Carlyle (CG) Q3 2025 Earnings Call Transcript

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DATE

Friday, October 31, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Harvey Schwartz

Chief Financial Officer and Head of Corporate Strategy — John Redett

Incoming Chief Financial Officer — Justin Pluff

Head of Public Investor Relations — Daniel Harris

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TAKEAWAYS

Fee-Related Earnings (FRE) -- $312 million for the quarter, $946 million year-to-date, representing a 16% increase year-to-date.

Assets Under Management (AUM) -- Record $474 billion, up 7% year-to-date, driven by organic inflows and platform growth.

Quarterly Inflows -- $17 billion in total inflows during the quarter, bringing the past 12-month total to nearly $60 billion.

Revised Financial Targets -- Management now expects full-year FRE growth of approximately 10% (previously 6%) and full-year inflows of $50 billion (previously $40 billion).

Distributable Earnings -- $368 million in the quarter, or $0.96 per share; year-to-date total reached $1.3 billion, up 10%.

Fee Revenue -- Total fee revenue grew 11% for the quarter and 13% year-to-date, noted as the firm’s fastest growth in the past three years.

FRE Margins -- Stood at 48% for the quarter and year-to-date, both above last year's record margin of 46%.

Capital Returned to Private Equity Investors -- $19 billion returned over the past 12 months in global private equity, 150% of the industry average; does not include $5 billion of signed transactions.

Carlyle Alpha Invest -- FRE up over 80% year-to-date; closed a $20 billion secondaries fund, the largest for the platform to date.

Global Credit AUM -- $208 billion, representing 45% of firm-wide assets and a 33% CAGR over five years.

Asset-Backed Finance Platform -- Raised $2 billion this quarter; platform AUM has reached $10 billion with ongoing acceleration.

Insurance Solutions Platform -- $87 billion AUM; closed $4 billion reinsurance agreement with Unum and issued inaugural $500 million funding agreement-backed note.

Evergreen Wealth Inflows -- $3 billion raised this quarter, marking the best fundraising quarter ever for global wealth; 10x increase in quarterly inflows since management change.

Capital Markets and Transaction Fees -- Generated $32 million in the quarter, up almost 20% year-over-year and more than doubled over the past 12 months.

Stock Repurchases -- Over $200 million repurchased in the quarter; company is approaching the end of its $1.4 billion authorization.

SUMMARY

The Carlyle Group Inc. (NASDAQ:CG) reported accelerated organic growth and margin expansion across its business lines, with fee-related earnings and assets under management reaching record highs. Management highlighted robust inflows led by global credit and solutions platforms, with a revised upbeat outlook on full-year FRE and total inflows. New strategic initiatives in insurance and wealth, including a landmark partnership with Oracle Red Bull Racing and increased activity in asset-backed finance, were cited as platform growth drivers. Balance sheet strength was reinforced by a $800 million note issuance and ongoing stock repurchases, maintaining flexibility for future investment. The transaction pipeline includes nearly $5 billion of announced exits and the potential Medline IPO, indicating elevated realization momentum into 2026.

Schwartz said, “With this momentum, we feel confident about exceeding the financial targets we updated last quarter.”

Year-to-date, 55% of firm-wide FRE is now generated by global credit and Carlyle Alpha Invest, up from 25% five years ago.

Redett noted, “Realization activities are up 35% the last 12 months,” with global private equity returns to investors up 30% over the prior period.

The global CLO platform has inflows of over $3 billion this quarter and only 12% of the platform is now in runoff following 41 resets in two years.

Redett explained, “we still view our stock as inexpensive and attractive investment.”

Carlyle Alpha Invest’s FRE now comprises 23% of total FRE, approximately triple the level from two years ago.

Insurance-driven initiatives are projected to generate more than $20 billion of new AUM in the intermediate term.

Carlyle’s transaction with BASF and the IPO of Orion Breweries mark milestone corporate carve-out and public exit events for its international platform.

The company sees increasing demand and diversification in secondaries, with solutions activity and client engagement supporting sustainability of inflows.

Management indicated strong performance at the operating company level within U.S. private equity, with portfolio company revenues up almost double digits and EBITDA up 8% over the past year.

INDUSTRY GLOSSARY

FRE (Fee-Related Earnings): The portion of earnings derived from recurring management fees, excluding performance fees or carried interest.

Distributable Earnings: Earnings available to be distributed to shareholders, typically including both fee-related and performance revenues, minus firm expenses.

Evergreen Vehicles: Perpetual capital structures allowing investors to subscribe and redeem on a regular basis, as opposed to traditional closed-end funds.

Secondaries Fund: An investment fund focused on purchasing existing investor commitments in private markets, providing liquidity to original investors.

CLO (Collateralized Loan Obligation): A securitized financial product backed by a pool of corporate loans, managed as a structured credit investment.

GP-led Collateralized Fund Obligation: A securitization backed by several private funds, sponsored by the general partner, allowing for liquidity or leverage at the GP level.

Asset-Backed Finance: Lending or investment backed by pools of assets such as loans, leases, or receivables rather than traditional corporate debt.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome to The Carlyle Group third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you would need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 11 again. 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.

Daniel Harris: 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 Pluff. 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 factor 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.

With that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

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 is 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's 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 our 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 a 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 Calistone and announced the sale of HSO. Lastly, in private equity, we recently announced the €7.7 billion carve-out of BASF's coatings business, leveraging our global industrials 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 Alpha Invest, the team continues to deliver exceptional growth, with FRE up more than 80% year-to-date.

Last month, we closed our largest-ever secondaries fund, $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 Alpha Invest 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 The Carlyle Group, we were attracting about $300 million per quarter in evergreen wealth inflows. Today, we're running at 10 times that level, at $3 billion in 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 two and a half 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.

John Redett: 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 top-line 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 three years. Roughly 55% of firm-wide FRE now comes from global credit and Carlyle Alpha Invest. That's up from about 25% just five years ago.

FRE margins remain 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 Alpha Invest delivered another excellent quarter, raising $6.3 billion of the 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 Alpha Invest now sits at $102 billion, up more than 20% year-to-date. FRE at Alpha Invest now represents 23% of Carlyle's FRE, about triple the level from just two 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 five years.

Global credit's FRE is now nearly one-third 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 defaults running well below the industry average. Our $13 billion direct lending platform has been growing at a 20% CAGR the past five 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 fundraise. 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 €7.7 billion transaction with BASF in partnership with the Cutter 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 a 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 Alpha Invest 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. Now, before we get to Q&A, I'd like to hand things over to John for some concluding thoughts.

John Redett: Thanks, Justin. Good morning, everyone. Let me make a few points on the progress we've made on our strategic plan over the last two 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. Lastly, our focus on capital markets has clearly generated momentum. We have more than tripled our revenues over the last two 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: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question will come from Brian J. McKenna with Citizens JMP Securities. Your line is open.

Brian J. McKenna: Thanks. Good morning, everyone. Looking at inflows for the—hey, how's it going, Harvey?

Harvey Schwartz: Great.

Brian J. McKenna: 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. 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?

John Redett: Yeah. Hey, 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, tremendous momentum. It really reflects we have strong investment performance across the firm. I would say client engagement remains positive and remains elevated. $17 billion in the third quarter, obviously a very strong quarter. It's nearly double the third quarter from 2024. If you look at it kind of on an LTM basis, we're $60 billion, and year-to-date, we're around $45 billion. We feel good about the revised guidance that Harvey alluded to in his script, which we provided last quarter, which was around $50 billion. We're at $45 billion year-to-date.

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

Brian J. McKenna: Got it. Thanks so much.

Operator: Our next question will come from Alexander Blostein with Goldman Sachs. Your line is open.

Alexander Blostein: Hey, good morning, everybody. Justin, welcome to the call. John, congrats again on the new role. Harvey, maybe just building on that a little bit, you alluded in your prepared remarks and 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 priorities in terms of growth for next year? What do you find to be most needle-moving, and what do you guys ultimately think that could mean for management for your growth into 2026? Thanks.

Harvey Schwartz: Yeah. Great, Alex. Thanks. I would say at this particular point in time, the momentum for the firm has never felt better. I say that in terms of client engagement globally, the strategic execution of the team. I think that when I say that, I'm talking about all aspects of the firm. 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. You think through 2026. The demand for capital is going to be quite high.

I think deployment will be good, and I think the opportunities will be great. We see opportunity virtually in every part of the platform. 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 in Fortitude. The engagement, just broadly speaking, with insurance clients as they continue to invest in private credit. The team's done a remarkable job there. We have the two flagship wealth funds, evergreen funds, up. CPAP will really be in the market next year. You'll see another wealth flagship vehicle, which will give our wealth investors the opportunity to participate there.

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. Capital markets still have a lot of room to run, and that's just going to be levered to activity. 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 I really feel we're just very much at the beginning of that.

Operator: The next question will come from Glenn Schorr with Evercore ISI Institutional Equities. Your line is open.

Glenn Schorr: Hi, thanks very much.

Harvey Schwartz: Hey, Glenn. Hello there. I'm curious. You had a lot of good things to say about the forward momentum and realization pipeline, and all the banks are super supportive in the deal environment coming through. 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. 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.

As you move into next year, I think that's where the extreme bullishness on the banks' part was as we head into early 2026. Does your forward pipeline align with that? 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? Thanks, Harv. Sure. I think that was four questions. I just want to point out you're violating Dan's rule, but we're going to address it all. I'm going to ask John to talk to the tributaries and the pipeline.

One thing I will say is that's not a quarter-to-quarter thing in our business. I think people should understand it. John, why don't you give a little more color on how we think about that pipeline, monetizations, and realizations?

John Redett: Yeah. 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. It's just part of the private equity business. It's hard to control when deals close, and 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. I would say the investment teams have been very focused on realizations, and the numbers show that. Realization activities are up 35% 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. As Harvey said in his prepared remarks, as of third quarter in global private equity, we're 150% the industry average. Clearly, we're an outlier in a positive way. I would also say our engagement with our investors is very positive. 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 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 Caloustone transaction, which was a very good transaction across a couple of different funds for us. We also will likely 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. I can't say all 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. We feel very good in terms of we are giving our investors in our private equity business 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. I think the pipeline, including the Medline IPO, speaks volumes to how our business is positioned in terms of momentum and realizations.

Glenn Schorr: Thank you. Thank you.

Harvey Schwartz: Thanks, Glenn.

Operator: The next question will come from William Raymond Katz of TD Cowen. Your line is open.

William Raymond Katz: Okay. Thank you very much. Maybe just a two-part. Just to make sure I understand the math. If it's $4 to $5 billion of announced transactions, is the typical MOIC 2X to sort of think through the realization opportunity? A broader question is just as I think about you getting toward the end of your repurchase activity, could you maybe refresh us a bit on capital management priorities, how you think about maybe where the stock is trading today versus any kind of inorganic opportunity now that the core business has stabilized? Thank you.

John Redett: Hey. It's John. 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. 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. Anytime we can invest capital in a 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 inexpensive and attractive investment. The other use of capital can be something on the inorganic front, but we focus on all three areas with driving growth. Our main priority.

Operator: The next question will come from Steven Chubak with Wolfe Research. Your line is open.

Steven Chubak: Hi. Good morning. Thank you for taking my questions. Welcome, Justin, to the call.

Justin Pluff: Hey, Steve.

Steven Chubak: 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 CP7. I 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.

Harvey Schwartz: We feel, as we've been saying, and we'll give you guys better guidance as we come to the year, but we feel very good about the momentum across the platform. Again, you pick your sleeve: capital markets, insurance flows, investors are making credit, the wealth channel. We'll have a bigger pickup in private equity flows into next year. 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.

Operator: Our next question will come from Brennan Hawkin with BMO. Your line is open.

Brennan Hawkin: Good morning. Thanks for taking my questions. The credit flows were really strong this quarter, but actually, the fee rate looked 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? Thanks for taking my question.

Justin Pluff: Yeah. Thanks for the question. It's Justin. 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. 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. 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. We're seeing really consistent and strong flows from wealth as well with our CTAC product and our BDCs. Quarter-to-quarter, it sort of just depends on the mix.

Really, every part of that business is doing well, and we're really excited about the momentum we're going to carry into 2026.

Harvey Schwartz: Thanks for that, Colin.

Operator: Our next question will come from Daniel Thomas Fannon with Jefferies LLC. Your line is open.

Daniel Thomas Fannon: Thank you. Good morning. $3 billion of wealth flows in the quarter are quite strong. Can you talk to the diversity of those flows? Clearly, you have momentum in that business, and I think you mentioned one product potentially coming to market next year. Maybe talk about the product roadmap and where you see that evolving as we go into 2026.

Harvey Schwartz: Yeah. As we talked about on the call, flows were up 10X since the new management team came into place a few years ago. What you're really seeing now is, and I still think it's early innings on this, the strategy coming together. The pillars of that strategy are three flagship funds: CTAC, which is Best of Credit, our Carlyle Alpha Invest Solutions business, and then CPEP, which will be really coming into view in 2026 across the private equity platform. The mix has been quite good. CTAC has been out longer. It's been a steady contributor. Of course, what you're really seeing is the pickup in the Carlyle Alpha Invest Solutions, the partnership with UBS.

I feel really, really good about the building momentum globally. All of these building blocks connect together, and success on each of the strategies really provides an exponential effect to the other strategies. It's all just about the brand, our connectivity with advisors. Obviously, you've seen us continue to invest in any number of ways: human resources, product development, and obviously the partnership with Oracle Red Bull in terms of connecting with the global platform. You should expect to see good momentum in that business and continue to grow at a good pace.

Operator: Okay. Our next question will come from Benjamin Elliot Budish with Barclays Bank PLC. Your line is open.

Benjamin Elliot Budish: Hi. Good morning. Thanks for taking my question. I had maybe another two-parter on 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 impaired stories there, or is it more market fluctuations? 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 strategics versus financial sponsors versus IPOs? What's the historical mix?

What would you expect going over into the next couple of years? Thank you.

John Redett: Hey, Ben. It's John. Look, your question's obviously focused on corporate private equity. 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. I think this quarter actually doesn't really deserve much narrative in the sense we just have the volatility in the publics. When I kind of look at corporate private equity performance, particularly in the U.S., we're very pleased. CPE is up kind of 15% the last 12 months. 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 double digits. EBITDA is up 8%.

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. I think that's important to understand. 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. There has been some volatility in those markets. Fundamentally, those are very good companies we own. We don't have any long-term concerns on that.

In Asia, in U.S., CPE7 in particular had some volatility in the public markets as well. It's particularly isolated to Standard Error 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 Standard Error and Hexaware. They're both great companies. I have absolutely zero concerns long-term about the public securities we own in our U.S. private equity business.

Benjamin Elliot Budish: All right. Thanks, John.

Operator: Our next question will come from Kenneth Brooks Worthington with JPMorgan Chase & Co. Your line is open.

Kenneth Brooks Worthington: Hi. Good morning. Thanks for taking the question. 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.

John Redett: Goodbye.

Kenneth Brooks Worthington: Credit. When looking at credit, the union 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 union-related or something else, recurring, doesn't recur. Anyway, any flavor would be helpful.

John Redett: Yeah. 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. When we have an opportunity to have a great outcome for our investors, we certainly take advantage of that. Some of it is the normal flow of our CLO business, which 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. The team has actually done 41 resets since then, and now only 12% of the CLO platform is in runoff. When you call a CLO and you reset it, that can play into the numbers.

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.

Kenneth Brooks Worthington: Okay. Great. I appreciate it. Thank you.

Operator: The next question is going to come from Patrick DeVit with Autonomous Research. Your line is open.

Patrick DeVit: Hey. Good morning, everyone. Obviously, it's been a perfect storm for secondaries here for a while now. To your points 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? Thank you.

Harvey Schwartz: Yeah. I think let's take a step back. There's a reason why we call it Carlyle Alpha Invest 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, the shorthand—and I know you know this quite well—the shorthand for that business is secondaries. 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. 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. Carlyle Alpha Invest creates the entire solution set for that. In terms of the more narrow slice of secondaries, anything you look at in terms of statistics suggests that demand for secondary capital is going to grow for several years. We would see that in our pipelines, in our engagement with clients. This is not—sometimes there 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. We could be in a room with a CEO or CIO, and the whole discussion is about how to reposition a portfolio. We need to start really thinking about this being at the center of a flywheel of corporate finance solutions. The narrow question on secondaries, it feels quite good.

Operator: The next question will come from Michael Saprese with Morgan Stanley. Your line is open.

Michael Saprese: Hey. Good morning. Thanks for taking the question. I wanted to ask about Carlyle Alpha Invest. I think you mentioned a $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. Thanks.

Justin Pluff: Yeah. Thanks. It's Justin. We're very excited about the ABF platform that we've built. It really started as a partnership with Fortitude Re, and it's expanded from there. We have multiple partnerships with origination platforms that have been feeding into that portfolio. We've had a lot of interest from the non-insurance space, which ABF has historically been really an insurance product. We have some vehicles that we are discussing with a number of counterparties outside the insurance space to expand that business. 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.

The team's done a fantastic job, and I think there's a lot of potential for that as we go into the fourth quarter of 2026.

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

Daniel Harris: 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.

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

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