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How Is Carlyle’s AUM Picture Likely to Pan Out in 2Q16?

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Market appreciation to help AUM

Carlyle Group (CG) reported AUM (assets under management) of $178.1 billion as of March 31, 2016, which was 7.6% lower than in 1Q15. The fall in assets was attributable to distributions of $4.9 billion, $1.8 billion in redemptions, and $1 billion due to market depreciation. These were partially offset by new commitments of $1.1 billion and a positive foreign exchange effect of $2.7 billion.

Although market appreciation is likely to impact its AUM positively in the June quarter, the company will see overall pressure on its AUM due to redemptions from hedge fund and from the likes of Alpinvest and Riverstone for 2016.

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AUM consolidation 

Carlyle Group’s hedge fund AUM fell by $1.8 billion in gross redemptions during 1Q16. CG expects AUM runoff of approximately $1 billion in during the next few quarters on incremental redemptions. Fee-earning AUM rose by 1% in 1Q16 on a trailing-12-month basis. The company had just $100 million in fresh capital raises during the quarter after redemptions, an amount for which it hasn’t started charging management fees. Management expects total outstanding capital to move to fee-earning AUM by 2Q16.

Fee-earning AUM saw commitments into its second energy mezzanine fund and its second power fund, and the activation of mandates into the AlpInvest and Metropolitan fund vehicles.

Carlyle’s total AUM stood at $178 billion. Let’s compare this to Carlyle’s peers:

  • Blackstone (BX): $336 billion in AUM
  • KKR (KKR): $98 billion in AUM
  • BlackRock (BLK): $4.5 trillion in AUM
  • Apollo Global Management (APO): $163 billion in AUM

Together, these companies make up ~1.4% of the Financial Select Sector SPDR Fund (XLF).

Dry powder

Carlyle had total dry powder (uninvested commitments) of $56.6 billion, making up 32% of its total assets under management as of March 31, 2015, which reflected the solid funding power of the company. The dry powder included $23.1 billion in corporate private equity, $4.7 billion in global market strategies, $15.4 billion in real assets, and $13.3 billion in investment solutions.

In the next part, we’ll discuss the role of the recent energy decline in Carlyle’s business.

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