HomeMost PopularInvestingCarlyle Group Forges Ahead With Organic Growth Despite Surging Costs

Carlyle Group Forges Ahead With Organic Growth Despite Surging Costs

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Carlyle Group, affectionately labeled as CG, is on a thrilling rollercoaster of organic growth, as their assets under management (“AUM”) balance continues to swell. The company’s steadfast focus on expanding investment platforms and deploying capital sustainably is impressive. However, the spiraling expenses and fierce competition for investment opportunities cast a shadow of concern.

The company’s global expansion and relentless pursuit of business growth bode well for sustained AUM expansion. On April 1, 2022, Carlyle inked a strategic advisory services agreement with Fortitude Re, leading to an approximate $50 billion boost in total AUM and fee-earning AUM. In May 2023, Fortitude Re revealed a deal to reinsure $28 billion of life and fixed annuity products. Once the transaction is sealed, Carlyle’s AUM will skyrocket by around $24 billion.

Over the past four years (2019-2022), fee-earning AUM achieved a blazing compound annual growth rate (CAGR) of 18.3%, while total AUM notched a spectacular CAGR of 18.4%. Both metrics continued their upward trajectory in the initial nine months of 2023. It is anticipated that fee-earning AUM and total AUM will rev up by 4% and 4.8% respectively in 2023.

The company’s commitment to scaling its investment platforms, expansion into infrastructure credit and real estate credit, and venturing into new frontiers like insurance and capital markets, all promise a splendid future for revenue growth. Our projections indicate an anticipated total revenue surge with a CAGR of 2.4% over the next three years.

Carlyle’s capital allocation maneuvers are nothing short of commendable. In April 2023, the board of directors gave the nod to a 7.7% hike in the quarterly dividend to 35 cents per share. Additionally, as of September 30, 2023, a chunky $396.8 million remained available under the buyback program. Given the company’s consistent earnings prowess, these capital distribution activities appear sustainable.

On the flip side, CG has been grappling with an incessant surge in expenses in recent years. Going forward, inflationary pressures, coupled with potential additional investments in technology and compensation costs, might exert pressure on its expense base, thwarting bottom-line growth. Our analysis predicts total expenses to spike with a CAGR of 5.7% over the next three years.

As of September 30, 2023, Carlyle was lugging around a total debt equivalent to $8.7 billion (comprising loans payable of consolidated funds and debt obligations). On the bright side, it held $1.6 billion of cash and cash equivalents, including those at consolidated funds. Nevertheless, with restricted liquidity, the company might find it challenging to meet its near-term debt obligations, particularly if the economic climate takes a turn for the worse.

The firm is currently facing stiff competition from insurance and reinsurance companies, local and regional firms, sovereign wealth funds, family offices, and agencies. Furthermore, an increasing reliance on advisory firms or in-house investment management could potentially diminish the appeal of fund of funds to large institutional investors.

At present, Carlyle flaunts a Zacks Rank #3 (Hold). Over the past year, the company’s shares have advanced by 9.9%, compared with the 9.3% growth registered by the industry.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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