Carlyle Group’s fourth-quarter earnings fell short of market expectations, primarily driven by weaker proceeds from asset sales, highlighting the headwinds facing the private equity sector even as other parts of the group’s operations delivered strong results, according to a report by Reuters.
Distributable earnings for the quarter stood at $384m, or 92 cents per share, falling four cents shy of analysts’ estimates, according to LSEG data. Shares of Carlyle dropped 6.1% following the announcement.
The private equity unit, a cornerstone of Carlyle’s business, saw earnings slide 24.1% due to a decline in realised performance revenue, which is primarily generated from asset sales. Revenue from this segment dropped 4.7% to $245.7m. However, Carlyle’s management anticipates that declines in the PE business will moderate significantly by 2025, driven by a planned capital raise for its next US buyout fund, slated to launch later this year.
While the private equity business faced challenges, Carlyle’s credit operation provided a counterbalance, delivering a 20.6% increase in distributable earnings. As the firm’s largest division by assets, the credit arm’s performance softened the overall impact of the PE unit’s struggles. Inflows into the credit segment reached $14.2bn during the quarter, driving total assets under management up 4% to $441bn.
Carlyle’s fee-related earnings (FRE) also reached a quarterly record of $287.4m, marking a 13% increase year-over-year. The firm retained $84bn in dry powder, or unspent capital, and deployed $17.6bn into new investments during the quarter. For 2024, Carlyle projects a 6% rise in FRE, with inflows expected to remain steady.
Analysts view the sale of portfolio assets as a critical factor for Carlyle’s stock performance, with the recycling of proceeds from these realisations into new buyout funds seen as key to driving investor confidence and share price growth.
Carlyle’s recent exits include taking StandardAero and Rigaku public in the US and Japan, respectively. Additionally, the firm agreed to sell Italian component maker Forgital to US investment firm Stonepeak in a deal valued at over €1.5bn ($1.55bn).
