Earnings Call Insights: The Carlyle Group (CG) Q2 2025
Management View
CEO Harvey Mitchell Schwartz stated, "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." Schwartz highlighted record fee-related earnings (FRE) of $323 million, record AUM of $465 billion, and $51 billion in organic inflows over the last 12 months. He noted, "We returned almost $15 billion to investors over the last 12 months. This represented 17% of our portfolio and is 3x the industry average." Schwartz emphasized strong performance in U.S. buyout funds, with two most recent funds appreciating approximately 20% over the past year, and spotlighted growth in Asia, real estate, and capital markets, including a $9 billion final close for the tenth U.S. real estate fund.
Schwartz also announced, "We announced a series of leadership appointments last week, including naming John Redett, Mark Jenkins and Jeff Nedelman as Co-President, and appointing Justin Plouffe as our new CFO."
CFO John Christopher Redett stated, "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." Redett also noted, "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."
Outlook
Management updated guidance to full year FRE growth of approximately 10%, compared to the previous 6% outlook. Redett indicated that full year inflows are now expected to reach $50 billion, up from the earlier target of $40 billion. He said, "We're also tracking towards full year inflows of $50 billion compared to our prior outlook of around $40 billion."
Schwartz suggested there is "upside to these numbers" if markets continue to improve, stating, "I think there's a lot of operating leverage to an improving environment."
Financial Results
The firm reported record FRE of $323 million for the quarter and $634 million year-to-date, both up 18% year-over-year. AUM ended the quarter at $465 billion. 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 quarter and $126 million year-to-date. Over the last 12 months, inflows reached $51 billion, representing a 12% organic growth rate.
Carlyle AlpInvest delivered FRE of $68 million for the quarter and $134 million year-to-date, up more than 80%. Global Credit FRE was $111 million in the quarter. Both Global Credit and AlpInvest now contribute 55% of firm-wide FRE, up from less than 30% two years ago.
Realizations in corporate private equity drove nearly $4 billion of realized proceeds in the quarter, with around $4 billion of announced but not yet closed transactions. The tenth U.S. real estate fund closed at $9 billion, nearly 15% larger than its predecessor.
Q&A
William Raymond Katz, TD Cowen, asked about the drivers of the FRE growth step-up and the outlook for 2026. Schwartz replied, "We'll think through that. We want to make sure you guys have the information you can use... I'm not sure anyone in the world can predict 5 years in any business given the complexities of the world."
Steven Joseph Chubak, Wolfe Research, inquired about retail momentum and fundraising run rates. Schwartz explained, "We systematically repositioned the business, the platform with our partners... This ties back to basic fundamentals. The brand has such global recognition, the partnerships that we have..."
Alexander Blostein, Goldman Sachs, queried about credit business growth. Schwartz said, "We've taken the strategy of selectively establishing collaborative partnerships... we are at 6 now... we have a pretty fantastic capability set, and I just see this market continuing to grow."
Benjamin Elliot Budish, Barclays, asked about AlpInvest and Solutions business outlook. Redett responded, "The business has really evolved... The funds we're raising are bigger than predecessors. The secondaries fund we're raising... is already significantly larger..."
Sentiment Analysis
Analysts demonstrated a positive to slightly positive tone, frequently congratulating management on results and promotions, and focusing on growth drivers and capital returns.
Management maintained a confident and upbeat tone in both prepared remarks and Q&A, with statements like, "I feel very good about the back half," and "The momentum is pretty palpable."
Compared to the previous quarter, there is a marked increase in management confidence and more positive engagement from analysts, reflecting improved results and upgraded guidance.
Quarter-over-Quarter Comparison
Guidance was raised from 6% to 10% FRE growth and inflows target increased from $40 billion to $50 billion.
Management's tone shifted from cautious optimism in Q1 to more confident and assertive in Q2, especially regarding strategic initiatives, growth in AlpInvest and Credit, and capital returns.
Analysts in Q2 focused more on sustainability of growth and medium-term drivers, compared to Q1's emphasis on macro risks and capital return pacing.
Key metrics, including AUM, FRE, and inflows, all increased quarter-over-quarter.
Risks and Concerns
Schwartz acknowledged, "There’s a lot of geopolitical stress in the world, which we’re being thoughtful about," but stressed the firm’s ability to adapt.
Management emphasized the importance of maintaining a disciplined approach to risk pricing and remaining capital-light, particularly in an uncertain environment.
Analysts raised questions about sustainability of carry realization in CP VII, the impact of macro policy on fundraising, and the trajectory of capital markets fees.
Final Takeaway
The Carlyle Group reported record financial performance in Q2 2025, raising its outlook for FRE growth and inflows, driven by strong momentum across investment platforms, capital returns, and strategic business initiatives. Management highlighted increased confidence in its ability to deliver growth, supported by new leadership appointments and expansion in key areas such as real estate, credit, and wealth. The firm’s disciplined approach, diversification, and operating leverage position it well to capitalize on improving markets and evolving client needs.
Read the full Earnings Call Transcript
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