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What Drove Carlyle’s Investment Solutions Segment?

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Feb. 20 2018, Updated 7:32 a.m. ET

Net performance fees

The carry funds of Carlyle Group’s (CG) Investment Solutions segment saw appreciation of 3% in 4Q17 and 10% in 2017. In 4Q17, the segment generated economic income amounting to $18 million, while in 2017, it was $51 million.

The Investment Solutions segment generated net performance fees amounting to $11 million in 4Q17, while in 2017, it was $25 million thanks to the appreciation. In 4Q17, the segment’s fee-related earnings (or FRE) stood at $9 million, which represents a rise of 107% on a YoY basis. This rise was due to a decline in expenses and a rise in the fee-generating assets under management (or AUM), which in turn led to a 14% rise in management fees. In 2017, FRE stood at $32 million, which represents a YoY rise of 38%.

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Total AUM

The Investment Solutions segment’s total AUM witnessed a rise of 7% to $46.3 billion in 4Q17 on a YoY basis. This rise was seen mainly because of the foreign exchange effect as well as appreciation in the market. In 4Q17, the segment witnessed fundraising of $0.7 billion, which represents a fall from 4Q16. In 2017, the Investment Solutions segment saw fundraising amounting to $5.9 billion.

The Carlyle Group has an enterprise-value-to-revenue ratio of 3.90x on an LTM (last-12-month) basis. Peers (XLF) CBRE Group (CBG), KKR (KKR), and Brookfield Asset Management (BAM) have ratios of 1.19x, 15.51x, and 4.77x, respectively, on an LTM basis.

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