Participants

Daniel Harris; Head of Investor Relations; Carlyle Group Inc

Harvey Schwartz; Chief Executive Officer, Director; Carlyle Group Inc

John Redett; Chief Financial Officer, Head of Corporate Strategy; Carlyle Group Inc

Alexander Blostein; Analyst; Goldman Sachs

Brendan O'Brien; Analyst; Wolfe Research

Patrick Davitt; Analyst; Autonomous Research

Brian Bedell; Analyst; Deutsche Bank

Brian McKenna; Analyst; Citizens JMP

Glenn Schorr; Analyst; Evercore ISI

Benjamin Budish; Analyst; Barclays

Daniel Fannon; Analyst; Jefferies

Bill Katz; Analyst; TD Cowen

Kenneth Worthington; Analyst; JPMorgan

Michael Cyprys; Analyst; Morgan Stanley

Kyle Voigt; Analyst; Keefe Bruyette & Woods

Michael Brown; Analyst; Wells Fargo

Presentation

Operator

Hello, everyone, and welcome to the Carlyle Group fourth-quarter 2024 earnings. (Operator Instructions) Please be advised that today's conference is being recorded.
Now, it's my pleasure to turn the call over to the Head of Investor Relations, Daniel Harris. Please proceed.

Daniel Harris

Thank you, Carmen. Good morning, and welcome to Carlyle's fourth quarter and full-year 2024 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz; and our Chief Financial Officer and Head of Corporate Strategy, John Redett.
Earlier this morning we issued a press release and a detailed earnings presentation which is available on our investor relations website. This call is being webcast and a replay will be available. We will refer to certain non-gap financial measures during today's call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. We have provided reconciliation of these measures to GAAP in our earnings release to the extent reasonably available.
Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factor section of our annual report on Form 10k that could cause actual results to differ materially from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time.
In order to ensure participation by all those on the line today, please limit yourself to one question and return to the queue for any additional follow-ups. With that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

Harvey Schwartz

Thanks, Dan. Good morning, everyone, and thank you for joining us. We have a very strong 2024 and I'm pleased to say delivered on each of our financial targets.
Our record performance demonstrates our ability to mobilize across the firm and deliver long-term value.
We generated over 1.1 billion of fee-related earnings, a near 30% increase over 2023.
We expanded our FRA margin to 46%, a 900 basis point year over year increase.
Inflows exceeded $40 billion. That brings us to more than $100 billion of inflows over the last two years, and we returned more than a billion dollars in capital to shareholders.
As I approach my two-year anniversary in Carlyle this week, I'd like to reflect on some of our key achievements.
When I joined Carlyle, it was clear the firm had a proven investment track record, a leading global brand, an iconic name in financial history. However, there was certainly some work to do.
Let me share some of the progress we made across our firm.
We bolster our leadership team to a combination of motions from within and hiring of external industry leaders. This group has quickly come together to mobilize our efforts around improving operations across the firm and delivering performance excellence.
We overhauled our compensation strategy, which improved alignment across all of our stakeholders. You, our shareholders, get more of what you value most, fees, and our investment team's compensation is even more driven by performance.
We implemented a new capital allocation strategy with a $1.4 billion dollar share repurchase authorization, reflecting our strong belief that the share price is significantly undervalued.
And most importantly, we have both strong momentum in areas we strategically identified for growth over the last few years, like global credit and insurance, global investment solutions, global wealth, and capital markets.
Together, these businesses delivered 2-year revenue growth for approximately 40%. Let me underscore that again. Together, these businesses delivered 2-year revenue growth of 40%.
Now let me focus on our 2024 highlights.
First, global credit has remained our fastest growing area over the past 5 years, with revenues increasing 22% in 2024.
This business has finished the year at $190 billion of assets under management.
Because our 3rd opportunistic credit fund, which is 30% larger than the prior vintage.
We also completed a landmark Discovery transaction, one of the largest asset-backed finance transactions of the year.
At $25 trillion globally, asset-based asset-backed finance is a massive addressable market, and we see significant opportunity to continue scaling this business.
Moving on to capital markets, this business was clearly subscale when I arrived 2 years ago.
We need a number of changes to drive value in this business.
We appointed a new global head of capital markets and revised our incentive program. As a result, we had a record year in transaction fees.
It's worth noting this record result was achieved in a market environment well below peak activity levels.
New areas like asset-backed finance, infrastructure, and renewable energy are now all meaningful capital marketsee contributors.
These areas accounted for nearly 40% of our capital markets revenue in 2024, up from single digits two years ago.
In 2025 we expect continued growth in this area.
Another priority is in broadening the scope of our global investment solutions business.
This year solutions produced a 44% increase in fee revenue compared to the prior year.
This platform has broadened its product set.
New areas like capM, Avest Global Wealth, Evergreen Fund, and our portfolio finance strategy are adding to the platform scale.
As an example of this growth, we closed the $1 billion dollar collateralized fund obligation in the fourth quarter.
There are 2 things to note here. One is that the design of this structure improved access to key Alves funds for insurance clients.
2, this is the largest instrument of its kind ever raised.
And of course, the core of this business continues to accelerate. We're finalizing fundraising for our 8th vintage secondaries fund, which is already substantially larger than its predecessor.
2024 was also a notable year for a global wealth business.
We saw record inflows of $4.5 billion and we expect to build on that success in 2025.
However, Greenwell products saw a 65% step up in AUM in 2024 to over $9 billion.
There's strong demand across the globe for Carlyle solutions.
We've added new distribution partners and we expect our new private equity product to launch in the latter half of 2025.
Now moving on to global private equity, I want to highlight the performance of our two latest US buyout funds.
Performance in these two funds appreciated 15% and 21% respectively in 2024.
That is more than $5 billion of value creation. It's a fantastic year for these two funds.
Activity levels are accelerated across our US bio franchise over the past year.
We took Standard Arrow public and one of the most successful IPOs of the year. We also invested capital into leading businesses like Vantive, $4 billion dollar carve-out of a leading global kidney care business, and WPAC, $2 billion dollar carve-out of a leading automotive equipment provider.
We want to congratulate the team for driving value for all of our investors, these funds, our firm, and our shareholders. It's really great to see.
Switching to real estate, our leading US real estate franchise is finalizing its latest opportunistic fund. We expect this fund to close larger than its predecessor. The AUM and this business has increased more than 80% over the past 4 years, and the team has done an extraordinary job navigating the real estate market.
Really impressive.
Before I turn over to John, let me give you some thoughts on the broader macro environment.
We have unique insights into the global economy through data from our investment portfolio, and the indicators remain positive around economic growth and employment. This reinforces our perspective that interest rates will stay higher for longer.
This should spur new investment activity regardless of the amount of future monetary using by the Fed and other major central banks.
Now, with respect to the new administration, our roots in DC are particularly helpful here.
We have a long history of working through various cycles, administration, and legislative priorities. We have mobilized the team as we evaluate changes in policy and regulatory action.
The new administration promotes a pro-growth and pro-business agenda which broadly supports our portfolio and global economic activity.
On Paris And they're getting a lot of attention. The situation remains fluid, but the majority of our portfolio is either domestically focused or more services-oriented versus goods, insulating it well from the impact of tariffs.
Nearly 80% of our global private equity portfolio is US based.
And though it is early days, anticipate very manageable impact across the portfolio, but continue to monitor closely, obviously.
On regulation, we feel that the regulation will be an overall positive for all market participants, and again, pro growth, pro-business.
In conclusion, we wrapped up a solid 2024 and we we anticipate a strong year of investment activity, realizations, and fundraising in 205. John will provide specific color on our 2025 outlook, but all the work we've done in helping position Carlos for continued long-term growth, with all of that, we're confident that we can further build on our progress in the years ahead. With that, let me now turn the call over to John.

John Redett

Thanks, Harvey. Good morning, everyone. Let's start with our results. We generated $1.5 billion in DE for the year, or $3.66 in DE per share.
Fee-related earnings of $287 million in the fourth quarter, and $1.1 billion for the full year were both records.
FRE FRE increased nearly 30% in 2024.
And our full year FRE margin of 46% increased nearly 900 basis points year over year. Clearly, we delivered on all of our 2024 financial targets.
Notably, we delivered record FRE.
While also investing for growth in key areas across our platform.
We increased the size of our global wealth distribution team by more than 3% this year, and the business itself grew assets under management by 65%.
In our asset-backed finance business, our team grew by nearly 30%.
We will continue to scale platforms where we see significant opportunity for growth.
We had strong performance revenue in transaction fees.
Which more than doubled to 164 million.
As Harvey mentioned, our capital markets business remains an important growth driver for Carlyle.
Our focus in investment in this area led to record levels of transaction fees in 2024.
Which we accomplished even as broader market activity levels remained well below that of prior years.
While transaction fees may vary quarter to quarter.
Over time we expect this Ernie stream to continue to expand.
We saw a nearly 40% increase in global investment solutions management fees.
And a 9% increase in global credit management fees while global private equity declined 7%.
We expect continued growth in global credit and global investment solutions in 2025.
In a more modest decline in global private equity.
We expect growth and private equity to resume as we progress through our next US buyout fundraise.
We also ended here with $23 billion in pending fee earning AUM across our platform, up nearly 50% year over year.
The management fee contribution from activating this pending AUM is close to 200 million annually.
Our FRE cash compensation ratio improved to 36% in 2024.
Down from 45% in the prior year.
This improvement was a direct outcome of our strategic compensation realignment that we implemented last year, as well as continued scaling of our platform.
We are well on our way to achieving a compensation ratio of 35% or less.
Activity levels increased across the platform.
With strong inflows of more than 14 billion in the fourth quarter and nearly 41 billion for the year.
This was our 3rd best fundraising year ever.
Deployment increased nearly 50% versus 2023 with global credit.
Corporate private equity and secondary showing the most acceleration.
With 84 billion in dry powder, we're well positioned for increased investment activity.
In terms of exits, corporate private equity realized proceeds nearly doubled from the prior year.
We completed 4 portfolio company sales in the fourth quarter and sold nearly $2 billion in public securities.
Including proceeds from the IPOs of Standard Aero in the US and Raku in Japan.
Additionally, there are several exits in process.
And in US buyout, our largest and most profitable fund strategy, we created meaningful value for our LPs in 2024.
We also distributed $5.3 billion in proceeds back to US buyout investors throughout the year and generated nearly $600 million of net accrued performance revenues in our two most recent US buyout funds.
Moving on, let me turn to our 2025 outlook.
We expect 2025 to be a year of growth and increased investment across our core businesses, including global wealth, global credit, and solutions.
We expect FRE to increase 6% compared to 2024.
However, we do see the potential for upside, driven both by opportunities and market environment.
We expect 2025 FRE margin to be at a similar level to that of 2024.
We will update you as we progress throughout the year.
We expect inflows in 2025 to be similar to 2024 levels. Credit is once again poised to raise the most capital across our platform, and we have a diversified fundraising pipeline across all segments.
In closing, we enter 2025 with conviction in the direction of our overall platform.
We will continue to invest into areas where we see the most opportunity to drive continued long-term shareholder value, and we remain focused on delivering great investment outcomes for our investors.
Now let me turn the call over to the operator so we can take your questions.

Question and Answer Session

Operator

(Operator Instructions)
Alexander Blostein, Goldman Sachs.

Alexander Blostein

Hey, good morning, everybody.
Thank you for taking the question. Morning, Harvey. So appreciate the guidance, good color, how you guys are thinking about 2025. I was hoping we kind of pack that a little bit, so I heard your comments and growth and credit and solutions offset by more modest decline in global private equity. What are some of the bigger drivers in credit that you guys see for 2025 and solutions that will drive some of that growth? And as you think about the global private equity business, can you help us unpack perhaps the timing of when you expect to come back to market with the next selection fund?

John Redett

Yeah, Alex, hey, it's John. Look, in terms of the 6%, the 6% FRE growth, I would describe this as a base case for us. This is the number we have a high degree of confidence around, but I think importantly, it reflects us aggressively in steam in businesses where we see growth, wealth, credit. Solutions and we're much more focused on delivering long-term growth and investing in the business will enable us to deliver long term growth. We are far more focused on the growth aspect of our business than than delivering kind of short term FRE. So you should understand that 6% in the context of us, we are investing aggressively in businesses where we see growth. And what does that mean?
You look at the headcount.
Increase we had in wealth last year is pretty significant. It'll actually be north of that in 2025. We think headcount will grow. More than 50%. We're investing a lot of money in our asset-backed business, which we also did last year, and our solutions business. We do see some upside to our 6% FRE, and I think there are a lot of drivers of that, but I'll just highlight a couple, wealth growth accelerates faster than we anticipate.
I do think capital markets fees could be a positive surprise. And I think insurance flows, there are a lot of conversations going on in insurance, more conversations today than I've seen since I've been CFO, so I do expect to see some insurance flows. That is a net positive. And I do think credit growth could surprise us on the positive. So I think there are some upsides in terms of credit specifically, we're continuing to see good, very strong growth in our asset-backed business, as Harvey alluded to in his prepared remarks. This is a massive market.
You see stats all over the place, but let's just say it's 20 trillion. So I do think you'll see some growth in asset-backed.
We raised a significantly larger 3 credit opportunistic fund, except materially from the predecessor, and I do think our CLO business will continue to see some headwinds in the front part of 2025, but I do think 2025 could be a positive surprise.
That team had an amazing 2024. Incredibly active after a couple of years of relatively limited activity. And the other big driver within credit Alex is CTA, which is our retail wealth product in credit. So feel very good about the trajectory of our credit business.

Operator

Steven Chubak, Wolfe Research.

Brendan O'Brien

Good morning. This is Brendan O'Brien filling in for Steven. I guess I just want to talk on the buybacks. You guys were obviously really aggressive in repurchasing shares this year, but when you announced the authorization, Harvey, you indicated that you would expect repurchases to accelerate alongside realization activity. And so given your more optimistic outlook for realizations, it'd be helpful to get an update as to how you're thinking about capital return and whether you would still expect to accelerate the buyback and how you're thinking about the balance versus investing in some of the growth opportunities John just discussed and returning capital to shareholders.

John Redett

Yeah, so last year we did, we announced a $1.4 billion dollar share repurchase program in 2024 we repurchased roughly 12 million shares, so $500 cost $550 million.
So we have $850 million left on the authorization.
We still view a stock buyback as a very attractive form of returning capital to our shareholders, you should assume. We will be active in 2025. I think it's also important to note, for the first time in Carlyle's public history, which is roughly 12 years, the last two years we've actually shrank our share count year over year, which I think is a is a real positive, but we will continue to evaluate capital allocation on the spectrum. And how do I think about capital allocation? I can buy back stock. I can invest in our businesses for growth, and we can do M&A.
I like returning capital to shareholders via the buyback. We will continue to do that, but we are also balancing that with aggressively investing in the business to deliver long term growth. But you should assume we still view our stock price as attractive and we will be repurchasing stock.

Brendan O'Brien

Great, thank you for taking my question.

Operator

Patrick Davitt, Autonomous Research.

Patrick Davitt

Hey, good morning everyone. The negative mark in in fee paying assets under management was kind of outsized relative to the reported 3% mark. So is that a reflection of a negative fortitude mark? And if so, is there a potential for you to move off of a mark to market fee base there like some others have?
Thank you.

John Redett

Yeah, so, I'll look at, the earning AM and let's talk more about the fourth quarter versus the year, and the fourth quarter, like you had, you clearly had some realizations which decrease that number, but realizations are good in our business in the sense we're giving capital back to our LPs. Our cap our LPs like to see capital return. So you did see some realization activity, certainly much more elevated relative to last year, but the fourth quarter, it had some It had some noise, and when I say noise, I mean really kind of non-economic impact. And what would that be? We had a $6 billion dollar mark to market in credit market activity, which is really the result of the movement in the 10 year at fortitude. That really has no economic impact to the firm, so that I would view that as noise. And we also had $3 billion of exss movement or FX movement in the quarter. So that's roughly 9 billion. Of really no financial impact to the firm. That's a lot of noise in the quarter. That would have had you up a bit. Realization activities brought you down. But I think you should also focus in on we have $23 billion of pending fee earning AUM. That's up 50% compared to the prior year. That will turn on throughout the year, and that's roughly 200 million of of annual run rate revenue. But again, a lot of noise in the fourth quarter of fee earning AUM.

Operator

Brian Bedell, Deutsche Bank.

Brian Bedell

Great, thanks. Good morning thanks for taking my question. Good morning, maybe just to talk about maybe GNA expense a little bit, and maybe if you just comment a little bit on the, increase in the fourth quarter and and then thinking about the investment for 2025 and some of the businesses maybe if you can talk about. Maybe the the the two or three biggest areas that you know I think you you cited retail and the asset backed business as well but if you can comment on how you're thinking initially about GNA expenses during the year and and are you still investing in the capital markets platform or do you see the incremental margins there you know the investment is mostly being complete and the incremental margins therefore being much higher in the cap markets.

John Redett

Yeah, hey, it's John, thanks for the question.
I'll start with the GNA question. Look, I'd say overall, we're focused on running the firm efficiently and I think it shows DNA GNA expense.
In 2023 was up 2%, GNA expense in 2024 was up 44%. So I think those are pretty good numbers in terms of running the firm. Efficiently, we expected fourth quarter GNA expense to be elevated. There's some seasonality in that elevation of GNA expense in the fourth quarter. If you go back and look at our GNA numbers the last 3 or 4 years, the fourth quarter is always a little bit elevated relative to the previous 3 quarters, but we also had, we had some one-off items in the fourth quarter this year. We had some fundraising expenses in the fourth quarter.
That were related to some direct lending money we raised and our Japan buyout fundraise, which was super successful, and those are, I would not describe those as as recurring and we had some unfavorable FX impact which, that kind of moves up and down over time. So I don't, I don't look at the fourth quarter, and I don't draw any kind of operating trend conclusions from the elevated fourth quarter level. I think we've done a good job of kind of controlling GNA expense in the into the 2 to 4% in terms of kind of looking forward in terms of the FRE, guidance we provided, I do see Q1.
Being more similar to Q4 this year and then I think throughout the year you'll see an acceleration in that FRE FRE growth. The other part of your question is where are we investing the money and I alluded to a little bit of it in my prepared remarks. We are clearly investing in wealth, and that's largely headcount that that headcount will be up 50%. At least in 2025, we're investing in credit. We see very strong growth in credit. We expect that directory to continue. You look at our solutions business, it grew organically 40+% this year. That's going to require some investment, which is really great to see. And in Japan, our Japan buyout had tremendous success raising money and we need to invest some more money there, so. I would say, I would describe the way we're thinking about aggressively investing is we're investing in businesses where we see growth and businesses, quite frankly, where growth is less evident in the near term, we're not making investments.

Operator

Brian McKenna, Citizens JMP.

Brian McKenna

Yeah, thanks. Good morning everyone. So I had a question on the BDC merger. Can you remind us what the incremental fees are to CG post merger and when those will turn on and then that vehicle will have north to $2 billion of assets. So how should we think about growth of the combined BDC as well as the broader direct lending platform moving forward?

John Redett

Yeah, so we haven't disclosed the impact. It will be a positive impact to management fees and FRE. I wouldn't describe it as a material impact to our credit business, but it's a positive. It's good to see that BDC merger will close late in Q1, early Q2, everything's on track in terms of the BDC. Look, in terms of direct lending, we actually had pretty good growth in. 2024, that's an area where I actually didn't touch on in terms of where we're investing, but we are investing in our direct lending business. Performance has been, really strong, and, we are investing in that business as well.
But look, you look at our direct lending business, relative to some of our peers, we don't have quite the scale our peers do. So I really view that as upside. There's no reason why with a brand like Carlyle, our direct lending business is not significantly larger than it is today, and we're making investments in that area of credit to make it a more scaled business.
Got it. Thanks, John.

Operator

Glenn Schorr, Evercore ISI.

Glenn Schorr

Hi, two quickies, follow ups to your earlier, hello there, in asset back line I'm just curious if you have dedicated strategies being formed yet or is this efforts within your insurance SMAs and credit overall credit business.
And then on investment solutions, I think your performance has been great.
I'm just curious how you see the evolution and growth in perpetual products in that area and how that might impact growth and returns in the in the solutions business going forward. Thanks.

Harvey Schwartz

Yeah, on acid bag, obviously, the asset bag market which we highlighted as a Large addressable market and it's a market that's in evolution, which is the convergence of The demand for capital from end users and obviously a lot of what's happening across the globe in terms of insurance capital coming in. So it kind of really hits a sweet spot for us in terms of growth. There's a dedicated fund being raised, but of course, we've built this off of our affiliate partnership with Fortitude, so we've been doing this for a number of years. And so, as John mentioned, we also invested heavily in the team last year and we'll continue to grow.
In terms of the solutions business.
One of our fastest areas of growth, both institutionally and across wealth, and you'll see us, during the course of the year continue to expand partnerships, and some of those, or significant partnerships, but we can't speak to them specifically today, but that's our expectation. So again, a lot happening in that space and, the performance and the trend and the breath is pretty impressive.

Operator

Ben Budish, Barclays.

Benjamin Budish

Hi, good morning.
John, I was wondering if you could talk good morning, John, I was wondering if you could talk a little bit more about your comp ratio expectations for the year. You said on the way to 35% or less just curious, what are the other key factors that determine the timing I imagine some of this related to realizations, but what sort of embedded in your expectations for the 6% FRE guide?

John Redett

Yeah, so I, there is obviously a large component of that, Ben is realizations and and and that realized performance revenues and look, we had a really strong 2024 in terms of realizations. And I do think as some of these funds where we're seeing realizations hit carry, you're going to see an acceleration for us in terms of netized performance revenue, so that will be a positive. Look, we gave it 30 to 35% range in in February of 2023. I knew it would take us a couple of years to get to that range. We got to a number last year better than I anticipated, 36%. I think 35 is eminently doable, but we'll get there. We'll get there naturally. I need, I do need netized performance revenues and we will rely on that versus thinking about like cutting expenses. We're much more focused on growth, but we'll grow into that number and we'll benefit from netized performance revenues.
Got it, thank you.

Operator

Dan Fannon, Jefferies.

Daniel Fannon

Thanks. Good morning. So a couple of questions on credit, curious as to why the management fees declined sequentially in the fourth quarter. Then obviously a very large transaction fee. You talked about investing in that business and scaling. So can you talk about the sustainability and outlook for transaction fees in that segment within Global Credit?

John Redett

Yeah, so, yeah, we actually just put, the capital markets transaction fees in the credit business. It's really spread. The the fees are generated across the platform. So, 3 years ago that was a largely private equity related earning stream. Today it's far more diversified. It's across credit, and it's across. Infrastructure and and it's across corporate private equity, but we report that segment largely in credit, so think of it more as something that we generate across the platform. But in terms of trajectory of credit, we feel very good. We have a lot of the businesses, every business in credit is growing, with the exception of the CLO business. In the CLO business, we had a little bit of market headwinds as a result of 2023, 2022 and 2023, where you just had no activity, and we made up for that this year. We had a tremendous level of activity, but, management fees in that business were down an immaterial amount, but the rest of credit is growing and we feel exceptionally good about the direct directory of credit looking forward.

Operator

Bill Katz, TD Cowen.

Bill Katz

Okay, thank you very much, John. Sorry to go back on this, but I'm just trying to unpack your comments about the fee paying AUM dynamics in the quarter. You mentioned they should have no economic impact, but I'm just trying to understand that since it's a fee paying AUM discussion, just sort of walk me through again why the $6 billion dollar decline in fee paying AUM will not have an economic impact looking ahead.
Thank you.

John Redett

Yes, so the, it will have a very minor economic impact in the sense, the way the agreement with fortitude works is we get paid on the level of assets, and there's an this resulted in an immaterial decline in those assets, but the impact to 2025 is literally a couple million dollars, so it's largely in my book, it's immaterial.
Okay.

Bill Katz

So it's more the fee rate associated with those assets at play.

John Redett

The fee rate is not impacted by the market activity.
Right, okay, thank you.

Operator

Ken Worthington, JPMorgan.

Kenneth Worthington

Hi, good morning. You have 500 million of net accrued carry in CP7. The fund is still hovering around 8% IRR. Given the investments in the ground and some of the recent, I'll call it successful partial realizations. How confident are you that 7 can remain above the the hurdle rate and and collect that that accrued carry. And then along the same lines cap 5 and step 5 IRRs fell a bit during the quarter. Can you talk about sort of marks and exits and how those weighed on this quarter's results for those funds?

John Redett

Yeah, hey, Ken, it's John. Look, I feel very good about the progress we're making in our US private equity business. Harvey referenced the appreciation and our two most recent buyout funds in 15, 20%, 20%. I think, I think it was a great year. The value creation in that business was $5 billion. So we're moving in the right direction, specifically on CP 7. I would say we're very pleased with the performance in CP 7. It's improved dramatically over the last 12 months, and in looking forward, we feel very good that that trajectory will continue.
Krysry's just not as simple as just overall performance level within the fund. It's also a function of how much money we've returned to LPs, but we are confident that that fund will hit Carry.

Kenneth Worthington

And then captain set 5.

John Redett

Yeah, I mean, look, cap cap is a is a fantastic business. We had really good appreciation in that franchise.
Most of the movement down in terms of performance was largely attributable to our public equities we hold and there's some volatility in public equities, period, all over the globe, but there's been more pronounced volatility in in public equities in China, and that that really drove a lot of the movement down.
Okay.

Kenneth Worthington

Great. Thanks very much.

Operator

Michael Cypress, Morgan Stanley.

Michael Cyprys

Hey, good morning, thanks for taking the question. I just wanted to ask about global private equity. I was hoping you could talk a little bit about how you expect the pace and magnitude of deployment and realization activity to evolve here. In 2025 in the context of at times volatile markets, higher 10 yield treasury yields over the last six months of uncertainty around tariffs, how you expect these and other factors to play into getting deals done and how you see that cadence of activity playing out in terms of the first half versus the second half of the year.
Thank you.

John Redett

Yeah, I would say, we still are positive leaning in terms of activity. I think when you look at M&A volumes last year, they were up kind of 20%, IPO volumes were up 50%, 60%. You saw us capitalize on the IPO markets opening with the Standard era, which was a very successful IPO of Raku in Japan. So I think that's a positive that those markets are opening up. Look, base rates are up. They're up relative to 3 years ago, no doubt, but spreads remain tight. Your all in financing costs, quite frankly, is still very attractive.
Debt markets are pretty much wide open. So I think that's another positive.
And I think the other real positive is strategic buyers have become active again. And that is a, that is another positive catalyst. So when you look at what you need to have a conducive market to buy and sell assets, it's largely in place with what, with what we're seeing. So, we're very optimistic that 2025 will be a busy year on the realization front.
Great thank you.

Operator

Kyle Voigt, KBW.

John Redett

Hi, good morning.

Kyle Voigt

Maybe just another follow up on GPE. You mentioned some continued decline in management fees there until you raise your next US buy op fund. Just wondering if you could help us understand when you expect to begin fundraising. When we could expect a potential activation given the pace of deployment you're seeing in CP8 I'm assuming it's 2026, but if you could maybe narrow that down at all, then how should we think about the size of CP9 relative to CP8 at 14.8 billion, particularly given the the private equity fundraising backdrop?

John Redett

Yeah, so as I said in my remarks, GPE global private equity was down roughly 7% in 2024, and I also said we expect the rate of that decline to be meaningfully lower in 2025 than it was in 2024. So I think that's a positive.
We anticipate launching the most recent US buyout fund. Towards the back end of 202,025 this year, and I can't really comment on on the size, but we should be in the market in 2025, late 2025, and you will see a fee activation at some point in 2026, which will be the catalyst to see our our corporate private equity business return to a more positive trajectory.

Operator

Mike Brown, Wells Fargo.

John Redett

Okay, great.

Michael Brown

Good morning.
So wanted to unpack the the targets, a little bit more. So the fundraising target, John, you shared some upbeat comments on credit and also fortitude. So I just wanted to clarify that the 40 billion or I guess, roughly kind of flat year over year does that assume any contribution from?
From potential blocks that could come from fortitude or that be kind of in the upside bucket that you referred to and then just on the management fees for within your FRE guidance you talked about deposit tailwinds for transaction fees and included in there for FRPR so just in total, how should we think about that management fee growth potential relative to the 6% FRE growth.

John Redett

Yeah, so, in terms of the fortitude part of your question, that is not in our FRE 6% guidance. I would view any type of inflows into fortitude, to be additive to that growth rate we provided, so again it's not in our base.
Case, look, in terms of management fee growth again, I would unpack it via looking at the three businesses. We have very strong management fee growth looking forward in in in solutions like it's not going to remain at the 45% level in perpetuity. That was obviously a blowout year but we do expect strong growth going forward. We had very good growth in credit. We expect that to continue. Again, the only area where we're really seeing any headwinds is within our corporate private equity business. And that, again, that was down 7% in 2024. We think that decline will be significantly less in 2025, and we do see a path to that resuming a positive trajectory based on some fundraising in our most recent in our US buyout fund, which will launch this year.

Operator

Patrick Davitt, Autonomous Research.

Patrick Davitt

Thanks for the follow up.
Hello, yeah, can you hear me?

Kenneth Worthington

Yeah. Yes.

Patrick Davitt

Awesome, just just one more quick follow up on that, through the lens of your kind of broader realization commentary, I assume the 6% FRE growth, is partially informed by a view that there will be a meaningful pickup in realizations in 2025. Did you give any more color around how you're thinking about that side of the FRE growth equation?
Thank you.

John Redett

Yeah, I would, I would not describe our forecasts in our 6% FRE growth as our base case as assuming there's a substantial increase in realization activity. We do think realization activity levels will increase relative to 2024, but I would not describe our assumption in terms of how we thought about the 6% FRA growth to be a substantial pickup in realizations.

Operator

Thank you. And with that, I will turn the call back to Dan Harris for final comments.

Daniel Harris

Yes, thank you for your time and interest in Carlyle today. Should you have any follow up questions, please reach out to investor relations, and we look forward to speaking with you again next quarter.

Operator

And this concludes today's conference call.
Thank you all for participating, and you may now disconnect.