The Carlyle Group

Carlyle Group exited June with $334.4 billion in fee-earning assets, up 0.3% sequentially and 3.0% year over year. Revenue increased 13.0% year over year to $1.1 billion in the second quarter, and fee-related earnings rose 10.6% to $358 million. Distributable earnings came in above expectations.

Why it matters: Carlyle continues to generate positive flows, with its mix of alternative assets benefiting from ongoing demand for nontraditional investment products. Carlyle picked up $16.8 billion from its fundraising efforts during the second quarter. This was above its quarterly run rate of $12.8 billion over the previous eight quarters, as well as average June-quarter fundraising of $10.8 billion for the past five years. The firm deployed $14.3 billion during the second quarter, above its quarterly run rate of $12.4 billion in the past two years, and significantly better than average second-quarter deployments of $7.5 billion during the past five years. Realizations of $6.7 billion were a step down from first-quarter results and below Carlyle's quarterly run rate of $8.6 billion in the previous eight quarters. They were, however, more on par with average second-quarter realizations of $6.1 billion over the past five years.

The bottom line: Increased uncertainty about the equity and credit markets tied to fiscal, tariff, and monetary policies, economic growth, and increased concerns about the private credit markets have pressured the shares of most of the alternative-asset managers. As there was little in narrow-moat Carlyle Group's second-quarter results that would alter our long-term view of the firm, we expect to leave our $50 fair value estimate in place. The shares are fairly valued right now relative to our fair value estimate. The stock has seen meaningful improvement relative to where it was trading in mid-March in response to heightened concerns about the private credit markets.

Carlyle ended June with $485.5 billion in total assets under management, up 2.1% sequentially and 4.5% year over year. Fee-earning related AUM of $334.4 billion at the end of the second quarter was up 0.3% from the first quarter of 2026 and 3.0% from the prior-year period. 

The company's portfolio remains diversified across business segments, with global private equity (which includes private equity, real estate, infrastructure, and natural resources funds) accounting for 29% of fee-earning AUM and 51% of base management fees during in the second quarter, while global credit (50% and 26%) and investment solutions (21% and 23%) made up the remainder. 

Fundraising of $16.8 billion during the June quarter was nearly evenly balanced among the firm's private equity (38% of quarterly inflows), global credit (35%), and global investment solutions (27%) segment, which has been rebranded as Carlyle AlpInvest. 

Deployments of $14.3 billion during the second quarter were directed primarily toward the company's global credit operations (50% of quarterly investments) as opposed to its global investment solutions (22%) and private equity (28%) segments. 

More of the firm's reported monetizations of $6.7 billion came from Carlyle's private equity platform (57% of realizations) than from its Carlyle AlpInvest (24%) segment or its global credit (19%) operations. 

Second-quarter management and advisory fee income was up 12.3% year over year to $759 million, as the increase in average fee-earning AUM was offset by a 9.2% decline in base management fee rates. Total revenue (which includes realized performance revenue and investment income) was up 13.0% year over year to $1.1 billion, primarily due to an increase in realized performance revenue. 

Carlyle's compensation costs of 35.1% of management and advisory fee income during the June quarter were just outside of the top end of management's targeted range of 30%-35%. Realized carry compensation costs during the quarter came in at 63.6%, below the midpoint of management’s 60%-70% target range relative to realized performance revenue. 

Fee-related earnings of $358 million during the June quarter were up 10.6% year over year, while distributable earnings were $472 million on a pretax basis, or $1.07 per share on a post-tax basis, compared with $431 million, or $0.91 per share after taxes, in the second quarter of 2025. This was comfortably above the FactSet consensus estimate of $0.91 per share, as well as our own estimate of $0.93, for the second quarter of 2026. 

For more insight into the trends and other issues affecting the alternative-asset managers, which influence our long-term forecasts for firms like Carlyle, please see our latest Industry Pulse, "US Alternative-Asset Managers: 2026 Q2," published in June. 

We also have a broader industry primer available for all of the US-based asset managers in our annually updated Industry Landscape, "US Asset Managers," which was last published in December 2025. 

Our Financial Services Observer, also published in December 2025, provides deeper insight into the seven alternative-asset managers we cover, including our take on Carlyle Group.

We've raised our fair value estimate for Carlyle Group to $52 per share from $50 to account for revised expectations, as well as the effects of the time value of money, since our last update. Our fair value estimate implies a price/earnings multiple of 14.0 and 10.0 times our 2026 and 2027 estimates for distributable earnings, respectively. For some perspective, during the past five (10) years, the company's shares have traded at an average of 12.0 (11.9) times trailing earnings on an adjusted basis, with the highest (lowest) multiple during the past decade being 21.6 (4.7) times. We use a 21% US statutory corporate tax rate and an 11.9% (11.0%) cost of equity (WACC) in our valuation.

Consistent with other alternative asset managers, we view fundraising, deployments, realizations, fee-earning AUM, base management fee levels, realized performance fees, and compensation costs as key drivers of our valuation. Total fundraising at Carlyle during 2025 was $53.7 billion, above full-year fundraising efforts of $40.8 billion in 2024. First-half inflows of $29.8 billion during 2026 put the firm on pace to match last year's results. With more than half of Carlyle's fundraising the past several years coming from its credit operations, which we expect to face headwinds in the near term, we see Carlyle raising $45 billion to $65 billion in new capital annually during 2026-30.

Carlyle deployed $54.5 billion in capital during 2025, above 2024 deployment efforts of $42.7 billion in 2024. First-half deployments of $24.3 billion this year leave it on pace to be somewhere between 2024 and 2025 results. We expect to see deployments in a range of $45 billion to $65 billion annually during 2026-30. As for realizations, Carlyle booked $34.1 billion in monetizations during 2025, above 2024 levels of $28.6 billion. With first-half realizations at $18.9 billion, the firm should surpass 2025 levels this year. We expect monetizations to be more sporadic going forward, though, with the company likely posting $25 billion to $45 billion in realizations annually during 2026-30.

Carlyle exited June 2026 with $485.5 billion in total AUM, with fee-related managed assets up 3.0% year over year to $334.4 billion. Over the next four and a half years, we envision Carlyle's fee-earning and total AUM reaching $410.1 billion and $548.6 billion, respectively. We expect to see modest levels of fee compression, with base management fees increasing at a 4.1% CAGR during 2026-30, but total revenue rising at a 0.8% rate annually on average with realized performance and incentive fees continuing to be constrained.

Compensation costs averaged 53.1% of annual revenue during 2021-25, and should be in a range of 40%-45% of revenue during 2026-30. Distributable earnings are expected to average $1.9 billion annually during our five-year forecast period. Our current estimates for 2026 and 2027 distributable EPS of $3.70 and $5.22, respectively, are based on our expectations for distributable earnings of $1.3 billion and $1.8 billion during those years.

We project a bull-case fair value estimate of $81 per share and a bear-case valuation of $31 per share. Our upside case implies a P/E multiple of 17.5 and 12.4 times our 2026 and 2027 estimates for distributable earnings, respectively. This scenario assumes rising equity markets, solid capital-raising efforts, and improved realization levels, with the net result being a 13.9% (8.9%) CAGR for base management fees (total revenue) and distributable earnings being 20%-25% higher than our base case during 2026-30.

Our downside scenario implies a P/E multiple of 11.2 and 7.9 times our 2026 and 2027 estimates for distributable earnings, respectively. This scenario assumes weaker equity market returns, lower levels of capital-raising, and lower realizations, with the net result being a negative 7.8% (negative 9.8%) CAGR for base management fees and distributable earnings being 20%-25% lower than our base case during 2026-30.

Unlike the more traditional asset managers, such as Invesco and T. Rowe Price, which focus on traditional asset classes like equity, fixed-income, balanced, and money market funds, alternative-asset managers like Carlyle Group deal with less-liquid alternative investments like private equity, credit alternatives, real estate/real assets, and hedge funds. Even so, we think that the alternative-asset managers, much like the traditional asset managers, benefit from switching costs (the core moat source) and intangible assets, which include organizational attributes—such as product mix, distribution channel strength, and geographic reach—and true intangibles—like strong and respected brands and manager reputations.

We assign Carlyle a narrow Morningstar Economic Moat Rating. The company has, in our view, built a solid position in alternative-asset management, using its reputation, broad product portfolio, investment performance/record, and a cadre of dedicated professionals to not only raise capital but maintain its reputation as one of the go-to firms for institutional and high-net-worth investors looking for exposure to alternative assets. Carlyle is currently the sixth-largest stand-alone alternative-asset manager in the world, with $485.5 billion in total managed assets, including $334.4 billion in fee-earning AUM, as of the end of June 2026.

Carlyle operates with scale in its major product lines—global private equity (with $162.7 billion in total AUM and $96.6 billion in fee-earning AUM), which includes its corporate private equity ($101.3 billion/$55.5 billion), real estate ($35.6 billion/$26.7 billion), and infrastructure and natural resources ($25.8 billion/$14.4 billion) offerings, global credit ($211.1 billion/$167.6 billion), and investment/fund solutions, known as Carlyle AlphInvest ($111.7 billion/$70.2 billion)—and is more diversified than most of its peers, with its product platform being more on par with Blackstone, which we tend to highlight as the best example of a diversified alternative asset manager.

The firm's distribution channel penetration mirrors the industry's—institutional (84% of total AUM) and high-net-worth (16%)—with its global reach including 29 offices across five continents, serving more than 3,100 active carry fund investors from 87 countries. Like its peers, the company has built a large base of employees—including in-house executives, consultants, and advisors—with decades of industry experience who can revitalize a company through cost-cutting, acquisitions, or other strategic maneuvers, increasing the chance of a successful investment.

All these attributes have provided Carlyle with the ability not only to gather assets but also to differentiate itself from peers. While the barriers to entry are not particularly significant for the industry, the barriers to success are extremely high. It takes time and skill to put together a long enough record of investment performance to start gathering assets and even more time to build the scale necessary to be competitive. BlackRock is the only legitimate traditional asset manager of size competing in this part of the market despite the fact that most of our coverage has been focused on building out alternative-asset manager offerings during much of the past decade.

On the switching cost front, alternative-asset managers like Carlyle (unlike their traditional brethren) have not had to rely heavily on investor inaction to keep annual retention rates high, as the products they offer tend to have lockup periods, preventing investors from redeeming part or all of their investment for a prolonged period. These arrangements have allowed Carlyle Group to post an annual retention rate of 93% (90%) on average for the past five (10) years, even with about a third of its total fee-earning AUM tied up in products that are redeemable quarterly.

Carlyle was the sixth-largest fundraiser among stand-alone publicly traded alternative-asset managers during the past decade, pulling in $357.6 billion with its private equity ($84.9 billion), private debt ($136.2 billion), real estate/real asset ($53.3 billion), and other alternative funds ($83.2 billion) during 2016-25. The company accounted for 4% (4%) of the industry's private debt segment fundraising during the past five (10) years, 2% (2%) of new commitments for real estate/real asset funds, 1% (1%) of the capital being raised for private equity/venture capital funds, and 6% (5%) of fundraising in the other alternatives category. Overall, the company accounted for 2% (2%) of total new commitments to alternatives during 2021-25 (2016-25).

Over the past five (10) years, the company has produced ROICs 1,200 (900) basis points above our estimated cost of capital. While we expect the firm to benefit from the interest rate differential and the potential for the retail market (a large untapped market for alternative assets) to gradually open to alternative asset managers, we also expect more competition in the industry, which will likely pressure returns over time. As a result, we have the firm generating adjusted ROICs of 19.9% on average annually relative to our estimate of the firms' cost of capital of 11.0%. This represents an average annual excess return of around 900 basis points over the next decade.

The Carlyle Group, with $334.4 billion in fee-earning AUM at the end of June 2026, is one of the go-to firms for institutional and high-net-worth investors looking for exposure to alternative assets.

The company's increased scale, diversified product offerings, long-track record of investment performance, and strong client relationships leave it well positioned for a variety of market conditions.

Customer demand for alternatives has increased, while institutional and high-net-worth investors have limited the number of providers they use—both positives for the largest providers.

A prolonged downturn in the credit and/or equity markets could leave potential investors in Carlyle's funds with limited liquidity and large commitments to other funds, making it difficult for the firm to raise new capital.

Private equity and real estate are both highly cyclical and heavily reliant on market-timing and exits to generate incentive income.

Competition for new investor capital is likely to increase as more traditional asset managers like BlackRock increase their exposure to alternatives and are willing to be more fungible on fees.