Global investment firm Carlyle reported a lower-than-expected profit for the first quarter on Thursday, as asset sales failed to translate into higher income for shareholders, sending its shares down about 2.7% in early-morning trading.
Distributable earnings, or profits that can be returned to shareholders, came in at $327 million, or 89 cents per share. Analysts had expected earnings of 94 cents per share, according to LSEG data.
Even though the firm sold assets, it was not able to pass through the gains, pulling realised net performance revenue down 84% from a year earlier to $20.5 million.
“Not a pretty quarter but strong DPI (Distributed to Paid-In Capital) should help stack the deck for better capital raising, AUM growth and new deployment opportunities going forward, all of which are important cogs in reaching management’s healthy 2028 targets,” said Evercore ISI analyst Glenn Schorr in a note.
DPI reflects how much money investors receive relative to their invested capital.
Chief Executive Harvey Schwartz said he expected a pick-up in transaction fee revenues in the coming quarters.
“We continue to have a deep set of assets to monetise for our investors,” Schwartz told analysts on a conference call. Schwartz has set targets to raise a further $200 billion by the end of 2028 and boost fee-related earnings to $1.9 billion.
Market pressures persist
Managers of alternative assets, including private equity and private credit, have faced investor worries about lending standards, the prospect AI will disrupt software businesses and market volatility that made dealmaking more uncertain.
Market volatility was high in the first three months of the year as the US and Israel engaged in war with Iran, sending up the price of oil and stoking inflation.
Fee-related earnings fell 3.4%, while fund management fees rose 3.6%. Transaction and portfolio advisory fees – which it earns from arranging capital market deals for portfolio companies and for clients — slumped 30% to $54.1 million.
Carlyle said its U.S. buyout funds delivered record realisations, or deals to cash out investments.
Inflows continued
The firm attracted $13 billion in inflows during the quarter, bringing total assets under management to $475 billion.
Assets swelled 5% at the AlpInvest unit that specialises in second-hand private equity stakes. That was offset by a 3% decrease in private equity assets and a 1% decrease in credit from the prior quarter.
TD Cowen analysts said they had “braced for a tepid” quarter, partly based on the company’s recent guidance, but the results were “nonetheless a bit softer across most KPIs (Key Performance Indicators)”.
Under generally accepted accounting principles (GAAP), Carlyle reported a net loss of $132.2 million, weighed down by an unrealised investment loss of $616.7 million.
So far this year, Carlyle’s shares have fallen nearly 14.1%, compared with 11.2% growth in the Nasdaq composite index.
Reuters
