By Arasu Kannagi Basil
Nov 5 (Reuters) - Carlyle Group exceeded third-quarter profit expectations on Thursday as the asset manager monetized more private equity investments and returned cash to investors.
The traditional private equity model of buying and selling companies has been hampered by rising interest rates in recent years, but Carlyle and some of its peers have accelerated investment exits and returned cash to investors.
Carlyle is well-positioned to accelerate growth in the coming years,
CEO Harvey Schwartz said, citing early stages of a strong fundraising cycle and near-record levels of assets yet to start paying fees. The firm has returned nearly $100 billion in capital to investors since the start of 2024, he added.
Distributable earnings, which represent the cash used to pay dividends to shareholders, came in at $1.12 per share in the three months ended September 30. Analysts on average expected $1, according to data compiled by LSEG.
Realized net performance revenue, which reflects its share of profits from investment exits, vaulted to $99.8 million in the quarter from $19.1 million a year earlier.
Shares of Carlyle, however, fell 7% as Wall Street sold off sharply on Thursday. The stock has lost about 28% this year as of last close, underperforming its bigger peers.
Carlyle closed on the sale of electron microscope manufacturer Tescan Group and a 27% stake sale in Japanese X-ray testing tool maker Rigaku during the quarter.
The company expects monetization to remain strong, with almost $6 billion of deals already signed up for exits that will come through in the fourth quarter, finance chief Justin Plouffe said.
Asked about data center investments, Schwartz said Carlyle had been cautious, given uncertainties around deal structures and collateral. More clarity around the processes could open up more opportunities for Carlyle and others, he added.
INFLOWS EXPECTED TO PICK UP IN Q4
Carlyle expects at least $20 billion of inflows in the fourth quarter, boosted by the closing of a reinsurance transaction with Unum Group.
Inflows totaled $10.8 billion in the reported quarter, driven by the firm's credit business — especially the first close in its latest opportunistic credit fund and capital raised in its aviation business.
Earlier this year, Carlyle set a target of drawing $200 billion in fresh capital by the end of 2028.
Long-term earnings power generally took a step back in the third quarter, making reliance on prospective asset gathering increasingly critical, TD Cowen analyst Bill Katz said.
Fee-related earnings fell 6% to $293 million as lower fee-related performance revenue and transaction fees weighed.
Carlyle deployed $11 billion of capital, led by activity across its credit and private equity businesses.
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur and Joyjeet Das)
