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Carlyle’s Global Market Strategies Division: What Happened?

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Fee-related earnings

The Carlyle Group’s (CG) top management has a favorable outlook on the development of the company’s credit business. In 3Q17, the company’s Global Market Strategies division reported fee-related earnings (or FRE) of $75 million, which was a substantial YoY (year-over-year) rise.

The rise was mainly due to commodities-related recoveries and a rise in management fees. However, increased compensation negatively impacted the division’s FRE.

The Carlyle Group has generated a return on invested capital of ~3.0% on a last 12-month (or LTM) basis. Here’s how its peers (XLF) have fared:

  • Blackstone Group (BX): 32.2%
  • KKR & Co. (KKR): 1.7%
  • Ameriprise Financial (AMP): 3.1%
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Investment income and fee-generating AUM

Carlyle’s Global Market Strategies division saw a substantial rise in distributable earnings, from $4 million in 3Q16 to $88 million in 3Q17. The division also saw a substantial rise in its economic net income, from -$11 million in 3Q16 to $88 million in 3Q17, primarily because of the rise in FRE.

The division reported investment income of $5 million in 3Q17. Its fee-generating assets under management fell from $29 billion in 3Q16 to $26 billion in 3Q17.

Top management has a positive view on the new hires in its Global Market Strategies division.

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