Good day, ladies and gentlemen and welcome to The Carlyle Group First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to Daniel Harris, Head of Investor Relations. You may begin.

Thank you, Nicole. Good morning and welcome to Carlyle's first quarter 2017 earnings call. With me on the call today are our Co-Chief Executive Officers, David Rubenstein and Bill Conway; and our Chief Financial Officer, Curt Buser. Earlier this morning, we issued a press release and detailed earnings presentation with our first quarter results, a copy of which is available on the Investor Relations website. Following our remarks, we will hold a question-and-answer session for analysts and institutional investors. To ensure participation by all those on the call, please limit yourself to one question and one follow-up and return to the queue for additional questions. This call is being webcast and a replay will be available on our website. 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 reconciliations of these measures to GAAP in our earnings release. 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 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. With that, let me turn it over to David for his remarks.

Thank you Dan. Thank you for joining our first quarter 2017 earnings call. We want to highlight three key messages on today's call. First, we produced our second strongest value creation quarter since our public offering five years ago, as measured in economic net income, thereby enhancing our ability to deliver future distributable earnings. Second, because of our strong investment performance as well as the favorable fundraising environment, our fundraising efforts are accelerating and we are increasingly confident that we can raise our targeted $100 billion in new capital from 2016 through the end of 2019. And third, our investment activity remains robust and because of the edge we are creating on transactions, we expect to be able to continue to deploy capital into attractive new investments despite high asset prices and heavy competition. Let me now put some additional context around these messages. First, we delivered solid across the board fund appreciation resulting in an exceptionally good quarter for ENI, specifically we produce $400 million of ENI during the first quarter of 2017 or $1.09 per unit after tax eclipsing the ENI levels for each of the full years of 2015 and 2016. The strength in economic net income also drove a substantial increase in our net accrued carry balance from less than $1.1 billion last quarter to more than $1.4 billion today for an almost 35% sequential increase in accrued carry. For the first quarter of 2017, we generated $55 million in distributable earnings or $0.13 per unit and declared a distribution of $0.10 per units to unit holders. Our first quarter carry generating exits were lighter than in recent quarters partially due to timing. As we said last quarter, realize carry this year will likely be lumpier on a quarterly basis due in part to smaller percentage…

Thank you David. Last quarter I concluded my remarks by highlighting the 2017 would be a transition year as we rebuild our carry accrued balance and focus on four priorities. Specifically, first we are continuing to invest wisely which is our most important job. We invest $4.4 billion in the first quarter and $17 billion over the past year. Our carry fund portfolio appreciated 6% in the quarter and 18% over the last 12 months. Second, we are progressing toward our goal of raising approximately $100 billion from 2016 to 2019 as David just mentioned. Third, we are building our credit business into a much more significant global platform. And finally, we are working to clean up some of the issues that have negatively impacted certain parts of our business. Let me spend a few minutes on the economic and the investment environment and turn to our fund performance and some of the transactions in the quarter. Economically, we see evidence of a synchronized global recovery. Industrial order books look strong across virtually all of the economies we track including the United States. I would not read too much into the headline GDP figure of 0.7% growth reported last week. Outside of automobiles, where there is genuine weakness, we see no evidence of a slowdown in consumption which was the main driver of the weak first quarter estimate. More importantly, government data captured the same recovery in business spending that we have observed in our portfolio and have reported to our LPs over the last several months. It is clear to us that CapEx has rebounded after a difficult two years. Overall, US economy looks to us to be growing roughly a full percentage point faster than it was last year at about 2.4% versus 1.5% last year. Despite this…

Thank you, Bill. Economic net income of $400 million this quarter was our highest since the fourth quarter of 2013. This growth in ENI was driven by strong appreciation and value creation across the portfolio generating $394 million of net performance fees. Most impressively about 65% or over $250 million of net performance fees in the quarter were generated by our current generation of funds that are continuing to invest. These are precisely the funds that will produce a substantial amount of our realized carry over the coming years as our current generation of funds complete their exits. Assuming our portfolio continues to perform well, we expect ENI to continue to exceed distributable earnings and further build our net accrued carry balance in the near term, position us well for future cash earnings. As said, I am mindful that one good quarter is not a trend and ENI is inherently unpredictable due to the nature of mark to market accounting. ENI can also be involved for funds that are moving through the carry waterfall into a full carry position. Fee related earnings were $26 million for the first quarter and $131 million over the last 12 months, excluding the impact of the commodities charts in the fourth quarter of 2016. As I said last quarter, fee-related earnings and fee earning assets under management are expected to grow again in 2018 after raising new capital and activating the related fees. As you know, upon raising new capital, we expensed the cost of fund raising up front, which has a short-term negative impact on results. But higher levels of fundraising lead to long-term growth in revenues and fee-related earnings. As we have done in the past, we will continue to actively manage operating expenses while also building scale and new products in…

Thank you, Curt. The first quarter was notable for a number of developments including the exceptional growth in net accrued carry of more than $350 million all of which positioned us well for the future. We are confident in our ability to raise substantial funds over the next few years and our investment performance has been excellent and unit holders should look forward to the positive impact of these fund raising efforts and strong investment performance will have on future earnings. We're now ready to take your questions.

[Operator Instructions] Our first question comes from the line of Michael Cyprys of Morgan Stanley. Your line is now open.

Just wanted to circle back to credit, you mentioned wide space for new credit strategy there, just can you elaborate it a little bit more in terms of the types of strategies that can make sense for Carlyle here, you also mentioned your investing heavily in the business. If you could just talk a little bit about how you're planning to do this, do acquisitions make sense or team hires, just any sort of color how you're going to be building this out.

I'd say, this is Bill Conway, in terms of the wide space and part of your question, some parts of our credit business are very strong, for example, the CLO business and the BBC is strong, and our distress business is very strong, our energy lending business is strong. But there are someplace where we have really no business or very little for example real estate credit would be an area that might be of interest to us. Opportunistic credit I think is an area that we would try to build out as well. And there are others. Now, in terms of how we build this out, I think that we're open to acquisitions or organic growth. I think generally we probably would favor organic growth, it enables people to be of Carlyle, one Carlyle and our overall culture. I think it can be cheaper to do sometimes although it's not as fast to make that happen. So it's a balancing act. We're very pleased with the job that Mark Jenkins has done and leading that platform since he joined us from CPPIB and he's adding some talent as well. He can't run these businesses alone and he's adding some very good people to help him. And of course, as David said, raising the money to invest by the credit platform. Our accounting methods says, we expensed the cost to fundraising, at this time we raise the money and then of course we hopefully get the benefit of investing that money for years to come. So those are some of the costs that will have to absorb as we build the business.

Just as a follow-up question, you mentioned that you're working to clean up some of the issues that had impacted your business I guess over the past year. can you just elaborate a bit more in terms of what exactly you're doing at this point to clean up the issues, what sort of actions are you're taking, is there any sort of restructuring or changes that we could see at Carlyle.

Well, first of all, I pointed to the disclosures we've made in our 10-K and previous reports that we've made to the SEC. And I think some of the problems are pretty well known in our commodities business. We're still awaiting a decision on CCC, [indiscernible] is an area where we've - for quite a while we've been thinking we're relatively close to the end of getting that cleaned up. So we continue to work all those issues. And I think we're making progress on all the fronts, but I point to for my protection and yours the disclosures that we've made in our SEC filing.

Thank you. Our next question comes from line of Patrick Davitt of Autonomous. Your line is now open.

You mentioned realizations as a driver - part driver of the marks, was that really just PPD or would you mark something that hasn't been publicly announced. And within that could you help segment how much of the mark was from things like PPD versus just kind of normal EBITDA appreciation. And also how much was catch up versus kind of normal 20% carry.

This is Curt, thanks for your question. Really, I mean what's impressive about this quarter was the broad nature of the appreciation. Keep in mind our public portfolio was smaller than it's been in the past. So a lot of the appreciation really is on the private side, now on the public side we have benefits of like PNB our Asia fourth buyout bond which appreciated significantly across, very good appreciation in that fund. But you also really across the portfolio not just things like exits like PPD, as you point out this in the exit process. But other sales opportunities that we have, we get very good market data, but really I appreciate what Bill said before, EBITDA is up across the portfolio, we're seeing topline revenue growth and so that's coming across really throughout everything. If you look at page 11 of the earnings release, you'll just see right there that in the quarter, corporate private equity was at 9% and that really drives a lot of the appreciation that you're seeing. Real assets up 5% and total was 7% in natural resources. So the energy business is doing very well and then just as you know we said on the call, in our prepared remarks, 7% in global market strategies and then investment solutions which doesn't contribute that much at this point to carry but will hopefully in the future. 3%. So really strong appreciation across the board really being driven by performance. And again I would say just pointing out, one of the challenges that we have is the public piece is a little smaller and so that's really not driving as much as really the private piece that's driving than the public piece and that's how we are kind of managing this. Hopefully that helps.

I guess real quickly then on the catch up part, if you don't want to separate it, which funds are still kind of generating or getting through that 80/20 waterfall.

So one of the things I said in my prepared remarks were roughly 250 million of the 394 million of net performance fees in the current quarter were generated by our current generation of bonds. So Carlyle Partners VI, Asia Buyout IV were two big contributors as well as a whole host of others. But those are two big ones that really contributed significantly, they're now pretty much through their waterfall, but movement on valuations especially with ones that continued to invest is when you make a new investment that's coming essentially across and so that will put essentially downward pressure on valuations. So there's still volatility and that's why I made the point on the ENI to point out the volatility that just fundamentally inherent ENI. I do think ENI is going to grow over time, but look, there's going to be quarters where it just backtrack and so it won't be a linear growth, but it will grow.

Thank you. Our next question comes from the line of Craig Siegenthaler of Credit Suisse. Your line is now open.

First on fundraising, so with real assets likely the big driver in 2017, and 2018 looking like a really big private equity year. Can you remind us how the next vintage of your real asset and private equity funds that your remarking over the next year with generate management fees, so sort of the timing and how that will work and also any commentary in terms of the net fee increase would be helpful as we think about the loss of fees in older vintage funds.

Sure, so this is Curt, I'll start and then David can probably provide you some more color on the fundraising itself. So from an earnings perspective, this year two big funds as we mentioned, Carlyle Real Estate Fund VIII and NGP Fund XII, we expect both of those funds to do well from a fundraising perspective. They should turn on fees somewhere at the end of this year, beginning of next year. That will have a big influence in terms of driving up revenues and then therefore fee related earnings as we approach beginning of 2018. That gives us a big uplift. You are also going to have some of the big corporate private equity funds also in the market, and as we said, that will have a big impact really on 2018 and will drive further growth. When you think about kind of forward numbers, I hate going to forward guidance and forward numbers, but given your question, I think the right thing to do is to go back into our past and think about what we've done before. So if you go back to 2014, that was really the end of our last big fundraising cycle, we generated about $250 million of fee related earnings in 2014. I think that's a number that we can hit again and I think that's the right way to kind of think about what you're going to start to see. And as I said before, you're going to see the recovery in fee-related earnings and real assets. And then in 2018, you're going to see CP being raised and so that will really have a benefit at the end of '18 and into '19. But again, in the short term, you're going to see these fundraising costs and so '17 is going to be a transition year as we kind of complete the fundraising for the stuff we have on this year. Hopefully that gives you the color you're looking for.

Let me add two points. First, we obviously have a lot of funds that are going to be in the market this year and next year and we had tried and thought we could sequence them, because we didn't want to have too many funds in front of investors at once, but the truth is there's so much demand for our funds that we have not found that to be a problem and we have many investors who are saying, well, I want to be in all of your buyout funds, don't give me just one or two to talk about, I'm willing to go into your US fund, your Asia fund, your Europe fund, your Japan fund. And so this is something that's different than what we've seen before. There's just incredible demand across the entire spectrum of investors for private equity products from firms like ours. So I think we can raise it and I also think it will be in pretty good size as I suspect we will hit the cap in every one of the funds that we have in the market. Another point I'd like to make and the second point is that the fees related to these funds. I don't want to say that there's no fee pressure ever and that no investor would like - would be upset with a lower fee. But the truth is that investors are really focused less on the fees at this point than getting access to the funds, getting the full allocation they want into a fund and getting the co-investment kind of opportunities that they want and that's what you're really discussing more of with investors, co-investment, can they get into the fund, can they get the full amount of the fund and when do they have to participate in the fund and when will the closings be. So there may be some points that may change, but right now, the fees that we want to charge and I suspect there appears, are really pretty much being accepted by investors in part because they realize even the net fee, a net return that they're getting here for the fees is very, very attractive.

Thanks. And then just as my follow-up, I wanted to come back to C corp conversion, I want to see if you have any updated thoughts on what it would take for you guys to convert from tax reform and also if you do convert, I know there's a few different models you can use. Do you have a preference as sort of more of a controlled C corp where there's not the full kind of corporate governance you get with a standard C corp, but you may be prevented from getting in the indexes with that version.

We continue to look very carefully at really everything that the government is doing and look at them from a tax reform perspective. And there's clearly some combined tax reform approach that would make sense for us to convert. Now, the problem is telling you exactly kind of what the right model or mosaic of components that's going to drive that, really need to kind of wait to kind of see what really actually gets put in place, so that we can value it all at the right components. But clearly at some point, you're going to see - if tax, the tax rate has dropped far enough, it would be attractive. Also, if you look at our sector in total, we're all similarly structured. The challenges or the opportunities that we all face are similar, especially as it relates to tax structure and the like. And so I think if you see a change, we'll probably all look at it similar in terms of kind of making a movement. And so, it's really hard to predict exact timing and exact rates and exact components, but we'll wait and watch and monitor.

Let me just add to that if I could that the President's proposal is still too vague to really know exactly what the details will be, because he's proposed one page so far, at least that was what was proposed a week or so ago. The tax bill that ultimately will pass and I suspect some tax bill will pass will probably be 1000 pages or so as opposed to these comprehensive tax bills are. So until you see the details, it's really too early to know what the impact will be, but the fact that your question is being asked and other people ask it, shows that there's enormous interest in the stocks of our companies and there would be even more interest if there was a conversion, I suspect and we'll just have to wait and see whether the corporate tax rate is low enough and whether the other factors are consistent with our making a conversion. It's just, I suspect, it's six months or nine months away before you can really know.

Thank you. Our next question comes from the line of Mike Carrier of Bank of America Merrill Lynch. Your line is now open.

Hi. Good morning. This is Mike Needham in for Mike Carrier. First, just another one on returns. Certainly, a strong quarter for your fund returns. I understand the returns can be impacted by a couple of things getting marked up in the quarters are volatile, but if I look at CP5 up 21% on the quarter, Cap 4, 25%, would that be a good full year return? So, I guess, are you seeing fundamental improvement across the private equity holdings, like revenue or EBITDA growth that's driving more long term fund appreciation or is it going to be more idiosyncratic?

Mike, this is Bill. I think that we are seeing improvements in both the economy and in the performance of our portfolio companies. If you think about the growth in the valuations in the current quarter, remember, you always have to separate the valuation from the exit and the like and what's going to finally happen on an exit and when are you going to earn the carrier and how much carrier you're going to take and lots of other variables going on. I'd say that CP5 was notable. It has a couple of large private companies in there. One is PPD. There are others. Those companies have marked up as well. Curt pointed out that our public portfolio is actually down probably $5 billion or so from its peak and that obviously was more volatile, but more visible in terms of the changes in valuation. We have a very, very robust valuation process that we go through. And so and to go up 21%, I would say that that was probably for one quarter, that's a big move for a fund the size of CP5 and it was driven by a couple of big portfolio companies moving up aggressively I'd say. In terms of idiosyncratic, I don't think that's quite right. When I went through in my prepared remarks, I talked about Japan 2, Japan 3, Europe technology, Europe buyout 4, CP4 and - CP5 and CP6. I think it's been pretty broad across the entire CPE portfolio as well as it has been across the real assets of portfolio. Now, of course, the other side of it is, you find an attractive asset, you think you reached a price that you find is satisfactory, you sell it. What happens is your assets under management go down. You no longer earn management fees on that. You can take a carry, but you have to work to replace that. You're going to raise new fund, you're going to have the expenses of the new fund to do that and then you have to find someplace to put the money to work. And that isn't very easy to do today. It needs - I mean asset prices are very high. And so while I think they're going to stay high, you've got to be pretty careful.

Okay. That makes sense. Thank you. And then just as a follow-up, I think you gave the 4 million pending realization pipeline, I don't know if maybe you guys could quantify that in terms of BE impact?

Really hard to quantify in terms of DE impact. And part of that is also kind of timing of outcomes through - remember you have to always look back through in terms of which bond and where they're in their carrier situation. But generally, it will be positive in terms of carrier - from a carrier realization standpoint, but we have to go through the analysis at the time of exit, because what we do is we look at rest of the portfolio and make sure that we're not kind of front ending carrier realization, right. We want to manage against the potential for future callbacks or we go through a careful process of assessing exactly where that portfolio is. So we don't like to do that actual analysis in advance because facts change.

Bill, let me add a couple of other things. When we say we have an accrued carrier balance net of $1.4 billion roughly that in some sense is carried that the limited partners owe the general partner of the firm. But we've chosen, at this point in time, not to take that accrued carry, because either we think that things can happen, we hate to be in the callback position. So we're very cautious on that. Secondly, we don't actually really take carry on a deal. It's fine to say well, we sell PPD and you're paying this and you generated that and giving 20% of it and everybody will smile and run away happy. But it doesn't really work like that. You take carry on a fund. And a lot of things are going on at fund, new investments, other deals going up and down. So it's more complicated than just taking 20% or some different number on a particular event. I should also say in the interest of disclosure that the PPD carry is likely to be realized over a couple of different quarters. The way that recapitalization of that transaction is structured, it looks to us right now like it will involve the second and the third quarters. So we realized over two quarter, I think this one and next one

Thank you. Our next question comes from the line of Bill Katz of Citigroup. Your line is now open.

Hi. Good morning. Thanks for taking my question. This is Ben Herbert on for Bill. Just wanted to ask about any thoughts on where we are in the credit cycle and then that against plans for deployment over the next few years.

Well, I would say, this is Bill again, that when you think rates can't go down, they go down even more. And it's kind of what's happened for really two decades or so and certainly since the GFC which would be at the beginning of it, almost 10 years ago, but even more than that really is long term decline in interest rates and it's hard to say, well that with the 10- year, let's say at 220 that it's going to go a lot lower than that, but it was 150 or so a year ago. So it certainly can go lower. And nonetheless, I think investors are really seeking some balance in the credit portfolio of reasonable returns. Our CLOs for a long time and even through the GFC earned pretty steady returns for our investors and so there's been significant interest in that part of the credit assets. But based upon what the LPs want, I think that there certainly is demand despite these relatively low rates for movement. I would say in terms of low rates, as we look at our CLOs, we get almost a daily request from some, one of the hundreds of investments that we hold in our CLOs for somebody wanting a price reduction and you really have two choices, you need to give them a rate up, or you get paid out. And it's been going on for quite a while and it continues now. You look at the credit statistics and most of the credit being raised is actually refinancings, not new credit.

Thank you. And then maybe just one follow-up on some of the chatter we've seen on residual insourcing by LPs and what your thoughts are on if that's a trend or impacting fundraising at all.

I'm sorry, can you repeat that. You said residual insourcing.

Yeah. Just insourcing by LPs, we've seen some increased chatter about that and just if that's impacting fundraising at all or if you think that's a trend.

Okay. You're referring to sovereign wealth funds or their equivalent doing deals themselves directly as opposed to investing in funds. Okay. This is the so-called Canadian model, a number of the Canadian sovereign wealth funds and pension funds have been doing deals directly where they are the GP or the co-GP and a number of those transactions have been quite visible. I think generally, we don't see this across the board through all the sovereign wealth funds and public pension funds. The Canadian model is somewhat unique because the Canadians are willing to pay their officials in these funds as much as $5 million to $6 million a year, which is very unlikely to happen in US public pension funds. And to recruit and retain people with these skills, you often have to pay a lot more than US public pension funds are willing to pay. So while I think the US public pension funds would like to put their toe into the water and do some of what the Canadians are doing, I don't yet see it impacting our fund raising. Outside the Canada and in the other parts of the world, China, Asia, Middle East, I think there are people who are talking about it and I think they'd like to increase their co-investments, but I don't think they really want to be as actively involved as GPs as maybe the Canadians. It may change in time, but right now it is not impacting our fund raising, if anything people really want to just go into these funds. And as I mentioned earlier, the biggest concern that some of the investors have now is that they're afraid they won't get their full allocation in a fund and we are telling people now and I assume our peers are doing the same, if you don't come into a first closing of some of our funds, you're not going to get your full allocation and that is really helping to drive these processes forward. And one of the things you will notice with Carlyle in the future and because of the demand, we've often had multiple funds for our closings, but I suspect we will reduce the number of closings to a much shorter amount that we've had historically, because we just will truncate the fundraising process and where people want to be in the first closing to get their full allocation. To answer your question, I don't see a big impact.

Thank you. Our next question comes from the line of Chris Kotowski of Oppenheimer. Your line is now open.

Yeah. You've touched on it before, but if I can come at it in a slightly different way. You mentioned the 21% depreciation in fund 5 and assuming you go forward with or the press reports about the sale in PPD come through as expected and all that, some of the remaining investments in fund 5 have struggled and I wonder if other companies have talked about an escrow process or a netting whole process and what should we - how should we think about the carry potential of the remaining investments in fund 5 after PPD is sold I guess is the question.

Well I'd say, this is Bill. I'd say that the sale has excellent carry potential for the remaining investments in fund 5. Each quarter, we do valuations and imagine that we have an investment in fund 5 that we invested $500 million in and things didn't work out and we think it's only worth $200 million. We are in effect for purposes of calculating our accrued carry and any carry we'll really take, we're looking at that $300 million as a loss and a reduction in value that will affect carry. So for those that are known to be struggling, that's already reflected in the valuations of the deals and the valuations of the fund. I want to repeat what I said before, we take carry on a fund basis, not on a deal specific basis. But CP5 is a fantastic fund for Carlyle and our investors and there's still a lot of good deals left in it.

And just to add on it, so I mean just to reiterate, when we're taking carry, we will generally look at the whole portfolio just as Bill said and as we've said before on CP5, sometimes, we'll take carry at reduced rates. So in the past, we were as low as taking a 10% carry rather than a full 20% carry. And then we'll modulate that and look at it over time. So sometimes it goes up to 15 or back to 20, et cetera. And what we're doing when we're doing that is we're essentially creating a carry bank, a reserve to really kind of cover some of those deals that are challenged, but that carry bank essentially sits as accrued carry, because it's carry that essentially we're owed, that we haven't taken yet and so what we're trying to do is make sure that we don't front end carry, but really that the carry comes, is realized over the remaining life of the fund as we access those remaining investments. And so sometimes, you will see in some of our filings where we have, we'll consider a great safe, where it's returned back to, we realize cost a little bit more than cost, it actually will throw off a lot of carry, because we've previously reserved for it and it's set aside catch out. So I think we're in pretty good shape in terms of CP5 in particular.

Yeah. And let me just talk a little bit about CP5 because I'm actually pretty proud of it. CP5 was a fund that we launched in 2007 and it had a committed capital of $13.7 billion. Today, we value that fund all-in in about $26.5 billion. So it's a fund where we and our investors have almost doubled the money. Now, it's one thing to double your money on $10 million. But when you double the money on $13.7 billion, it is just a - it takes a lot of work and a lot of time. Now, the remaining fair value on CP5 at the end of the first quarter was about $5.5 billion. And obviously a big part of that is PPD. It isn't half of it, but it's a big part of it and so, we just are - we're continuing to build value in the rest of the fund and that reflects the markups and markdowns on our valuation basis of all the assets remaining in the fund.

I mean, I guess everybody has their own different way of talking about this with the escrows and the netting holes and everyone seems to follow a slightly different process and so I was just trying to think about the potential of the end of the lifecycle of some of the funds and what it can still generate in terms of cash earnings.

Thanks, Chris. Sure. Well, the other thing that happens is, these funds also, they - at some point in time, you know like we're taking management fees from these funds as well. That happens at some point too and that can affect the earnings part of the cycle.

Thank you. And our next question comes from the line of Robert Lee of KBW. Your line is now open.

Thanks and good morning. Thanks for taking my question. Maybe just starting with the fund raising, just kind of curious, is there any difference or change in the complexion of LPs, I mean obviously the demand is high. So I guess also as part of that, how do you balance interests from maybe new LPs versus existing LPs who want to maintain or even up their capacity.

Well, what we do now is we're going back with all of our major funds, we're going back to our existing investors and letting them know of our plans to raise excessive funds. So we probably do inform existing investors before we tell non-existing investors and clearly we have a high re-up ratio. We're not upset if we have a high re-up ratio because if people re-up, they tend to re-up for many, many funds in to the future as well, but you always want to have some new investors, because there are people who are new investors who might be just starting their private equity programs. They might not have private equity programs before and now they could be potentially large investors in the future. There are some sovereign wealth funds that are just getting into private equity. There are some large family offices that are just getting into it and there are some public pension funds outside the United States that are just getting into it. We, today, I would say that most of the private equity firms that are peers of ours, their large investors in their main funds tend to be US public pension funds which have historically been roughly 30% of the money for public firms like ours and our numbers are roughly like, something like that. Probably 30% of the investors on our main funds are US public pension funds, however, as a percentage, they're going down a bit and sovereign wealth funds are coming up a fair bit. And I suspect sovereign wealth funds are probably 17% to 20% of US peer firms like ours in terms of their capitalization, money coming into these funds and I suspect that percentage will increase. One of the biggest increases percentage wise is now coming from…

Great. And maybe if I could break the rules too with a follow-up question. I'm just curious with all the fund raising going on currently in the next couple of years and given that there is such strong demand, is there any - is your need to put up contribute commitments of 1.5% or so at all changing and how should we think about that in any way from in terms of demands on Carlyle's cash flow and balance sheet. I mean I'm assuming the commitments in aggregate will go up, will more of that be funded by employees or are there fewer - is there less need to commit more to fund?

Well, the way we do it now is we ask the professionals in the firm if they want to participate in a fund and to our delight, many of our investment professionals put a fair amount of their net worth into their funds. I think over the years, we've had about roughly $9 billion of capital invested or committed to our funds from people who work in the firm and because the investments have been pretty good, this is what people tend to do with their money. So I suspect that will continue as we earn a fair amount of money, people will have more money to invest. So I don't think that is a big problem in terms of getting that product served. We do put money from our balance sheet as well and the balance sheet can contribute anywhere from 1% to 2%, depending on factors and so forth and we are improving our balance sheet position. I expect that is important way for us to earn money and I suspect we will continue to do that. I think that is, our ability to fund our GP part is not that significant problem that we're worried about, because we have some money in our balance sheet, and there's an enormous appetite from people in the firm. So I don't really think that's a concern of ours. Bill or Curt may have a different comment.

So I full agree with what David just said. The only thing I would just add to it is risk retention as it relates to the CLOs that will - you will see a bit of an increase in our investments, simply due to the risk retention rules. So we're investing more off of the balance sheet into the CLO program, which we're really pleased with, that's a good safe place to put capital.

Thank you. And our next question comes from the line of Glenn Schorr of Evercore. Your line is now open.

Hi. This is Kaimon Chung in for Glenn Schorr. Just noted that there has been more dividend recap lately and generally purchase multiples have been high and covenants have been a bit looser. Do you think that will be a big source of monetization going forward and just curious if your company has a capacity to take on more leverage and just do you think dividend recaps are good in the long run? Thanks.

Well, I won't give you they're good in the long run. I just think they're inevitable. When we exit move to monetize some of our positions, we can occasionally - company public, we can sell company private. We can recap it and continue to own it by taking a dividend let's say. At different times in the market, different methods of exit take priority. I think maybe in 2014 or '15, we had like 15 companies go above them. And this is in a world where frankly less and less companies are going public and so we had a lot of them around the country, around the world going public. I think generally when we model a transaction, we're generally not including dividend, early dividends as part of our rates of return. It doesn't mean, we don't ever do it, but it's kind of not the typical way that we model our results and of course the one thing I've learned is that the model just, you know the model won't happen, something different will hopefully better than the model in terms of the returns. Let's face it, it's tempting with interest rates so low to load up the companies with debt. On the other hand, you can overdo that. Hopefully, we don't do it very often, but it certainly can happen. I think that the Federal Reserve pressure on debt levels that has been ongoing for the last several years and it comes and goes in its strength, I would say generally it has limited the amount of debt in the portfolio of companies to the six times range and maybe in some ways, that is actually a good thing. It stops people from doing things they shouldn't do. It stops borrowers from borrowing too much and it stops lenders from lending too much. I expect these trends to continue as long as money is cheap and readily available and I expect that money will continue to be cheap and readily available.

If I can just add to that of what the industry is doing, we think it's Carlyle specific situation on the recap as Bill addressed. The industry now is seeing about 50% of all exits are trait sales and about 30% of all exits are sales to secondary buyouts or other private equity firms. About 15% of our IPOs, recapitalizations are in the single digit number. So it's relatively small as a percentage of all the way that we're exiting it generally. And Carlyle's numbers are probably not that different than the industry numbers.

Thanks. And sorry if I missed it, but can you just give us an update on your global infrastructure fund in your core plus real estate. And also just what type of allocations the LPs like the sovereign wealth funds and pensions funds are making to them and how the consultants are approaching them?

Well, on global infrastructure, there's clearly a great appetite for infrastructure around the world. The current administration in Washington has talked about increasing the US expenditures towards infrastructure, but a lot of that will be involving private investors coming alongside public investments and we see this increasingly in Europe and in Asia. And so I think if you take a look at any - if you take a look at any public pension fund or any sovereign wealth fund, I suspect the highest percentage increase of what they're doing is probably going to be in infrastructure because the percentages are relatively low now, but they're going to go up. And so I think that there's a fair amount of appetite there and I think what the administration is going to do is probably going to increases that. In core plus real estate, there, we see a lot of opportunity, a lot of interest in opportunistic real estate, but as I may have said on earlier calls, opportunistic real estate is still only 3% or 4% of all real estate in the world. While we have big funds in this area, opportunistic is still a small segment of real estate. Core-plus is probably slightly bigger in some respects and core is the biggest of course. We see an increasing appetite for core-plus and that's why our fund raising there has gone reasonably well and we expect to increase that in the future. And we see more allocations to core-plus real estate from some of the sovereign wealth funds and the public pension funds. Does that answer your question?

Yes. It does. Thank you.

Thank you. And I'm showing no further questions at this time. I'd like to hand the call back over to management for any closing remarks.

Thank you, Nicole. And thanks everyone for listening to our earnings call this quarter. We look forward to speaking to you next quarter as well.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Everyone, have a great day.