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Easy Liquidity and Zero Rates Lead to Higher AUM for Carlyle

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Sep. 29 2016, Updated 6:04 p.m. ET

Preference for equities and alternatives

Carlyle Group (CG) and other alternative managers have managed to attract capital continually on the back of expected performance from equities as against debt investments. Carlyle has introduced new funds focusing on regions as well as sector-based deployments. The company has seen AUM (assets under management) falling over the past few quarters on higher distributions, partially offset by new fundraising. In the September quarter, Carlyle expects a rise in AUM to stem a decline mainly due to higher market appreciation and fundraising as against distribution to its limited partners.

Carlyle’s AUM stood at $175.6 billion in the June quarter, driven by market appreciation of $4 billion and $1.7 billion in new funds.

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Generating premium returns

Institutional investors have been shifting their funds towards passive funds, as alternatives have failed to generate premium returns as compared to the index over the past few quarters. Passive funds provide a low-cost option as against alternatives that charge premium fees. Alternatives like Carlyle can attract more funds on the back of generating premium returns.

Carlyle attracted funds into its second power fund on the pricing of three new CLOs, fundraising, and activation of mandates in AlpInvest fund vehicles. The company saw outflows in hedge fund partnerships.

Carlyle Group’s total AUM stood at $175 billion. Let’s compare this to its 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 ETF (XLF).

Liquidity to deploy at attractive prices

Carlyle had total uninvested commitments, or dry powder, of $55.1 billion as of June 30, 2016. The high dry powder across its private equity, credit, real estate, and hedge funds provides enough liquidity to be deployed if good opportunities are available for investments.

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

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