Carlyle Group Inc.(CGABL)Q1 2025 法說會逐字稿

Thank you, Daniel. Good morning, and welcome to Carlyle's First Quarter 2025 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-GAAP 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 Factors section of our annual report on Form 10-K 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, please limit yourself to one question and return to the queue for any additional follow-ups. And with that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

Thanks, Dan. Good morning, everyone, and thank you for joining us. I'll quickly touch on this quarter's record results and then share my perspective on the macro environment. First quarter performance was quite strong, hitting record levels. Quarter's highlights include record fee-related earnings of $311 million, that's up 17% year-over-year; record FRE margin, 48%, our highest level of distributable earnings in several years at $455 million and record assets under management of $453 billion. Across the board, from margin expansion to FRE growth to investment performance and fundraising, you can really see the strategy coming together as we progress towards our goals for this year and beyond. Now let me shift and talk about how we're thinking about the current environment. We entered the year with a very high level of market optimism and very high expectations. The markets were fully risk-on.

Of course, as we saw, the recently announced trade policies very quickly impacted investor sentiment and risk appetite. With respect to our global portfolio, we think about this in terms of first-order effects and knock-on impacts. With respect to first-order effects, the effects of the tariffs are contained to a limited number of investments. The majority of our global private equity portfolio is services-oriented with 80% of companies based in the U.S. Second order effects on the economy are beginning to emerge as we've seen in some of the recent economic data, but given where we are in terms of the policy implementation, the long-term effects of the trade policy are too difficult to forecast at this point. From a Carlyle perspective, we are exceptionally well positioned to lead in this environment. Our investment horizon and our capital base are long-term, and our capital-light model affords us the ability to capitalize on compelling new investment opportunities.

In a dynamic environment like today, you need experience, scale, brand and a diversified platform to meet the shifting demands of private capital and serve the needs of our clients. With $84 billion of dry powder, we are well positioned to be active in this market environment as opportunities emerge. Although we are going through this period of uncertainty, the macro trends driving demand for private capital remain strong and likely will be reinforced over the coming years. Over the past 2 decades, the number of public companies in the U.S. has been cut nearly in half, while the number of private companies has increased by more than fivefold. For investors looking to drive returns and capture the next generation of market growth, private market access has never been more important. These structural shifts are already showing up in Carlyle's results. We are seeing strong momentum across our key growth areas and believe the trends reshaping global markets will continue to play to our strengths.

Now I'll touch on our businesses and growth areas that we've been focused on over the past 2 years. Carlyle AlpInvest generated record FRE in the first quarter, nearly double the first quarter last year. AUM in this business grew 12% over the past year to a record $89 billion. The business continues to diversify across client solutions. A good example of this is our latest portfolio finance fund, which held its final close last month at more than $4 billion, more than 3x the size of its predecessor. In Global Credit, quarterly fee-related earnings surpassed $100 million for the first time, an increase of nearly 50% from last year. The significant demand for private credit solutions continues to drive inflows and our investment opportunities continue to expand. Recently, our private credit team is linked to significant opportunities in European lending where less competition is leading to strong relative value.

Evergreen private credit deployment is up 150% year-over-year. We also had a strong start to the year in insurance with Fortitude announcing more than $8 billion in reinsurance transactions. Fortitude's annuity reinsurance agreement with Taiyo Life Insurance Company was their sixth transaction in Japan. Carlyle's long-term track record in Japan, alongside strong investment origination capabilities have helped Fortitude develop a leading presence in the market. Our pipeline of growth opportunities remains healthy as insurance companies seek to transfer risk and improve capital efficiency. And our strategic initiative to grow capital markets continues to accelerate. Over just the past 6 months, we generated a record $150 million in fees. We see substantial opportunity for long-term growth in this business, although the near-term market environment may slow the pace of activity. Moving on to Global Wealth.

As you know, 2 years ago, we prioritized this initiative by aggressively adding to the team and leveraging our global brand to drive growth. As a result, evergreen inflows have doubled over the past year. In Global Private equity, we remain focused on driving value in our portfolio companies and monetizing assets. We've generated $20 billion of realizations over the last 12 months. In the first quarter, we successfully IPO-ed Hexaware Technologies in India. This was the largest ever sponsor-backed IPO in India and the largest technology services IPO globally in more than a decade. We also closed a nearly $1 billion secondary sale of shares of StandardAero and a $1.4 billion sale of power assets. John will touch on this in more detail. We saw continued appreciation in our 2 latest vintage U.S. buyout funds and the underlying portfolio companies continue to grow EBITDA at double-digit rates through the first quarter.

The portfolio remains well positioned in the current environment. To close, Carlyle is much more diversified today than it's ever been. During these periods of market volatility, the breadth of our platform enables us to mobilize where opportunities present themselves. We will continue to invest in our growth, leverage our long-term investment horizon and capture value creation opportunities in the private markets. With that, let me now turn the call over to John, who will walk through our results in more detail.

Thanks, Harvey. Good morning, everyone. As Harvey said, our first quarter results were strong. We delivered record FRE, FRE margin and assets under management. DE of $455 million was a record start to the year. As a management team, we are focused on accelerating long-term growth while also achieving our near-term goals. We remain comfortable with our ability to meet our 2025 financial targets but realize the situation is fluid and the market backdrop is uncertain. We continue to invest in our businesses to better position Carlyle for long-term success. We finished the first quarter with $453 billion of AUM, up 6% year-over-year. Growth was driven by $50 billion of inflows over the past year, including $14 billion in the first quarter alone. We generated record FRE of $311 million in the first quarter, 17% higher than the first quarter last year. Overall, we saw strong growth in Carlyle AlpInvest and Global Credit, while Global Private Equity was in line with expectations.

Transaction fees more than tripled in the quarter compared to the same period last year. The $150 million in transaction fees we generated over the past 2 quarters is more than any prior year. Carlyle AlpInvest generated $66 million in FRE in the first quarter, nearly double the level from the first quarter of 2024. Management fee growth of nearly 40% year-over-year led to a record FRE margin of 58% with good momentum across all areas of Carlyle AlpInvest, with strong inflows into our secondaries platform, portfolio finance, and our global wealth strategy. In Global Credit, first quarter revenue of $232 million grew 28% year-over-year, driven by capital market fees. Global Credit also experienced strong first quarter inflows of $7.5 billion. The rapid growth of Carlyle AlpInvest and Global Credit has driven these businesses to account for 50% of our firm-wide FRE compared to 34% in 2023.

In Global Private Equity, results were in line with our expectations given expected step-downs in several funds. Management fees should increase in the second quarter as we recently activated management fees on our latest U.S. real estate fund. A highlight in our Private Equity business is U.S. Buyout, our largest flagship strategy, which continues to perform particularly well. The last 2 vintages each appreciated 2% to 3% in the quarter and around 18% over the past year. Along with this appreciation, we also returned significant capital to investors. Across all of our U.S. Buyout strategies, we returned nearly $8 billion of proceeds to investors over the past year. More broadly across the Carlyle investment platform, we returned $31 billion in proceeds, more than 40% higher than the prior 12-month period. This is indicative of the strength of our diversified global investment portfolio and further upside when markets are more active.

In our evergreen strategies, we managed $26 billion in AUM, up 27% over the past year. And we continue to actively invest in our wealth capabilities with headcount in this area increasing by 100% over the past year. This remains a major driver of long-term growth for Carlyle. Wrapping up, while market conditions remain dynamic, Carlyle is built to perform across market cycles. Our nearly 40-year track record, long-term capital base and global scale provide a strong foundation for continued growth. We are confident in our ability to deliver attractive results for shareholders while continuing to be a trusted partner to our investors. With that, let me turn the call over to the operator for your questions.

Our first question comes from Ben Budish with Barclays.

Maybe just starting out with something high-level. I mean, you talked a little bit about the macro backdrop. Just given your portfolio is quite global, can you talk a little bit about how you're viewing the impact of trade policy and tariffs on investment and deployment activity? And how is that maybe feeding into LP discussions? You mentioned in Q1, especially earlier in the year, you returned a lot of capital. How is that sort of impacting LP discussions more recently?

Sure. Stepping back for a moment, I've mentioned some of this in my earlier comments. We began the year with very high expectations. Initially, the tariff policy caught market participants off guard with its announcement. However, the administration has since done a thoughtful job of explaining the full implementation of the policy. At the Milken conference earlier this week, I heard the Treasury Secretary discuss the three key components of the policy. This clarity has positively influenced the initial market sentiment. Regarding discussions with limited partners, there seems to be a short-term focus prevailing in the market. I've spoken with more Chief Investment Officers and CEOs recently than I have in my entire career. There’s a lot of attention on daily headlines and market expectations as everyone is keen to understand the direction of policy progress. Generally, I wouldn’t characterize the current environment as strictly positive or negative; it has various shades of uncertainty.

Most senior professionals I’ve interacted with in the past few weeks are cautiously looking for opportunities to deploy capital, and each conversation concludes with an openness to business. This aligns with the current S&P levels compared to the start of the year and the state of capital markets. While people are investing, they are doing so thoughtfully, and further progress in policy implementation will likely generate a more positive market response. A key concern for many is the dialogue with China. It is challenging for market participants, including ourselves, to gauge the potential secondary effects on the economy. The ongoing trade tensions between the U.S. and China, the two largest economies globally, raise concerns about their impact on the global economic climate. This question remains at the forefront of discussions, and there is a strong desire to see some progress.

Our next question comes from Alex Blostein with Goldman Sachs.

So Ari, I wanted to double-click into Private Equity for a second. So very good momentum outside of Private Equity. Obviously, you talked about AlpInvest and real estate and credit. All of that is moving along nicely. But given the fact that there's just so much focus for you and really the industry broadly as well on DPI performance and just the elongated sales cycle we're seeing in private equity. How are you thinking about the corporate PE franchise for the next 12 to 18 months? What does it mean for CP IX and in terms of both sizing and timing?

So on timing, I don't see any major adjustments to us going back into the market on CP IX. And that will really be driven by our pace of deployment. You saw that we were very active in deploying capital in CP IX last year. I think more importantly, across the private equity complex, a couple of factors. One, towards the end of this year, beginning of next year, we will be launching our wealth platform, and that will bring in a whole separate stream of capital. There's a lot of appetite for Carlyle on platforms globally across all of our solutions. In terms of the dynamic, I'll tell you the way we're thinking about it and the way we were managing our business is, obviously, our teams have done a really good job, and John highlighted U.S. Buyout in terms of the portfolio. And the amount of capital we returned across our private equity complex really makes us a bit of a positive outlier. So we've been actively returning capital.

I mean, off the top of my head, if I think about the last 9 months or so, we took StandardAero public. I think it was the third largest IPO of the year in the U.S. We did Hexaware, which John spoke about in India, which is the largest ever private equity owned company in India. We did Rigaku, the largest ever private equity-owned entity in Japan. And so our teams have been navigating this market environment, I think, quite thoughtfully. In terms of private equity broadly, I think that the marketplace will continue to see some headwinds. I think that those headwinds, if you have scale like we do and diversification, I think it's much more easily navigated. But we're really quite proud of the performance, particularly in our U.S. Buyout business. I don't know, John, what would you add?

Yes. Look, this is a business we've talked a lot about in the past. We made some changes to our U.S. private equity business. I would just echo what Harvey said. We're very happy with the PE performance in our U.S. Buyout business. Again, good appreciation this quarter. If you look at the last 12 months, around 18% for our 2 latest vintages. So the performance is tracking to our expectations. And also just what Harvey said, we have been very active on the realization front, and Harvey listed a couple of those. And quite frankly, we even had a realization in our Asia buyout business post trade liberation Day. We sold a big block of a company we owned in India. So we're continuing to execute, and that's what we're focused on.

Our next question comes from Patrick Davitt with Autonomous Research.

So nice to see you had some chunky insurance wins. But how should we be thinking about those relative to the kind of roughly $40 billion flow guide you were expecting for the year? Is this counting towards that? Or should we consider it incremental to that? And then more specifically, within that flow track, could you update us on how the wealth product flows are tracking, how the redemption requests are tracking since Liberation Day?

Yes. So when we put out the $40 billion in the fourth quarter results, we view the $40 billion as a flow number. So you should assume the 14 tracks to that $40 billion flow number we put out there. In terms of wealth, I would say we've had very, very strong performance. Again, this is an area we have been talking about a lot. We're very focused on making investments in that space. Fundraising in the quarter was up 40%. The amount we have in the Evergreen products is up 70% year-over-year. So we're very pleased with the progress we're seeing in wealth. And again, we only really have two products in the market, that's CTAC, our credit product and CAPM, our secondaries product. And if you look at the trajectory of CAPM, it's really quite impressive in terms of the fundraising. In terms of kind of post-trade policy shift, I'd say the data set we're looking at, it's limited to April, but we have not seen anything in the data that would give us pause. April actually was a good month. So based on what we're seeing, we feel pretty good.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe just shifting to expenses, very good FRE margin in 1Q. It seems like it's tracking a little bit ahead of the run rate expected for the year. So maybe if you can talk, John, a little bit about that run rate. Is this a good run rate for G&A as we move through the year? And should we be expecting any additional expenses related to the retail wealth efforts?

Yes. I would say we are very satisfied with the 48% FRE margin. We have consistently emphasized that we do not view controlling expenses as a means to increase that margin; rather, our priority is to enhance it through growth. We are making significant investments in the business. As mentioned in our previous earnings call, the 6% FRE growth forecasted for 2025 reflects ongoing investments. The 48% margin reported this quarter is a result of substantial investments in areas we believe will drive growth. I do not anticipate this to change significantly as it is well-planned for the year. Regarding G&A, the first quarter figure was noticeably higher than the same quarter last year, which had some exceptional positives, making it less reliable as a benchmark. However, I am pleased with our current G&A level, which I consider to be close to a reasonable run rate. I view around $100 million as a suitable run rate for G&A. In comparing the first quarter to the fourth quarter, the latter typically shows an increase, but overall, I am satisfied with where G&A stands, estimating it to be between $95 million and $100 million.

Our next question comes from Brian McKenna with Citizens.

So AlpInvest has experienced some pretty impressive growth over the past year. And it seems like the business remains well positioned moving forward. But how should we think about related fundraising for the balance of this year? I know CAPM will be in the market. But what else will you be raising capital for? And then just bigger picture, if I look at AlpInvest FRE, it now represents 20% plus of firm-wide FRE. So where can this contribution go longer term?

So, I'll kick off and then I'll hand over to John for a bit of the detail. But I would say that one of the initiatives over the past few years was really to better integrate the AlpInvest team into the broader strategy of the firm. That included obviously driving the CAPM solution through the wealth channel and really leveraging the entire distribution capability of the firm. And so what you're really starting to see is the convergence of those strategic efforts plus the great performance by the team. I was just in Amsterdam. We celebrated the 25th anniversary of AlpInvest. And so now this is also an area where LPs globally, regardless of institution, sovereign wealth or the wealth channel, there's huge interest in this category. And I would say I expect that to continue for an extended period of time. So as we continue to leverage the brand and the platform, I think there's significant upside from here. But we're really pleased. And obviously, all this has been done across the entire platform organically.

Yes. The only thing I'd add, I mean, echo a little bit what Harvey said, we couldn't be more pleased with how this business is performing. I mean the organic growth rate numbers are really, really strong. The FRE margin is very impressive. And look, I think the secondary market as a whole, the market continues to grow at very elevated levels. We think activity levels are going to accelerate given the current market conditions. So we think it's a really attractive space. I think the thing you need to think about in terms of this business and its ability to have a sustainable long-term growth rate is we will wrap up fundraising at some point, probably midyear for our secondaries fund, but that fund is already 57% committed. So there’s a very clear growth path for this business. We will probably be in the market sometime soon with the next vintage of the fund. So the growth rate is kind of impressive looking back. But also as you think about this business going forward, I really, really like the growth path.

Our next question comes from Ken Worthington with JPMorgan.

We're seeing some potential for stress in the endowment sector and the financial media is suggesting their position in private markets could decline. I guess maybe first, do you think this is a legitimate topic or might it be overblown? And assuming it's not overblown, can you talk about this from a risk perspective for Carlyle and future fundraising if endowments slow investments in private markets? And then the different perspective is, what could this mean for AlpInvest and your secondaries and wealth business given your dry powder and fundraising potential there?

So I don't see the endowment shift in terms of some of the bigger headline numbers that you've seen sort of being broad-based or material to the business or to the industry. Obviously, we just spoke about in the prior question, we're one of the leading providers of capital through our secondaries and co-invest platform at AlpInvest. And so this in the short term will certainly be a potential opportunity for us to deploy capital into those flows. We will see all those flows. As you would imagine, there won't be any flow we don't see given the brand and the team. But I don't see this being a significant overhang in terms of allocation to private capital. I think it's going to be more isolated. Now that could evolve, but that's my viewpoint today.

Our next question comes from Mike Brown with Wells Fargo.

So Harvey, there are headlines that continue to come out about a large life and annuity provider and they're considering some strategic alternatives. Would Carlyle consider some inorganic growth in that space? Is that something that's kind of interesting to you in terms of the opportunity to manage something of that asset size? And can you just maybe touch on some of the strategic ways you could approach something like that, just given the size and complexity? Would that have to be done via kind of partnership? Maybe how could that work with Fortitude? Any interesting color here would be helpful.

Having been here for a little over two years, I can say that when I first arrived, we were primarily focused on repositioning the firm and implementing our strategic initiatives. We're pleased with the progress and momentum we've built. Two years ago, the idea of pursuing any inorganic growth seemed premature. Now, we're in a better position to explore those options. However, our approach to opportunities remains grounded in our corporate finance strategy and whether it aligns with our goals. We're confident in the range of offerings we have, from AlpInvest secondaries to private equity, and we don't feel pressured to fill any specific asset class. All the growth we've discussed has been organic, showcasing our ability to expand without external acquisitions. Regarding the insurance sector, while I can't speak about specific deals, our partnership with Fortitude has yielded significant benefits both in terms of growth and our capital investments.

This collaboration has enhanced our asset management capabilities, giving us a competitive edge in this area. As our asset-based finance business continues to develop, we are gaining a comprehensive understanding of how to approach insurance more strategically. I think it's important to address the underlying question about whether capital-heavy or capital-light strategies are preferable. Our view, shared by the board, is that neither option is inherently better; rather, it’s about finding an optimal balance. We lean towards a capital-light approach, which allows us to focus on deploying resources and managing our portfolio without the burden of a heavy balance sheet. This flexibility positions us well to engage proactively with clients. Nevertheless, we remain open to exploring accretive acquisition opportunities if they align with our business objectives.

Our next question comes from Michael Cyprys with Morgan Stanley.

I was hoping maybe you could elaborate upon the opportunity set that you see in Japan across your business, a lot happening there at the micro level across Japan. Just curious if you could speak to some of the opportunities across the Buyout business, but then also across Fortitude and on the credit side as well?

Yes. So obviously, the Japanese market has been incredibly dynamic. I'll be in Japan in a couple of weeks celebrating our 20th anniversary. I think we're one of 2 firms that have actually stayed committed to Japan for that period of time, and the franchise is exceptionally strong, exceptionally strong. Obviously, they grew their funds significantly in the most recent fundraise last year. And my expectation is that when they're back in the market in the next couple of years, that fundraise will just continue to grow because the demand for LP interest and the opportunity set only continues to look better, at least right now. In terms of, I think, how do we extend that brand, we're capable of doing that in a lot of ways. We've been on wealth platforms in Japan. Obviously, working with Fortitude to leverage their skill set and our brand has been very, very powerful. You've seen us, as I said in my remarks, our sixth transaction.

So we're really a leader in the insurance space there. But all of this dates back to the 25-year history the firm has invested in Japan. I will say the Japanese market is increasingly dynamic for a couple of reasons, which are compelling. One, obviously, is this evolution of companies willing to become more dynamic in terms of their corporate stewardship. So that's fantastic for us, again, given our long-standing role in the region and our network. But also, there's a real push to extend asset management capabilities, and so we can play a valuable role there. So we're super enthusiastic about our position in Japan and the role in the region.

Our next question comes from Bill Katz with TD Cowen.

Maybe for John or you, Harvey, you've done a great job as you mentioned regarding the transaction line. Could you explain the difference between typical leverage for deployment and your current position in the capital markets? Looking forward, how should we consider the growth trajectory based on the last six months?

I'll take that question. This initiative was launched two years ago, and the team has done an excellent job managing the liability side of our portfolio companies' balance sheets. However, we didn't have a process to drive value in the capital markets business. We have safeguarded and enhanced our capabilities and restructured incentives across the firm to create value through capital markets. We're not committing significant portions of our balance sheet or taking on risk; instead, our strategy is driven by execution and activity levels across various sectors like private equity, credit, and infrastructure. The focus will be on deployment and restructurings in the portfolio companies as we invest capital. The long-term trajectory looks promising, especially since many businesses were not previously positioned to benefit from this. As we leverage our firm's capabilities, we anticipate multiyear growth. As John mentioned, the $150 million generated in the last two quarters represents a record year, even in a low-activity environment. It's challenging to predict exact figures, but we are proud of the team's achievements while ensuring we remain capital-light in our approach.

Our next question comes from Kyle Voigt with KBW.

Just a question on real estate. It looks like CRP X was activated in April and has $7.5 billion committed, so already almost larger than the prior vintage. Just wondering if you could give us an updated view on the sizing for CRP X? And if you could also just tie that into what we could possibly expect for GP segment management fee step up in 2Q versus 1Q as that fund turns on or even an update to the prior comments for the full year GP management fee trajectory in '25 would be helpful.

Yes, let me start by addressing the latter part of your question. In our GP segment, management fees were down, primarily because we experienced a decrease in two funds, including our real estate fund, which was reflected in the first quarter. However, on April 1, we activated fees on our current real estate fund, so you can expect to see some growth in management fees in the second quarter as a result. We will benefit from this activation and anticipate growth in the second quarter regarding management fees. We are still in the process of raising money, so I cannot comment on the final amount. However, as we have mentioned before, we expect it to be larger than the previous fund.

Our next question is a follow-up from Brian Bedell with Deutsche Bank.

Actually, I just wanted to come back on Fund IX. Given you're 70% committed on Fund VIII, just the thought process around being back in the market for that fund. Could that be as early as 4Q in terms of a potential fundraise? And I guess in your fundraising sort of target for this year or what you've outlined, is any consideration of Fund IX within that target?

There's nothing in Fund IX for that target that we put out earlier this year. And right now, we're still holding to the fourth quarter kickoff for Fund IX, but we're not wedded to it. If the environment stays like this, we'll see how the deployment goes in Fund VIII, but we're very, very focused on the performance of Fund VIII, which as you've seen, has tracked up quite beautifully. So we'll see how we go on Fund IX. But it's going to give or take, 3 to 6 months, that's your target zone. But there's nothing in the model for Fund IX.

Yes, there's no impact to this year for Fund IX. But I would say there's nothing we're seeing day-to-day that would suggest we're not going to put it in the market when Harvey said. Again, the performance in CP VII and CP VIII continues to track ahead of our expectations, and we've been very active on realization. So we feel pretty good about CP IX.

Our next question comes from Michael Cyprys with Morgan Stanley.

Just wanted to circle back just around the fundraising targets. I think you guys mentioned $40 billion for the year, 6% FRE growth. Did those include the blocks from Fortitude? I think in the quarter, you had $4 billion, and I think there's maybe another $4 billion coming in the second quarter. Just wanted to clarify if that's embedded in the $40 billion fundraising, 6% FRE growth for the year?

Yes, Michael. So when we put out our kind of $40 billion-ish of inflows last year for 2025, that was an inflow number. So it would include the flow from Fortitude. So we had $14 billion in the quarter, which compares to $5 billion first quarter last year, so almost 3x. And on an LTM basis, we're at $50 billion. So we feel very good about our fundraising capabilities.

Our next question comes from Patrick Davitt with Autonomous Research.

As you pointed out, had some bigger realizations from CP VII in 1Q. How should we think about the triggers for that fund to start actually generating cash carry? And more specifically within that, does IRR need to be higher than 8% before you would feel comfortable doing that?

Yes. I mean, look, it's very hard to predict exactly when a carry fund hits carry. I would say we're certainly well on that path. I mean, the performance in that fund you're referring to, CP VII, continues to improve, and we've had a lot of realization activity. And quite frankly, the pipeline of realization activity is heavy in that fund. So we feel very good. Ultimately, when that fund hits full carry is hard to exactly predict, but it's probably at some point over the next kind of 12 months.

This concludes the question-and-answer session. I would now like to turn it back to Daniel Harris, Head of Investor Relations, for closing remarks.

Thank you for your time this morning. If you have any follow-up questions, feel free to reach out to Investor Relations after the call, and we look forward to talking to you again next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.