. We're 2,500 people. We're not looking to eliminate 100 people. We're actually looking to add more people and make them incrementally more productive and get an exponential effect. And so when we inform the teams better, give them maximum information, and allow them to make the best investment decision, you get better investment outcomes.

Now for the companies we own, I think the team explained it really well. It's hard to scale engineers. And so it's not like you can say to every portfolio company, hey, we'll give you 10 engineers. Nobody can do that. The talent pool is not deep enough, it's not rich enough. It doesn't exist in the external environment. And so what we do is we make sure the teams know about the technological capabilities. We want to keep them very -- the portfolio companies are very current. And at the same time, we want to make sure -- and Lucia described it, we want to make sure they have access to all the resources that exist in the world. And so -- and then, okay, how do we then leverage that? We funnel that back in. So if they have the -- that day she described where we had hundreds of presentations to CEOs and CTOs, we want the people running the portfolio companies to make sure that they have access to the most current knowledge so they can then hire the right firms, engage the right firms, use the technology, they can have breakthroughs.

Now our responsibility is then once we get them access to create the flywheel effect around that. And by the way, in terms of community capital, the way we think about the investment process is no different in private equity than it is in Mark's business than it is in Carlyle AlpInvest. It's all about leveraging the technology to make better investment decisions and make our people more productive.

Question up here, Mike Vinci.

Mike Vinci from Goldman. So you guys spoke about warehousing some deal flow on the balance sheet for CPEP. Can we maybe talk through the interplay between choosing to warehouse that deal flow versus giving it to LPs, and maybe what the longer-term puts and takes of that could be for the either management fee rate growth algorithm or any other interplay you see there?

Well, we don't -- there's no cherry-picking of one thing in one bucket versus another bucket. So we want to make sure we have waterfall. So there's no conflict between our LPs. So we basically create the opportunity for our retail vehicles off the flow that's in our institutional business. We don't want our institutional clients to be in conflict with our wealth clients. We don't want our wealth clients to be conflict with our institutional clients.

And so for example, in Carlyle AlpInvest, there's an allocation methodology. We don't describe, oh, well, this will go here, this will go there. The retail vehicle has its own investment committee. John can speak to that process more. But the reason Justin used that as an example is we want that capital -- when we're deploying capital, and again, we are going to be a bit psychotic at the margin about how we deploy it. When we deploy that capital, we want velocity in it as best we can. So his point was, hey, we're using it to launch the vehicle because we got to ramp up for the vehicle, but we're going to get that capital back and then we're going to redeploy it back into the business.

But John can talk a bit more about...

Yes. I would just -- I would reiterate what Harvey said. The balance sheet warehousing for CPEP, the private equity wealth product, it's just because the product is new, right? And you think about the episodic nature of the content origination in the private equity business, we wanted to have enough content when we started to raise money to put into the fund. So over time, that warehousing will go to zero, and there will be no need going forward for a warehousing capability in that product.

But it was just -- it's just -- I think of it more as kind of seeding the fund getting it going versus kind of a warehouse concept.

I can just add one small thing. When we originate secondary, and I think Brian can speak to this. I think with CP VII and CP VIII, there was $22 billion of secondary origination, so large notional amounts done just in those funds alone.

Question back here with Glenn Schorr again.

Sorry, one more. Maybe a good wrap-up question. So I personally am still a huge believer in the secular growth story of private markets. I think you guys laid out a very good job of your individual businesses. But this big ramp is interesting. And I think you backed it up with performance and everything you laid out. But when we step back, we see LPs are super cash star because DPI and other firms hasn't been as good. You see the wealth industry being more cautious, hopefully, just a moment in time, but there's less gross sales and higher redemption requests on certain products. And then there's a lot of competition. There was at least 93 or so new evergreen funds launched across the industry last year.

So is it that we're going to see a consolidation of winners? Or is this just a cyclical moment of time of softness? I'd love to get your thoughts on how we should balance your big growth drivers while you have these temporary -- hopefully, temporary slowdowns?

Yes. So I would say, to Jeff's point, the reason we were able to articulate this growth, and we're just articulating the facts is the cadence of the fundraising. That's it. We have funds coming to market, and we expect those funds to grow.

Now I think I'm going to answer your question, but I think what you're getting at is why should you feel confident in our ability to execute? We put these numbers here, we try to be really explicit for you because -- if I'm not explicit, you guys kill me and I don't want you guys to kill me. So we want to be as explicit. Also, we want to hold ourselves to this discipline. But the reality is, I don't know, wealth could be bigger, retirement could be bigger, Wealth could be a little smaller. AlpInvest could be bigger. We could deploy capital faster. CCOF could grow dramatically based on its performance.

So I think from our perspective, the reason we're comfortable with the output around FRE, DE is our starting point of the diversification of the platform. I think it would be much harder for me to tell you that if I was just a middle market private equity firm, or if Carlyle was just a secondaries firm, if Carlyle was just a direct lending platform. It's the diversity of the platform, Glenn, that gives us comfort that there's ballast, right? So I don't know, maybe over the next 3 years, for whatever reason, private equity is a little slower. I suspect that means Carlyle AlpInvest will scale faster, vice versa.

There are kind of 2 sides of the coin, although I agree with everything Mike said. The industry is evolving in a way where solutions and corporate finance, which is really more the world I come from originally, is super exciting, super exciting. And so I just think ultimately, Glenn, the demand for capital will pull capital. And when I started in my opening comments, and I said everywhere I go in the world, everybody wants capital. And by the way, they want bank capital. They want public market capital. They want high-yield bonds. People want to finance growth. Private capital is an incredibly important part of that growth. We've lost half the public companies in the Wilshire in 25 years, 26 years. And so the demand for capital will be higher. This is our best estimate sitting here today with a ground-up build of what we think is achievable. But these numbers will move a little bit, and we'll keep you updated.

Maybe one last follow-up, Bill?

Sorry, Glenn. Bill Katz again, TD Cowen. Just thinking through the margin opportunity, just listening to each of the segments and just doing the mental math on the margins are already pretty high. So as you think about going forward, I appreciate the reinvestment opportunity and you could run the business at higher margin if you wanted to today. When you look across the different businesses, where do you see the best incremental margin opportunity?

Best. I don't really think of it that way, Bill. I mean I don't know that we rank it as best. We really take a very long-term view because we're not steering ourselves to, oh, this has the best margin. I will say that over the past 3 years, what we've done is been really thoughtful about making sure opportunities are scalable.

Mark talked a lot about this in the credit platform, and he talked about -- you can jump in, but he talked about how when he's thought about the platform and he has these -- they're not just evergreen vehicles for wealth, but sort of vehicles for institutional clients cross-platform. But why don't you get a sense of the cross-platform and why that's a margin...

The margin expansion comes from -- and I got 20 minutes, so I didn't have the detail, but we built purposely that platform with -- you've got key strategies that are feeding the origination, if you will. But we have both institutional and wealth cross-platform accounts for each incremental. So when we bring -- it's open architecture. So when we bring an opportunity in, it gets allocated across that whole platform, not just to one specific strategy. And so that one origination as it grows, and the capital grows, you're just getting a higher margin because we're not hiring more people to originate, right? We're not hiring more people to prosecute them. So that leads to just a higher margin for the platform.

Direct lending, obviously getting a lot of attention today because of the exposure to SaaS and everything like that. And again, when I showed up, everybody said to me, oh, you have a problem, you have a big enough direct lending business. We're investing in our direct lending business. We're adding resources. We actually think there could be a pullback in the marketplace. People will be more disciplined about the next marginal dollar that goes into direct lending. Direct lending is not going away. And we think it can be an important part of Mark's toolkit.

So -- but I don't really think about oh, this has the next best margin opportunity. Just because -- that sort of takes the whole rest of the equation. Obviously, it's an important input, but it's not how I prioritize it. Obviously, the team does all that work and Justin obsesses about it. I really do go back to first principles, and I say, what does the client need? What does the wealth adviser need? What does the sovereign wealth fund need? What does the pension fund need? What does the insurance company need? What do these clients need? And then how can we construct that in a way that delivers value for the firm and for our team and people want to be involved with and excited about.

And I'm glad to hear my team is having so much fun. I didn't -- honestly, they've never said to me before publicly. They talk about how hard they're working, but it's great to know they're having fun, too. So everybody, we could not be more grateful for your support. I really meant what I said it before. A lot of you when I showed up, gave me great feedback. Sometimes it was intense, but super appreciated. Keep giving us the feedback. We learn from all of you, and we truly appreciate all your support and your time. Thanks so much everybody.

Good day, and welcome to the Carlyle Group Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Daniel Harris, Head of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, and welcome to Carlyle's Fourth Quarter and Full Year 2025 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 have provided a 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. 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.

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.

Thanks, Dan. Good morning, everyone, and thank you for joining us. 2025 was a record year for Carlisle. We significantly outperformed the targets we identified at the beginning of the year. We delivered record fee-related earnings up 12% year-over-year, materially exceeding our original forecast. We also had record FRE margins, 47%. We generated $54 billion of inflows, again, significantly outperforming our original $40 billion target. Engagement across the global franchise and all client segments from institutional to wealth continue to build throughout the year.

Transaction fees were a record $225 million, up almost 40% year-over-year. We closed out the year with record assets under management of $477 million, driven by strong investment performance and robust fundraising across the platform. Importantly, our 2025 results demonstrate the breadth the depth and the durability of our global business. Before I walk through our results in more detail, let me just briefly comment on the macro environment. Looking back at 2025, despite concerns around shifting geopolitical dynamics, the market proved to be resilient. M&A and IPO activity accelerated as market sentiment improved. 2025 ended with credit spreads near all-time types and equity markets at all-time highs.

Over the last several years, a lot has been written about low levels of monetizations in the private equity industry. Carlyle has proven to be an exception to that narrative. Since 2024, we have been the #1 private equity sponsor globally by IPO proceeds, generating roughly $10 billion of IPO issuance over the past 2 years. This number is more than any other firm in our industry, $10 billion. The most recent example of this is Medline. The IPO raised more than $7 billion in equity valuation of $49 billion a milestone transaction for Carlyle and the broader market. This was the largest sponsor back to IPO of all time, the largest health care IPO ever and the largest IPO of 2025. The transaction was meaningfully oversubscribed and today is trading more than 50% above its IPO price.

Medline is a great example of the types of businesses our teams look to invest in, a market leader in their sector with a great management team. Medline has an exceptional track record with more than 50 years of consecutive sales growth since inception and Carlyle is quite proud to have partnered with Medline's founders and leadership team over the last 4 years.

But it's not just Medline. StandardAero marked the second largest sponsor backed U.S. IPO in 2024 and has appreciated approximately 30% since its public offering. We listed 2 companies in Japan, Orion Breweries and Rigaku. Rigaku was the largest ever sponsor-backed IPO in Japan, and we IPO-ed Hexaware, which was the largest ever sponsor-backed IPO in India and the largest technology service IPO globally in more than a decade.

While it's clearly worth noting that we are the industry leader in IPOs over the past 2 years, what's equally important is the breadth and diversity of these offerings across geographies and sectors.

More broadly across our GP portfolio, activity remained quite strong. We returned $18 billion of capital to investors in 2025 and $18 billion in '24. Our teams remain highly focused on returning capital to our investors, and we expect ex momentum to continue into '26. All of this has contributed to our strong performance across our corporate private equity funds our latest vintage U.S. bio fund appreciated 17% for the year. Our third and fourth venture Japan buyout funds appreciated 60% and 30%, respectively, and our most recent European technology fund, was up 20%.

Moving on to Carlyle AlpInvest. 2025 was a record year of growth, reinforcing AlpInvest's position as one of the most influential private market solutions platforms globally. AlpInvest returned over $10 billion to our investors and invested a record $14 billion, highlighting both the breadth of the market opportunity and the scale at which the platform is operating. We closed our largest ever secondary strategy at $20 billion, continuing to grow our co-investment platform and expanded our portfolio finance strategies.

Demand for secondary solutions remains strong as investors seek liquidity and portfolio optimization and Carlyle AlpInvest continues to be a meaningful contributor to FRE growth and platform differentiation. In Global Credit and Insurance, we continue to see strong momentum across the platform. Direct Lending had a record quarter of originations. We continue to grow and invest in the platform, adding key leaders and talent. We've added a new Head of Direct Lending and senior origination professionals, enhancing origination and integration across our private credit strategies.

Our performance continues to be strong with realized losses across the portfolio running at an average of just 10 basis points per year over the past decade. Additionally, we continue our leadership position in CLOs amidst a record level of industry-wide issuance. Carlyle priced a record 39 CLOs last year. Carlyle was the most active CLO manager for U.S. activity and CLO influence of $7 billion in 2025 were up almost 20% from the prior year.

I also want to touch on the momentum we have in Global Wealth. In 2025, we continue to see significant progress in our strategic approach to Global Wealth. We had another year of record inflows almost doubling Evergreen Wealth AUM year-over-year. Demand was strong across our Evergreen suite. We soft launched CPAP, our private equity solution for individual investors in the U.S. with a select group of leading RIAs.

With the launch of CPAP, we've established our 3 key solutions across each businesses. with options to access Carlyle for credit, secondaries and now PA. This is all the result of the strategic investment that we started to make 3 years ago. We continue to invest in resources across the entire wealth spectrum, including mass affluent retail and retirement. We expanded our wealth organization meaningfully this year, growing head count by approximately 50% and added specialized capabilities to support sustaining growth across channels. We hired a Head of Retirement Solutions, a new role at Carlyle, reinforcing our conviction that wealth and retirement are long-term growth engines for the firm.

In conclusion, we entered 2026 with strong momentum. In 2025, we delivered on our strategy in a very concrete way growing fee-related earnings, significantly exceeding our inflows target, deploying a record amount of capital, turning money to investors and positioning our portfolio to take advantage of a more functional exit environment. We will continue to build on this strategy and foundation we have established over the last several years.

Our focus remains on investment performance, disciplined capital allocation and delivering long-term value for our global investors and shareholders. We also announced that we are hosting a shareholder update at the end of February. Look forward to seeing you there. At the event, we will share multiyear financial targets, more insights into the strategic direction of the firm and how we will continue to build on our success.

With that, let me turn the call over to Justin.

Thanks, Harvey. Good morning, everyone. I'd just like to start by saying how excited I am to assume the CFO role and have the opportunity to work more with each of you. And of course, a big thank you to John Ride for his time and leadership as CFO and for his help and guidance, which has made this transition so seamless.

Turning to our results. In 2025, we had our third best year ever in terms of distributable earnings. We generated $1.7 billion in DE for the year or $4.02 per share. This was up 11% from the prior year and is our highest level since 2022. For the fourth quarter, we generated $436 million of DE or $1.01 per share. Fee-related earnings were a record $1.24 billion in 2025, a 12% organic growth rate driven by sustained operating momentum across the firm. The full year results significantly exceeded our initial guidance. for the fourth quarter, FRE was $290 million.

Total fee revenues were a record $2.6 billion for the full year, a 10% organic growth rate. Fee revenues were primarily driven by Carlyle AlpInvest which was up 46% and Global Credit, which was up 13%. For the quarter, fee revenues were $670 million, an increase of 2% year-over-year. Our full year FRE margin was also a record 47%, up from 46% last year. This margin expansion reflects continued operating discipline and the scalability of our model.

Three years ago, we outlined an organic growth strategy, which has clearly been successful as we have delivered consistent earnings growth. We continue to invest in priority growth initiatives such as global wealth, insurance solutions and asset-backed finance, among others, and see significant opportunity in each for continued growth. We remain focused on investing for growth and expect that margins will further expand as revenues continue to scale. In addition to record financial metrics, we had an incredible year of activity across the platform in 2025.

Inflows totaled $54 billion, well above our initial guidance and our third best year on record. Inflows increased 32% year-over-year, led by Global Credit and Carlyle AlpInvest which each increased by more than 60%. Evergreen Wealth inflows were also a record in 2025, which more than doubled the prior record set in 2024. For the fourth quarter, we generated $9.2 billion of inflows across the firm with more than half of that total from a diverse set of strategies in Global Credit.

Deployment was a record $54 billion in 2025, up more than 25% versus last year, led by a more than 40% increase at Carlyle AlpInvest and nearly 30% growth in global private equity. We deployed $17 billion in capital in the fourth quarter alone. With $88 billion of available capital across the firm, we are well positioned to continue deploying capital throughout our business. Realized proceeds totaled $34 billion, almost 20% higher year-over-year and our second best year on record, reflecting improving exit conditions. We returned 17% of beginning value over the past year, significantly higher than the industry average. We realized $12 billion of proceeds in the fourth quarter alone for our fund investors.

Turning now to segment performance. Carlyle AlpInvest generated a record $274 million of FRE for the year, up nearly 60% and almost 4x the level from just 2 years ago. Growth was driven by strong institutional and global wealth fundraising and continued scale benefits across the platform. AlpInvest distributable earnings were also a record of $319 million in 2025, almost 70% higher than last year. The business remains well positioned for further growth as net accrued carry ended the year at $656 million, up 21% year-over-year.

For the fourth quarter, AlpInvest DE was $67 million, up 12% from the fourth quarter of 2024. In Global Credit, we delivered a record $402 million of FRE for 2025 and up 21% from the prior year. FRE has grown at a 20% organic CAGR over the past 3 years. Net realized performance revenue tripled year-over-year, contributing to a record $481 million of DE in 2025. For the quarter, FRE increased 4% year-over-year to $102 million and DE was up 7% to $123 million.

Global Private Equity realized over $18 billion of proceeds in 2025, the highest level in the past 3 years. In addition, we've already signed or closed $7 billion of proceeds in Corporate Private Equity, just year-to-date. Strong appreciation in our 2 most recent U.S. buyout funds drove net accrued performance revenue to nearly $2 billion.

Finally, I'll say a few words on capital management and the balance sheet. We ended 2025 with a strong balance sheet, including $2 billion of cash, over $3 billion of investments and almost $3 billion of net accrued carry. Our net accrued carry was up 9% sequentially in the fourth quarter, driven by strong appreciation in several of our largest funds. Together, these assets represent approximately $23 per share of pretax value. And on capital management, we returned a record $1.2 billion of capital to shareholders between dividends and share buybacks during 2025.

Looking ahead, we entered 2026 with solid momentum across the platform. We expect continued growth supported by a diversified fundraising pipeline, expansion in global wealth and improving capital markets conditions. While the macro environment remains complex, it is generally constructive for deployment and realization activity. We look forward to providing additional detail at our 2026 shareholder update on February 26.

With that, I'll now turn the call over to the operator to take your questions.

[Operator Instructions] And our first question comes from Alex Blostein with Goldman Sachs.

Welcome Justin officially to the CFO role. So Harvey, to your point, Carlo showed a lot of momentum and beginning to drive pretty meaningful realizations in the private equity portfolio in 2025, you sound constructive but obviously, the environment has changed a bit just in the last couple of days here. So I would love to get your thoughts on how you're thinking about sort of sustainability in this monetization momentum into 2026. How dependent are you guys on the equity market exits versus more M&A transactions that you might see in your backlog?

I'd be reluctant to extrapolate the last week's volatility into something that becomes longer stretched. We're all going to have to see how the market response is kind of reallocation of capital and some concerns about capital spending. I'll tell you when we get our best information as we talked about this before from our proprietary data in our portfolio. when we look across all the companies that we own and interact with the January data looks very good.

So if you were just to look at that data, you would feel very good about GDP growth, margins, EBITDA generation. And so I can extrapolate that, obviously, from our portfolio given the size of it to the broader economy in the U.S. and globally. But it looks pretty good. Obviously, the markets have demonstrated some jitters and we'll all navigate through that. But I would say, in aggregate, again, we're all going to deal with the market environment we get, but credit spreads have moved a bit. There's a bit of hesitation. It's a bit of a -- how would I say, a bit of self first ask questions later as people readjust their portfolios. But the economic engine feels quite good.

Having said that, the markets have demonstrated some fragility and we've talked about that. But I don't think that to be too surprising given you were record highs. But again, going back to the engine and the performance, it feels very good.

Our next question comes from Glenn Schorr with Evercore.

So look, you're in an interesting spot to comment on what's going on in perception versus reality in the direct lending and credit world because you have a piece, you have a piece in your secured lending fund. But for the most part, you've built a big credit business outside of what's in the line of fire right now, at least publicly, right? So in your CLO and your ABS business.

So my gut is, forgive me for putting words in your mouth, you've been probably thinking about having a bigger presence in direct lending world over the last couple of years as you've seen the growth and software exposure excluded. I'm curious how you think about the state of play, how you think about credit quality exposures out there. And more importantly, how does any of this inform how you're thinking about growing your credit platform, including a bigger presence in the wealth channel. I appreciate the thoughts.

Thanks, Glenn. I'll maybe need -- I'll let Justin flow some details on the credit business because he was key driver of building that over the last 20 years. But what I would say with regards to how we're being informed by all this, there was a lot of discussion last year about direct lending and sort of marginal market participants coming in and sort of driving spreads tighter and maybe terms a bit too aggressively. Ironically, when I showed up 3 years ago, some of the conversations I had about I had with you where things like, "Hey, you guys should be bigger in direct lending."

Now we've been very systematic and thoughtful about how we've been doing that. But we've really been I'd say, kind of positioning for the opportunity set to open up like this. And so we feel quite good about it, given our footprint and ability to scale from here, as I mentioned, we've added a new head of direct lending and Justin drove a lot of that along with Mark Jenkins, obviously, a new origination. So we feel quite unfooted.

On the wealth front, we continue to add to platforms. Actually, we were positive on all our flows in the fourth quarter was one of our best quarters effort across the entire platform, including credit and we're launching on more platforms. And so again, momentum feels good. It's just nervousness that has gripped the market over the last couple of days. But again, we're being thoughtful, very thoughtful about deployment. But we feel good about the positioning and the breadth of the franchise.

I don't know, Justin, if you'd add anything.

No, that's exactly right. I mean, we've built our credit business specifically to cover really the full universe of what private credit has to offer to be diversified and build durable portfolios that should do well through cycles. And of course, we've been managing credit for more than 25 years through multiple cycles. So I think our credit business is really an all-weather business. I it's incredibly well positioned to weather any of this volatility. And we're seeing that result in terms of investors' appetite. As Harvey said, we had significant inflows into our credit wealth funds this quarter. So we're in a good position. We feel really good about our portfolio and our business.

I don't know what we'd do with the detail that we got yesterday, but a lot of the companies were able to provide the software and related exposure as a percentage of AUM percentage of each of the businesses. Are you able to give us a little apples-to-apples to put things in perspective.

Yes. Software investing has never been a big driver for Carlyle. As you know, our power allies have been in things like aerospace and defense and health care and industrial. So it's never been a huge driver of our business. I think others were giving a percentage of AUM, ours is 6% of total AUM, which I believe is below others. But again, not a huge driver of our business and not something we think is problematic.

We try to use the broadest possible definition on that 6% to...

That's right. Exactly.

All inclusive however you could think about it, top part of caps tax everywhere it could be. But as Justin said, this is not a piston in the engine that has been a key driver of Carlyle's strategy.

Our next question comes from Mike Brown with UBS.

So maybe I'll ask on the margin here. So it reached 47% here in 2025. And looking at the segment, it looks like AlpInvest Best was the best driver by credit. GPE's margin declined a bit here. AlpInvest had some tailwinds from catch-up fees. And just looking forward here, so Justin, you mentioned that margins expect margins can continue to expand, can you maybe just touch on each segment, which segment could see the most expansion in 2026? And then longer term, which segment drives the margin higher longer term, which one could kind of be the biggest growth engine there.

So we'll go into more detail that on the 26. I really hope you can join us for that. And we go through the multiyear plan. What I will say about the margin, just reflecting on the past 3 years is I think what the team has done is pretty remarkable because they've managed to invest in the business, add resources, grow headcount, really reposition the platform and drive the margins 1,000 basis points basically since the day I showed up. And so it's been a really remarkable effort, but we'll go into more detail on all those things on the 26 in terms of the forward outlook.

Okay. Looking forward to the update.

Our next question comes from Bill Katz with TD Cowen.

I presume the answer will be see you on the 26, but I'll ask it anyway. I was wondering if you can maybe talk a little bit about you might stand in terms of capital raising, particularly for the Fund 9 looks like Fund 8 had really good appreciation here your comments on the realization pace and the DPI metrics as well. And then I'm curious, you are running up against the conclusion of your repurchase program. I'm wondering how you're thinking about capital priorities into the new year.

Thanks, Bill. So I'm trying to figure out what I say before I say see on the 26. So a lot of the forward-looking stuff, we are going to go into obviously much more detail on the 26. I would say that the client engagement and the fundraising is impressive for a whole host of reasons. But when I think about it and what the team has accomplished over the last couple of years, it really is about the diversification of the business mix, both across institutional clients.

So it's pension funds, it's insurance, it's sovereigns. And obviously, the strategic pivot in the wealth channel now having basically all 3 flagship funds up and running, but it's also geographic. And so you have this nice diversified set across clients and geographies and opportunities that's really driving all of that and the success of the $54 billion that we brought in last year and this success over the last couple of years. And so -- but we'll give you more insights.

But I would say, again, we feel quite well positioned for forward trajectory given the -- when we look at the fundraising over the next couple of years, flagship vehicles that will be in the market, but everything that's gone into building and supporting those flagship vehicles and resources we've added. So -- but we will see on the 26.

Our next question comes from Patrick Davitt with Autonomous Research.

I appreciate the software exposure at 6%. But I would imagine your CLOs have a fair amount of exposure and those loans are obviously down a lot. So could you frame the exposure just in the CLO bucket? And to what extent performance as a result of this recent volatility could impact over collateralization tests.

Our CLO performance has been among the best in the industry. Our team has done a phenomenal job. Our software exposure is right on top of the index. We're not overweight, we're not underweight. And look, when we invest in software, we've been doing this for many, many years, right? So we've had disruptive technologies before and our teams are very, very well positioned to address these. So look, our CLO business is the best in the world, in my view. Their performance has been fantastic. I don't expect this recent volatility to affect them at all.

If anything, again, I don't want to make near-term market predictions because things are so sort of, I don't know, 1 day, we could be tier 1 day, we can be a loser. But there may be some technical opportunities here in the marketplace across that business, which gives us the opportunity actually to launch a few deals. So -- but again, I think look testing up in that business the team is world-class, but that's -- we're kind of -- as you said, right there with the index.

Our next question comes from Brennan Hawken with BMO Capital Markets.

This is Mark [indiscernible] on for Brennan Hawken. Within AlpInvest, fees preceding this quarter, I believe it exceeded the $56 million reported for the full year. Can we read that to imply there was negative catch-up fees this quarter?

Not negative. They are not...

No. They're not negative catch-up fees this quarter. We did have catch-up fees earlier in the year. But if you actually strip those out, AlpInvest management fees were up 4% quarter-over-quarter. So the momentum there is still good.

Our next question comes from Steven Chubak with Wolfe Research.

Welcome Justin. So I wanted to ask on transaction fees, had another really strong year. You indicated you anticipate a more active monetization backdrop for next year. with transaction fees just nearly tripling over 2-year time frame, is there any way for you to help frame the revenue upside or potential, are there any areas where you feel like you're under-earning? And are there any remaining gaps on the platform in terms of your overall offering?

We'll give you more insights on that on the 26 in terms of the forward. I think you really -- I'm sorry, but you really kind of nailed it in terms of -- what I think is most impressive is this basically was almost at 0 when I showed up 3 years ago. And when I think it really demonstrates is the agility of the platform, the way the team has led and built this business and really flexibly focus on a strategic priority.

You may remember a couple of years ago, one of the work streams I talked about was capital markets and transaction fees. And I think there were some skeptical people that thought we wouldn't be able to build this out. The short answer is, we thought it before, there are some gaps. There's still some businesses that because of fund -- historical fund documents will come online. So there's an opportunity set. But we still see upside, but we'll give you more color on that on the 26th.

Our next question comes from Brian McKenna with Citizens.

So there's clearly a ton of momentum in the wealth channel, and it feels like flows are really beginning to inflect here. I suspect a lot of this has to do with your efforts on the branding front and what Carlyle has to offer these clients globally, but can you spend a minute talking about the Carlyle store, you're telling in the wealth channel today what's resonating with these distribution partners and their clients? And then are there still opportunities to further enhance your brand in the channel?

So this was obviously a strategic picture 3 years ago, and this is what we've done. First of all, the brand is global, iconic long, long history, and that is fundamental to being on platforms, being recognized globally. We -- David Rubenstein and the team, they've been going to the Middle East in the '90s. We were the first to have a franchise in Japan, we stated in Japan for 25 years. We're the only firm that didn't leave. So it's this commitment geographically and the brand recognition, which is a cornerstone of an ability to deliver solutions.

Obviously, performance is a key driver here. And the way the teams have thought about driving these solutions is about creating diversification. And so the breadth of diversification is quite important to our clients. And then, of course, there's the client engagement, working with our partners all over the world getting very close to the advisers. I personally spend time with advisers. It's quite critical for us to understand their needs.

Well, we're not in the business of telling everybody that in every single person's portfolio, they should have private markets, but where it makes sense, we want to make sure that we're providing the most value add in terms of a series of options with diversification that can be durable and deliver over the long term. So we're very, very focused on that.

I will say the team has done a remarkable job of adding resources. We've done things that have been very well by the market like the Oracle Redwall partnership. So it's been a multipronged investment here, which has really driven this. And we think there's very, very long-term upside, and we're enthusiastic to see what happens ultimately in the retirement channel. So again, long-term driver, but we're being very disciplined about it.

Our next question comes from Ben Budish with Barclays.

Harvey, most of the forward-looking questions, I appreciate your saving for the investor update, but I'll ask maybe a 2-parter anyway. Specifically for 2026, just curious if you could talk about what you're expecting in terms of management fee growth. I think this year should be a bit of a funky year with some large flagships coming to market later in the year.

Realization is picking up, which could be a headwind to earning in the private equity segment. And so probably this year, not quite as indicative, at least from a management fee growth perspective of what I suspect you're going to talk about. So curious if you can give any color there.

And if you can't, maybe just one other question on the year. On the realization side, given where CP 7 and 8 are, I think there's an expectation we should see realizations before really as performance revenues come in. Just curious how we might think about that trajectory as well over the course of this year.

Yes, again, so I don't want to disappoint you, but we're going to go in such a level of detail on this on the 26 that I think giving you a fuller picture makes a lot more sense in terms of the strategy and how everything is coming together. Again, the only thing I'll go back to on realizations is how proud we are of our team.

A couple of years ago, the global private equity leadership really decided that our clients wanted monetizations. They took advantage of a very attractive market environment and it was a very deliberate strategic decision across the platform, as I said before, it was global, we were a market leader.

We monetized more IPO assets really than anybody in the world. And so we're quite proud of what they've done. But this is strategically how they position the platform, but we'll go into a whole host of detail on the 26th. So I apologize for leaving you a little bit short on the kind of near-term questions.

Our next question comes from Ken Worthington with JPMorgan.

So 2025 was a good environment for the CLO market. How is 2026 looking for Carlyle here for CLOs sort of inside and outside the U.S. And does the software and AI angst sort of impact the outlook here? And then along the same lines, you set up a fund to help with the equity pieces. To what extent are you utilizing that equity? And how much dry powder does that fund still have?

I'll let Justin get into the details of the CLO business. What I would say on the AI impact of things. Again, this is more of a broad market environmental atmospheric, I think. I mean, again, we've seen the fragility in the market. I think they're really just trying to process what the implication is across markets and industries, but specifically on the CLO business, I'll turn it over to Justin in terms of how we feel about the marketplace in the environment?

Yes. We've had an incredible 2 years in our CLO business in terms of issuing new deals, but also resetting deals and extending the life of those deals. The team has been incredibly active in that regard, and that makes our business just more durable, right, over time.

Now the year started off in CLOs, constructive, I'd say, spreads are tight on both sides of the arbitrage. I think we're going to have another active year. I don't know if it will be the record year of the last 2 years, but our team is, in my view, the best in the business. If there is activity in the CLO market, we will be participating. And the business is really well positioned now that we've extended the life of so many deals over the last 2 years.

Our next question comes from Michael Cyprus with Morgan Stanley.

Just a question on the credit business -- question on the credit business continues to put up meaningful growth. across the overall credit platform. Just curious if you could elaborate a bit on some of the steps you're taking to enhance originations, expand your sourcing funnel and what actions might you look to take here in '26.

Yes. We've done a number of things to enhance originations, really, not just last year but over the past 5 years under Mark Jenkins leadership, recently, just in the past year, we did hire Alex G from Goldman Sachs to come in fantastic track record, 30 years at Goldman in that business. We hired Mike Mayer, who's got decades of experience in origination. We've actually built out our origination team even beyond that just in the last few months. And that's just in direct lending alone.

So we've got a fantastic origination engine. We did the most originations we've ever done in credit in the past years -- in the past year in 2025 with almost $30 billion of originations. So that engine is hitting on all cylinders. And as I said, it's a broad-based durable business. It crosses many, many different parts of the private credit universe. And so no matter where the market goes, we have the strategy, we have a team that we think is ready to take advantage of it. So we feel great going into 2026.

Any steps you might take here in '26 around expanding sourcing from here? Or is it all done enhancing the origination machine?

It's mostly done, but we'll get more into the strategy on the '26 in terms of how we're positing because we do think we have some unique levers we can pull. But in terms of the resource build-out, Justin and the team have done a great job in the past year.

I'm showing no further questions at this time. I'd like to turn the call back over to Daniel Harris for closing remarks.

Thanks, everyone, for your time today. I know it's been a very busy week. We look forward to seeing all of you on February 26 for the shareholder update. And if you have any questions following today's call, feel free to follow up with Investor Relations. Have a great weekend.

Thank you for your participation. You may now disconnect. Good day.

Good morning. Thank you, everyone, for joining our next session. It's my pleasure to introduce John Redett, CFO and Head of Corporate Strategy at Carlyle, on his way to becoming Global Head of Private Equity for the firm. So this is the last time we get to talk to John in his CFO capacity, but clearly, that's not the last time he'll get to hear from us. So...

so I expect it generally to be softballs because this is my last event as CFO.

Probably not. Probably not. And especially now that as a CFO, you'll just naturally get a lot more financial-related questions, which makes it fun for us, maybe less fun for everybody else, but we'll see. But thank you so much for doing that. Carlyle obviously is coming off of a really strong year, record FRE over the last 12 months. I think about $60 billion of inflows over the last 6 months as well with increasingly a more diverse set of products when we think about secondaries and credit and other things you guys are doing in the wealth channel.

So on a clearly strong path. And look, I mean, the stock has not got unnoticed, one of the best, if not the best performers in the space this year as well. So all good things.

Look, why don't we start with a bit of a macro question first. Just given the breadth you guys have, especially across the private equity business across the globe, talk to us a little bit about what you're seeing on the ground in terms of corporate health, what are some of the bright spots? And what are some of the fundamental risks you guys are seeing across your portfolio companies?

Yes. Well, thanks for having me here today, Alex. It's good to be with you. So look, we own companies all over the globe, every geography, every industry. We have 700,000 employees in our portfolio companies. So I think we'd be a top 10 Fortune 500 company based on employees. So we have tremendous data. I would say, generally speaking, it looks pretty good. And as we look at kind of 2026, I'd say the growth we're projecting looks pretty attractive across the globe. I think there's certain parts of Asia where it might not be as strong as we're seeing in the U.S. But it's generally pretty -- it's pretty positive.

So look, I think the Fed is going to continue to try to push down rates. I think a big question is what happens to the long end of the curve versus the short end of the curve. But we think 2026 is going to be a very healthy deal environment. Rates are getting more attractive, getting lower. The financing markets are wide open, very healthy. Alex's partners in investment banking at Goldman are telling me the IPO markets are open, and I think they are getting open. You might have seen some news last night with us on Medline. I think confidence levels remain elevated. M&A is accelerating. And I think we have a more favorable regulatory environment. So we think 2026 could be a very busy year in terms of new investments as well as continued healthy pace of monetization. So we're -- I'd say we're generally pretty optimistic. I think the caveat is geopolitically, the world is a little more complicated today than it was 5 years ago. So that could obviously throw a wrench in everything.

Great. Well, it's a good way to set the stage for the conversation for the next 30 minutes or so. Let's kind of break this down into some of the individual businesses, really starting with private equity. Now you're stepping into the Global Head of Private Equity role, which is a large business for Carlyle. It's not, of course, the only business, but it's an important one. And frankly, it's still probably the biggest source of debate among investors as far as just the trajectory for that business goes for you guys. So as you enter that role, first and foremost, what are the key priorities for you? And what's sort of on your to-do list for '26 as Global Head of Private Equity?

So I'm very excited for the new role. I'm going back to a business that I was part of for 17 years. So it's a business that I know extremely well. It's where I started my career at Carlyle. And Alex is right, it's -- private equity is our biggest business. It's our origins. It's where Carlyle got started. So it's a very, very important business to us. We haven't seen the growth out of that side of the business relative to credit or AlpInvest the last few years, but it's still a very high-profile business. It's very profitable. So we love the business.

So initially, my focus will be -- and you've seen this focus from the management team in the last couple of years, we are very focused on performance. We're an investment management firm. First and foremost, we're focused on performance. And you've seen some significant changes we've made on the investment side of the business, and you've seen a corresponding quick improvement in performance. So we're very focused on performance. I will be very focused on fundraising. We have CP IX coming to market in the near term. So that will consume some of my time.

And then look, there's some businesses that have scale and there's other businesses that I think I wish they had more scale. So I'll spend a little bit of time focused on that. And also, are there things that we do really well as a firm that we can better leverage to drive more fundraising. So one of the things that pops into mind is we are a leader in aerospace and defense. We are -- it's the origins. We've been doing aerospace and defense for nearly 40 years. We're one of the few firms that actually has a dedicated aerospace defense business. You can't pick up a newspaper or I guess you don't pick up newspapers anymore. You can't open your iPad and read an article without hearing about elevated defense spending over the next 5 to 10 years.

So I think there's things we can do there to better drive fundraising. But look, it's a business that Harvey and I have been very focused on in the last couple of years. I don't think you're going to see a radical shift in strategy. I think we're doing a lot of the things we've been doing the last couple of years that I'll continue to do over the next few years. But I'm very excited. It's a fantastic business, very successful long-term track record and just got a great brand.

Let's spend a couple more minutes here, and I really was hoping to address both performance and then some of the fundraising dynamics. Let's start with performance first. So CP VII, CP VIII, so net IRRs for both funds are in kind of the 8% to 9% range. The market is probably sort of nervous still about what is the ultimate outcome is going to be for really both of those. Obviously, CP VIII stacks up a little better than CP VI. But when you look at the underlying portfolio company performance, how is that tracking relative to your expectations, the original kind of budget that you put together? And what do you ultimately see as performance for these vintages shaking out to be?

Yes. Let's start with CP VII. And we've talked a lot about CP VII on the earnings calls. And look, we've been doing this for 40 years. You're going to have a fund that is not your best vintage or as someone internally calls, it's not our best work of art, and that's CP VII. We're not going to -- our investors are not going to lose money, but it's not going to be acceptable to them. And quite frankly, it's not acceptable to us. We have done, I think, a very good job improving the performance of CP VII. I would say that performance is tracking ahead of what we told LPs that would be doing. I also think we've done a very good job monetizing assets for CP VII.

So I think that's a real plus for the -- for our LP base. And most of our large LPs are in multiple funds, and they've been with us for a long time. So I think they're going to give us -- they're going to be okay with CP VII, and they know it's not going to be something we're proud of. But when I look at CP VIII, that's where I get really positive on kind of the fundraising environment for CP IX. The gross IRR is 19%. It's first quartile on some metrics. It's second quartile on other metrics. It's 72% invested.

Typically, when you're in a PE fund that deep into its 70-plus percent invested, you have a problem child. We don't see that in CP VIII. So I think CP VIII is going to be a great fund. We've already monetized a good portion of one of our earlier investments, and that was monetized at a 50-plus percent IRR. So I think we're setting the stage where CP VII, okay, it's not our best fund. It's delivering returns ahead of what we told people. We're turning money and CP VIII is a great fund. I feel actually very good about coming into the CP IX fundraising environment. And I spent a lot of time talking to LPs.

And look, a lot of it is, too, if you were large LP and CP VII and you got a lot of co-investment, your returns are probably a lot higher than that 8% or 9% net. So I think we're in good shape. I feel good.

Let's spend a couple of minutes on CP IX and really just the way you view the corporate private equity business over time, where I think in the past, you and Harvey talked about CP IX being sort of similarly sized to...

That was Harvey.

Of course. Let me double check. So -- but is that still the expectation, right? Is it about the same size as kind of what you're hoping for? Is that the feedback you're getting? We would hope so from some investors. And then when you think about -- that's helpful. And when you think about just broadening out the growth profile of corporate private equity in general, I know you mentioned maybe leaning into some of the things that are subscale. You've had problems in Europe, obviously. So that's been a smaller fund. How do you think about like kind of franchise growth outside of the flagship fund that could eventually maybe reinvigorate growth in the entire franchise of it?

Yes. I mean, look, of our 3 businesses, it's the most mature business. And it will be a slower growth than our AlpInvest -- Carlyle AlpInvest business and our credit business, for sure. It's a more mature business, and it's already achieved scale generally in its flagship fund. But you look at some of the other businesses, our European technology business performance is fantastic. They will be back in the market at some point. I would expect that fund will be bigger. We just raised a bigger Japan fund. So I think that's a positive. And when you look at some of our real asset strategies like our real estate business, we've had really good growth in our real estate business.

So I think we can get the business to grow. I think wealth, we just launched our private equity wealth product, we call CPEP. We launched that in October. I think over time, that will help drive the business. But Harvey and I both know that the business can grow. I know it's been challenged the last couple of years, and we have had our issues in Europe. Part of Europe is doing fantastic. Technology is doing fantastic. Our buyout business. It's still a little bit of a turnaround, but we've been very public on our earnings calls, acknowledging that, and it's still kind of a work in progress. But we do think the business can grow over time.

Great. Okay. Let's pivot. I would love to spend a minute on monetizations. That's an area where you highlighted as well that you're starting to see some really good momentum. Obviously, an IPO out there that's proceeding. Looking out into 2026, what are the general expectations for realization activity and more importantly, for the net PRE knowing that there are some timing dynamics and kind of the waterfall things you have to work through to actually convert some of the sales into PRE.

Yes. So I think monetization for us is -- it's a positive story. We've had $32 billion across the firm through the third quarter. I think that's up 30%, 35%. We've had a really good year within corporate private equity or global private equity. We're running at roughly 150% of where the industry is. So I think the teams have been very, very focused on monetizations. I think they've got the memo. During the third quarter, we had a light quarter in terms of net realized performance revenues.

But we talked about on the earnings call, we had quite a significant backlog of deals that were announced, signed but hadn't closed. I think it was roughly $5 billion-ish. We've closed the vast majority of those deals. So I think from a net realized performance revenue perspective, looking at fourth quarter versus third quarter, fourth quarter will be multiples of what the third quarter was.

So we feel good about that. And as I kind of look into the market, look at 2026, if the markets kind of stay where they are or improve, I think that number likely accelerates. We have some very good companies that we're ready to monetize. We still own some public securities and some very good companies like a StandardAero, like a Hexaware. So I'm very optimistic that, that number has some upside over the next 12 months.

Great. We talked about dynamics in private equity in terms of growth and fundraising, but maybe kind of zoom out a little bit broader and talk about the franchise as a whole. So when I look at the inflows you guys have seen so far this year, about $45 billion raised year-to-date. You're kind of on track to do $50 billion plus minus something like that in that range. Into 2026, how are you thinking about fundraising across the franchise? And what are your expectations?

So I think fundraising to me, and I came from the investment side of the business, not the fundraising side of the business, has been one of the more positive surprises. You'll recall when we initially put 2025 guidance out, we were targeting $40 billion, which was equivalent to what we did the previous year. We revised that guidance to $50 Billion and through third quarter, we're tracking to $45 billion. We're very comfortable that we're going to hit the $50 billion. So I think we have a ton of momentum in fundraising.

But I get even more excited when I look forward at our fundraising. If you think about what we're going to have in the market in the next 18 months, it's actually quite staggering. So we'll have our flagship U.S. buyout franchise, CP IX in the market. We'll have a new vintage for our opportunistic credit business, which we call CCOF. That will be in the market. Infrastructure is in the market today. Our secondaries, our co-investment business and our portfolio business are all 60-plus percent committed. So they will likely all be in the market sometime very soon. And our CLO business, and we're the world's largest CLO manager, we are in a couple of year period of outflows, and that has transitioned into inflows. So when I kind of look at the fundraising map for us over the next couple of years, I mean, we're going to have almost every large flagship product in the market. So I'm very optimistic. I'm very optimistic.

Yes. And I guess as a follow-up to that, maybe translating some of this fundraising dynamic into actual top line growth and management fee growth. And it's interesting, right, because 2025 was a really good year for you guys. Within that, there's a bunch of catch-up fees, which makes '26 is a bit of a difficult comp, right? So just math, frankly. But the reality is a lot of this is timing because the fundraising dynamics that you've outlined really won't accrue probably until 2027, just the way the management fee kind of waterfall works out. So how do you think about the management fee growth for the firm in '26? And if that's not really the right way to measure performance, maybe on a multiyear basis, what do you think Carlyle is capable of delivering from a management fee growth perspective?

Yes. So we did have a lot of catch-up fees this year and they were largely isolated to AlpInvest. We had a little bit in credit, but it was largely AlpInvest. And look, catch-up fees are a byproduct of being successful in fundraising. I know people like Alex don't like catch-up fees, but I don't actually mind them as much. And you should expect to see catch-up fees in the next couple of years with such big fundraising opportunities in the market. But look, we have a lot of big products coming to market. Some of those, Alex, will turn fees on in 2026. Others will turn fees on in 2027.

So when I look at the management fee growth opportunity in the next couple of years, I think it is going to have meaningful growth. We are very optimistic that over the next couple of years, you will see a significant step-up in our management fees. And that's just a byproduct of having such large funds in the market in the next 18 to 24 months.

Yes. All right. Fair enough. Why don't we talk a little bit about the wealth channel. Clearly, very important for you guys, very important for the industry as a whole, and Carlyle has been making really good progress building out your wealth footprint led by CAPM, but also you have credit-dedicated products, CTAC and you recently launched secondaries only version CAPS, I guess. And then you also have CPEP, the private equity fund, right? So you're really kind of rounding out the offering there. So talk to us a little bit about how you're looking to scale these products over the next 12 to 18 months. And then particularly related to the private equity fund, CPEP, how are you differentiating this one versus some of the other private equity strategies in the wealth channel that have already been out there raising capital?

Yes. So look, we're very happy with where we are in wealth. And I realize our wealth numbers don't -- are as large as some of our peers. But I think you need to level set 3 years ago, we were nowhere in wealth. So we've really restarted this effort. This year, we've doubled the amount of inflows into our wealth channel. Our wealth AUMs doubled what it was the previous year. So we're really making a lot of progress. And given our size, it's starting to be impactful, and it will continue to be more and more impactful to both our top line and our bottom line.

We have 3 businesses, AlpInvest, Carlyle, credit and private equity. We now have basically 3 products that mirror that. So we have CTAC, which is our oldest wealth product. That's a credit product. That is scaling nicely. A couple of years ago, we launched an AlpInvest product, CAPM, we call it. That has scaled really quickly. Within 2 years, we're at $5 billion. And I think that's got quite a bit of runway ahead of it. We just launched a JV with UBS, which is just a secondaries product, and that is scaling really quickly. So we're very pleased with that.

And then in October, we launched CPEP. And that's our private equity product for the wealth channel, probably the more of the 3 products, probably the more complicated of the 3, just given the kind of the episodic nature of content creation, right? Deal environments, it's lumpy. So you got to think through some things. That will be the best of what Carlyle has to offer across the globe in private equity. So it will encompass Japan private equity, Asia private equity, U.S. private equity, Europe private equity and tech. So it will be the best of the best.

And I think we're a little bit unique in the sense to help us kind of manage -- better manage that episodic nature of the content creation, up to 20% of that will be -- come from our secondaries business. So we just launched in October. We launched the exact same way we did our CAPM product where we launched with a couple of smaller platforms just to make sure we are ready to go. And you will start to see CPEP accelerate pretty meaningfully in 2026 and 2027 as we get on the larger platforms. Initially, you'll see that in the U.S. You'll see that kind of start to build out in Japan -- Asia and Europe as well in 2026. So I think the next 2 years from a CPEP perspective, you'll see a meaningful pickup in what we raised.

Great. What about other product development? So I know you have asset -- you have products in a number of asset classes today. What else is interesting on the horizon? What do you envision the wealth product solution ultimately looking like? And then we've obviously seen a number of your peers partner with traditional managers on hybrid products, JVs in a way. We haven't really seen you guys do that. So maybe if you can talk to us a little bit about the pros and cons of something like that.

Yes. I'd say in the near term, Alex, we're really focused on the 3 products we have, the credit, the CAPM/CAPS and CPEP. We want to make sure that those products are scaling appropriately and the performance is meeting our expectations and quite frankly, our investors' expectations. So that's very important to us. I think there is a real need for an asset-backed finance product. You should expect something like that coming from us in the near term. And I think longer term, we have such a fantastic real estate business.

We are -- our performance is meaningfully ahead of the index. We have the Apollo who manages that business is one of our better investors. We have an institutional evergreen real estate product, but I think we should think about down the road of having an evergreen wealth real estate product. So I could see us doing something there. I think infrastructure is a perfectly good asset class for the wealth channel. So I think over time, you'll see the product suite get built out. Look, in terms of the announcements we've seen with privates, partnering with traditional managers, I think it's been -- I think it's a little bit of a mix.

A lot of it seems to be more press release focused versus actual solving a problem or a need. We're having a lot of conversations with some of the more logical traditional asset managers. And we're taking more of a partnership approach, and we're looking for more of a solution to a challenge, and we're having some conversations. I do think over time, and I think you'll see this probably in credit first, you'll see more of a hybrid product between more private credit and public credit. I think PE is a little more further down the road. I think you'll probably see secondaries follow credit, but we're having a lot of conversations.

Great. The growth in the wealth channel has obviously been really, really critical, but it's also having -- creating interesting nuance relative to the way private markets have existed, which has been entirely institutional. And as part of that, institutional investors have been used to getting quite a bit of a fee-free co-invest. That's been obviously a source of fundraising for you guys as well. This creates a bit of an interesting wrinkle to that, right? Because now you have vehicles that are paying you 125 basis points that are going after the same investment opportunities. So as a large manager globally, how do you balance these 2 potential conflicts? And does that perhaps create maybe some helpful friction where some of the pricing dynamics could actually get better on the...

Actually -- and look, I spent a lot of time with our large LPs, and I've had many conversations on this topic. I think it's -- I actually think it is exactly what you said. I think it's health attention. We generate a tremendous amount of co-investment every year, billions of dollars. There are often cases where we have such a need for co-investment, we're actually going outside that fund, the non-fund LPs to generate -- to fill the co-investment need, we're not getting paid for it.

So I think we're now creating a solution via these wealth products, particularly on the private equity side, where it's more applicable to where -- we're going to continue to generate billions and billions of co-investment, but now we're going to have a vehicle that can take some of that co-investment, which today, we're not getting paid for because it's being taken up by non-fund LPs. And going forward, we'll be getting paid for it because it's going to come out of the Evergreen product. So I think it's net-net, a positive for us. I also think it's a real positive for our businesses because it's going to open up the opportunity set. They're going to be able to look at opportunities that are bigger because they're going to access to a bigger pot of capital. So I think it's managed appropriately. I think it's healthy tension, and I think it's a positive for our business.

Yes. That's great. Okay. Let's talk about the AlpInvest business for you guys. Really enormous success here over the last couple of years across several verticals within that, but the secondaries business and the co-invest, obviously, the 2 largest there. As you think about the current supply-demand dynamics in the market, and you mentioned those funds are actually pretty far along in their investment cycle already. And as you kind of gear up for the next vintages, how do you think about timing and sizing? So that's kind of part A. And part B, given all the interest in the space around secondaries in particular, what are some of the adjacencies that you see AlpInvest kind of building out into over time that it might not be really needle moving today, but could be bigger 3 years from now?

Yes. This was the softball question I was hoping for it to come a little earlier. This has just been an unbelievable growth story for Carlyle. I mean the growth numbers coming out of AlpInvest are staggering. When I became CFO 2.5 years ago, the FRE and AlpInvest was [ 10 ]. 2.5 years later, third quarter, it's close to [ 90 ]. And that growth is 100% organic. We didn't buy it. It was 100% organic, which to me is much higher quality growth. Look, this is a business that is getting tremendous positive focus from our LP base. It is an industry that has real long-term tailwinds.

And I think there is a misperception out there that this tailwind is being completely driven by the lack of monetization activity in private equity. And I would tell you that, that is absolutely a tailwind, but it is not the tailwind. There are multiple tailwinds in this business. I think it has a very long runway of incredible growth. We're in an industry where supply exceeds capital formation. And there are only a handful of scale players in this space, and we're one of them. And I think it's going to be very difficult to replicate what we have organically.

You think about what is AlpInvest. And it's much more than a secondaries business. I think we all too often characterize it as a secondaries business. We have secondaries, we have primary, we have co-investment. We have portfolio finance. Secondaries is the largest component. So I think it often just gets discussed in the context of secondaries. But what this business really is, is a data business. I mean we have data on tens of thousands of companies that we've invested in over the last 25 years. I think it's going to be very hard to replicate what some of the scale players like AlpInvest has.

So I think we've done a really good job with AlpInvest. It was largely unintegrated into the Carlyle platform 3 years ago. We pivoted, starting to integrate it, which has been a huge positive. I'm very happy with where the business is. I think this business can continue to grow with its existing products. I think portfolio finance is going to be a business that scales quickly over the next 3 to 5 years. And we started that business 2 or 3 years ago. We're starting to do credit secondaries. I think that could be another big driver. Does infrastructure make sense and wealth. I mean I personally think this has a long runway as well in the wealth channel. So it's -- look, it's a business that we couldn't be happier with.

Yes. Great. Look, another business that you guys sound pretty optimistic about is asset-backed finance sits within your credit franchise. I believe you guys have 6 origination partnerships across the business. So maybe spend a couple of minutes on how these partnerships contribute to capital formation across the Carlyle kind of credit complex as a whole. And I guess, opportunities you see to further scale the asset-backed finance business given all the kind of enthusiasm there is out there on the market.

So I would say we are in -- to use a baseball analogy, we're not even in the first inning for ABF. I mean this is a multitrillion dollar market. I've seen stats that would say it's 5, 10, 20x direct lending. I don't -- you probably have the right stat, but...

Once you get into multiple trillions, it doesn't even matter...

It's a huge industry, we manage $10 billion and that's gone from kind of 0 to $10 billion in a couple of years. It's one of the areas of Carlyle that we're really investing money in terms of giving them capital, adding headcount. We've added some senior people recently. As I mentioned, I think this -- you could see a wealth product coming out pretty soon. But I think I personally -- when I look at our credit business, I think this should be the fastest-growing part of our credit business. I think there's only going to be a handful of real players in this space. And I think we have a right to win. We've been doing it for a while.

We have 6 partnerships in terms of origination channels, and I think we're doing it perhaps differently than our peers. We don't own the origination platforms outright. As a long-time financial services investor, I like to have alignment with people who originate credit and assets. So I think having the originators have continued skin in the game, I think that's the right type of alignment. We have 6 partnerships today. I would suspect that number will continue to grow. We're picking partnerships purely based on where we see interest from an asset perspective and then figuring out what originator we want to partner with. But it's an area -- it's a part of our credit business that I think will be significantly bigger.

Yes. Having you in the CFO role for maybe a couple of more weeks, I'll figure -- I figured we'll throw a couple of P&L questions for your way as well. Let's talk about the FRE margins. Obviously, Carlyle has been investing into a number of key initiatives that are starting to scale nicely, whether it's retail, secondaries, obviously, asset-backed finance, you just talked about. How should we be thinking about the more normal pace of annual FRE margin expansion for the business? And how would you frame incremental margin uplift from stronger PRE or stronger capital markets revenues, right? Because there is a lever there with more PRE, there's actually room for FRE margin to expand as well. So how should we think about both of those?

Well, I'll say, when I became CFO 2.5 years ago, I couldn't figure out why our margin was so low. And we trailed the industry meaningfully. And in 2023, when we did a little bit of a reset on our comp, we put out some forecast and we put out a 40% to 50% FRE margin target. This year, we're running around 48%. So we're at the upper end of that range. And I've been very clear, we know we can operate the business meaningfully higher than that. It's pretty straightforward, but we're going to get there via growth and scale.

And I'm going to continue to invest in businesses for long-term growth, and I'm willing to impact the margin in the near term, recognizing that as the business grow and scale, I think our FRE margin will expand significantly. So I know we can operate the business well north of that range I provided a couple of years ago. I would say in terms of FRE for the year, look, we originally said we're going to grow FRE 6%, acknowledging that we're investing a lot of money in the franchise, which is impacting the margin. And then we raised it to 10%, I think, on the second quarter earnings call, so from 6% to 10%. I think for the year, we'll finish somewhere around 10% to 11% on FRE growth for the year. But again, I feel very good looking forward over the next couple of years in terms of really starting to see meaningful growth on the top line, and that's something that you and I have spent a lot of time talking about. So I feel very good looking forward.

Great. All right. My last question for you to just wrap it up. Let's talk about the share repurchases. That was always part of the framework that was sort of introduced, I guess, when new management, you and Harvey came on to pivot away from the prior strategy. So Carlyle repurchased, I believe, about $500 million of shares year-to-date. And that's obviously an important and sizable part of the capital allocation process. The total share count hasn't really moved much. So as you think about the forward capital allocation strategy, also taking into account that hopefully, we'll see a lot more PRE coming in and the cash flows come in on the back of that, how should we think about maybe a more aggressive capital return plan and making a larger dent in the overall share count?

Yes. So since we went public, our share count up until 2023 had been increasing every year. I'm not really sure what dilution policy that was. But anyhow, when Harvey came on board and I became CFO, 2023 is the first year we shrink share count. We did the same thing last year. You should assume we're focused on doing that again looking forward. We announced a $1.4 billion share repurchase in the fourth quarter of 2023. We did $500 million last year. We've done kind of $500 million-ish year-to-date. So we're getting pretty close to blowing through that authorization.

I still think the stock is cheap. So I'm happy to buy back stock. I think the return is pretty good. But it's just more broadly how do Harvey and I think about allocating capital to the business. Share repurchases made a lot of sense given how cheap the stock was. We were not in a position until maybe the last 12 -- last 8 months to be forward looking externally at M&A. We're now in a position to where we're operating from a position of strength, so we could do M&A.

But the other area where we're just really investing capital is just investing in our businesses for organic growth. So the last 2.5 years, it's been a combination of investing in businesses and share repurchase. I think going forward, in terms of capital allocation, you should, a, assume we're going to be incredibly disciplined. If we were ever to do anything on the M&A front, the bar is incredibly high financially as well as culturally. But I think about capital allocation as M&A, investing in businesses for growth and share repurchase.

Great. Perfect. All right. We'll leave it there. John, thank you so much. Great to see you.

Good seeing you. Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to Carlyle Group Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to Daniel Harris, Head of Public Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, and Happy Halloween, and welcome to Carlyle's Third Quarter 2025 Earnings Call.

With me on the call this morning is our Chief Executive Officer, Harvey Schwartz; Chief Financial Officer and Head of Corporate Strategy, John Redett; and incoming 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 have provided a 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. 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.

In order to ensure participation by all those on the line 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.

Thanks, Dan. Good morning, everyone, and thank you for joining us. We delivered another strong quarter of results, as we continue to execute our strategic growth plan. For the third quarter, we delivered FRE of $312 million and now have generated $946 million year-to-date, up 16%; record AUM of $474 billion, up 7% year-to-date; organic inflows of $17 billion in the quarter and nearly $60 billion over the past 12 months with significant capital coming from credit, secondaries and global wealth. With this momentum, we feel confident about exceeding the financial targets we updated last quarter, which included full-year FRE growth of approximately 10%, up from our prior outlook of 6% and full-year inflows of $50 billion compared to our prior outlook of $40 billion.

Before I dive into more specifics of the quarter, I'd like to address the macro environment. As we look across markets today, this remains a somewhat complex, but quite resilient environment. While the markets have been impacted by ongoing headlines related to policy shifts and geopolitics, the underlying health of the global economy continues to be strong. Inflation has moderated, balance sheets are healthy, and overall, consumers are still spending.

With official government data delayed by the shutdown, earlier this month, we released Carlyle proprietary U.S. economic data. These indicators are derived from our portfolio of nearly 300 operating companies and more than 700,000 employees. These insights provide one of the few real-time views into the economy, steady EBITDA growth, continued investment in technology and AI infrastructure and resilient consumer demand.

Turning to credit markets. There's clearly been a lot of focus here over the past several weeks. To date, our own market and portfolio data are not signaling any broad deterioration in overall credit quality or systemic risk. Consistent with the economic data I just walked through, fundamentals remain pretty solid and credit events have been idiosyncratic. Of course, the credit cycle is evolving, as it should, repricing where necessary, but again, not flashing broad stress. Capital markets activity has meaningfully accelerated. Announced M&A volume was up more than 40% year-over-year in the third quarter. IPO volumes are up 60% year-to-date with increased activity during the quarter.

Now turning to our global private equity business. We've capitalized on an improving transaction environment, returning capital to our limited partners. Over the past year, we have returned $19 billion in capital to investors in global private equity, 150% of the industry average. Note, this does not include $5 billion of signed transactions.

Our momentum internationally continues. In Japan, we announced the successful IPO of Orion Breweries. This marks a positive indicator for the broader IPO market and is another important milestone for our team in the region.

In Europe, we recently completed the sale of Calastone and announced the sale of HSO. Lastly, in private equity, we recently announced the EUR 7.7 billion carve-out of BASF's coatings business, leveraging our global industrial platform and deep carve-out expertise.

In the past 20 years, Carlyle has done 19 industrial corporate carve-outs with an average IRR of 25%, another great example of the unique operating skill set we bring to our investors.

In Carlyle AlpInvest, the team continues to deliver exceptional growth with FRE more than 80% year-to-date. Last month, we closed our largest-ever secondaries fund of $20 billion, further scaling the business.

We recently closed a $1.25 billion publicly rated, GP-led collateralized fund obligation, the largest of its kind to date. This underscores Carlyle's leadership and innovation within a rapidly expanding segment of the marketplace. We also recently completed a $550 million credit secondaries continuation vehicle, reflecting the evolution of our business across newer asset classes.

Carlyle AlpInvest is a market leader at the forefront of an industry with strong secular and cyclical tailwinds. In Global Credit, our platform continues to scale. During the quarter, inflows into our asset-backed finance strategy were almost $2 billion, highlighting the continued demand for private investment-grade assets.

Our strategic approach to insurance solutions continues to pay dividends across all aspects of our investment management capabilities, including our partnership with Fortitude Re and with our third-party insurance clients. Justin will get into more details about Fortitude Re, but insurance remains a key driver of growth for Carlyle, and we continue to see momentum across the platform.

Finally, moving on to Global Wealth, our momentum remains strong. When I first joined Carlyle, we were attracting about $300 million per quarter in evergreen wealth inflows. Today, we're running at 10x that level at $3 billion of inflows, our best fundraising quarter in Global Wealth ever.

To be successful across all aspects of wealth, retail and retirement, you need experience, scale, brand recognition and diversification. Part of our strategy is partnering with extraordinary brands, like our recent announcement with Oracle Red Bull Racing. This marks the first ever private markets partnership in Formula One and aligns directly with our long-term global wealth strategy to reach new clients and deepen engagement in key markets.

Over the last 2.5 years, we mobilized quickly to capitalize on the growth of private markets and retail. We continue to invest heavily into the business, adding resources and platform partnerships to drive growth.

To wrap things up, we are well on our way to exceeding our financial targets for this year and have very strong momentum heading into 2026.

With that, let me turn things over to Justin.

Thanks, Harvey, and good morning, everyone. Q3 was yet another strong quarter, consistent with the long-term growth trajectory we've established. We generated $368 million of distributable earnings or $0.96 per share. Year-to-date, distributable earnings totaled $1.3 billion or just over $3 per share, up 10% from last year.

Fee-related earnings were $312 million for the quarter, up 12% year-over-year. This increase in FRE has been fueled by organic topline growth. For Q3, total fee revenue increased 11%, and year-to-date, a 13% growth rate represents our fastest pace of growth in the last 3 years. Roughly 55% of firm-wide FRE now comes from Global Credit and Carlyle AlpInvest. That's up from about 25% just 5 years ago.

FRE margins remained strong at 48% for the quarter and year-to-date, exceeding last year's record of 46%. Capital markets and transaction fees were $32 million, up almost 20% year-over-year and have more than doubled over the past 12 months. As we said throughout the year, our FRE growth is entirely organic and reflects the scalability of our model and operating discipline across the firm. We are on track to exceed our full-year target of at least 10% growth in FRE while continuing to invest for the long term.

Let me turn to a couple of highlights for our businesses. Carlyle AlpInvest delivered another excellent quarter, raising $6.3 billion of capital, bringing the year-to-date total to more than $15 billion. Third quarter inflows were driven by both institutional demand and strong momentum in our global wealth products. AUM at AlpInvest now sits at $102 billion, up more than 20% year-to-date.

FRE at AlpInvest now represents 23% of Carlyle's FRE, about triple the level from just 2 years prior. Global Credit generated nearly $10 billion of inflows this quarter, and over the last 12 months, inflows have totaled $31 billion, helping lift total AUM to $208 billion.

Global Credit AUM now comprises 45% of firm-wide assets and has grown at a 33% CAGR over the past 5 years. And Global Credit's FRE is now nearly 1/3 of Carlyle's total. Our Global Credit business is comprised of a diverse set of platforms that deliver attractive risk-adjusted returns for our investors.

Our $87 billion insurance solutions platform is anchored by our strategic partnership with Fortitude Re and has been quite active over the past few months. It closed its $4 billion reinsurance agreement with Unum, its fourth reinsurance transaction this year, issued an inaugural $500 million funding agreement-backed note and recently launched a reinsurance sidecar focused on driving growth in Asia.

Together, we believe these initiatives will lead to more than $20 billion of new AUM in the intermediate term. Our leading nearly $50 billion global CLO platform had inflows of more than $3 billion in the quarter. Credit quality remains strong, and the business has recently been recognized for having among the best performance across all U.S. CLO managers this year with the faults running well below the industry average.

Our $13 billion direct lending platform has been growing at a 20% CAGR in the past 5 years. We believe the market opportunity for direct lending will continue to grow, and we are continuing to invest in this platform, adding resources across leadership and origination.

Credit quality remains healthy across the portfolio with realized losses running at an average of just 10 basis points per year over the past decade. Our $10 billion asset-backed finance business raised $2 billion just this quarter, and our leading $20 billion opportunistic credit strategy continued to deploy its third vintage fund and is quickly approaching its next fund raise.

Shifting now to Global Private equity. Over the past year, we have attracted nearly $9 billion of capital into our GPE strategies. And today, we have $40 billion of available capital to deploy across the platform. We're excited about our growing transaction pipeline as we head into the fourth quarter, including the recently announced EUR 7.7 billion transaction with BASF in partnership with the Qatar Investment Authority.

We also have nearly $5 billion of announced exit transactions that we anticipate to close in the coming quarters. While Q3 was a lighter realizations quarter, we expect a significant step up in Q4. In addition to this, as you may have seen, one of our U.S. bio portfolio companies, Medline, filed a registration statement with the SEC in connection with the proposed IPO. We remain excited about the future of Medline and congratulate the management team on all they have accomplished so far.

In Global Wealth, our evergreen vehicles continue to scale quickly. We currently have more than $32 billion of evergreen capital, and we raised $3 billion across our evergreen wealth products this quarter. The $6 billion raised over the past year reflects a 90% growth rate from the same period last year.

Notably, our new Carlyle AlpInvest CAP solution in partnership with UBS saw strong demand in its first full quarter and has already surpassed more than $1 billion in assets.

Finally, I'd like to say a few words about the state of our balance sheet and capital management activities. During the quarter, we took advantage of strong debt markets and issued $800 million of 10-year notes at 5%. This extends the duration of our liabilities and leveraged our strong credit rating. This capital provides additional flexibility to invest in growth initiatives in the coming years.

We also repurchased over $200 million of stock in the quarter, reflecting our conviction that Carlyle shares continue to be an attractive investment. We are disciplined and opportunistic when allocating capital, balancing share repurchases with investments to drive future growth. Our balance sheet is strong and well positioned to support our organic initiatives and the firm's long-term financial flexibility.

To summarize, our third quarter results highlight continued growth earnings diversification and operating momentum across the platform. We're executing well, scaling efficiently and delivering attractive results for both shareholders and investors. I look forward to meeting and working with all of you more over the coming months.

And before we get to Q&A, I'd like to hand things over to John for some concluding thoughts.

Thanks, Justin. Good morning, everyone. Let me make a few points on the progress we've made on our strategic plan over the last 2 years. We grew AUM 25% to nearly $475 billion. In the last 12 months, we grew FRE more than 50% to $1.2 billion. Not only did we grow FRE, we improved FRE margins by over 1,200 basis points. We overhauled our capital allocation and compensation strategy.

We returned more than $2 billion in capital to shareholders through dividends and repurchases. We also implemented a strategic update to our compensation strategy to increase alignment with all stakeholders. This allowed us to pay more carry to our employees and more fee-related earnings to you, our shareholders.

We overhauled our global wealth strategy. As Harvey said, we increased our inflows 10x. And lastly, our focus on capital markets has clearly generated momentum. We have more than tripled our revenues over the last 2 years to almost $240 million. The positive momentum we carry into 2026 is the direct outcome of the extraordinary work of our people.

I'm excited to begin my next role, leading global private equity, a business with world-class investors and significant momentum.

With that, let me turn the call over to the operator for your questions.

[Operator Instructions] And our first question will come from Brian Mckenna with Citizens.

So looking at inflows for the -- hey, how's it going Harvey? So looking at inflows for the quarter, it was clearly a little bit lighter in private equity, but credit and solutions both came in above expectations, and there's a lot of momentum there. It would just be helpful if you could talk about the outlook for inflows by business into year-end. And how you're thinking about flows throughout 2026 and some of the different drivers there? And then, I guess, do you have any visibility into some of the larger insurance transactions that might be coming in over the next couple of quarters?

Thanks, Brian. It's John. Look, we feel very good about where we are in terms of inflows. This is an area where I think we have tremendous momentum and really reflects we have strong investment performance across the firm. And I would say client engagement remains positive and remains elevated.

So $17 billion in the third quarter, obviously, a very strong quarter, it's nearly double the third quarter from 2024. If you look at kind of an LTM basis, we're $60 billion, and year-to-date, we're around $45 billion. So we feel good about the revised guidance that Harvey alluded to in his script, which we provided last quarter, which was around $50 billion. Again, we're at $45 billion year-to-date.

We obviously had a very strong quarter in credit and AlpInvest. Harvey talked about how we closed on the secondaries platform, where we raised $20 billion, but we had a really strong quarter without any real private equity funds in the market. So I feel good about the diversification that's driving this growth. So overall, I'd say in terms of inflows, we have tremendous momentum going into the fourth quarter, but more importantly, going into 2026.

And our next question will come from Alex Blostein with Goldman Sachs.

Justin, welcome to the call, and John, congrats again on the new role. Harvey, maybe just building on that a little bit. You alluded in your prepared remarks, in the script as well, just around the strong momentum you guys think for 2026. Maybe expand on that a little bit. What are the key top-of-the-house priority in terms of growth for next year? What do you find to be most needle moving? And what do you guys ultimately that could mean for management fee growth into '26?

Great, Alex. So I would say at this particular point in time, the momentum for the firm has never felt better. And I say that in terms of client engagement globally, the strategic execution of the team. And I think that, when I say that, I'm talking about all aspects of the firm. So you see it in solutions, you see it in the wealth channel, you see it across credit. It's a quiet year for private equity and fundraising, but the performance by the team, as I mentioned, has been remarkable, returning 150% of the average of capital.

When you think through 2026, the demand for capital is going to be quite high. So I think deployment will be good, and I think the opportunities would be great. We see opportunity virtually in every part of the platform. If you think about credit, they're building quite quickly in the asset-backed business. You'll see more activity there. Same across insurance, the pipeline remains very good and fortitude and the engagement just broadly speaking, with insurance clients, as they continue to invest in private credit. So the team has done a remarkable job there.

We have the 2 flagship wealth funds, evergreen funds, up, CPEP will really be in the market next year. And so you'll see another wealth flagship vehicle, which will give our wealth investors the opportunity to participate there. So really when you sort of look at all aspects, either through the client lens or the specific business, I feel very, very good about the momentum and about flows and about growth.

And then, capital market still has a lot of room to run, and that's just going to be levered to activity. And so all the pieces now that we've been putting in place over the last couple of years, and I have to thank John for his leadership and partnership in that role, you're really starting to see it, but we're -- really feel we're just very much at the beginning of that.

And the next question will come from Glenn Schorr with Evercore.

So I'm curious, you had a lot of good things to say about the forward momentum in realization pipeline, and all the banks are super supportive in the deal environment coming through. So when you go through your comments of your $5 billion of announced transactions, I don't know if you can help us a little bit on timing with that. But fourth quarter better than third quarter, Medline IPO happening, I guess my question is if we could peel back that onion a little more because I think that's the part of softness in the quarter and just a light realization quarter.

And then, as you move into next year, I think that's where the extreme bullishness on the bank's part was, as we head into early '26, does your forward pipeline align with that? And then, again, trying to get at what some of the other questions get in that is what does that mean for an FRE story for next year? This year, you beat your 10%, is it shaping up to be a bigger story than that next year?

Sure. I think that was 4 questions. Glenn, I just want to point out you're violating Dan's rule, but we're going to address it all. So I'm going to ask John to talk to the extreme bullishness in the pipeline. One thing I will say is that's not a quarter-to-quarter thing in our business, and so I think people should understand it. But John, why don't you give a little more color on how we think about that pipeline, monetizations and realizations?

Yes. I would just echo a little bit what Harvey said, Glenn, we as a management team don't look at quarter-to-quarter. It's much more of a multi-quarter view that we take. I mean, it's just part of the private equity business. It's hard to control when deals close, and it's just -- it is what it is.

I think just taking a step back in terms of -- we have been very -- this management team and our investors have been very focused on performance, and we are incredibly pleased with our investment performance. And I would say the team -- the investment teams have been very focused on realizations, and the numbers show that. Realization activities are up 35% in the last 12 months.

In global private equity, which I think most people focus in on in terms of realizations, that's where most of our carry funds are, we've returned nearly $20 billion in the last 12 months, and that's 30% higher than the prior period.

And as Harvey said in his prepared remarks, as of third quarter in Global Private Equity, we're 150% of the industry average. So clearly, we're an outlier in a positive way. I would also say -- our engagement with our investors is very positive. But let's just focus in on your question in terms of the pipeline.

In our U.S. private equity business, I would say we are returning more capital than we have -- than our goals or our targets. Since we had the end of the third quarter, we've closed on $1 billion of transactions. That includes the Calastone transaction, which was a very good transaction across a couple of different funds for us. We also will likely close -- announce and close on a deal today, which is in our U.S. private equity business.

In terms of the $4 billion of deals that are signed and pending close, that does not include, Glenn, the Medline IPO, which, as you know, we publicly filed for an IPO on Tuesday. But -- look, I can't say all of this $4 billion of pipeline will close in the fourth quarter, but it's a big number. Most of it will probably close in the fourth quarter. Some of it might spill over into the first quarter. But we feel very good in terms of we are giving our investors in our private equity business. We are giving them back more money than we are investing, which is a positive in the environment we're in.

In terms of just kind of high-level pipeline going into 2026, I'd say our deal teams are very busy, both in terms of deployment and realizations. And I think the pipeline, including the Medline IPO, speaks volumes to kind of how our business is positioned in terms of momentum and realizations.

And the next question will come from Bill Katz of TD Cowen.

Okay. Maybe just a 2-part. Just to want to make sure I understand the math, if it's $4 billion to $5 billion of announced transactions, is the typical MOIC 2x to sort of think through the realization opportunity?

And then a broader question is just as I think about you getting towards the end of your repurchase activity, can you maybe refresh a bit on capital management priorities? How are you thinking about maybe where the stock is trading today versus any kind of inorganic opportunity now that the core business has stabilized?

It's John. So I -- we are near the end of our $1.4 billion authorization. We repurchased $200 million in the quarter. I think year-to-date, we're around $500 million of repurchases. I would expect a similar amount probably in the fourth quarter. And look, just more broadly, how do we think about capital allocation. There are various ways we can allocate capital as a management team. One of them is we can invest in our businesses for growth. We are clearly doing that. That's our first priority. We are laser-like focused on growth. So any time we can invest capital in the business to accelerate or achieve growth. That is our first priority.

We can give capital back to our shareholders via dividends or via repurchase. We still think, and you should assume, based on our repurchase activity that we still view our stock as an expensive and attractive investment. And the other use of capital can be something on the inorganic front, but we focus on all 3 areas with driving growth our main priority.

And the next question will come from Steven Chubak with Wolfe Research.

Welcome Justin to the call. So I did want to ask on the FRE growth just looking out to next year. I recognize you're tracking above the 10% year-on-year guide. You spoke of the strong momentum heading into next year. At the same time, you do have some headwinds just in the form of elevated catch-up fees that may not repeat as well as the fee rate step down from CP VII. So just wanted to gauge your confidence level and the ability to drive FRE growth next year, even in the face of some of those headwinds, and speak to some of the building blocks that support that view.

We feel -- as we've been saying, and we'll give you guys better guidance as we come through the year, but we feel very good about the momentum across the platform. Again, you pick your sleeve, capital markets, insurance flows, investments we're making in credit, the wealth channel. And then, we'll have a bigger pickup in private equity flows into next year. So I'd say overall, coming into the end of the year, the momentum feels, as we've said, as good as it's ever felt.

And our next question will come from Brennan Hawken with BMO.

The credit flows were really strong this quarter. But actually, the fee rate looks a little bit light versus my expectations. Was there anything to do with timing on those flows? I know sometimes that can kind of skew the averages and cause the fee rate to look a little wonky. Did the flows come in at a lighter fee rate with the mix? Or was that fee rate impact more of a timing thing?

Yes. Thanks for the question. It's Justin. Look, I think some of that might have been skewed by some of the insurance transactions, where the fee rate can be a little bit wonky. But overall, we have great momentum across credit. We're up 18% year-to-date in fee revenues. We're up 28% year-to-date in FRE. And we really see broad-based momentum. It's not just one business, right? Asset-backed is taking in capital significantly. Our CLO business is really hitting on all cylinders, having another great year.

And we're seeing really consistent and strong flows from wealth as well with our CTAC product and our BDCs. So quarter-to-quarter, it sort of just depends on the mix, but really every part of that business is doing well, and we're really excited about the momentum we're going to carry into 2026.

And our next question will come from Dan Fannon with Jefferies.

So $3 billion of wealth flows in the quarter, quite strong. Can you talk to the diversity of those flows? And then, clearly, you have momentum in that business, but -- and I think you mentioned one product and potentially coming to market next year. Maybe talk about the product roadmap, and where you see that evolving as we go into 2026?

Yes. So as we talked about on the call, flows were up 10x since the new management team came into place a few years ago. And so what you're really seeing now is -- and I still think it's early innings on this, the strategy coming together. And the pillars of that strategy are 3 flagship funds: CTAC, which is best of credit; our Carlyle AlpInvest Solutions business; and then, CPEP, which will be really coming into view in 2026 across the private equity platform. And so the mix has been quite good.

CTAC has been out longer, but a steady contributor. And then, of course, you -- what you're really seeing is the pickup in the Carlyle AlpInvest Solutions, the partnership with UBS. But I feel really, really good about the building momentum globally. Again, all of these building blocks connect together and so success on each of the strategies really provides an exponential effect to the other strategies. And it's all just about the brand, our connectivity with advisers.

Obviously, you've seen us continue to invest in any number of ways. There's human resources, product development, and obviously, the partnership with Oracle Red Bull in terms of connecting with the global platform. And so you should expect to see good momentum in that business and continue to grow at a good pace.

Okay. And our next question will come from Ben Budish with Barclays.

I had maybe another 2-parter on the -- your sort of public markets exposure. Maybe just in the quarter, it looked like there were a few public investments that were weighing on your private equity performance. Just curious if you could address, is it sort of timing-related end of quarter to end of quarter? Are there any sort of like impaired stories there? Or is it more market fluctuations?

And then, as we think out, you've given us some commentary on big specific transactions like Medline, but maybe just philosophically, how should we be thinking about the realization pipeline in terms of strategic versus financial sponsors versus IPOs? What's the historical mix? What would you expect going over into the next couple of years?

Ben, it's John. Look, your question is obviously focused on corporate private equity. And again, I -- similar to realizations, I look at performance over a multi-quarter period. It's very hard to have a story or narrative on any specific quarter, so -- and I think this quarter actually is -- doesn't really deserve much narrative in the sense we just had some volatility in the publics.

But when I kind of look at corporate private equity performance, particularly in the U.S., we're very pleased. CPA is up kind of 15% in the last 12 months. But more importantly, when I look at the operating metrics within the portfolio in the U.S., we continue to see continued strength. Revenues are up almost up double digits. EBITDA is up 8%. So I feel good about the underlying performance of the -- operating performance of the individual portfolio companies.

I'd say, look, we are an outlier in terms of realizations, you can't have the level of realization activity we are having if your performance is not good. So I think that's important to understand. And again, the teams remain very focused on performance and realizations.

I think some of the volatility you're referring to was largely isolated to our CAP franchise, where I think we have an outsized percentage of the assets we manage in public securities, and there has been some volatility in those markets. But fundamentally, those are very good companies we own. We don't have any long-term concerns on that in Asia.

In U.S., CP VII, in particular, has some -- had some volatility in the public markets as well. It's particularly isolated to StandardAero and Hexaware. They were down from the previous quarter. If you look at where they are today, actually, we've already erased most of that down movement we saw in StandardAero and Hexaware. They're both great companies. So I have absolutely 0 concerns long term about the public securities we own in our U.S. private equity business.

And our next question will come from Kenneth Worthington with JPMorgan.

John, it's been a pleasure working with you. Best of luck back in buyout. Justin, I'm sorry, John has set a pretty high bar here. When looking at credit, the Unum block hit this quarter, so congrats. At the same time, we saw the most significant level of credit, I'll call it, distributions in both AUM and fee-paying AUM. Can you talk about the dynamics that drove the outsized, I guess, distributions this quarter? I don't know if it was Unum related or something else, recurring, doesn't recur, anyway? Any flavor would be helpful.

Yes, Ken. Look, I'd characterize it as the normal course of the business. It's not a bad time to realize some of our investments, especially in the opportunistic side. So when we have an opportunity to have a great outcome for our investors, we certainly take advantage of that. And some of it is the normal flow of our CLO business, which we've done a -- the team has done a really amazing job over the last couple of years.

Two years ago, about 40% of our CLOs were in runoff. And the team has actually done 41 resets since then. And now only 12% of the CLO platform is in runoff. But that -- when you call a CLO and you reset it, that can play into the numbers. So I don't think there's anything really specific there, nothing really in the insurance side, just the normal course of raising new capital and realizing investments for our LPs.

And the next question is going to come from Patrick Davitt with Autonomous Research.

Obviously, been a perfect storm for secondaries here for a while now. But to your point earlier, it feels like the realization window is opening up a bit, though in fits and starts. How are you guys thinking about the sustainability of the so-called golden era in secondaries if the realization window keeps opening up?

Yes. So I think -- let's take a step back, there's a reason why we call it Carlyle AlpInvest Solutions. That whole business is going through sequential growth, not just because of the secondaries activity, but because of the broader capability set across the platform.

Remember, that -- the shorthand, and I know you know this quite well, the shorthand for that business is secondary. But actually, what they're providing is a suite of solutions, secondaries, co-invest, really corporate finance solutions. We highlighted a few of the trends in terms of credit secondaries and obviously co-invest.

So it really is, I think, a bit of the evolution of what's happening in our industry. As the industry continues to grow and mature and private capital is really at the center of capital, what you're seeing are the need for liquidity tools, so AlpInvest -- Carlyle AlpInvest creates the entire solution set for that.

Now, in terms of the more narrow slice of secondaries, anything you look at, in terms of statistics, suggest that demand for secondary capital is going to grow for several years. We would see that in our pipelines, in our engagement with clients. And this is not -- again, sometimes they are sort of misunderstood or stale narratives in the world around the industry.

This is not about distressed portfolios or people who can't sell things. A lot of this now is about capital allocation and repositioning of capital. And so we can be in a room with a CEO or CIO and the whole discussion is about how to reposition our portfolio. So again, we need to start really thinking about this being at the center of a flywheel of corporate finance solutions. But the narrow question on secondaries, it feels quite good.

And the next question will come from Michael Cyprys with Morgan Stanley.

Wanted to ask about ABF. I think you mentioned $10 billion platform today. I was hoping you could elaborate on some of the steps you're taking to expand the platform to accelerate growth. How you see this platform contributing as you look out over the next 12 to 24 months?

Yes. It's Justin. We're very excited about the ABF platform that we've built. It really started as a partnership with Fortitude, and it's expanded from there. We have multiple partnerships with origination platforms that have been leading into that portfolio. We've had a lot of interest from the noninsurance space, which ABF has historically been really an insurance product, but we have some vehicles that we are discussing with a number of counterparties outside the insurance space to expand that business. So -- we're at $10 billion today, and it's accelerating. I actually think that is probably one of the greatest growth areas that we see in our credit business. Steve has done a fantastic job. And I think there's a lot of potential for that, as we go into the fourth quarter in 2026.

I show no further questions in the queue at this time. I would now like to turn the call back over to Daniel for closing remarks.

Thank you, everyone, for your time today. If you have any further questions, feel free to follow with Investor Relations. We look forward to talking to you next quarter.

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

Good afternoon. My name is Jo, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kiwetinohk Energy Business Strategy Review Update Conference Call. [Operator Instructions]

Mr. Carlson, you may begin your conference.

Thank you, Jo, and good afternoon, everyone. Welcome to the Kiwetinohk Energy investor call announcing the conclusion of our formal business strategy review and sale of the company. Thank you for joining us for this update. I'm Pat Carlson, Kiwetinohk's CEO. And to start, I will ask Janet Annesley, our Chief Sustainability Officer, to do an indigenous land acknowledgment. Please go ahead, Janet.

Thank you, Pat. Kiwetinohk's conference call today is coming from Calgary, the traditional territories of the people of Treaty 7, which includes the Blackfoot Confederacy comprised of the Siksika, the Piikani and the Kainai First Nations, the Tsuut'ina First Nation and the Stoney-Nakoda, including Chiniki, Bearspaw and the Goodstoney First Nations. Calgary is also home to the Otipemisiwak or the Métis Nation of Alberta Districts 5 and 6. Kiwetinohk has operations across Alberta's Treaty 6, 7 and 8, and we recognize the diversity of First Nations and Métis people in all these places that we call home.

Now back to you, Pat.

Thank you, Janet. Joining me today in addition to Janet are Jakub Brogowski, Chief Financial Officer; Mike Backus, Chief Operating Officer, upstream; Lisa Wong, Senior Vice President, Business Systems; and Kevin Nielsen, VP, Corporate Controller and Investor Relations.

We'd like to use the first part of the call to provide you with information regarding our corporate sale announcement made earlier today. [Operator Instructions]. Before going through details regarding the sales process, I'll remind everyone that the conference call may include forward-looking information and non-GAAP financial measures with the associated risks and disclaimers detailed in our news release and other official disclosure documents, which are all available on our website and SEDAR.

I'm extremely excited and pleased this afternoon to have announced that we entered into an agreement with Cygnet Energy, whereby Cygnet will acquire all issued and outstanding shares of Kiwetinohk for cash consideration of $24.75 per share. This transaction marks a successful outcome of the business strategy review that we first announced on March 5 and represents a 63% premium to Kiwetinohk's share price on that date.

Since the formation of Kiwetinohk in 2018, we've assembled a high-quality liquids-rich asset base in the Duvernay and Montney, driven differentiated growth and delivered peer-leading netbacks supported by our owned and operated infrastructure and access to premium Chicago gas pricing. Today's announcement is a recognition of these achievements.

I'd like to thank our shareholders on behalf of the Board and our team for their continued support.

I will now ask Jakub to provide more information from the CFO's perspective.

Thanks, Pat, and good afternoon, everybody. As Pat mentioned earlier this year, we began a comprehensive business strategy review with the goal of unlocking value for our shareholders. I believe today's transaction achieves that goal. It represents the culmination of years of disciplined development of our high-quality, long-life producing assets.

Leading up to this announcement, Kiwetinohk undertook a thorough and independent review process. This included the formation of a special committee of independent directors, a detailed assessment of strategic alternatives with our independent legal and financial advisers and the receipt of an independent formal valuation and fairness opinion.

As Pat noted, Kiwetinohk shareholders will receive $24.75 per share in cash, funded primarily by NGP Energy Capital Management and the Carlyle Group with a portion of ARK Financial's shares in Kiwetinohk being exchanged for equity in Cygnet.

Some key deal metrics we're proud to have achieved, particularly in an uncertain and declining commodity price environment include a total enterprise value of $1.4 billion, a 3.5x multiple of our estimated 2025 adjusted funds flow from operations, approximately $41,500 of value per flowing barrel of production and a premium over our total proved NPV15 reserve value before tax of $1.3 billion, as outlined in our 2024 year-end reserve report prepared by McDaniel & Associates. This premium was achieved despite a decline in the overall commodity price environment during 2025 to date.

After a thorough review of options available, including the status quo, the special committee unanimously recommended and the Board of Directors approved the Cygnet transaction. Management and Kiwetinohk's Board of Directors have also unanimously recommended the Cygnet transaction and Kiwetinohk shareholders representing 79% of Kiwetinohk's shares outstanding have agreed to vote in favor of the transaction, including 38% of minority shareholders. Further details are provided in this morning's press release and will be provided in the management information circular that will be mailed to Kiwetinohk shareholders.

I'd like to take a moment to thank all Kiwetinohk employees. The work our team has done since going public has positioned the Duvernay as a top-tier unconventional resource, attracting significant new capital and renewed industry interest in the play. Today's announcement with 2 major international investors entering Canada is a direct reflection of that success. Our strategic review has crystallized the value we've created, allowing us to deliver a strong and certain return to shareholders faster and with greater confidence than continuing as a stand-alone business we likely have achieved.

I would also like to thank our shareholders for their continued confidence and support since the company's formation. Your belief in our strategy and the people has made this milestone possible. We now look forward to closing this pivotal transaction and beginning an exciting new chapter for Kiwetinohk and its stakeholders.

'll now turn it back to Pat.

Thank you, Jakub. I'd like to conclude this conference call by thanking all of the directors, employees and contractors of Kiwetinohk for the efforts and achievements over the last 7 years and our shareholders for their support through COVID and times of volatility in engineering and energy markets.

We will now open phone lines for questions. Thank you for joining us for this update. Jo?

[Operator Instructions] There are no questions at this time. I'll pass it back to you, Pat.

Yes. Thank you, everyone, for participating in the call, and we look forward to talking to you again after our Q3 Board meeting. Thank you.

This concludes today's conference call. You may now disconnect.

Good day, and thank you for standing by. Welcome to The Carlyle Group Second Quarter 2025 Earnings Call. [Operator Instructions]. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Harris, Head of Investor Relations. Please go ahead.

Thank you, Kevin. Good morning, and welcome to Carlyle's Second Quarter 2025 Earnings Call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz; and Chief Financial Officer and Head of Corporate Strategy, John Redett. 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 substitute for measures prepared in accordance with general accepted accounting principles. We have provided a reconciliation of these measures to GAAP in our earnings release to the extent reasonably available. Any forward look 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.

In order to ensure participation by all those on the call today, please limit yourself to one question and return to the queue for any additional follow-ups. With that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

Thanks, Dan. Good morning, everyone, and thank you for joining us. We delivered an exceptionally strong second quarter. Our performance marks significant progress against our strategic plan and underscores once again the momentum we have globally. We set a number of new record highs. FRE was a record $323 million, up 18% year-over-year. FRE margins for the first half was also a record 48%, and we hit record AUM of $465 billion. It's also worth noting at $886 million, this is the highest level of first half DE the firm has ever had. We also brought in $51 billion of organic inflows over the past 12 months. This is a clear sign of continued confidence from our investors and is reflective of the diversified nature of our Global Investment platform. Before I dive into more specifics of the quarter, I'd like to address the macro environment.

As we progress through the second quarter and into the summer, sentiment has continued to become meaningfully. Markets are functioning quite well, and [indiscernible] has accelerated. Equities are near record highs and credit spreads are also near record high levels. Markets have responded quite well to progress by the administration on tariff negotiations and tax policy. This has reduced uncertainty and an accelerating M&A and deal activity. As we all know, confidence is the greatest market elixir. And with increasing confidence, we're seeing continued demand for private capital. We're investing where we have strong convention and [indiscernible] value, while maintaining our disciplined approach, how we price risk.

Across the firm, we deployed $26 billion in the first half of 2025. This is up almost 50% year-over-year. I would also like to highlight how much capital we're returning to investors. Firm-wide realized proceeds are up nearly 40% year-over-year. While the corporate private equity market broadly has faced criticism for low levels of capital return to investors, we've defied that trend. We returned almost $15 billion to investors over the last 12 months. This represented 17% of our portfolio and is 3x the industry average. And again, this is just for the second quarter, which does include significant post-quarter activity already announced. This is a really impressive achievement for our teams and fantastic for our investors, and highlights the strength of the portfolio and differentiates us in the marketplace to other firms. And trends in performance also continue to be quite positive. Our two most recent [indiscernible] funds appreciated approximately [ 20% ] over the past 12 months.

In Asia, funds 1 through 4, each ranked in the top 5% performance in their respective categories, and our fifth fund appreciated 8% this quarter alone. We've also had distinctive performance versus the market in other parts of our business, amid one of the most difficult and fundraising environments for real estate and [indiscernible]. This week, we announced the final close of our tenth U.S. funded $9 billion. That's nearly 15% larger than the predecessor fund. This team is worth underscoring given the team's standout performance versus the history in a difficult real estate investment backdrop. This marks the largest U.S. real estate fund raised across the industry in the past 18 months, a real reflection of the performance excellence of our team and the power of our global brand.

Over on Global Credit, we hit key milestones across multiple parts of the platform, an asset-based finance, a key area of growth for Carlyle, we see lots of momentum. This quarter, we announced the first of its kind collaboration with Citigroup in the fintech specialty lending space. We also entered into a new strategic origination partnership bring us to 6 platform partnerships that collectively enhance our differentiated origination capabilities. Asset-based finance AUM is up 40% year-over-year and continues to scale rapidly. And in our opportunistic Credit business, we provided a landmark hybrid capital solution to Trucordia, a leading insurance broker. More broadly, global insurers continue to represent an improving growing client base for Carlyle. We continue to see strong demand for capital and liquidity solutions for insurers to Fortitude [indiscernible], which closed on $8 billion of reinsurance contracts in July. We also continued compelling partner to third-party insurance clients globally, providing access to a range of investment opportunities, particularly as interest in private investment grade solutions accelerates. This enables us to work with the full spectrum of insurance clients while benefiting from the growth of our partner or Richard Ray.

Moving on to Carlyle AlpInvest. The business had a record quarter with fee revenues up more than 50% and FRE nearly doubling over the past year. Secondaries continue to be a major growth engine and our latest fund currently in market is already significantly larger than the prior vintage. The secondaries co-investment portfolio finance business provides us with unique content and a committed advantage as market dynamics shift and liquidity needs evolve. Our expertise, combined with the scale of our global platform puts us in a strong position as secondaries and portfolio finance markets continue to grow.

Turning to Global Wealth. We've seen the assets in CAPM increased sixfold over the last year. CAPM provides diversified exposure across our Carlyle Alpinvest investment strategies. There are a number of reasons advisers and investors have interest in this solution, including the need of deployment, liquidity, diversification benefits and of course, a long history of outstanding investment performance. This is an extraordinary solution for our wealth clients. Last month, we launched a partnership with UBS, where we are the only private equity secondary solution for their international wealth clients. We're thrilled to partner with them and the early response has been fantastic. UBS is one of the leading global wealth management platforms, and we expect this partnership to be a strong driver of growth.

In aggregate, we now have almost $30 billion AUM of perpetual evergreen strategies, up nearly 40% year-over-year. Lastly, we continue to gain momentum in Capital Markets business, another important strategic initiative for the firm. Over the last 12 months, we generated over $230 million in capital markets fees and we see further upside to this level of M&A and IPO market activity increases.

To wrap things up, obviously, we've seen tremendous growth and momentum over the last year. As we look ahead to our next phase of growth, we asked a series of leadership appointments last week, including naming John Redett, Mark Jenkins and [ Jeff Nenteman's ] Co-President; and appointing [indiscernible], as our new CFO. These appointments, are natural evolution of our business and solidify our ability to operate at scale with the focus, alignment and agility required [indiscernible] today's environment. I look forward to partnering closely with these leaders as we execute our strategy and deliver significant value to our investors and stakeholders around the world. With that, let me turn things over to John.

Thanks, Harvey, and good morning, everyone. As Harvey said, we had a fantastic second quarter. We delivered record FRE of $323 million, up 18% year-over-year. Year-to-date FRE totaled $634 million, up 18% with a 48% FRE margin. DE of $2.05 per share over the first 6 months was a record start for the firm. Management fees reached $590 million for the quarter and $1.1 billion year-to-date, a 7% increase. Capital market fees were $48 million in the second quarter, $126 million year-to-date, more than double last year. Overall, year-to-date fee revenues of $1.3 billion increased 14% year-over-year. We also reported record firm-wide AUM ending the quarter at $465 billion. First half inflows totaled $28 billion, and over the last 12 months, inflows reached $51 billion, a 12% organic growth rate. We raised $2.2 billion in our Evergreen Funds during the quarter, bringing our AUM in this important growth area to nearly $30 billion, up more than 40% year-over-year.

Both Global Credit and Carlyle Alpinvest delivered record FRE, together accounting for 55% of firm-wide FRE, up from less than 30%, 2 years ago. This shift reflects the increasing earnings power of these businesses and the overall diversification of our earnings stream. Carlyle AlpInvest FRE reached a record $68 million for the second quarter. And year-to-date FRE of $134 million is up more than 80% driven by a 43% increase in management fees. We raised $5.1 billion of new capital in the quarter, supported by the final close of our latest co-investment fund, which is nearly 15% larger than its predecessor. We've also seen strong fundraising in our latest secondaries fund, which is already significantly larger than its predecessor, and we are still raising capital. FRE margin in AlpInvest reached 54% in the quarter, up from 49% in compared to last year. Global Credit also delivered strong performance with $111 million in FRE compared to $1 million in the second quarter of last year, a 37% year-over-year increase.

For the first half, FRE $215 million increased 41% organically year-over-year with a 46% margin. Global Credit benefited from strong capital markets activity, increasing fee-related performance revenue and 11% growth in management fees. Credit inflows remained strong with $5.5 billion raised during the quarter. This was driven by CLO issuance, asset-backed finance, inflows into CTAC. Over the past 12 months, global credit inflows of $24 billion reflect continued scaling in our strategy as well as cyclical and secular tailwinds.

Turning to Global Private Equity. A key highlight in the quarter was the activation of our tenth vintage U.S. real estate fund, which closed at $9 billion, nearly 15% larger than its predecessor. A great outcome amidst a challenging real estate fundraising environment. Performance in our U.S. buyout platform remains strong with CP7 and CP8 portfolio appreciation of 3% to 4% in the quarter, and 17% to 20% over the last 12 months. We also continue to return significant capital to our investors. This quarter, realizations in StandardAero, NSM Insurance, Forgital and [indiscernible] $4 billion of realized proceeds in corporate private equity. In addition, we've announced approximately $4 billion of transactions that have not yet closed. It's worth repeating what Harvey said.

Over the last 12 months, we have returned almost $15 billion to investors in Corporate Private Equity, nearly triple the industry average. Realizations across our Global Investment platform over the last 12 months are approaching levels not seen since 2022. Given the exceptional first half performance and momentum across the business, let me update you on our 2025 outlook.

We now expect full year FRE growth of approximately 10%, up from our prior outlook of 6% while continuing to invest in the business to drive growth. We see potential upside if markets continue to improve. We're also tracking towards full year inflows of $50 billion compared to our prior outlook of around $40 billion.

Before we wrap up, I'm really excited for Justin to step into the CFO role in January. I've known Justin for a long time as we've been colleagues at Carlyle for nearly 20 years. He's an exceptional [ investor ] and business manager, and I'm excited to work with him over the next several months as we both transition into our new roles. With that, let me turn the call over to the operator for your questions.

[Operator Instructions] Our first question comes from Bill Katz with TD Cowen.

Congratulations to everyone with the promotion. Wonderful to see. Just maybe pick up, John, where you left off on the guidance. Great to see the increase for sure. I was wondering maybe a two-part question, maybe part-one for you and maybe part two for Harvey. For you, wondering maybe unpack maybe the driver the step-up of the FRE growth, how much of that is more second half versus sort of strong first half? And then where do you see the incremental growth on sales?

And then for Harvey, I know we've been speaking about this a little bit. I know your peers are laying out sort of 5-year targets. It doesn't seem like you want to do that, but it seems like you might be receptive to looking out a little more intermediate term. I'm wondering if you can maybe frame out how we should be [indiscernible] sort of initially thinking through 2026 opportunity to grow the business?

Well, Bill, maybe I'll kick off. And I heard it was your birthday today. Is that right?

Yes, and thank you for the great results, great birthday present.

That's all about you, Bill. Well, Happy Birthday. Look, when I arrived at the firm, some of the feedback from our stakeholders is that we didn't have forward-looking metrics for people to dive into. So for the first time ever, as you know, roughly 2 years ago, we put out the annual metrics you guys have given us feedback that you'd like to see longer duration -- and so going through that. We want to make sure you guys have the information you can -- I don't know [indiscernible] and I talked about this. I've talked about this with a lot of shareholders. I'm not sure anyone in the world can predict 5 years in any business, given the complexities of the world. But certainly, there's a bit of a desire for more, we'll certainly contemplate that. I'm not committing to anything. But we'll certainly take that into consideration. But yes, I want to turn it over to John for the second part of the question.

Yes, Bill, look, the revised outlook, it really just reflects the strong momentum we have -- it's across the entire platform. And look, the firm is performing ahead of our expectations. So look, we're pleased with the year-to-date results. The momentum is strong, as I said, but we continue to invest heavily in the franchise to drive growth looking forward. I think it's helpful just to -- I mean FRE was up 18% in the second quarter, up 18% year-to-date. Very, very pleased with the results. So the outlook really just reflects improved momentum across the franchise. What's driving this outperformance?

I would say the growth -- the organic growth at AlpInvest is just -- it's exceptional. There's no other way to describe it. They are -- and again, I think it's important to realize, it's all organic. It's truly exceptional. We had really strong capital margin revenue year-to-date. And the markets I would describe as kind of neutral, not super strong, not weak. So I think that has -- that could be a source of growth for us looking forward, and we do see some upside to the guidance if the markets improve.

Wealth is a big driver that's becoming increasingly more important for the firm, and that's an area where we're investing heavily. Clearly, fundraising is a big driver. We're very pleased with the fundraising, a lot of momentum there. And we had a good quarter, a good couple of quarters of deployment in credit, and that's how we activate fees and credit based on deployment. So we feel very good about the [indiscernible]. The guidance is not really meant to manage you quarter-to-quarter, but more to give you a look through the full 2025. And again, if the markets improve, there could be some upside to the outlook we provided you.

The only thing I'd add to that, Bill, is when I travel the world, the level of engagement is as high as I've ever seen it in the first [indiscernible] have been at the firm. And that obviously reflects all the great work the teams are doing on executing the strategy, but it's also part of the environment. And the last point John made, I think there's a lot of operating leverage to an improving environment. And so I think there's upside to these numbers.

Our next question comes from Steven Chubak with Wolfe Research.

I wanted to just unpack some of the retail commentary a bit more. The momentum is quite impressive. Flows are steadily building. We also had a CPAP launch coming in the back half. So it does seem like fundraising is potentially poised to take another step function higher what do you think achievable level of run rate flows on the platform? Just when we think about the vehicles already out there market, some of the launches still on the come. And given that you're likely marketing CPAP right now, I just want to get a pulse on the initial receptivity to the product?

Yes. So why don't I give you some insight into that. When I got here, there really wasn't a what I would call systematic strategy for how we were going to engage, welcome around the world, but it was very obvious. [indiscernible] and I say emerging because even though it's been significant I still remain quite committed to the view that globally, this is a trend that's going to continue for many, many years. And we see systematically repositioned the business, the platform with our partners. And again, this ties back to basic fundamentals. The brand has such global recognition, the partnerships that we have, we're really thrilled with our partners, as I mentioned, launching this partnership with UBS as their exclusive partner internationally. So these are world-class partners that we're working with.

From time to time, people, I think, would suggests, okay, there's a lot of people on platforms. There's not a lot of Carlyle's on platforms with the scale we have, the brand we have, the history we have and the ability to create solutions that we can. John talked a bit about Carlyle AlpInvest, but that's a category killer in terms of the wealth business. It has all the characteristics and it allows us to build off that in some unique ways. So here are the sort of fundamental components of the strategy. [indiscernible] Flagship funds, the 1/3 of which you mentioned, CPAP, which will be coming online in the second half of the year, all these things have a very natural flywheel effect. So we're known globally, we have a position in the marketplace. I spend a lot of my time with advisers and advisers are quite interested in including this in their toolkit. It's not for every adviser, it shouldn't be for every adviser, but the momentum is pretty palpable. And so we'll have these three flagship products. And then it's a lot of what we can do to work with advisers around the world to come up with unique solutions because we have all the component parts. And again, this just builds on the success of the brand.

The last piece I'll talk about is obviously, everyone in the industry is enthusiastic about the potential executive order that may come out of the White House, maybe as early as today around the retirement space. I think that, again, is going to open up a space which is long overdue. Wealthy clients have had access to this space for a long time, firefighters, features all around the United States have had access to their pension plans. So I think, again, this is all going to bundle into the strategy across the board. So we're super enthusiastic about the momentum here. This is just getting started.

Next question comes from Alex Blostein with Goldman Sachs.

Good morning everybody. I wanted to maybe click into another area of sort of strategic priorities for the firm, which has been around Credit. Really nice results this quarter, even when you back out the catchup fees. Maybe talk a little bit about how you view the credit business over the next couple of years? Specifically related to asset-backed finance, Investment Grade, Private Credit, the capabilities you have there. and how you expect that business to grow, not so much for the back out, but if you think about it on a multiyear basis?

So one of the more interesting phenomenon in the industry, which I think is -- really just fits really nicely in our wheelhouse is this convergence of insurance, credit, private credit, and private credit has evolved, as you know, like several years ago, people talk about direct lending, direct lending, still a critical part of the toolkit, but the diversification across the asset classes in private credit is allowing our partners to earn incremental returns, and they're effectively as they grow, they're moving assets into the space because of the risk reward and the fact that, again, it's private investment grade. It's just another sleep of private investment right now. A lot of the excitement around this is around the size of the marketplace and the need for capital in the marketplace, which again, we only see growing.

We think in the strategy of selectively establishing collaborative partnerships. I think we're at 6 now, where we think we can provide. We are at 6 now, but we're always actively partnering with people where we can generate unique asset flow. You saw last year, we did the largest transaction last year in Discover. And so we have a pretty fantastic capability set, and I just see this market continue to grow. Over time, again, we talked about, well, this will be another wealth opportunity part of the [indiscernible] fits in already nicely into things like CTAC - but this is a space that's getting a lot of attention. And again, originally, I think it's really started with the convergence of insurance and private credit and the search for incremental improved risk-adjusted returns. But now this is a global discussion.

Sovereign wealth funds, institutions, pension funds, asset-based finance is becoming much more mainstream in these investing discussions. And we built up quite a franchise and a lot of internal content on the back of our partnership with Fortitude. So we got an early start here. We feel really good about the trajectory.

Our next question comes from Ben Budish with Barclays.

Just curious if you could talk a little bit more about the near-term outlook AlpInvest and the overall Solutions business. It seems like the secondaries vehicle fundraising is going really, really well. Curious how much more there is to go there? CAPM is in the market, you've got a new secondaries vehicle launching a little bit later I know in the past, there's been a little more of a kind of cadence of big fundraisers for co-investment. Secondaries and then kind of gaps in between, but it seems like that's starting to fill out a little bit more. So just curious if you could -- I know you mentioned earlier, you're not necessarily looking yet to give kind of longer-term targets. But how should we think about that one? Can the FRE potentially double again with the same speed as it has in the past? And how should we be thinking about that kind of medium-term trajectory there, given all those moving parts?

It's John. Thanks for the question. Look, I think you're right. When you kind of look back historically at AlpInvest, the growth was more of a kind of a step function. We would raise money then it would be flat for a period of time, then we be back in the market and raise money. And that was kind of what that business looked like for a couple of years. I think the business has really evolved. I don't really see that step function growth going forward. I think CAPM is going to be a big driver of growth, a consistent driver of growth looking forward. I mean CAPM in the second quarter, it's up 6x what it was relative to second quarter 2024. So just exceptional growth there. The funds we're raising are bigger than predecessors. I said the co-investment fund we raised, we closed in the second quarter. It's 15% bigger. The secondary fund we're raising is -- it's going to be significantly larger than the predecessor it already is, and we haven't finished fundraising.

I think it's important to note that we continue to raise money for our latest secondaries vintage fund, and that's on 65% committed. So obviously, we're going to be back in the market at some point in time in the near term with another secondary fund. So I think that will even out the growth -- and this UBS partnership we have on the secondary front, I think we'll continue to drive growth. So I look at the business, and I feel very comfortable that the business can continue to generate consistent growth. I'm not going to sit here and tell you it's going to grow at 45% every single year. I think that's quite exceptional. But I think this business has tremendous growth attributes to it, and I would fully expect it to continue to grow at a very attractive growth rate going forward.

Our next question comes from Brian McKenna with Citizens.

And first off, congrats on all the momentum. So John, you've been CFO for about 2 years now. I'm assuming you've had a little bit of a different view and look at the entire business just in this position. So as you transition back to global private equity, is there an opportunity to collaborate more and leverage the broader Carlyle ecosystem to drive better outcomes in that business? And really, what are your top priorities going to be once you're back in that role? And ultimately, how do you permanently accelerate growth in that segment longer term?

Yes. Look, I think collaboration across the Carlyle platform is something that's always been very strong. I think it's a hallmark of our culture. We've always been a very collaborative culture and that really reflects collaboration within global private equity, but more importantly, between Global Private Equity, Credit and AlpInvest. So I don't think there's much I need to change there. It's actually -- it's quite impressive looking at it today. In terms of Global Private Equity priorities, look, we've been very focused on Global Private Equity in the last several years. It's been an area where Harvey, I spent a lot of time. And I look at the progress within our Global Private Equity business, and I think it's quite exceptional. We had made some changes to that business, and we've talked about it in the past. -- and you look at the business the way our Corporate Private Equity business is performing in the U.S., the performance is very strong, up 3% or 4% this quarter in our U.S. Corporate Private Equity business. up 17% to 20% in the last 12 months. So I feel very good about our U.S. Private Equity Business.

Our Asia Private Equity business performance is very strong. Look, performance drives realizations and more realizations leads to carrier release. And we talked about it in our remarks, we are an outlier in a good way in terms of realization. And we've been active in the last 12 months. We've continued to be active post the second quarter. So I feel very good with how the investment teams are completely focused on performance, and monetizations.

And look, real estate, it's probably been one of the most challenging real estate fundraising markets that I can recall, maybe ever. And we were able to raise a real estate fund our tenth fund. That was 15% larger than the predecessor, which, look, it reflects just the caliber of the team we have in place in the performance. So I feel very good about the role on stepping into a business that is actually performing exceptionally well.

On the move, I'll just add two things on the move. One, a little -- maybe more nuance. When you think about the trajectory of big, big strategic growth areas of the firm, credit insurance, how we think about global client relationships, and just take CTAC, for example, which basically, to some extent, is a horizontal slice of everything we do in private equity and AlpInvest. Having John in this role is going to be extraordinarily beneficial in terms of driving all that, driving all best practices, which we already have, to make sure we're uniform across the board in terms of how we think about resource allocation, investment excellence and product development, right?

John being the seat leading CTAC is kind of natural, right? Also look, I'll speak on his behald. Obviously, the last 2 years is the most enjoyable part of John's career. He doesn't want to say that. I'll say it on his behalf. But hey, we'll have a chance to thank John, but John has been extraordinary. I'm super excited for Justin coming into the seat. Because again, you're taking another big part of the firm, someone who's been with us for 20 years, has all the history now coming into the seat. And this moving people internally is hugely beneficial as we think about strategy for the firm.

Really, really I can't overstate how critical it is in terms of these leadership positions and the synergies they bring for the company. It was really fantastic that we were fortunate enough to have John be able to step into the seat, and we feel great about Justin. And so what will be -- this transition is going to be seamless for you guys.

Our next question comes from Patrick Davitt with Autonomous Research.

You get the strong flagship marks, obviously, returning a lot more capital. But the net IRR of CP7 still kind of stuck at that 8%. So how should we think about the tipping point where you would feel more comfortable taking cash carry on incremental realizations from that fund? And I know you don't give specific like realization numbers, but you mentioned the $1 billion in 3Q already. As you look at that, I think about what could be sold before year-end, how are you feeling about the tenor of realized performance fees and 2H versus 1H, or does the CP7 issue and/or lead times make this more of a 2026 story now?

Yes. It's John. Look, we have been clear in previous calls, CP7 is not going to be our best fund. I think when I look at CP7 today versus 2 years ago, I think what we've done is quite extraordinary. That fund is appreciated 17% and you look at CPA. CPA is a second quartile fund, and that fund appreciated 20% and quite frankly, already has a pretty healthy level of DPI given that it's only 65%, 70% invested. So it's really hard for me to tell you exactly where the tipping point is for carry. But the only thing we can do really to drive -- continue to perform, and that's what we're doing. I mean the performance in the U.S. is very strong. Performance in Asia is very strong. The first 4 funds are top 5%. Our Asia Bio fund returned 8% last quarter. So we're going to focus on performance, performance drives realizations. And when DPI gets to the right level, that will be the tipping point for carry.

I think it's important also to look at just our accrued carry on our balance sheet, at $2.9 billion. That's up 30% from last year, 30% from last year. And the two big drivers of that 30% increase have really been Corporate Private Equity, a lot of it U.S.-driven, 7 and 8 and AlpInvest Invest had a big driver this quarter, which is great to see. And again, this $2.9 billion, a 30% increase from last year, that represents $8 a share. So it's a tremendous source of value for shareholders going forward.

Our next question comes from Brian Bedell with Deutsche Bank.

Congrats on the promotions as well. Maybe just going back to Capital Markets fees. Obviously, this has been a great growth build -- on a strategic perspective -- on a strategic level, sorry. I'm counting like 7 quarters of year-over-year -- straight quarters of year-over-year growth. So maybe if you could just comment, given the capital markets backdrop coming into the second half, whether you think the second half can exceed the first half in terms of capital markets fees? And then a little bit on the longer-term strategy coming into '26 in terms of what are the sort of the key organic growth drivers you see in the capital markets business in terms of what you're building relative to just simply the macro environment.

Just stepping back for a second. Thanks for the question. So as we discussed when I got here, there really was no strategy around capital markets fees and the team has done an amazing job. Creating a strategy, implementing a strategy, one of the things that is core to the strategy is we're not risking capital. So these are very, very, I would say, highest quality fees you can have in capital markets. they spin off all the business activity, which is why I earlier said, there's a lot of operating leverage because of the flywheel effect relative to activity levels. So as we come into the -- and we progress into the second half of the year and into next year, I think a couple of things are happening.

One, this is just second nature in the business now. Two over time, we still have businesses that, for various reasons, historically, documents prevented us from taking fees -- very antiquated in the industry. As you know, people have been taking fees for well over a decade, we're just putting that in place now. So there's more organic opportunity, but also as the businesses grow, the opportunity grows. So I think you see -- three components of natural organic trajectory.

One is other funds as they come online into new vintages, we'll have the opportunity to drive fees. Two, operating leverage to the environment and just the muscle memory. This is now becoming real muscle memory in the business. And then three, is the scale of the platform growth, asset-based finance more things that we're doing across credit, other parts of the firm, then those are natural fee drivers. And so I think we've looked -- we gave you some numbers at one point. We went back and we said, "Hey, look at a really active point in the cycle. This was a $300 million business. I think over the intermediate term, we'll be in a position where in the right environment, we should be exceeding that meaning point.

Yes. The only thing I'd add -- I'd reiterate what Harvey said, I do think our capital markets revenue stream is very high quality in the sense and Harvey mentioned, we're not taking balance sheet risk for this earnings stream. So it's not a balance sheet-driven earnings stream. Two, it is only focused on Carlyle. We're not doing capital markets outside of Carlyle. And if you just look at the last 2 years, the tremendous growth we've had in the Capital Markets revenue, the markets have been relatively benign. And we've been able to drive tremendous growth. So I think this is going to be a great source of growth looking forward.

Our next question comes from Ken Worthington with JPMorgan.

Just digging into Wealth. Your Wealth products are really ramping nicely. We're seeing flows get better each quarter, great success in CAPM and CTAC and you got new funds coming -- just remind us, can you flesh out the path forward on next steps? What's the ongoing vision here?

Well, global domination. No, sorry, I don't mean to joke. I'd say that, again, this is really right in our power zone. Why do I say that? There are a handful of things that one needs to be successful in Wealth, and ultimately retirement. You need brand recognition. Brand recognition is -- it's a little bit of a cliche thing and it gets overused a lot, but what does brand recognition really mean? Brand recognition is about a business established in 1987 that's built trust around the world, is recognized around the world that the founders develop and gives us global reach. Within global reach, we also have a 25-year history in Japan, a 30-year history operating in non-Japan Asia, the wealth phenomenon is a global phenomenon.

We often talk about it solely in the U.S. But brand is a key differentiator for Carlyle in terms of our ability to reach advisers, connect with advisers and wealthy individuals around the world full stop. That's one.

Two, diversification of the platform. This is super, super critical. As a mono line, you can have some success, but having the diversification of the platform we have. And as I said, Think about the counter-cyclicality of an AlpInvest platform, Carlyle AlpInvest and conventional buyout. So as we sit in the lab and think about solutions for clients, we have the flexibility to build things that advisers. And that is really the key to -- so that's why I spend so much of my personal time with advisers. I was just out in the West Coast with advisers because understanding what the advisers want at their client is key, solving those issues, and we have all the capabilities to do that. We have the brand reach, we have a global footprint. And again, I just really think this is early days in this trend around the world. We're on multiple platforms in multiple geographies. And we're very, very excited about it.

Our next question comes from Glenn Schorr with Evercore ISI.

Wanted to follow up on all the good growth across AlpInvest and Secondaries. And my question is more on potential for performance. Because you see -- you're seeing great growth. The industry is raising tons of money. And I know turnover is small as a percentage of the total pie. So that's what's exciting. The flip side is that you're seeing some of the perpetual products bid through the institutional bid. And I'm just wondering, can the industry and you continue to put up good returns in the face of all the capital raised and narrowing discounts available?

Yes. Glenn, we talked a little bit about this in the past. I think the industry has cyclical and secular tailwinds and I kind of think of the secondary industry is 10, 15 years behind the corporate private equity sector or industry. So you have tremendous demand for this product, which is driving a lot of our growth. The other thing, too, is this is a business -- an industry where there are only a handful of of large-scale players, which is somewhat different than the private equity industry. This is an industry that's growing at -- the secondary space is growing at 40% per annum. So I'm not going to sit here and say AlpInvest can continue to grow at the 40-plus percent a year. But I do think we are a long way off from this being a mature industry.

The growth dynamics driving the growth here is just -- they're just too strong. The utilization of secondary is very different than it was 10 years ago. A lot more people are using secondaries as a liquidity mechanism that they never had before, not just being driven by lack of realizations in corporate private equity, but more as an annual liquidity mechanism to constantly be rebalancing their portfolio. So I think it's got tremendous tailwinds that are going to drive it for the foreseeable future.

I think from a wealth perspective, I think this is one of the best products. I think it's -- it's just a great wealth product. When you think about it in the context of like a private equity product, you don't have a J curve, much easier to manage. Two, it's much more diversified private equity exposure. So I think this, from a wealth perspective, has a tremendous growth looking forward.

I'd take a step back for a second and first of all, I underscore everything John said I think sometimes, a couple of points here strategically that need to be identified can kind of get lost in the industry. One is, as John mentioned, there's only a handful of hyperscalers in this business we're one of them. And what it means to be a hyperscaler is it means to have 25 years of history, we celebrated our 25th anniversary of AlpInvest in Amsterdam this year. It's about understanding cycles, consistency of performance, consistency of the team, but it's also -- it often shorthand gets referred to as secondaries -- not just secondaries. -- secondaries is co-invest, it's primarily on our platform, and it's also portfolio finance. And this, I think, is where you kind of get into the secret sauce. And by that, I mean, it is evolving to be a corporate finance solutions business, not just secondaries.

So I'm in conversations with sovereign wealth funds or CEOs or CIOs or wealth clients, it's really more about how can we deliver the full breadth of that platform. And that's been a big part of the pivot over the last couple of years that and integrating it into the everything Carlyle, to give the business leverage. But when I sit with a CEO or a CIO in the same conversation, it could be -- you want to bid on these assets. We'd like to buy assets. We'd like to rebalance assets, and we'd like to talk to you about a portfolio finance solution. Solutions business truly in all aspects of the world. And so I just feel really good about its place and its value to our clients, where they're institutional or wealth.

Our next question comes from Michael Cyprus with Morgan Stanley.

Just wanted to follow up on the success in the private wealth channel with the success with CAPM, CTAC and the new private equity evergreen product to come in the second half. So just curious how you're thinking about leveraging the success across even broader suite of products over time in the private wealth channel? So curious how you're thinking about product development, scope for partnerships to maybe create hybrid public-private products, scope for accessing the 401(k) channel. Just curious how you're thinking about this, how you're approaching this? And what might be what might we see from Carlyle over the next several years?

Yes. A fantastic question, something we're spending a lot of time on internally, as you can imagine. So I think that the key to all this it's putting the client at the center of the discussion. What I mean by that is, if it's the retirement channel as that opens up, what are the fundamental needs in retirement? How do we think about the fact that -- there's a lot of talk, for example, with are about the TAM and the excitement and the enthusiasm, I think all that's fantastic. I think it's true. I also think it's a long overdue that hard working people have access to these tools in their retirement. There's a lot to be sorted out between now and then in terms of working with regulators ultimately and government officials to make sure the industry we get it right. What do I mean by get it right?

We had to develop solutions that over long periods of time consistently deliver exactly as an industry what we say we're going to do. So when we look at this strategic read, it's about, okay, what are the things where we have fantastic capabilities, we spent a lot of time talking about the secondaries business, there are a lot of things you can do in the lab with a hyperscaler secondaries business in terms of creating solutions.

The key is not -- we could create -- if you and I are in a room, we could create almost on limited list of solutions of things we can provide for this platform. We could do regional funds. We could do tilt in different solution spaces we can combine. It's again about understanding what is the fundamental client need, whether it's the wealth adviser, the [indiscernible], ultimately, the retirement channel and really developing solutions that over the long term, have fantastic performance and deliver. And so that's how we're thinking about it. But there's any number of permutations that we could build, but we don't want to build for the sake of building. Just we want to build the things that are right.

Our next question comes from Dan Fannon with Jefferies.

I wanted to follow up on the insurance opportunity. You guys had some announcements earlier in the year, but was hoping to get an update for the back half or as you think about kind of longer term, the growth and contribution from that segment?

Yes. Look, -- we've been pretty clear on Fortitude. It's been a very good investment for us. It's been a big driver of growth. And look, I know there's some commentary around 2024. 2024 was deliberately quiet for us. We had to absorb the Lincoln transaction, which was in the fourth quarter of 2023. So that was a conscious decision on our end. We really started ramping up activity towards the back end of 2024. And I think the results this year reflect that. We announced a $4 billion transaction, closed in the first quarter. The [indiscernible] transaction, which we announced earlier in the year, actually closed July 1. So that transaction is closed, and there's a couple more in the pipeline.

So look, I think it will be a very busy year on the Fortitude front. One thing I particularly like about Fortitude, it's a reinsurance solution for us. It's been a great solution on that front. It's very active. The pipeline is, quite frankly, probably busier than it's been in a couple of years, we're probably the most active reinsurance business in Japan. And I think there's more to come on that front.

But also, as we think about how do we get kind of more of a flow insurance capability into Carlyle. The way we set up Fortitude is we can do that inside Fortitude, we can do it outside of Fortitude. So we have tremendous strategic flexibility in terms of how we think about attack in the flow segment of the insurance business. But look, overall, we're very pleased with Fortitude. This year has been a good year in terms of growth. And again, I'd just reiterate the pipeline is very active.

Our next question comes from Kyle Voigt with KBW.

Just on GPE, earlier this year, you mentioned the rate of decline for 2025 management fees would be meaningfully below the 7% you posted in 2024. And it seems like you're well on track to deliver that. I just wanted to get your updated thoughts on the progression of management fees for GPE and whether you think we could be at an inflection point here in terms of getting back to year-on-year management fee growth in 2026?

And Harvey, there's been a lot of change in the macro environment just over the past year -- or the past quarter. When you're out speaking with LPs, how do you think receptivity is right now for potentially allocating to U.S. buyout? And has the tone changed at all there recently and obviously asking just in light of you getting ready to launch CP9 fundraising?

Yes. The engagements with LPs has been great. You see that reflected across the whole global platform. And when we work with LPs, we look at them obviously, across the entire platform. And so I think that private equities industry, as I stated in my prepared remarks, has kind of gotten tagged, maybe appropriately so and criticized with not returning capital. I am super pleased and proud of what the teams have done at Carlyle. John went through it earlier, so I won't repeat it, but you think what the U.S. buyout leadership has done in the past 2.5 years, [indiscernible] up in terms of making changes, repositioning the portfolio, investing really, really well.

I mean the performance in CPA, John talked about, second quartile and already distributing liquidity back to our investors. And we are an outlier at this stage in the industry in terms of returning capital. Returning 3x the industry average in terms of capital and corporate private equity, that's no small feat. It's not -- it's perfectly true also to say we're not happy with some of the net IRRs, and we have some work to do, but the momentum in this business and the engagement with LPs is quite high. And we're doing everything our LPs want us to do with the portfolio. So the feedback from me has been positive.

In terms of the macro environment, I think it's taken market participants a bit of time to understand how policy gets implemented in the administration, right? If you go back to Liberation Day, I think everybody is a bit caught-of-card by that. I think now there's a general acceptance that the administration is acting as everybody expected at the beginning of the year, which is very pro growth. And while some might struggle with the approach of the process, we actually look at sort of where things land, it feels very pro-growth leaning in on regulatory changes -- getting a tax policy through. So on any given day, you could see a lot of noise in the marketplace, but the marketplace feels pretty friendly at the moment. Again, anything that happened in the world, there's a lot of geopolitical stress in the world, which we're being thoughtful about. But the momentum across the whole platform feels good. And I'm really proud of what the teams have done on the bio side. It's super impressive.

I'm not showing any further questions at this time. I'd like to turn the call back over to Daniel for any closer remarks.

Thank you for your time and attention this morning. Should you have any follow-up questions, feel free to reach out to Investor Relations. Otherwise, we look forward to talking to you next quarter, and have a great summer.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

All right. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. Note that taking your photographs and use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative.

All right. With that out of the way. Good morning, thanks for staying with us here on day 2 of the Morgan Stanley Financials Conference. I'm Mike Cyprys, Equity Analyst covering brokers, asset managers and exchanges for Morgan Stanley Research. And for our next session, we have the Carlyle Group, and we're excited to have with us John Redett, the Chief Financial Officer.

As many of you know, Carlyle is a global alternative asset manager with over $450 billion of assets under management across private equity, real assets, credit and solutions.

John, welcome. Thank you for joining us.

Thank you. Thanks for having us. Appreciate it. Hopefully, by the time we're done, we'll move you from a neutral to a buy.

All right. I look forward to that.

So let's set the scene with the macro backdrop through the lens of your portfolio companies globally. What are you seeing just in terms of the state of the economy, health of the consumer, path of inflation, just given a lot of the uncertainty and volatility that is out there? And how is your portfolio holding up through this?

Yes. I think it's interesting. I think the market is telling you that the level of uncertainty has diminished dramatically from early April. I think it was incredibly elevated right after Liberation Day.

If you look at the S&P, it's up 5% or 6%. If you look at where the S&P is trading, it's near record highs. If you look at spreads, spreads are actually tighter today. than they were pre-Liberation. So the markets are not too troubled. And when I look at our portfolio across kind of credit, secondaries, corporate private equity, it's very healthy. We came into the year with a very strong portfolio. First quarter looked very good. And we haven't seen any noticeable deterioration in the last couple of months in our portfolio.

So we feel very good about the portfolio. I think the consumer is a little bit of a kind of a mixed bag, if you will. I always tell CEOs, if you can tell me how well your consumer customer is doing, I can tell you exactly who your consumer is. I think it depends on income levels. I think at the lower end of the income spectrum, it's more of a challenge. And at the upper end, it seems to be smooth sailing. But generally speaking, we haven't seen any deterioration in our portfolio in the last couple of months.

That's quite encouraging. So maybe with that backdrop and over $80 billion of dry powder you have today, just maybe you could talk a little bit about how you're thinking about deploying capital here, where you're seeing some of the most interesting opportunities to put capital to work?

And what's changed now versus a year ago as you're sort of putting that capital to work as you think about that? Any areas you're avoiding?

Yes. I mean, look, I would say our investment teams across kind of credit, private equity in our solutions business, which is a secondaries as a co-investment and a portfolio finance business are very busy. Our deployment was up roughly 50% the last 12 months over the previous 12 months. So the teams are very busy.

You referenced we have $80 billion of dry powder, which is plenty of capital to support the investments our teams are looking at. I would say within the investment businesses, our Japan buyout team is incredibly busy. That is a very, very attractive market. Within the U.S., our corporate private equity team sees a lot of good opportunity in health care, aerospace, defense, business services. Credit is pretty busy, I'd say, across the business. We've priced 4 CLOs since the end of first quarter. So that team has been very busy.

Our asset-backed finance business, which I think is going to be the biggest driver of growth in our credit business, that team is super busy. That's an area where we're investing a lot of money. And I think the investments are starting to show. And then in terms of our secondaries business, that team has been busy for the last 3 years, and it really hasn't slowed. We're raising a secondaries -- our current vintage of our secondaries fund, and we should have the final close in the second or third quarter. That's already 60% committed.

So I'd say the activity level is pretty evenly spread out across the platform. The teams are leaning in. We're certainly not risk-off. If we find a great company, we're leaning in and we're going to buy it.

And turning to the exit activity.

How much of the portfolio would you say is exit ready today? Has this changed at all just given some of the recent market volatility uncertainty? And how do you see the backdrop for realizations as you look out over the next 12 months? Do you need to see IPOs come back in order for this to pick up?

Well, that would be helpful. Investment bankers, including some in the room, keep telling me IPO market is open. I'm not sure it's open. But anyhow...

I have seen a number of deals though over the past couple of...

Mainly crypto, but we don't invest in a lot of crypto.

I'd say in terms of realizations, that's probably where I'm most proud about our investment teams. I think we are an outlier in a good way. If you look at -- you can't pick up a newspaper where they don't talk about how private equity is not returning capital.

And generally speaking, from an industry perspective, that is true. That's a fact. The industry is returning roughly 30% to 35% of the invested capital based on historical standards. We are probably double the industry. So we are actually returning more capital to our LPs than we're investing. In the U.S. alone, in our corporate private equity business, we returned $8 billion or $9 billion last year to our LPs.

So our teams are actually, I think, a little bit of an outlier in a good way. We are returning capital. In the fourth and first quarter, we had some very high-profile IPOs, StandardAero, which I think was one of the more successful IPOs done in the last couple of years. I think it really opened up the IPO market. That was obviously a big success for us. We had Rigaku which was the largest ever sponsor-backed IPO in Japan, and we had Hexaware.

So the teams are busy. In fact, I think if you look at IPO market the last couple of quarters among large-cap sponsors, we had 70% of the market. So I think we're a bit of an outlier in terms of realizations. It slowed down a little bit kind of post-Liberation Day, but it's picked back up. We did another secondary sale of StandardAero a couple of weeks ago. We just sold a block of a company we own in India, a very successful investment.

So it's picking up. I think the teams are optimistic that activity levels will resume. The one area that I think is a little bit more uncertain is just the IPO market. And we have a couple of companies that I think I would characterize as IPO ready. They're fantastic companies. But we're going to kind of sit tight and watch the IPO markets until we feel like they're open. But I would say realization activity is an area where I am incredibly proud of our investment teams.

Maybe shifting gears to fundraising. You've laid out plans to target $40 billion of flows for this year, including from [ Fortitude ]. It's a similar level to last year, which was nearly $41 billion, which was, I think, the third best year that you have ever raised. So I guess what gives you confidence in your ability to achieve a similar level of success this year, just given this backdrop we were talking about with the DPI challenges for the industry, although be you guys may be doing a little bit better. What does the progress look like so far on the fundraising front?

Yes. So last year, we put out a $40 billion target. And of all the targets we put out, I was probably most nervous about that one. But we surpassed it. So I think this is very much a bright spot for us.

This year, we put out a similar target. And look, I realize when we put these 1-year financial targets out there, unlike, say, a fundraising, you guys go through all these super in-depth analytics and then you actually take the number and divide it by 4. So it's not linear like that.

We have quarters where we raise a lot of money. We have quarters that we raise less money. So it's very hard for me to say quarter-to-quarter. But we put a target out of $40 billion again for this year of inflows. We had $14 billion in the first quarter. We're very much on track to hit our target for 2025. We have another $4 billion in insurance that we've announced that we should close in the second quarter.

And quite -- we have some of our biggest strategies in the market. So we have our secondary strategy in the market. That is a very, very attractive area for LPs. We have our co-investment strategy in the market. We have our real estate strategy in the market. I think we're a bit of an outlier in terms of real estate in the sense we have a very strong performance in that product, and there's a lot of demand for that product.

And then we should be in the market. We've talked about on previous earnings calls for our latest vintage of our U.S. buyout fund at some point late this year. So I feel -- the fundraising target, I feel very good about it.

How are you thinking about the sizing of that U.S. buyout fund?

Too early to tell.

Do you think it could grow?

We're optimistic it could grow.

Staying with the fundraising side, maybe just on the institutional side, we are hearing about some pressures across the institutional LP community, whether it's from China LPs to large endowments and just overall distributions weighing on LPs. So to what extent do you see this impacting fundraising? And more broadly, how do you think about the growth outlook across the institutional community? Some would suggest that they're largely full up on allocation. So where do you see some of the biggest opportunities on the institutional side?

Yes. So I would just say just kind of taking a step back, Harvey and I have done a lot of travel around the globe the last, last month. I was in Asia a couple of weeks ago. I was in Europe last week.

And I know in the media, there is this certain narrative that institutional clients are allocating away from the U.S. We are not hearing that from our institutional client base. They still very much want access to the U.S.

Look, it's -- if you are an investor, it's a very hard market to avoid. It's the largest market. It's the most liquid market. Monetizations in our market are the easiest. So we're just not hearing that narrative around LPs wanting to allocate outside the U.S. away from the U.S.

I do think there's -- I do think China at the moment is a little bit of a challenge in terms of fundraising. I think that's for the industry. That's certainly not specific to Carlyle. I do think a successful resolution of this trade deal with China, and it looks like they made some progress the last couple of days should alleviate some of that. So we do feel better about China long term.

And for us, China is a very small amount. It's immaterial. So it doesn't impact our fundraising targets at all. And in terms of the endowments, that's also an area that has been getting a lot of press. And it's very hard for me to comment on the endowment channel in the sense. We just -- it's just a channel we've never tapped into. We focused more on family offices for endowments, but -- so I can't really comment on the endowment channel.

And where would you say you see some of the biggest growth opportunities across the institutional community...

I think there's pockets in Europe where there's good growth opportunities. The Middle East, -- we're seeing good demand coming out of the Middle East. We're seeing good demand coming out of parts of Asia, I would say, kind of non-China. So we feel very good about the institutional market.

What about in the U.S.? Some would say U.S. is over their skis a little bit, some would say.

Yes. I mean, look, I think the U.S. is a little slower to make a decision, but we have some of the largest institutional investors in the U.S., and they're very much allocating money to the products we have in the market, and we expect them to allocate money to corporate private equities [indiscernible] that's the market. So...

And you mentioned just in terms of your travels, Harvey travels around the world, not hearing about investors overseas looking to necessarily reduce allocations to the U.S.

What are you hearing just in terms of demand for non-U.S. exposures for which you have a leading Japanese platform and franchise there. I guess what are you seeing around the globe in terms of appetite for non-U.S. assets? And is there an opportunity for you guys to lean into that a bit more aggressively?

Yes. I mean, look, we're as global as any of the [ ED Alt ] managers out there. I mean we've been in Japan for 25 years. Harvey and I were in Tokyo a couple of weeks ago celebrating our 25th anniversary.

Japan is -- the Japan we've all been waiting for. I mean it is hot. And we're probably the biggest name in Japan. So there is tremendous demand for anything Japan today. Our current Japan buyout fund, I think it was 60%, 70% bigger than the predecessor. So Japan is a very, very attractive market. I would say most spots in Asia are very attractive ex-Japan. I mean we've been in India for 20 years. That has a tremendous amount of interest.

And Europe is an area where we've been in Europe probably 30 years. We are really starting to hear a lot of interest in Europe. And I think Europe is going to be a very good place for corporate private equity in the next 5 to 10 years. And we're leaning into areas where we see opportunity.

Why don't we shift gears and talk about the private wealth channel, major focus for the industry, significant opportunity. You have a number of products in the market from CTAC to CAPM.

Can you talk about the traction that you're seeing, the steps you're taking to broaden out distribution? And maybe touch upon how flows have fared through the volatility in April and into May?

Yes. So look, obviously, I think everyone in this room knows that the wealth channel is -- it's an enormous opportunity for our industry. It's obviously an enormous opportunity for Carlyle.

It's a massive market. It's largely untapped for our businesses, and it has really good, really good tailwinds, which there's not a lot of things in financial services that have such strong tailwinds. So obviously, very attractive for us.

This has been a real focus area for the management team. When Harvey joined about 2.5 years ago, we really, really started to focus on wealth, invested a lot of money in wealth, and we're incredibly happy with the progress. I do think this is such an enormous opportunity, and it is such a large market that this is going to take years to play out. It will still be playing out long after I'm CFO. I don't really buy into the narrative that it's going to play out quickly. It's just too big of a market, and it's going to take time for people to change their asset allocation into these products.

So I think it plays out over a long period of time. I'm probably investing more money in wealth than any other area of the firm. How do you do well in wealth? You have to have a brand. We clearly have a brand. You have to have good performance. You don't have to have the best performance, but you have to have good performance. And you have to be willing to invest a lot of money. When you go on these platforms, you need to have the resources to educate the FAs about the products that they're selling.

So it requires a fair amount of investment, and we're making great progress. I think we've doubled the flows in our evergreen wealth product over the last 12 months. I think our evergreen wealth AUM is up 70%. And as you said, we only have 2 products in the market. We have a credit product, which we call CTAC, which has been around for a few years. That continues to scale.

And we launched CAPM, which is our solutions, largely secondaries product, I want to say, 18 months ago, and that is scaling really rapidly, much faster than I think we anticipated. It's a fantastic product for the wealth channel. If you think about it, it's private equity exposure diversified and there is no J curve. And the returns on that product are phenomenal.

So we think that will continue to scale quickly. And then we hope to have a corporate private equity product in the market in the fourth quarter. I'm spending a lot of time on that. And that will really reflect our global corporate private equity footprint. So Japan, Asia, Europe and the United States, and we should have that up and running in the fourth quarter. And we do think that will ramp quickly.

Our strategy is probably a bit different than some of our peers in the sense we're going to have 3 products. I know a lot of our peers have flooded the markets with multiple products. We're going to make sure those products are performing well. And then over time, you can -- it's likely to see us add additional products. But we're going to initially focus on these 3 products, which really reflect the 3 businesses we have at Carlyle.

Maybe just digging in on the private equity product that you mentioned is coming in the fourth quarter of this year.

Maybe you could speak to what this product is going to look like, how it's going to differ from, say, CAPM that you've introduced? And what role can it play in client portfolios relative to a client buying CAPM?

Yes. So I think when you think about the wealth space and the products we're selling into the wealth space, I think a corporate private equity product is probably the most complicated.

The nature of corporate private equity is it's episodic. Deals don't happen every day. You can go a period of time where deal activity is more benign. You can go through a period where there's a tremendous amount of deal activity. that's not necessarily correlated to the flows you're getting into the product.

So the biggest challenge is how do you manage the flows into the product given the episodic nature of the deals you're putting into that retail portfolio. I think our product will be a little different to the industry in the sense it will have a secondary sleeve to help us kind of manage the fluctuation of capital coming in and capital being put to work by our corporate private equity deal teams. And I kind of view it as more of a relief valve that will enable us to kind of manage the episodic nature. So it will be a different product.

And is that liquidity sleeve a stake in CAPM? Or is it a stake in sort of similar types of investments...

Similar type of investments.

That they're making?

Yes, similar type investments.

Got it. Okay. And maybe just you could speak to broadly how you see your presence in the wealth channel evolving over the next couple of years, whether it's from a distribution standpoint.

It sounds like maybe not that many new incremental products beyond the 3. But when you look out, like what other types of strategies could make sense given the platform that you have.

Yes. I mean, look, 2 years ago, we were really behind. We've made tremendous progress. We've really focused on the brand, making sure the 2 products we have in the market are performing well.

We don't really have a problem getting on the wirehouses, but you should expect to see more of those kind of partnerships going forward with the wirehouses, the RIA channel and other kind of large banks, you should expect to see some partnerships on the distribution front.

It is a tremendous focus area. Harvey spends a lot of his time in the wealth channel. I probably spend less than Harvey, but it is a massive focus area for the firm. And I think we -- 2 years ago, we had maybe 30 individuals in our wealth business, and it's well north of 100 today. And I would expect that type of growth to continue.

And you mentioned partnerships. One of the things we're seeing is alternative managers partnering with traditional money managers on the product side.

Just curious your thoughts around hybrid public private solutions. How are you thinking about that? And to what extent could we see some of that?

Yes, you're seeing a lot of partnerships, not a lot of products yet, but a lot of partnerships. And look, we understand why some of those partnerships are being created.

And you should assume we're having similar type of conversations, very focused on anything that's very much a partnership. And look, I think it's very much an evolving area. I think it's going to change. It's going to be very different in 5 years than what it looks like today.

And I don't think you're going to see situations where they're just going to have one all partner. I think they're going to have multiple partners.

Got it. So we'll stay tuned on that.

Why don't we shift and talk about margins, fee-related earnings margins. You guys have made significant progress in recent years. You achieved 46% FRE margin in 2024 and note that you expect this year's margin to be similar with about 6% or so fee-related earnings growth. Can you talk about some of the underlying contributors to get there between whether it's fundraising, fee activations, of expense growth? And where might there be any sort of scope for upside?

Yes. So I think it's important to put the FRE margin in context at Carlyle. The margin we had last year of 46% was 1,000 basis points higher than it was 2 or 3 years earlier. It was 2,000 basis points higher than it was 5 years ago.

So we made tremendous progress on the margin front. And I've been very clear with shareholders and the investment community that when we put our first guidance out for 2024, we said, we want to get the FRE in the kind of the FRE margin in the 40%, 50% range. Last year, it was 46%. I think in the first quarter, it was 47%, 48%. So we're already at the upper end of that range.

Can we drive our FRE margin outside that range? Yes, we can. But we've also been very clear that the way we're going to get that margin higher is going to be through growth and scale. We're not going to cut our way to a higher margin. And quite frankly, we didn't even really cut that many expenses to get the margin to where it was. We just -- I would say, we're a little more prudent in terms of how we thought about expenses. But our single focus is on growth going forward. And the way you will see that margin expand beyond that range we outlined will be from growth and additional scale.

And you're already seeing that in some of our businesses. If you look at the FRE margin in our AlpInvest business, which is our secondaries co-investment and portfolio finance business, it was in the mid-50s in the first quarter, and that business is really starting to scale. So the margin should improve over time with growth and scale.

In terms of the absolute FRE, last year, we had a really good year on FRE. We had $1.1 billion. Our guidance this year was 6% FRE growth. And the way we outlined it to our investors on the call was, I know FRE is important. But to me, 2025 FRE, the absolute FRE level is a lot less important than the growth rate this firm and this platform can continue to generate consistently in a couple of years down the road.

And Harvey and I are completely focused on growth -- sustainable long-term growth. And that 6% FRE growth, if we were not investing in the businesses, that number would have been a lot higher. But we are investing heavily in our businesses to generate growth down the road. And in our opinion, most of our shareholders would very much prefer us to be taking that strategy. So I think we'll -- let me put it this way. I don't know if we'll beat it. I feel very good about the 6%.

Okay. Fair enough.

Want to make sure as Carlyle, we were at $310 million, $311 million of FRE. So I feel very good about the number.

Great. Why don't we shift and talk about private credit. We saw fee-related earnings in your global credit business grow by 50% year-on-year, surpassing $100 million for the first time. So significant growth there.

I guess how do you see the pace of growth in your credit platform trajecting going forward, you look out the next 3 to 5 years? And where do you see some of the incremental opportunities to further expand the platform and the capabilities?

Yes. Look, growth has been a very good business for us. It's been a large contributor to our growth rate. I think over the last 4 years, I think FRE is up 40%. I think the AUM is up 40% as well. So it's been a big driver of growth. We have our insurance business inside our credit business.

Look, the business, I think, had some headwinds the last couple of years, given how large we are in the CLO space. We're the largest CLO manager in the world or maybe today, we're #2. I always get these e-mails that we're #1. But -- and the industry that had headwinds. I think those headwinds have abated. As I said earlier, we priced 4 CLOs since the end of the first quarter. So fantastic activity. If you actually -- if you look at the credit business ex-CLOs, the credit management fee business has been growing 15%, 16%. So it's been growing at a very healthy clip. It just had some headwinds with the CLOs. And again, we think that's largely abated.

So I feel very good about credit kind of looking forward as being one of our big, big growth drivers of our platform looking forward. Where I think we're going to see outsized growth in that business is insurance. We have a balance sheet-light strategy in insurance. As you know, via Fortitude, we had an unbelievably active year in 2023. We added $25 billion of assets to Fortitude.

We had a deliberately quiet year last year as we made sure that the Lincoln acquisition we did was properly integrated and the assets were properly rotated. We've already announced $8 billion of transactions this year, 4 of which we've closed. We hope to close the other 4 in the second quarter. So I would say insurance conversations are more elevated than I've ever seen, and I expect that to continue.

I think the other area of credit where we're a major player is the asset-backed finance space. That is a massive market. It is multiples of direct lending. And that's a business similar to wealth, we're investing a lot. We've added a lot of headcount. We had almost no AUM a couple of years ago, and that's already a $10 billion business. I like that business a lot. I think it's going to be a big growth driver. It throws off a lot of capital market fees, which has been a big initiative for us.

The other component of credit that's been a big driver. We put our capital market fees inside our credit business. And look, for 2 years, that's been a big focus area for Harvey and myself. And I think we've made tremendous progress. Last year was a record year. If you look at just the last 2 quarters in capital markets, it's better than any 1-year we've had. So clearly, it's working.

I think the quality of those capital market earnings revenue streams, Mike, are high quality in the sense that we're not using our balance sheet. We're not levering our balance sheet, taking down debt. And also, it's just focused on Carlyle. We're not underwriting non-Carlyle deals.

Why don't we double-click on the ABF platform? Can you talk about how it's contributing today? How you see it scaling as you look out over the next couple of years? And where might there be opportunities for expanded origination?

Yes. So again, this is a business that we've really organically built over the last couple of years. I think if you look at the headcount in that business, the growth is probably -- the growth rate is probably similar to what we've seen in our wealth space.

I think this business will be largely played out among the large global players. You have to be able to write big checks. We did a student loan deal, I want to say last fall, closed it last fall. That was in aggregate, a $10 billion deal. So it requires a lot of checks. I think in terms of originations, it's really going to come from 3 different areas. I think banks are going to have multiple relationships with credit providers.

So that will be a channel. I think there will be one-off bidding situations where we'll get flow from. And then we have ownership stakes in, I want to say, 4, 5 origination platforms. And I would assume over time, that expands into other asset classes. But where we've been pretty active would be manufactured housing, student loans, C-PACE loans.

Look, I think the headwinds facing the banks, maybe they get a little better from a regulatory perspective. I don't think they get to a point to where it impacts that business. I think the tailwinds for that business are long-term sustainable. And I think the asset classes that make sense in banking stay in the banking system and a lot of the other assets come into the ABF ecosystem.

Again, the market is multiples of the direct lending business, and we really feel like we have a good position in that market.

Great. We have just a few minutes left. I do want to get a question in on AI, advances in technology, data reshaping many sectors.

So I was hoping you could talk about how you see AI impacting the asset management industry, how you're experimenting with that today? What use cases you've identified and how many you might put into production over the next 12, 24 months?

Yes. So AI is an area where we are investing a lot of money, a lot of time and a lot of resources. And I would say it's kind of -- some of the use cases are pretty obvious, right? It should help automate a lot of different processes. We have at Carlyle, like the digestion of data. You think about our businesses on the credit side of the business, you're digesting a tremendous amount of data with credit agreements.

When you think about what we do on the secondary side of the business, when we buy a portfolio, there's a tremendous amount of data. So AI will definitely help us automate a lot of that. It will help us become very efficient. In our back office, we can do similar things, whether that's in legal, using AI to look at contracts. So I think it's going to help streamline our back office. I also think we can help our portfolio companies in our secondaries business, our credit business or our private equity business. We can let them leverage the money we're spending in AI. And you think about what AI is really powerful is any type of rules-based decision, AI is super powerful.

So if you own a business that processes insurance claims, any claim that fits in a predefined box probably doesn't need a human. AI can make that decision. And anything that doesn't fit in that predefined box, you probably need a human to adjudicate that claim. But I think it's going to be incredibly powerful on the efficiency productivity front.

And then I think some of the other kind of newer frontiers are just the massive amount of data we have at Carlyle across our platform. How do we better leverage that data to help us in the diligence process to help us make better investment decisions. It's not quite there yet, but it will evolve. But I would say AI is an area where we spend a lot of time.

On the diligence process, what's the timing do you think for something like that coming across to your team?

It's not as far away as you think.

So maybe sometime next year?

Yes, we're spending a lot of money. And look, when you have a lot of data, it's a huge advantage.

How do you think about the impact of what that does it increase the velocity of capital from a deployment standpoint because you're making decisions more quickly? How do you think...

Yes. I think you can have -- if you become more efficient, you can have your people spending time more wisely.

And when you think about the magnitude of efficiency saves, you were mentioning the back office, just how might you sort of quantify?

I haven't really quantified it yet. I think it's early. We are doing very specific test cases. And I would say we are very pleased with those test cases.

Look, I don't think anyone can deny the massive impact AI is going to have on any company. And if you don't think it will, you're already behind and maybe you've lost. But it's just going to take time. The narrative is too much it's going to happen overnight. We are all spending a lot of money, very focused on AI, but it's just going to take time to play out.

Great. Why don't we leave it there. Thank you very much.

Thank you.