The Carlyle Group held a Q4 2023 earnings call and it was noteworthy as fee related earnings (FRE) reached record levels. CEO Harvey Schwartz stated:
We set several records last year which you see on Page 6. They include: record FRE at $859 million; record Q4 FRE margin of 43%, and we finished the year with record AUM at $426 billion.
Schwartz is excited about 2024:
We are targeting FRE of $1.1 billion. We are targeting FRE margins to increase to a range of 40% to 50%. We are targeting inflows to exceed $40 billion in 2024. And again, we have significantly increased our ability to return capital to shareholders by expanding the share buyback capacity. Again, we intend to be active buyers of our stock as we see strong value returning capital to you, our shareholders. We began 2024 with clear momentum.
Harvey noted in the Q&A:
...we are 100% making sure we invest in growth. And we think the growth opportunities for Carlyle are pretty extraordinary, and we have the momentum. And I think you see it in the financial targets.One item struck me:
...we incurred a onetime non-cash GAAP charge of $1.1 billion, largely related to the value of future carry going to employees.Harvey characterized that as allowing Carlyle to "generate higher FRE for shareholders more quickly." Carlyle chiefs know how to spin.
Carlyle Group co-founder David Rubenstein was recently announced as the lead owner of the Baltimore Orioles in a PEU club deal. The public is on the hook for $600 million in subsidy for development around the stadium.
In 2014 Carlyle invested in apartments next to the planned Atlanta Braves stadium through a joint venture with Atlantic Realty.
In a message from the ownership group Rubenstein highlighted development opportunities at Camden Yards, the Orioles home stadium.
My wise friend commented on Mr. Rubenstein's $600 million public subsidy:
How do you spell welfare? All around me I see the same game, using others people's money to get rich with no accountability. All these guys and their junior brethren entice people to forward funds to their partnerships, where they graze on fees with imaginary marks and follow on deals supported by more debt. It's a fantasy that breathes reality for these quite extraordinary times we live in. Those that are enriched on the pump never get to experience the dump. This model of economics has infiltrated the psyche of this exclusive club to think, and maybe rightly so now, that they are in control, that they are excluded from from the aftermath of this spectacle.Rather quickly he added:
One more thing. We have exchanged meritocracy for mediocrity especially for the billionaire class. What they are guaranteed for failure and fees and assets under management coupled by low tax rates and bankruptcy laws that favor their grip on the system is a corrosion that affects all of us and our children. Forty years ago when you raised money it was very rare that they would let you pay for expenses let alone a lifestyle. You had to produce good results to draw an income with a hammer that would come down if you didn't. Today's capitalism is a mutation beyond repair.Bravo to that contribution.
Update: One can generate lots of fees doing this:
Carlyle served as the sole manager, sole structuring agent and ratings advisor for the transaction.
No conflicts of interest here. Move along...
